Transcript 

Of

 

THE HON PETER COSTELLO MP

 

FEDERAL MEMBER FOR HIGGINS

 

Interview with Steve Price, 2UE

Thursday, 17 January 2008

9.30 am

E & OE

SUBJECTS:      Sub-prime, interest rates.

PRICE:

Mr Costello is in our Melbourne studios for his first lengthy interview since the election loss.  Good morning to you.

MR COSTELLO:

Good morning Steve, good to be with you.

PRICE:

Are you bored yet?

MR COSTELLO:

No, not in the slightest.  I am still a Member of Parliament, as you know, and I am enjoying those duties very much.  I have had some time off over Christmas, I saw some of the cricket and I have seen some of the beach, so not in the slightest Steve.

PRICE:

I saw you standing there that Sunday with your wife next to you and it struck me that she may have had a rather major influence on your decision?

 

MR COSTELLO:

Well, without going into my personal circumstances the wives and husbands and children of people who are in public life do have a heavy burden.  When you are in Federal politics you are away a lot. As Treasurer I did 12 Budgets which required me to be locked up in Canberra a lot.

PRICE:

So how many days a year do you reckon in the 365 you are not home?

MR COSTELLO:

I figured out that I was away 35 weeks a year, something like that, and even when you are not away from your home town of course you are out every night anyway in your home town, so…

PRICE:

You were just…

MR COSTELLO:

It was easier to count the nights that you were home.

PRICE:

You were doing this with kids too, I mean…

MR COSTELLO:

I have got kids.  I did it for 11½ years and particularly as the Treasurer when you are doing the Budget, you know, it was three or four months just continuously in Canberra and the other MPs weren’t there, they would be back in their electorates.  So that was the longest period that you would spend away from home.  So that’s pretty tough.  I said at one stage that I had effectively turned my wife into a single mother and that’s the way it was.

PRICE:

So if Tanya said look I’d rather you didn’t put your hand up for…

MR COSTELLO:

Well, look, I am not going into what passes between, in a marriage as you know Steve I am sure you wouldn’t either. 

PRICE:

But look I had my wife in Canberra for most of last year.  I know exactly what it was like.

MR COSTELLO:

And what did she say to you?

PRICE:

I said to her when the Coalition lost it would nice if you didn’t go back there for a while.

MR COSTELLO:

She might have said: “I enjoy going to Canberra”.

PRICE:

Yes, get away from you.

MR COSTELLO:

So look Steve I was Treasurer for 11½ years and during that period Australia has had its best economic period in my view probably in its history.  I was able to make my contribution.  The electors decided on a change of Government.  I don’t think, and this is my view, I don’t think Australia will be as well governed.  But that is a matter for the electors to decide and they did and they are the final judge and you can’t argue with them.

PRICE:

So you quite clearly accept that you lost?

MR COSTELLO:

Well, the electors decided that.

PRICE:

But after 11½ years it’s hard to wake up and think I am not still in charge of the economy?

MR COSTELLO:

Well you know, you wake up and you think to yourself well I think things could be done better than they are, of course you do, and I think that a Coalition Government would have been better for Australia’s future but the way our country is governed is that a majority decides.  The majority decided and no point arguing with them.  They decided and that’s their verdict.

PRICE:

Well we wake up today to the worst share market losing streak in seven years, talk of a US recession, is that just bad timing for Labor?  I mean we would be waking up to those headlines would we not if you had won?

MR COSTELLO:

Well the sub-prime crisis in the United States started emerging in say July last year.  I had a lot to say about it as Treasurer, I thought it would be quite significant and I kept making the point that there was a lot of uncertainty in the financial markets even to the extent that some of the commentators said I was over-emphasising the risk.  I think people would now realise that what I was saying was accurate, that there will be a lot of fallout in financial markets as a consequence of this.

PRICE:

And what was the purpose of that message from you?  You were sending that message to who and the warnings were serving what purpose?

MR COSTELLO:

The warnings were this – that a lot of US financial institutions have lost a lot of money, not all of which they have yet reported.  A lot of these sub-prime mortgages were bundled up and sold off to other financial institutions and those financial institutions will also report losses.  The third thing that will happen as a consequence of this is that people will be more wary about lending, they might continue to lend but they will want premiums.  And so there will be a lot of dislocation in financial markets and in stockmarkets.  Now…

PRICE:

So we haven’t seen the full fallout of that here yet?

MR COSTELLO:

Yes.

PRICE:

I mean we are reading this morning about these so-called ‘kangaroo bonds’ which is last slabs, billions of Australian superannuation dollars that have been lent there.  Have we got the worst news of the result of that yet?

