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Retail Trade, Australian Economy, ATO
March 31, 2000

International Trade in Goods and Services, Petrol Prices, Interest Rates, ATO


Transcript No. 2000/27


The Hon Peter Costello MP




Thursday, 30 March 2000

1.45 pm

SUBJECTS: International Trade in Goods and Services, Petrol Prices, Interest Rates, ATO


There is an improvement in Australia’s position on International Trade in Goods

and Services today for the month of February. The fact was that the deficit decreased to

about 0.9 billion and the good news for Australia was that exports of goods and services

were up 6.4 per cent outweighing an increase in imports of 1.7 per cent. So that’s a

good trade result for February. What it shows is that as the world starts to grow stonger

again, Australia’s exports will pick up. It means that we’ll get a better

contribution to growth in Australia from exports, and that our position will improve as

world growth picks up accordingly. So I welcome today’s figures in relation to Trade

showing strengthening of the Australian export position as global growth comes back after

the Asian financial crisis.


Are you encouraged by what you saw in Asia particularly?


The weak spot in the world economy has been Asia in particular, in 1998/1999. We are

now starting to get growth in most of Asia. The Japanese economy of course is still weak

but you see in countries like Korea, come back. Some of the ASEAN countries come back.

Contributing to stronger regional growth and that’s good for Australia. We now have

better exporting opportunities and we believe over the next year or two, Australia’s

balance of payments problems will continue to improve.


Does it worry you that these good trade figures could be an incentive for the RBA to

raise interest rates?


Well, as world growth picks up, as the world economy grows stronger than was expected,

interest rates around the world have moved up. It’s happened with the European Bank.

It’s happened with the Federal Reserve in the United States and it’s happened

here in Australia too. We’ve had interest rates moving up. But it’s not an

altogether bad thing. The reason they’re moving up is that the world economy is

strengthening. As the world economy strengthens, Australia will do better on its export

front.That means that there will be stronger growth in our economy from exports and that

will contribute to an improving employment market.


Do you see any benefits for Australia out of the OPEC decision?


I welcome the OPEC decision. The world price of oil has tripled over the course of the

last year. And consumers have felt that at the petrol pump. It’s been caused by

reduction in world oil production, pushing up the world oil price, meaning the consumers

have been paying more at the bowser. Now if you can push up world production and push down

the world price, Australian consumers will benefit. The fact that production is going to

be lifted is good news and we hope that you’ll begin to feel the effects on the oil

price it will take some time to come through. But you’ll be feeling the effects on

the oil price later in the year.


What about the impact on inflation?


Well, obviously the fact that the world oil it price trebled, and as a consequence

Australian petrol prices went up, that meant that our inflation rate has been edging up.

This is caused through external events. And if production lifts and the world oil price

goes down and petrol pump prices come down, conversely that will be better for our

inflation position, but the, they will take quite some time to feed through into the CPI

figures, because it will take quite some time to feed through to the bowser. So

you’ve seen a rise in inflation as a result of the world oil price and if the world

oil price comes back that would be a positive sign on the inflation front for us.


Mr Costello what do you think about David Koch’s letter (inaudible) the Tax

Commissioiner (inaudible)?


Who’s letter?


David Koch’s letter.


David Koch?


(inaudible) to the Tax Commissioner (inaudible) to see whether there is any systemic

failure in the tax system?


Well, there was a Senate inquiry that looked at this last year and I think the Senate

inquiry actually said that there was good risk management procedures in place and that

they had been subject to external audit. And from memory the Senate inquiry was chaired by

the Labor Party. So it was looked at last year, that was the conclusion. And I think they

actually called witnesses to that effect, but it’s all there on the public record. It

was a public report and from memory the public report, in fact chaired by the Labor Party,

said that the Tax Office had good systems in place. I think they also made the point that

in any organisation you can have bad people, what you’ve got to do if you have a bad

person is you’ve got to investigate, charge, if the evidence is there, convict and

punish. That’s what you do if you find somebody who has engaged in wrongful action.

But that has to be determined in a court of law and people are entitled to the presumption

of innocence until the trial takes place. But where there is somebody who has broken the

law, the court is the place to establish that. And we should be very careful to ensure

that any charges are properly dealt with through the legal system and in the courts.


Are you concerned that the Tax Office can handle GST and a scandal?


Well the Tax Office is properly implementing the Government’s tax reform program

and I have every confidence that that’s going to be in place and properly operating

on 1 July. And don’t forget this, on 1July we are abolishing wholesale sales tax. We

are introducing the largest income tax cuts in Australian history. We’re changing all

family benefits and we’re starting to drop the company tax rate. Now they are great

structural reforms for Australia’s taxation system. Years overdue. And we’ve got

to make sure that we capture the benefit as a society, as a community from tax reform.

Cheaper exports, more exports, lower transport costs, high growth, more jobs.


Mr Costello, there is speculation in the paper this morning that Mr Carmody’s role

in promoting Mr Petroulias and why a second tax official is apparently under

investigation, still actually there and in place. Do you have confidence in Mr Carmody and

the tax office system?


Well I think, if there is ever evidence against anybody it has to be investigated in

full. The person has to be charged, and in the court of law the evidence has to be

presented and if the evidence is there, they are convicted and punished. That’s the

way you deal with these things. And you should be very careful that that is done by the

book. And the court of law is the place where the evidence is presented and the

prosecution will have every chance to prove its case and the person charged has every

chance to establish their defence. That’s the way we do it in Australia. In Australia

if you break the law you are charged, you’re tried and if convicted you’re

punished and that’s the way it is going to be done in accordance with the law. And

you can’t do it any other way.


Do you have full confidence in the system that there is not a fault allowing the big

end of town to exploit loopholes.


Well I have full confidence in the ability of the law enforcement authorities to

investigate and charge. And that’s what’s happened.


In your speech, though in arguing for ethical behaviour in directors, you did seem to

suggest that regulatory bodies can’t cope with the breadth of maybe inappropriate or

criminal activity…


Regulatory bodies in Australia, as I think I said during my speech, are probably as

good as any in the world. Our system of financial regulation is considered by the IMF to

be the best in the world. It is recommended around the world. The Australian model. Our

system of corporate regulation, with the ASIC is also considered to be probably, equal to

any in the world. Certainly better than many in Europe. So our regulatory arrangements are

very strong, very good. And it’s one of the reasons why Australia was able to

withstand the Asian financial crisis. We did the hard work, we put the institutions in

place and they are operating very well indeed.