Iraq, Trade, Australian Economy

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Presentation to the OECD Forum 2003 – “Corporate Governance – Strengthening Conditions for Investment”
April 29, 2003
Governor General
May 5, 2003
Presentation to the OECD Forum 2003 – “Corporate Governance – Strengthening Conditions for Investment”
April 29, 2003
Governor General
May 5, 2003

Iraq, Trade, Australian Economy



LCI TV (Pre-recorded)


Tuesday, 29 April 2003



SUBJECTS: Iraq, Trade, Australian Economy


Aside from the United States, another country was very tough at the time of

the Iraq crisis – Australia. Peter Costello, you are the number two of the Australian

government, you are the Treasurer. If there’s a number two, there’s a number

one, and the Prime Minister of Australia was particularly tough with France

and the French position (in relation to Iraq). Does your presence in France

signify that Australia wants to rebuild the relationship with France?


We always look forward to a good relationship with France. France is a very

significant investor in Australia, and we have enjoyed strong trade relations.

We have had our differences over Iraq. We’ve had our differences over agricultural

policy. But we try and keep those in proportion and keep the relationship on

a strong basis.


Before getting into the detail of Franco-Australian business, is it true all

the same. And to close the chapter, both literally and figuratively, does Australia

regret a little the vehemence of the remarks of the Australian Prime Minister

during the crisis?


No, we were part of the coalition of the willing. We had troops in Iraq and

they made a very significant contribution, and we are pleased with the outcome

in Iraq. But we always try and keep differences in proportion. We had a difference

over Iraq, but that doesn’t jeopardise the whole of the relationship. And we

have enjoyed a good relationship with France in the past, and we hope to continue



Peter Costello, one of the lessons that Europe, the old Continent, has taken

from the Iraq crisis is that it is urgent to construct a European Defence Policy.

As you know, Europe has the project for the A400M – the military Airbus. I think

I’m right in saying that Australia could participate in this program for the

military Airbus. Can you confirm this?


Well, I do not know that we have any plans to actually engage in construction,

but of course as a supplier of military hardware, we always look at the projects

which are coming from all around the world. We assess their viability, we try

and get value for money. We have, of course, Qantas, the Australian airline,

has bought a number of the European air buses, for instance …


Le Qantas.


… Qantas, and provided the price is right and the product is good, I

am sure it will continue to look carefully at those products.


Australia was contacted to be part of the A400M project?


Well, I am not quite sure about the actual construction itself. What we try

and do, is, we look around the world we try and find the best products, the

best value for money. We make our assessments accordingly.


Still in relation to the Iraq conflict and with this link then to the defence

sector, the Defence industry number one in Australia is a company of French

origins. It’s Thales that bought an important Australian (organisation) in the

sector about 10 year ago. The Thales group is hoping for additional contracts

in Australia. Could differences between Australia and France over Iraq prevent

these contracts going to Thales?


No, I do not think so. Thales is an investor in a company called Australian

Defence Industries. Australian Defence Industries has a number of contracts

with the Australian Defence Force. Those contracts will go ahead. And in relation

to any future contracts, obviously the Thales interest will not affect ADI,

provided it delivers value for money. There are occasions in which one has to

assess national interest considerations, but we have found to date that Thales

has been a very good investor in Australian Defence Industries. It has not worried



There are other companies like Sodexho, which is a major group and which assures

the alimentary logistics of Australia troops. Do you think that for the same

reason – the difference of opinion between France and Australia over Iraq –

do you think that for this reason the contract with Sodexho could be reviewed?


No. Look our view in relation to defence, is, that where we stipulate a product

and it meets our specifications and our price, and we enter a contract, then

we honour it. That is our position. There are occasions in which there is sharing

of military intelligence, where we need to consider the position of our allies.

And, of course, our allies in relation to Iraq were the United States and Britain,

so we had to take into account their interests as well. But in relation to our

own purchases, we approach this very much on a commercial basis. A good product

for a good price is what interests us …


Before speaking a little about the economy to finish, there is a subject on

which our two countries absolutely do not agree, and it’s the Common Agricultural

Policy. You consider that we too heavily subsidise our farmers in Europe and

in France.


Yes, we think that the subsidies inhibit free trade. Australia is a big agricultural

producer, as you know, and we would like to export more to Europe. We think

that the subsidies are subverting that trade, and it means that the French farmers

are enjoying a kind of protection which is not in the interests of open free

trade. We also think that if the common agricultural policy were changed, the

French consumer would have the ability to exercise their consumer power and

get cheaper products for lower prices, which would be good for them, too.


A little macroeconomics. What are the economic forecasts for Australia this

year and next year? What is the value of investing in Australia?


Well, Australia is a very strong economy. We have averaged growth of 4 per

cent per annum for nearly a decade. This year’s growth looks as if it will be

about 3 per cent because we have had a very severe drought. The non-farm economy

is still growing at 4 per cent, but a severe drought has brought our growth

rate back to 3 per cent. As that drought breaks, we expect that the longer term

trend growth will resume. So we have a strongly growing economy, we have low

inflation, we have high productivity, we have a strong budget position. And

Australia is a very good opportunity, not only for investment – about 20 million

people live in Australia – but also it is a base for investment into the east

Asian region. And a lot of the French companies find it a very good base to

have regional headquarters, for example.


Treasurer, thank you very much for these explanations.


Well, thank you very much.