Transcript

of

The Hon Peter Costello MP

Federal Member for Higgins

Interview with Alan Jones, 2GB

7.15am

Monday, 19 October 2009

E&OE

SUBJECTS: Parliamentary record, financial regulation, financial crisis

JONES:

Today on Monday October 19, 2009 when the Liberal Member for the Melbourne seat of Higgins Mr Peter Costello who was elected to the Parliament in 1990 will offer the Speaker his resignation from political life.  Peter Costello entered the Parliament in 1990 but was elected Deputy Leader of the Liberal Party in May 1994 and served in that post for more than 13 years.  He is the longest serving Treasurer in Australian political history, he brought down 12 consecutive Federal Budgets which included 10 surpluses, during the time he eliminated the Commonwealth Government’s net debt of $96 billion.  He introduced the largest tax reform in Australian history A New Tax System which introduced the GST, he cut income and company taxes.  And indeed it was the strength of his financial supervision that enabled the banks to be in such a strong position when the international economic tsunami hit the rest of the world and us last year.  I might add a tsunami he forecast prior to the 2007 election.  He pioneered the largest reform of superannuation, the abolition of tax on superannuation payouts for those over 60 which the Government now is tinkering with.  Well for one final look at Peter Costello in the political scene to which he contributed so much for so long and from which he now departs.  He is on the line from Canberra.  Peter Costello good morning.

MR COSTELLO:

Good morning Alan.  Good to be with you.

JONES:

Thank you.  How did you wake up today?

MR COSTELLO:

Fresh.  It is a beautiful day.

JONES:

Do you ever think that you have had some regrets that when the leadership was offered to you rather than Alexander Downer after the fate of John Hewson you didn’t then accept it?

MR COSTELLO:

Well this was back in 1994 of course.  I had only been in Parliament four years.  I think I was probably mid 30s and it wasn’t offered to me, John Hewson called a leadership ballot.

JONES:

You would have won it.

MR COSTELLO:

I may have won it if I had run then.  I didn’t think at the age of 37 or whatever I was 36 it was a good move.  I wanted to get some more experience.  I had never been in Government so I didn’t run in that ballot.  I supported Alexander Downer and eventually John Howard became the leader.  And people forget of course that I was a great supporter of John Howard’s and helped him become the leader, served alongside him for 11½ years.

JONES:

It seems so long to me anyway since the day that Dollar Sweets, when Australian first heard about you, you weren’t in Parliament and here you are making a name in this wild world of industrial relations along with Michael Kroger and it was a pioneering victory.  Just explain the basic principles of that to our listeners.

MR COSTELLO:

Well these were the days of thuggery in work places – I might say not all together eliminated even today – but this was a small manufacturer who was subject to a picket line.  I think it lasted 160 days.  The factory where he operated from was subject to a fire bomb attack, there were bashings of employees as they went to work and telecommunications were cut off from the factory all because of an industrial dispute.  And this poor guy who was just trying to save his family business, I think he employed about 30 people, had run out of advisers, everybody said well you have got to understand this is how Australia works.  If you are subject to a picket line like that you really have to give in.  And he said well this will end my business.  And they said well that is why you have to give in.  And in his desperation he came and he found probably the newest lawyer on the block as I then was. 

JONES:

You were just kids.  You were only just kids.  

MR COSTELLO:

And I don’t think he knew any better and the funny thing is I didn’t either.  So I said I don’t think this is the way things should be in Australia.  And we commenced this big legal action which eventually saved the company, it saved the employees jobs and in the mean time it gave small business a lot of heart that things didn’t have to be like that in Australia.  You didn’t have to always give in to picket lines and thuggery, that you could stand up.  And I think that was a great breakthrough in the early 1980s.

JONES:

And it built a bit of a reputation for one P Costello.

MR COSTELLO:

Well people said maybe he is not as silly as we thought.

JONES:

You were confident as Treasurer in 2007 going into the election that Australia was in good shape.  Is it in good shape today?

