TRANSCRIPT
of

HON. PETER COSTELLO MP

Treasurer

Doorstop

Canberra

Thursday, 19 September 2002

11.00 am

SUBJECTS: International Monetary Fund (IMF) Report; leadership; economy

TREASURER:

The annual report by the IMF on the Australian economy was released today and

the report notes the impressive performance of the Australian economy and the

skilful economic management that has ensured Australia survived both Asian Financial

Crisis and the US recession of 2001. The IMF notes that fiscal policy remains

fundamentally strong. It notes that inflation is heading back to the mid-term

of the range and it predicts strong growth for the Australian economy in 2002,

growth stronger than any of the other developed countries of the world.

Notwithstanding that, there have been some factors which have emerged in recent

times which we think need to be taken into account. One is drought and secondly,

the extreme volatility on world stock markets which we would expect to slow

US recovery and in time to affect Australia. So we will not be totally immune

from the international developments but as the IMF notes today Australia’s economy

is impressive. The structural reforms that we have undertaken have made it much

more resilient than it used to be. It has been able to survive external shocks

and we need to keep good economic policy going if we are to keep Australia growing

at the strong pace that it has been experiencing in recent years.

JOURNALIST:

It warns interest rates may have to rise?

TREASURER:

What it says is that inflation is heading back to the mid-term of the band

and it indicates that if it were a world recovery and the world started growing

stronger you would have to keep an eye on monetary policy – and obviously you

would.

JOURNALIST:

Mr Costello, do you join the growing list of backbenchers imploring the Prime

Minister to stay on for another election?

TREASURER:

Well, I think it is strange that people are raising leadership now. We are

in the middle of a debate on Iraq and I do not think it is the time to raise

leadership. And I will not be raising it and I do not think it is the right

thing to do. We have difficult decisions, we are discussing possible military

action in Iraq and I do not think the Party should engage in leadership speculation.

JOURNALIST:

Should the leader stay the same while there is uncertainty?

TREASURER:

Well I am not going to add to speculation. As you know I have not raised any

speculation at all.

JOURNALIST:

Isn’t that just adding to speculation Mr Costello?

TREASURER:

No I haven’t, no I haven’t raised any speculation at all, you know that.

JOURNALIST:

But you are not saying that Mr Howard should stay on?

TREASURER:

No, you know I have not raised leadership. I will not raise leadership. I do

not think it is the right thing to be raised, that is what I am saying. I do

not think this is the time to raise it and I am not adding to it in any respect

at all, and you know that. You know that I have not raised it, nor will I raise

it, nor will I add to it.

JOURNALIST:

(inaudible) wait until the Iraqi situation is resolved?

TREASURER:

No. I am not raising it, I am not discussing it. As I said I do not think it

is the right thing to be raised. We are in the middle of a very difficult debate

on Iraq, that is what is taking our attention, that is what we ought to be focussing

on. I do not think we should be talking about leadership.

JOURNALIST:

(Inaudible) interest rates may have to go up but that right now the concerns

are the (inaudible) overseas would drive (inaudible) and housing prices, and

that may be a reason to hold off on interest rate raises in the immediate future.

Is that something you would agree with?

TREASURER:

Well, what the report says is that inflation is heading towards the mid part

of our target band of between 2 and 3 per cent. It notes the weakness in the

world economy and I think probably since the IMF did its report the world economy

if anything has weakened a little. That is, there has been enormous volatility

on American stockmarkets. I would expect that sooner or later that that will

affect business investment and consumer investment in the United States and

that is the engine for world growth.

JOURNALIST:

These figures are pretty much in line with Treasury’s forecasts. Do you think

the IMF really knows that much about what’s going at the ground level in the

Australian economy?

TREASURER:

Look, I think if I can say so, probably the people that are on the ground have

a better grasp of the economy. But it is useful I think to have an outside body

which comes in and looks at these things and can run a ruler over it and can

indicate if there are any major glaring errors that people inside the country

are missing. The other useful thing is that they do the same in relation to

other countries. So it gives you the opportunity to compare the various countries

and what this assessment does is it agrees, it confirms what we think about

the importance of structural changes and also gives us a look on where we are

compared to other countries and it says that the Australian economy is one of

the impressive performers in the world, the strongest growing economy of the

developed nations and it confirms our view that we have to continue to work

on reform to keep it that way.

JOURNALIST:

Does it provide comfort on your fiscal growth forecast for the current year

at (inaudible) per cent?

TREASURER:

That is our GDP growth figure 3 and ¾, I think the IMF says 4 per cent

in 2002 but I think that the development since the IMF report, probably on the

downside, not in a major way, but on the downside, particularly in the international

economy and in relation to the drought. Now we will have to update our forecasts

for the Mid-Year Review and that is when we will do it next.

JOURNALIST:

Do you think that high levels of debt and also a reliance on housing leave

the economy more vulnerable to shocks?

TREASURER:

What was the second part of your question?

JOURNALIST:

For likes of housing, the importance to the economy of high levels of debt.

TREASURER:

Well look, housing has given us a lot of strength through 2001 and 2002. When

America went into recession Australia grew, and one of the reasons was we had

strong investment in housing. Now I think that that will slow. It can not keep

going for ever. I think it has probably peaked and it is probably declining.

And we expect that business investment will take up the slack and that is what

we are looking at.

JOURNALIST:

If the drought and the international situation are weakening slightly does

that mean you’re going to have to revise your (inaudible) downwards?

TREASURER:

I am not saying what we will do with our forecasts except noting that the IMF

is probably a little higher than us and I think that since their report, the

factors have been on the downside, but we will have a look at the Mid-Year Review

and we will put out our, (inaudible) I only get the liberty of making two forecasts

a year. These guys in the financial markets make them on a daily basis and they

make so many they get them right sooner or later. You make 365 and you will

get one of them right.

JOURNALIST:

(inaudible)

TREASURER:

I only get two so I have to be very, very careful about it.

JOURNALIST:

Treasurer you must be close to announcing the final Budget outcome?

TREASURER:

Probably are, yes.

JOURNALIST:

When can we expect that?

TREASURER:

Okay, thanks very much.

JOURNALIST:

(inaudible)

TREASURER:

Well, I do not want to comment on that. Discussions are proceeding.