Transcript No. 2001/097

Can I just say something about the economy first. It seems as if the world economy is continuing to slow with the US economy showing signs of a slow down throughout the course of 2001. That, of course, will have an effect on Australia. But with a super-competitive exchange rate and a taxation system that now has no taxes on exports – our exports have been strong over the course of the year -whereas the United States is looking at growth of say 1 to 2 per cent throughout the course of calendar 2001, Australia will be growing stronger than the United States. Our growth rate will probably be in excess of 3 per cent over the calendar year of 2001. So Australia will not be immune from world developments. But the Australian economy is strengthening and will be one of the faster growing economies of the developed world in 2001. I welcome in particular the business surveys that we have seen recently from Westpac and also from the National Australia Bank which show a strong bounce back in business confidence and that will be good for the Australian economys prospects throughout the course of 2001.

Nonetheless, it makes Australia (inaudible) are slipping back, this is going to affect us perhaps more than you are saying?

TREASURER:

The world economy is slowing, the United States economy is slowing in particular. But Australia is growing faster than the United States and with pick-ups in business confidence, with pick-ups in housing and business investment, and with a tax system that now has no taxes on exports, that is the best thing you could be doing for your export industries. And so we have seen quite a growth in Australian exports over the course of the year, and exports have held up remarkably well, aided no doubt by the super-competitive exchange rate. But the Australian economy is strengthening through the course of 2001, with a stronger second half of the year than we had in the first half of the year.

But how long can that growth be maintained? You cant make (inaudible)?

The Australian economy is predicted to grow faster than Europe, Japan and the United States in the course of 2001. We will probably be, in the course of 2001, particularly in the latter part of 2001, one of the faster growing economies of the developed world. And that will be supported by tax changes of course, by kickback in of the housing industry and the construction industry, and also supported by improving business confidence. Which are good signs.

Alan Greenspan (inaudible)?

Well, Mr Greenspan has indicated that whilst the US economy has slowed very

considerably, he thinks that it may now be bottoming, the rate of slow-down

is slowing and that there might be some signs that the United States will pick

up again. From an Australian perspective, a strong US economy is good for the

world and good for Australia. We would prefer a strong US economy rather than

a weak one. But we are leading the United States in growth at the moment. Our

economy is stronger than theirs is. Our growth rate is projected to be stronger

than the US growth rate in 2001, and notwithstanding the fact that world slowing

of growth is not helping us, the prospects in Australia are such that we will

probably grow faster than the United States, faster than Japan, faster than

Europe. And, if I may say so, the people who got it wrong again, absolutely

wrong again, were the Labor Party who were positively salivating at the prospect

of Australia turning down. They got it wrong, and they got it wrong on America…

What does this all mean for interest rates?

What it means is that our low interest rate regime is being supportive of economic growth. Our interest rates today are as low as they have been since the 1960s on homes, with the exception of a period back in 1997/1998, we are now running the lowest home mortgage interest rate since the 1960s, and that has been good for the Australia.

(inaudible) US (inaudible)?

The US economy is slower than Australia and their interest rates are correspondingly have been cut lower than our official rates here in Australia but that is just because their economy has weakened substantially more than ours.

So you wouldnt expect further rate cuts here no matter what happens there?

I dont comment on the future direction of interest rate movements.

Can I ask you about Aston? Why do you think the Liberal Party held the seat? And how does this place you for the Federal election? What does it mean?

Well, it now appears as if Chris Pearce has got an unassailable lead in the seat of Aston, and it looks as though Chris will become the next Member for Aston. I pay tribute to him for the campaign that he ran. I think he will be a good Member for Aston. I see Mr Beazley this morning said, oh the Labor Party had never marked Aston down as one of their wins anyway. It was nice of him to tell the people of Aston that after the ballot. Last week he wasnt saying that. And he said that he is going to concentrate on other seats. And to the people of Aston I say that Chris Pearce will be a good Member. He campaigned on the local issues. I hope he will take up where Peter Nugent left off. I think the people of Aston have sent a clear message; they want the Scoresby freeway to be built. And this Government intends to do that. I think they have also made it very clear that they are worried about the high interest rate regime of the Labor Party. The people out in Aston know that when the Labor Party last held Aston they were paying 17 per cent on their mortgages. And they want a low mortgage interest rate regime because it means savings for families, more money for expenses for the children, so that they can concentrate on things that are more important.

What does it mean Federally though? How does it place you for the Federal election?

The Federal election will be a tight Federal election. The Labor Party thinks it can coast into office without a policy. I think Aston ought to be a big wake-up call to Mr Beazley. If you havent got a policy the people of Australia arent going to trust you. And until he gets a policy, until he announces how he is going to fund his rollback, how much he will put up income taxes, how he is going to fund all of these promises, the people of Australia are not going to put any trust in him. And I say to Mr Beazley if he wants to come clean, he ought to announce policy.

That is what politics is all about, it is about policy. And hiding his own policy and taking a lazy approach to politics I dont believe will be rewarded. And I think that is a big message out of Aston. The hiding of policy, the lazy approach of Mr Beazley on policy has not repaid him in the Aston by-election.

You admit though that if the national type swing was repeated at the Federal election there would be a Coalition wipeout?

Well, in by-elections where the Government is not at issue, you normally get

a very large swing. The swing is normally above 5 per cent. I think the Aston

swing will probably be about 3.5. The last time the Liberal, a Liberal Government

held a by-election in Victoria was the Flinders by-election in 1982 where the

swing to Labor was about 3.3, and the Labor Party got rid of its leader because

the swing was so low on that occasion…

They won the next Federal election.

They won the next Federal election because they dumped their leader. Now, there might be a message there. There might be a message there.

For the Labor Party you mean?

For the Labor Party.

And what do you think of Mr Beazley signing that pledge about Telstra sale?

Look, if you live long enough in politics you see everything. Mr Beazley has today signed a pledge that he wont sell off any remaining shares in Telstra. I want to show you the last time the Labor Party signed a pledge like that. They signed it on the Commonwealth Bank on the 24^th of September 1993 and they put it in the prospectus. What they said, is, the Government would reduce its shareholding to 50.1 per cent in the Commonwealth Bank. “The Government has no intentions whatever, of further reducing its shareholding”. There it was, in a prospectus on the 24^th of September 1993. Here is the Budget of the 9^th May 1995, which was 20 months later: “The Government has decided to sell its remaining 50.4 per cent shareholding in the Commonwealth Bank”. Written undertaking on the Commonwealth Bank. Written repudiation. Mr Beazley has put that one out, but we all know he would do precisely on Telstra what he did on the Commonwealth Bank. Youve seen it all in politics.

It was 20 months, there was no intervening election, he gave a written undertaking on the Commonwealth Bank and he broke it. He gives a written undertaking on the Telstra. Who would believe him? Who would believe him?

What impact did you (inaudible) income tax cuts last Thursday have on a result in Aston?

Look, I think in Aston there was a whole combination of factors at work. I

think…

(inaudible)?

…well, I think Chris Pearce was a good candidate, the Governments commitment

to Scoresby was important, the Governments low interest rate regime was important.

I think there were a whole range of factors. You cant isolate any one of them

out, but there is one thing that is clear about Australian politics now, and

I think this was demonstrated by the last week in Aston, Labor stands for higher

income taxes, and the Coalition stands for lower income taxes. And I think that

came out at the Aston by-election very clearly. And I think that will be of

ongoing significance in the Federal election this year.

Thank you very much.