MR COSTELLO:

Yes.  Australia largely avoided the financial crisis.  There was a financial crisis in the United States, there was a financial crisis in the United Kingdom.

JONES:

But you warned about this during the election campaign and no one wanted to listen. 

MR COSTELLO:

Nobody wanted to listen then because the commentators had all decided that we were in a golden era, that growth was automatic, that it didn’t take too much work, that we could afford a change of Government.  I said that there would be a huge convulsion coming of financial instability coming out of the sub-prime market and it would be difficult for Australia.  But here’s the point, we were most unlike the Americans, a lot of people think to themselves America is a big country they must have the best system of financial regulation.  It is not true.  The United States does not have a good system of financial regulation.  We had from 1997 on put a much better system in place here in Australia.  It has saved Australia from the financial convulsions that occurred in the United States and the United Kingdom and interestingly enough Obama is now looking at revising the American system and he is taking many of the ideas from Australia and so he should.  Because Australians were at the cutting edge in all of this.

JONES:

Is there something narcissistic about the Prime Minister’s approach to this?  I mean he tried to pretend that this was an international crisis, that everyone was suffering equally in the crisis whereas we went in with infinitely, we were better stocked to prevent any kind of impact on us.  There has been very little recognition of that hasn’t there?

MR COSTELLO:

Well everybody had their own reasons for trying to analyse the crisis in their own way.  The Government was motivated by talking up the dimension of the crisis because by talking up the dimension of the crisis that would enable them to engage in the huge spendathon they went on.  The spendathon would be popular in the electorate but they needed a reason to engage in a spendathon and so the reason became oh look at the nature of this crisis.  I think, and I have said this before, the spendathon was completely overblown.  You will be paying for the spendathon for a long, long time to come.

JONES:

Do you think Australians understand that?

MR COSTELLO:

Well they will when their taxes start rising.  The financial system here was in much better shape than it was in the United States, that we had made a house of bricks.  You know the story of the three little wolves, what is it three little pigs?  One had a house of straw, one had a house of sticks, one had a house of bricks.  And the one that was made of brick didn’t blow down.  We had made our financial system strong and it didn’t blow down.  We didn’t have a bank that collapsed, in fact we didn’t even have a bank that made a loss.  This is the extraordinary thing about Australia no bank even made a loss.  I used to say that there is only one thing worse than obscenely high bank profits and that is bank losses.  No bank made a loss, no bank fell over, the Australian financial system was strong.  Sure we got affected by downturn overseas…

JONES:

In relation to trade?

MR COSTELLO:

Yes.  But we had a strong situation and I think as we look back and remember all of these Budget forecasts will be updated in November, what the Treasury will say well gee it wasn’t really as bad as we thought and the implication of that will be gee the spendathon was much greater than was needed.

JONES:

So have we loaded this on to Australians in future generations for the sake of massaging the egos of a few people in Government?

MR COSTELLO:

Well look Alan when you are distributing taxpayers dollars those who receive them are never going to complain.  If you got a $900 cheque nobody is going to send it back.  If you get your house insulated nobody is going to say well they didn’t want that.  But here’s the point, Governments can’t create money so when they have distributed the $900 cheques, when they have done the insulation somebody has got to pay for it.  And who pays for it?  The taxpayers.  Now the bill is coming and when the bill comes people might say to themselves gee that is a big bill for a $900 cheque.

JONES:

I am interested that you pioneered the largest reform of superannuation.  The abolition of tax on superannuation payouts for those over 60.  Now the Government has got two major inquiries into superannuation.  There is emerging uncertainty out there.  Do you think the Government knows what it is talking about when it talks about lifting incentives for the low paid to invest in superannuation, well the low paid will tell you they have got nothing left.  If you start tinkering with these things then you run the risk of undermining the confidence that people should have in the ability of superannuation to provide for them in their old age.

