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Employment, economy, Commonwealth Bank executive payout, health spending, petrol prices, leadership, RBA Board


Doorstop Interview

Parliament House, Canberra

Thursday, 13 February 2003

12 noon

SUBJECTS: Employment, economy, Commonwealth Bank executive payout, health

spending, petrol prices, leadership, RBA Board


Well the good news in the month of January, another 111,000 Australians found

work, and our unemployment rate fell to 6.1 per cent. And employment growth

has been particularly strong over the last three months, and over the last three

months the employment growth has already exceeded our forecast for the full

year. There is a statistical blip in relation to this survey as the Bureau of

Statistics moves to a new sample and that will have to be taken into account

and worked out over further months. But trend employment has been strong and

continues to show that the economy is creating good jobs growth. Since the Government

was elected in 1996, 1.2 million more Australians have found work which is great

news. As we look forward of course, there are still difficulties on the horizon

with the drought and the international economy, but the good news is another

111,000 Australians found work in the month of January.


Are most of these full or part time jobs?


Most of the jobs are actually full time jobs. About 72,000 of the 111,000 that

the Bureau reported were full time jobs. So, that is also welcome news.


Can the jobless rate dip below the 6 per cent in this first half of ’03?


We forecast that the jobless rate would be at 6 per cent by June, it is 6.1.

To be frank with you it is probably a false precision to talk about 6, 6.1 as

if there are big differences, but we thought by the end of the financial year

the unemployment rate would be around about what it is now and it is possible

that it could improve on what it is now, over the course of the remaining part

of the year. But the factors that will influence that are the drought, obviously

the drought would have to break and the international economy which continues

to disappoint.


So how do these figures, these positive figures fit with recent surveys that

show a slow down in activity, a slump in consumer confidence?


Well, I am not surprised by the movements in consumer confidence. When you

look back over the month of January, when nearly every front page, every day,

was talking about Iraq and the possibility of war, and if it wasn’t talking

about that it was bushfires. January was a terrible month for bushfires, loss

of property, loss of life, so I am not surprised that consumer confidence reacted

in the way that it did. But what these figures will show you is that there is

still real investment going on by business. And that is supporting good jobs

growth. And we are seeing the good jobs growth coming through in January, largely

as a result of business investment plans that were being laid down last year.


Treasurer do you advise Australians to believe these figures or wait for further



I said earlier there is a statistical blip in these figures as a consequence

of moving to a new sample and that will have to work its way out over forthcoming

months. And also as you would know, you look at a participation rate of 64.7

per cent which is something that we have never seen before. And I would be very

surprised if the actual participation rate was 64.7 per cent because it is out

of kilter with the kind of figures that we have seen. But trending which tries

to smooth all of that out, shows you that over the last three months there was

good jobs growth. And I think all of the anecdotal evidence shows that there

has been good jobs growth. And that is why I say that it is probably a false

precision to say 6, 6.1, 6.2, these are false precisions.

But what you can say, is that at a time when the international economy is

weak and Australia is affected by its worst drought possibly this century, the

fact that job growth is continuing, the fact that unemployment is at levels

that we haven’t been at for ten years, ten year lows, shows you that there is

a bit of underlying strength in the Australian economy.


Would you expect a war to dampen the employment market?


Look, the first, the first effect that we have already seen of the unstable

situation in relation to Iraq is oil prices. Oil prices have risen. People know

that, they have seen it at the bowsers. That is taking spending away from other

areas. It is also an additional cost for businesses, so it is not helpful in

an economic sense, yes, I can confirm that.


Treasurer, do you think any of the people that have got a job in these new

figures can expect a $32 million pay-out when they leave their job? What’s your

response to the Commonwealth Bank pay-out?


Well, I find it impossible to believe that any executive is worth $32 million.

I find it, I can’t conceive of it, and I would say to the directors that are

responsible for that, they better have a very good explanation for their shareholders.

And I would say to the shareholders they have every right to demand some answers

from their directors, every right indeed…




…it is their money. Let me make this clear, this is the money of the shareholders

of the Commonwealth bank and the directors are supposed to be husbanding those

resources properly. I find it impossible to believe…


Mr Costello…


…that it was worth it.


…should have David Murray re-negotiated Mr Chris Cuffe’s contract when they

took over Colonial First State?


Look, I don’t know whose contract it was, and I don’t know what the contract

was, and I am not getting into that because I’m not the Managing Director of

the Commonwealth Bank. But I find it very difficult to be believe that any executive

is worth $32 million. It is the shareholders’ money and I think the shareholders

have every right to expect a full explanation from those that are managing the

Commonwealth Bank.


Mr Costello, would you consider tightening regulations over disclosure of these

huge salaries because it stands only senior officers have to have their salaries

disclosed and quite often it is not the officers of the company which are earning

the higher salaries?


Well, we have tightened it, we have tightened it, and that is why there was

disclosure. See, this was actually disclosed and we have tightened it and as

a consequence these things are being disclosed. As I understand it this was

entered into quite some time ago but under disclosure rules is now disclosed

and that’s because of…


Yeah but the actual names…




…don’t have to be disclosed?


Well, I think the fact that disclosure was forced, and I think the fact that

now practically everybody in Australia knows the name indicates that there has

been good disclosure.


Treasurer, the AMA today has announced that in their Budget submission they

want an extra $2 billion for health, including, they say, you should increase

the Medicare levy in the Budget. Is that something you will consider?


No, no we won’t be increasing expenditures by billions of dollars, no we won’t…


… Medicare (inaudible)…?


…and let me say that’s because, in a difficult budgetary situation with troops

already pre-deployed to the Middle East and the expenses involved in the Defence

build-up, the priority for expenditures will be Defence.


Treasurer Costello, last time petrol prices went up around the dollar mark

the Government was able to offer people some relief. Do you think there is any

prospect whatsoever, or any need, with petrol prices where they are already,

before the Gulf comes involved in a conflict, would the Government consider

some sort of relief in petrol prices?


Look, petrol prices have risen not because of any Government policy but because

of instability in the Middle East and strikes in Venezuela, and the fact that

on international markets people have to pay more for oil. This is not something

that is a result of a Government decision, it is not something that can be stopped

by a Government decision. This is something that relates to the supply and demand

of oil and the difficult international situation. I think people understand



But it is going to be hurting people out in the bush in particular, it’s a

very tough time for them already?


Well of course, nobody wants higher petrol prices. But the fact of the matter

is whilst there is a threat of war in Iraq and whilst there is instability in

other oil producing nations the price of oil has gone up. But people understand

that this is not a consequence of any Government decision, nor can it be stopped

by any Government decision.


Speaking of stability, Mr Costello, do you think there is a need for stability

of leadership during a time of national crisis like this?


Of course it is very important that the Government is fully focussed on the

international crisis, and it is.


Treasurer, can you comment on when you may be announcing a replacement for

Dick Warburton on the RBA Board? Do you have a short list or…?


When I am ready to announce it I’ll announce it.


Treasurer can I ask you another question about the $32 million. Labor, I think,

is suggesting that the Government considers some kind of change to the tax treatment

of these pay-outs by companies. Is there anything the Government can, or would,

consider there in terms of taxable treatment of these pay-outs?


Well, it’s fully taxable, this is a fully taxable payment. I guess that is

one consolation in all of this. But I would say this, it’s shareholders’ money,

this is money that belongs to the shareholders of the Commonwealth Bank. They

elect directors to represent their interests and the shareholders have a very

legitimate interest in knowing whether the directors were looking after them

properly. And I’d say to those shareholders that the remedy for this lies very

directly in their own hands. Thanks.