Interview with Karl Stefanovic

Today Show

Thursday, 3 March 2005
7.10 am

 

SUBJECTS: Economy, Interest Rates, Bulletin

STEFANOVIC:

Good morning Mr Costello, you are not the most popular man in Australia this

morning.

TREASURER:

Well I was actually offering to play golf with your weatherman a moment ago.

STEFANOVIC:

Well we will save that for some other time but right now I am a little bit

confused and I am sure that a lot of Australians are. The Reserve Bank thinks

the economy is bubbling along nicely so it has lifted interest rates, and the

Australian Bureau of Statistics seem to think that if the economic trend continues

we will be in a recession within the six months, who is right, who is wrong?

TREASURER:

Well the economy is being pushed along at the moment by very high consumer

sentiment, business confidence is very high, profits are as high as they have

ever been and unemployment is at 30 year lows so there is no doubt there is

some strength in the economy. What the figures showed yesterday I think is that

rather than accelerating, it is probably moderating a bit from a very high base

so Australia’s prospects are still very strong of course and any talk

about a recession of course is not at all within the bounds of possibility.

STEFANOVIC:

So was the Reserve Bank right to lift interest rates in your opinion?

TREASURER:

Well the Reserve Bank looks at inflation and it has got a charter to make sure

that inflation stays within 2 and 3 per cent. At the moment it is and even the

Bank itself says that it couldn’t see it breaking out by the end of next

year. So it is important that we keep inflation low, it is important that wages

are based on productivity, if we do that we can keep as many people in work

as we have currently got and possibly get some more. So I think it is important

to keep our eye on the ball here and keep inflation low.

STEFANOVIC:

So how are you going to do that? I guess to an extent your Government is partly

to blame in so far as there hasn’t been any significant labour market

reform.

TREASURER:

Well this Government put in place such labour market reform as you could get

through the Senate with the blocking activities of Labor and the minor parties,

but the great news for Australia is that the Labor Party which used to block

reform in the Senate now no longer has a majority. So we are now able to clear

through the Senate further reforms and we will be doing so. The great outcome

from the last election is the blocking tactic against reform of Labor were shown

up by the ballot box and they were voted out of the majority, a blocking majority

in the Senate so we now have the opportunity to do much more economic reform

and in particular labour market reform, and that is what we will be doing after

1 July.

STEFANOVIC:

The concern is I guess, these reforms are going to take some time and there

is already talk that there might be another interest rate rise next month, is

that something that Australians should be preparing for now?

TREASURER:

Well look, I don’t want to comment on the future movement of interest

rates because I have entered into an agreement with the Reserve Bank, given

them a target and given them the responsibility of moving it from time to time

but what I can say to you is that interest rates at the moment, at 7.3 per cent

are very low by historical standards. When I first became Treasurer they were

10 per cent, so you are saving about $550 a month on the average mortgage

compared to where they were under Labor when Labor was thrown out of office.

They move around but under our Government they have been moving around between

6 and 8 per cent which historically is very, very low.

STEFANOVIC:

It is a fair question though, shouldn’t Australians have the right to

know if you believe that interest rates will rise next month as well?

TREASURER:

Well what I believe is that if we concentrate on keeping inflation low, if

we up the reform agenda particularly with industrial relations reform, than

we can keep the Australian economy growing with low inflation and that is consistent

with low interest rates regime. That is what I believe, that is my policy.

STEFANOVIC:

Alright, I know that you have been busting to talk about this all morning,

but Mr Howard said last night, you would take, you would actually take over

as Prime Minister if he got hit by a bus, have you been taking any driving lessons?

TREASURER:

I always drive very carefully and I always put my seatbelt on.

STEFANOVIC:

So any movement on when you will take over, if you will take over?

TREASURER:

Oh no look, people speculate about all sorts of things and they do it on a

daily basis. I think the important thing is to keep focused on the job at hand.

STEFANOVIC:

Are you concerned that if you did take over the Prime Ministership, I think

it has been flagged as March 2, 2006 by The Bulletin, are you concerned

that you won’t have the trust of the Australian public if interest rates

keep going up?

TREASURER:

Well the important thing as I have said is to keep economic policy strong because

that is consistent with low interest rates. Let’s get this in perspective.

During our Government interest rates have varied between about 6 and 8 per cent.

Under Labor they varied between 10 and 17 per cent. That was the variation.

So let’s get this in perspective, a variation between 6 and 8 per cent

is a different universe to a Labor interest rate policy.

STEFANOVIC:

It is still very high aren’t they compared to the rest of the world,

I mean the US interest rates are still low, why don’t we, why is there

such a problem if interest rates go down and what is the problem with that?

TREASURER:

Well the US was in recession. Anybody can reduce interest rates by bringing

on a recession and putting millions of people out of work but Australia is a

growth economy, our unemployment is as low as it has been in 30 years, we are

one of the growth economies of the world and in a growth economy with unemployment

at 30 year lows, to have interest rates as low as they are by historical standards

is not a bad mix.

STEFANOVIC:

Alright Mr Costello, thank you very much for your time this morning and definitely

no bus driving lessons alright?

TREASURER:

It is great to be with you, thank you very much.