THE HON PETER COSTELLO MP
TREASURER

Doorstop Interview

Friday, 22 February 2002
2.30pm

Hobart

 

SUBJECT: Foreign currency loans; Governor-General

TREASURER:

Good afternoon. I just want to comment on claims in the press today by the

Leader of the Opposition that the management of Australia’s portfolio of debt

has blown $2 billion. That is a false claim, the kind of false claim that Mr

Crean is often apt to make. And he then went on to say that the Government should

not be speculating. I want to make it clear that the policy of having foreign

currency exposure in Australia’s debt portfolio was introduced by the Labor

Party. Mr Crean was on radio today attacking the Government for a policy which

the Labor Party introduced, which will give you some idea of his credibility.

It was introduced in 1989 by the Labor Party, having a foreign currency exposure.

He is absolutely shameless. He is attacking the Government for a policy which

the Labor Party introduced. And in relation to the matters, as I think has been

made entirely clear by the Treasury officers today, there have been no such

losses and nor in relation to these transactions do they appear on the Budget

bottom line. So, this tissue of misrepresentation from Mr Crean should be dismissed

with the contempt that it deserves.

JOURNALIST:

What do you say the figure is, then? What do you say the losses are?

TREASURER:

Well, I think the Treasury has actually said that over time it has been a profit.

I think what the Treasury said, that it has realised savings of $100 million

per year since 1989. So, that is the figure.

JOURNALIST:

So there is no effect on the Budget bottom line whatsoever?

TREASURER:

No.

JOURNALIST:

Could you explain why the Government speculates in foreign currency markets?

TREASURER:

It doesn’t.

JOURNALIST:

Well could you explain to the lay man the process that is being talked about

here?

TREASURER:

Well, what happened is that in 1989, the Labor Party decided to have a portfolio

of foreign currency. That is, to hold some of its debts in foreign currencies.

It doesn’t speculate. It holds debt in foreign currencies. We have made a decision

to wind that up.

JOURNALIST:

When was that decision made, Treasurer?

TREASURER:

The decision was made, I think, I will give you the precise date. Well, it

was in the evidence as being made in the last year or so.

JOURNALIST:

Why was that decision made?

TREASURER:

Because we do not believe that it is an appropriate policy and it was not a

good way of managing the debt portfolio. It had been put in place by the Labor

Party in 1989. We thought that it was not the proper way to manage the portfolio

and so we ended it.

JOURNALIST:

So what was said to Treasury, to Senate Estimates, last night? What actually

happened? If you are saying Dr Crean is wrong, sorry Mr Crean is wrong, what

is correct?

TREASURER:

Well, Mr Crean is wrong on two counts. One is, he says that there has been

a loss. There has not. Mr Crean says that this is the responsibility of the

Coalition Government. It was a policy of the Labor Party. That is how it got

introduced in 1989. He is shameless, this man. Now, you asked me what was said.

I would refer you back to the evidence. Go back and have a look at the evidence.

Have a look at what the Treasury has said today. I think the Treasury officer

has gone back in and said that the evidence that was given yesterday was misrepresented.

JOURNALIST:

Did you at any time okay the suspension of guidelines to allow further transactions

to occur after October (inaudible)?

TREASURER:

We ended the policy. That is what I said. We ended the policy. I ended the

policy.

JOURNALIST:

So at no time did you okay a suspension of guidelines to allow another transaction?

TREASURER:

I ended the policy of having a benchmark of foreign currency. That is what

I did. That was the policy of the Labor Party and I ended it.

JOURNALIST:

Why did it take you until just this past year to do it, some time in the past

year?

TREASURER:

Because in the advice to me in 1996 and 1998 was to continue it. And then I

decided that we would end it because I did not think it was an appropriate policy.

JOURNALIST:

Why not?

TREASURER:

Well, I do not think it is necessary to hold foreign currency.

JOURNALIST:

It wasn’t just the position of the Australian dollar?

JOURNALIST:

I do not think it is necessary any more. You see, the point is this. We are

not borrowing money. Because we are not borrowing money, we do not need to hold

debt in any currency, let alone in foreign currency. So there was no point in

trying to hold foreign currency debt when we were not borrowing. There was no

point in that. And we got to a situation by the last year where we had not borrowed

any money and we were repaying it. So there was no point in holding debt in

any currency other than the stock that we were running down.

JOURNALIST:

So was the initial policy an effort by the then Labor Government to, I guess,

try and speculate on foreign exchange movements?

TREASURER:

No, I do not think they did it to speculate. They just thought that, for purposes

of diversification, it would be a good policy, and that is why they introduced

it.

JOURNALIST:

And spread the risk over a number of currency markets?

TREASURER:

Well, it depends how you look at it. They would say that it was diversification,

that that was the reason. It was recommended. It operated ever since the Labor

Party introduced it, right through the Governments in which Mr Beazley and Mr

Crean served. Because we do not borrow any money, we came to the conclusion

that it was not necessary to continue it. And we ended it. And you could imagine,

you know, the sheer shamelessness of Mr Crean to go out and to use this as an

attack on the Coalition Government, a policy which Labor introduced. It is extraordinary.