MR COSTELLO:

There are Australian financial institutions which will be holding some of the risk.  Some have reported already, some haven’t reported already…

PRICE:

That’s not more bad news to come?

MR COSTELLO:

Not just Australians institutions, it will turn up in other financial institutions BNP you saw reported big losses and there is still a lot of reporting to go.  So it will have an effect undoubtedly on financial markets – a point I have been making for six months.  By the way, see this didn’t just happen, this started emerging about the middle of last year.  We had extensive discussions about the sub-prime and its implications for the world economy at the APEC Finance Ministers’ Meeting.  So don’t think this is a recent phenomena, no.

PRICE:

I know you will understand, do you mind just hanging on.  We have had this explosion at Drayton’s Winery in the Hunter Valley, I won’t hold you up for more than a minute or so.

News update

PRICE:

Sorry about that Mr Costello.  It just important that we get that news out there to people.

MR COSTELLO:

It’s a tragedy isn’t it.

PRICE:

Awful, awful circumstance.  Just on the sub-prime and we turn to interest rates, housing interest rates here, Reserve Bank we might see them put interest rates up again in February.  We have had the banks move outside the Reserve, you were very tough on that during the election campaign, they have done it anyway, you seem to have been able to in your 11½ years never have that happen. 

MR COSTELLO:

Yes well there are two factors here, there is the official interest rate, the cash rate, which the Reserve Bank moves and then traditionally the banks move accordingly. There is also the margin, that is the amount the banks charge over and above the cash rate.  Now these margins were cut in the late 1990s and recently the banks increased them.  Now what that means is they will always charge more over and above the official cash rate than they used to.  And borrowers will always pay more than they used to.  On any given cash rate a borrower will have a higher interest rate charged then by the banks because they have now moved margins.  And you can see from a bank’s point of view if they can increase the margin the amount they take over and above the cash rate that enhances their profitability.  You can see why it is bad for a borrower because from a borrowers point of view on any given cash rate they will be paying more than they used to.  And I think the way we had the system operating was that the banks moved in line with the RBA cash rate.  But we didn’t approve them increasing their margins.  And it’s the increasing of the margin now which will be good for the banks but it won’t be good for borrowers.

PRICE:

Do you think Wayne Swan jumped in quick enough to criticise them for that?

MR COSTELLO:

Well he approved it of course when the NAB increased its margin as first off the blocks.

PRICE:

You wouldn’t have done that?

MR COSTELLO:

He put out a statement, well you can see what I did.  I was very vigorous on the subject.  He approved it and then all the banks after they saw that he had approved it, started moving.  At that point he jumped in and said oh, no, no, no, no. But if you don’t want the banks to move you have got to make sure the first one doesn’t move.  You don’t approve the first one because once the first one moves you know all the rest are going to do the same thing.

PRICE:

Talking of banks, there was a report at the weekend that you have been offered a job with Macquarie Bank.  Are you considering that?

MR COSTELLO:

Steve I said that that was just wild speculation and it was just speculation.  I think the journalists were flying a kite and believe me if I have something to announce I will announce it.  It won’t come out as an unsourced story.

PRICE:

So you have had no job offer from them?

MR COSTELLO:

Look I am not going through who I have spoken to or who’s spoken to me because you know people will just say well if it wasn’t that one is it this one or is it the next one?  I am not going to get into that.  I am just going to say that there is a lot of speculation Steve.

PRICE:

So does a job outside politics interest you?

MR COSTELLO:

There is a lot of speculation, when it was unsourced, I have got no idea who was putting it around and I am not going to comment on every one of them, it was just completely speculation.

PRICE:

But does a job outside politics and a higher income interest you?

MR COSTELLO:

Well Steve look, I have made my contribution in Opposition and in Government in the Parliament and I will be looking to a post Parliamentary career in the commercial sector.  I said that as you mentioned on 25 November and that’s what I will be looking towards.

PRICE:

Does that mean you will serve the full term as a backbencher?

MR COSTELLO:

Well look I am…

PRICE:

Or are you keeping your options open?

MR COSTELLO:

I am serving my constituents, I have indicated where I eventually intend to go and when there is some further news I will let you know.

PRICE:

Have you examined the numbers?  Do you think this will be a one term Rudd Government because that would influence your decision because I would imagine that if you stayed in the Parliament you would still harbour leadership ambitions?

 

 

MR COSTELLO:

Well look Mr Rudd has inherited the strongest economy since the war – probably in Australian history.  People around the world would envy him.  There would be no other incoming Prime Minister that would have inherited a Budget…

PRICE:

Yes, but can your side in three years knock him off after you have looked at all the numbers from the election?