MR COSTELLO:

Look superannuation is so complicated people find it very, very hard to keep up with the rules.  So I introduced a rule which said this:- after 60 if you take your superannuation [there is] no tax.  That is a pretty simple rule, no tax if it is a lump sum, no tax if it is a pension.  Now that is all you have to think about, a very simple rule.  Now that gave people a lot of confidence in superannuation.  Okay put some money in now, we might not get it for 20 or 30 or even 40 years but there will be no tax on it.  They can understand that.  That is a good investment, they will go into that.  And it was designed to last 20, 30 or 40 years.  Now the Government gets elected, it has started tinkering with these rules in its last Budget.  People will start to say to themselves well hang on if they can tinker with those rules in the first two years right and I want to get my money out after 20 years or 30 years can I be sure that these rules will still be applied?  They will just think I don’t know about this.

JONES:

Who wants to scrimp and save and plan to invest in super if the rules can change?

MR COSTELLO:

Well exactly right.  Here I am trying to get my money out in 2029 and I was told back then it would be tax free but oh you know there are all these sub clauses and conditions now and it is too late 20 years after the event.  And I said this to the Government this is a good rule.  The Labor Opposition supported that rule when I brought it in.  The Treasury supported that rule, said it was sustainable.  It was a simple rule.  The industry supported it.  No need to change it.  Don’t start tinkering.  What you will do is you will undermine confidence.

JONES:

Just on this emissions trading scheme all the focus has been on Malcolm Turnbull.  Has there been adequate scrutiny of Kevin Rudd over a cap and trade carbon dioxide scheme?  Forget whether we agree with global warming or any of that sort of stuff, when economists and business leaders around the world including people who would be very well known to you as a former Treasurer, I mean Kenneth Rogoff I am sure you know them Professor of Public Policy and Economics at Harvard University.

MR COSTELLO:

Yes.

JONES:

Few economists agree with this cap and trade scheme that Kevin Rudd is trying to shove down our throats.

MR COSTELLO:

Well what I find alarming here is that I don’t think the journalists and the media have actually explained to the public what this means.  This means as we know your electricity prices go up.  Now have they told them how much extra you will be paying on average?  That is the first to me and the most obvious, the most basic thing.  How much more will you be paying for electricity?  Now when electricity goes up and that puts up the price of your milk, how much will the milk go up.  We would like to know.

JONES:

All the groceries will go up.

MR COSTELLO:

By the way when I was introducing the GST I couldn’t go on a radio program without somebody saying well a litre of milk costs me this now what will it cost under the GST?  “Mr Costello tell me now that petrol is so much per litre what will it be under the GST?”  I would have to answer all these questions and there would be endless discussion about whether I was right or whether I was wrong or whether it would go up 2 cents or whether it would go up 5 cents.  I am really surprised that nobody says to the Government Ministers well tell me what a litre of milk is now and tell me what it will be.  Tell me what a loaf of bread is now, tell me what it will be.  Tell me how many people in the coal industry will actually lose their job.  Tell me how many people in the aluminium industry will lose their jobs.  These are pretty basic questions and I just don’t think there’s been the searching analysis.  Now after all of that Alan people might say well I am prepared to pay more for milk and I am prepared to pay more for bread because this might reduce our carbon emissions by 5 per cent people might say that.  But at least they should make an informed decision about it.

JONES:

Just before you go.  The most formidable politician you have met in your time in politics?  Here or overseas?

MR COSTELLO:

Oh well I have met some good ones.  I must say Clinton was a master I think at working a room.  He was, he really just had the ability to make everybody feel as if they were special in a particular way.  And I remember one day we were on a boat with him in Sydney Harbour and he was saying his farewells and he even went into the kitchen and he said farewell to the cooks.  And I thought to myself that is a mark of somebody who is good at politics. 

JONES:

Good on you.  Well I have got to say farewell to you.  I think dear old Jack Gibson who has now left us, one of the great coaches of rugby league most probably got it right in his comments apply with great validity I think to Peter Costello.  If I could just say – played hard, done good.

MR COSTELLO:

Thanks very much.

JONES:

All the best.

MR COSTELLO:

Thanks Alan.

JONES:

Peter Costello.  7.30am.