JOURNALIST:

Last night a spokesman for yourself said, is reported as saying, that the loss

would not effect the current fiscal position. Are you now this afternoon saying

that there was no loss?

TREASURER:

I am saying that there are no realised losses. That was the point that he made

yesterday. That whether they are realised or unrealised, they are not on the

Budget bottom line, which is also what he said yesterday.

JOURNALIST:

So could you explain for the lay man, please, a $1.9 billion unrealised loss?

Could you explain what that is, please?

TREASURER:

Well, I do not think it has anything to do with the way in which the Commonwealth

is managing its stock.

JOURNALIST:

Why not?

TREASURER:

Well, I think that all of this has been gone through in the Senate Estimates.

The Senate Estimates has explained the matter. But there are two points that

I am making today. One is, no loss has been realised. The second is, if you

want to be critical of the policy, you had better ask Mr Crean why he introduced

it, he and the Labor Party.

JOURNALIST:

Do you support an independent inquiry into the [inaudible] of the Governor-General

and should he stand aside?

TREASURER:

The Prime Minister has made it clear that on the material which he has seen,

he believes that there are no grounds for the dismissal of the Governor-General

and on the basis of the material which has been presented after he has carefully

considered it, the Governor-General continues to enjoy his confidence.

JOURNALIST:

(inaudible) need (inaudible) inquiry?

TREASURER:

Well, there was a need for the Prime Minister to look at the material which

has been brought to light and he has said that he would look at any new material,

but this is a matter for the Queen acting on the advice of the Prime Minister

and so if there’s going to be any evaluation of the material, the Prime Minister’s

made it clear that he has done it.

JOURNALIST:

But even so, if more evidence comes to light (inaudible) tomorrow or the next

day, shouldn’t this be (inaudible) by an independent inquiry? (inaudible) a

retired Judge for instance, rather than just the Prime Minister?

TREASURER:

No, because under our Constitution, the appointment and dismissal of a Governor-General

is a matter for the Queen acting on the advice of her Ministers, which in this

case is the Prime Minister. So it’s a question for the Prime Minister to evaluate.

He made it clear yesterday that he had evaluated the material which had been

brought to light and he had reached the conclusion that there was no grounds

for dismissing the Governor-General. And that is the position.

JOURNALIST:

Treasurer what level of damage do you believe has been done, and is being done

to the Office of the Governor-General after (inaudible)?

TREASURER:

Well, I think everybody would say, including the Governor-General himself,

I think, that he would wish that these matters had been handled better, and

I think even the Governor-General would say that, I think the Prime Minister

has said that. But, given the circumstances, the question became, after evaluating

the material, were there grounds for dismissal? And after a careful evaluation

of the material the Prime Minister has concluded that on the material he has

seen, there is not. And I fully support his view.

JOURNALIST:

Is that the end of it there? So the fact that he has made that decision (inaudible)

there is no grounds to dismiss the Governor-General, or (inaudible)?

TREASURER:

No, I think what he said yesterday was that he has considered the matter and

concluded on the basis of the material that he has seen, that there are no grounds

for dismissal. So on those circumstances he wouldn’t be giving any advice to

Her Majesty about dismissal. And in those circumstances, the Queen would not

be taking any action.

JOURNALIST:

So that is the end of the matter as far as the Prime Minister is concerned?

TREASURER:

Well, as far as the Prime Minister is concerned, on the basis of the material

that he has seen and he has evaluated, there are no grounds for dismissal.

JOURNALIST:

(inaudible)

TREASURER:

Under our Constitution a Governor-General is appointed by the Queen acting

on advice of Ministers. Now the thing that I think is important is that we follow

the Constitution.

JOURNALIST:

But there’s nothing stopping an independent inquiry taking place?

TREASURER:

Well, there is nothing to stop press inquiries taking place. They are obviously

taking place.

JOURNALIST:

(inaudible)

TREASURER:

But under our Constitution, if you are looking for the dismissal of a Governor-General

it can only be done in one way. And that is by an action of the Queen acting

on the advice of her members. Now, if people, you say this can be done or that

can be done, lots of things can be done, but under our Constitution the only

means of securing a dismissal is by a decision of the Queen acting on the advice

of her Ministers and in this case it is the Prime Minister, who has considered

the matter.

JOURNALIST:

(inaudible)

TREASURER:

Well, look I think you know my view on how the Constitution works, and I will

only repeat what I said earlier.

JOURNALIST:

What is your assessment of the information today that a Liberal frontbencher

has rung the Governor-General today and asked him to consider his position (inaudible)?

TREASURER:

I have no knowledge of it. I don’t know whether it occurred or not, so I can

hardly comment on it.

JOURNALIST:

(inaudible)

TREASURER:

It most certainly was not me, I can assure you. Okay, thanks.