MR COSTELLO:

Well this in my point, I mean he has inherited an extremely strong…

PRICE:

You can be loose and free now, you are a backbencher (inaudible) you are not constrained by the rules any more.  You are on the backbench remember, you have got the slippers on, you can say what you like.

MR COSTELLO:

If he’s got any brains he will just leave the Coalition settings in place.  That is the smartest thing that he could do but the extent to which he wants to intervene…

PRICE:

You haven’t shaken off your discipline yet.

MR COSTELLO:

No, no the extent to which he wants to intervene I think is the extent to which he will get into trouble.

PRICE:

I know in 11½ years you would form habits but you can loosen up now.

MR COSTELLO:

Well you asked me whether this would be a one term government and the point I make…

PRICE:

Well yes or no?

MR COSTELLO:

…the point I make is he has inherited, I mean we are a couple of months into it and it has got three years to run, and I am making this point, he has inherited a very strong position.  If he is clever and he leaves the settings in place he will have a very strong economy.  If he intervenes and he tries to go off on Labor Party dry policy changes or if he tries to implement the agenda of the union movement that’s the extent to which he will get in trouble and that’s the extent to which he will feel the electoral backlash.

PRICE:

John Howard has all but disappeared.  Would he be hurting?

MR COSTELLO:

Look you have got to have a life in perspective.  Would he be pleased that we lost the election – no of course not, that would hurt.  But he can also look back on the fact that he was the second longest serving Prime Minister in Australian history, he can look back on the achievements in his term of office and I think in the longer scope of history when all of that is held in perspective he will feel better about that.  But at the moment of course he would be disappointed as I am with the election loss.

PRICE:

How hard is it to give up power?

MR COSTELLO:

Well it is not a question really of power.

PRICE:

Well you were the most, second most powerful person in Australia for 11½ years.

MR COSTELLO:

Yes but it is not power that motivates you.

PRICE:

Probably no one invites you anywhere any more.

MR COSTELLO:

I wish that it were true. 

PRICE:

No free lunches.

MR COSTELLO:

Oh that’s very easy to give up.  Let me tell you.  It is the, you lose the capacity I think to do what are positive things where…

PRICE:

Which you felt very strongly about.

MR COSTELLO:

(inaudible)

 

PRICE:

But you wanted to make a difference.

MR COSTELLO:

Exactly right.  Look you wake up in the morning and you see somebody making an error on economic policy and you know that you don’t have the ability to correct it.  Normally if I had’ve woken up and I have seen an economic challenge I would have gone into the office and I would have done something about it.  So you have got to give that up and that’s the hardest thing of all to know that somebody else will now be making critical decisions and particularly when you see people making decisions which you don’t think are good ones.  That is hard to give up.

PRICE:

That ability to make a difference is that what causes you to pause when making a decision about your future?

MR COSTELLO:

Look Steve I had the opportunity over 11½ years, I was Treasurer longer than anybody else in Australian history so you know I had my opportunity, I gave it everything I had, the results are there for everybody to see.  The economic historians will write it in due course and people will make their conclusions.  Now you know I still wanted to do more.  I still want to contribute as best I am able but it is a question of finding the right way to do it.

PRICE:

And you think Brendan Nelson is doing a good job?

MR COSTELLO:

Yes, I like Brendan.  I think Brendan is a good guy and I would say to all of his and our colleagues get behind him.  Get behind him, give him a go.  He has been elected…

PRICE:

Get behind him in the sense of supporting him?

MR COSTELLO:

Yes.  He has been elected the Leader, he deserves every support from every Member of the Parliamentary Party.  And I will be certainly supporting him and I would say to all of our colleagues, get behind him, he is going to take up the fight.

PRICE:

So 2008 no Peter Costello, no John Howard, but most important for you no Kevin Sheedy.

MR COSTELLO:

I thought you were going to say no Howard, no Costello but most importantly a Price.

 

PRICE:

No.

MR COSTELLO:

The real power still stays on the throne.

PRICE:

No Kevin Sheedy I mean this is Mr Costello’s football team Essendon of course.  Would you really middle of last year said let’s grab Matthew Knights a former Richmond player and replace Kevin Sheedy?

MR COSTELLO:

I don’t mind Richmond people.  A lot of Richmond people are good people like yourself.

PRICE:

He will be all right will he?

MR COSTELLO:

You will be all right too.

PRICE:

Thank you very much appreciate your time.

MR COSTELLO:

Great to be with you.