Economy, US Dollar, Defence Reserves, Budget, Leadership – Doorstop Interview

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Economy, US Dollar, Defence Reserves, Budget, Leadership – Doorstop Interview


Doorstop Interview

Hyatt Regency


Monday, 19 May 2003

12.20 pm


SUBJECTS: Economy, US Dollar, Defence Reserves, Budget, Leadership


The dollar hit a 40 month high today Treasurer, what are the implications for

the economy do you think?


Well, I think what’s going on mostly in international currency markets is that

the United States dollar, which was strong for a very long period of time, is

now correcting itself, and as a consequence of that you are seeing other currencies,

including the Australian dollar, appreciate against the US dollar. I remember

saying at the time that the US dollar was abnormally strong coming through 2001-2002,

their economy’s been weak, and what you are now starting to see is a correction.

Now, from Australia’s point of view, obviously exporters will be keenly watching

that, but you have got to remember that a lot of exporters do actually sell

in US dollar prices in any event. So, those that are selling in US dollar prices

wouldn’t be affected.


The US Treasury Secretary says that he is not worried about the slide in the

US dollar, should we be worried?


The main effect that I see from the US dollar is that it means that the Euro

is appreciating quite significantly against the US dollar, and that will have

an effect in Europe. Europe is very sluggish anyway, and the fact that their

currency is now appreciating against the US dollar will, I think, have an effect

in their economies. It will probably subdue their economies at a time when they

need growth. From the Australian point of view, bear this in mind, that our

trade weighted index is about 56, that’s really been the historical level, if

you look back over 20 years, so its not too far out of whack, but you have seen

the Australian dollar appreciate, because the US dollar is falling just as back

in 2001-2002, the Australian dollar depreciated because the US dollar was rising.


The Treasury reported big paper losses seven years ago through currency swaps,

are those losses evaporated now?


Well, this is the thing about currency movements, you can sit there and as

the currency moves on a minute by minute, or hour by hour, or week by week basis,

you can tote up your losses or your gains, and as you said, some years ago these

were all on paper and put it this way the movement in the exchange rate has

been totally to the opposite direction and on paper you would be showing substantial

profits as a consequence.


Mr Costello, is the training up of the Reserve troops allocated for in the



Yes, we have made full allocation in the Budget for all of the Defence initiatives.


Is the dollar going to remain high do you think?


Well, when you are talking about currencies you have got to bear in mind the

various different currencies with which we measure ourselves. The Australian

dollar is probably at it’s historical level against the Euro. The Australian

dollar is much higher against the US dollar today than it was, say two years

ago, that’s because two years ago the US dollar was abnormally strong and now

the US dollar is correcting itself. This is not an Australian dollar movement,

it’s a US dollar movement. With the weaker economy in the United States, with

stock markets down in the United States, people who were pumping money into

the United States in the late 90s, early 2000s, are now taking a different view

and the US dollar is correcting. So, we are at historical levels against some

currencies and we are returning to more historic levels against others and you

have to bear in mind that on a trade weighted basis, on a trade weighted basis,

the Australian dollar is not far out of it’s historic level, but we don’t have

the advantage which we did have for quite some time, of what I used to call

the super competitive exchange rate, the exchange rate is adjusted.


How much is it going to cost to train up the Reserve troops?




How much is it going to cost to train up the Reserve troops?


Well, Senator Hill will be announcing that.


After Mr Crean’s budget reply last week tomorrow’s Newspoll is expected to

reveal that he would be more popular, or their budget polices would be more

popular than yours. How do you respond to that?


Well, I think that Simon Crean completely failed in his Budget reply, he has

a vision for nothing but Budget deficits and higher taxes. The Australian people,

I don’t think, want budget deficits and I am pretty sure they don’t want higher

taxes. And that was Mr Crean’s response and I think the reaction of Mr Beazley

said it all.


But it has been very well received by the public, his budget response, by the



I don’t think there is any evidence of that at all. What evidence are you…


Well I am saying that tomorrow’s Newspolls are expected to reveal that his

popularity will have risen.


Well, you know more about the Newspoll than I do.


Two Ministers said over the past week that you would make a great Prime Minister,

are you itching to get into that job?


Well look, I have just brought down the Government’s Budget, we are yet to

enact it, but we are seeing the Labor Party assume its usual obstructionist

behaviour and try and defeat it in the Senate and I am absolutely focused on

trying to enact the Budget. Mr Crean had a good opportunity last week to take

a positive attitude, and yet it was just more whining and negativity, obstructionism

and opportunism. I think Australians want more from the opposition, I think

the Australian public wants the Government to get on with governing, and to

do things that will make Australia strong. There are very big difficulties in

the world at the moment, the threat of terror, the threat of SARS, the fact

that other economies are struggling, and Australia has to meet all of those

difficulties and I think people expect the Government to get on with governing.


But we weren’t asking you about that, we asked whether you wanted to become

the Prime Minister in your ambitions?


Well I said to you that my ambition is to pass the Budget. That’s what I said

to you. Thank you very much.