TRANSCRIPT
THE HON PETER COSTELLO MP
Treasurer

Doorstop Interview

Sanctuary, Riverside Gardens, Douglas

Wednesday, 28 July 2004
12.00 PM

SUBJECTS: June Quarter 2004 Consumer Price Index (CPI); Australian Economy; Interest Rates; Australia – United States Free Trade Agreement; 2004-05 Budget; Sudan; Troop Deployments; Woodside; Federal Election

TREASURER:

Today’s Consumer Price Index shows that you can run an economy with strong economic growth, record low unemployment and moderate inflation.

In June quarter, the Consumer Price Index increased by 0.5 per cent and inflation through the year was 2.5 per cent. That is right bang in the middle of our target range of 2 to 3 per cent. And nearly half of the rise is actually made up by transportation and in particular petrol prices, which rose as a consequence of world oil prices and movements in relation to the exchange rates. So half of it actually came from more or less external factors.

Contributing to falls in prices in the June Quarter were falls in food prices which fell overall by 0.9 per cent in the June Quarter and in particular an 11.4 per cent fall in vegetable prices which is a response to the drought beginning to unwind. We had a build in vegetable and fruit prices during the period of the drought but as the drought unwinds you are actually seeing price falls in those areas.

But overall to have inflation rate of 0.5 per cent for the quarter and 2.5 per cent for the year is the kind of result that we have been aiming for and to do it during a period of strong growth and record low unemployment proves that you can have – with the right management, disciplined and consistent economic policy – you can have growing employment, strong economic growth and low inflation as a result.

JOURNALIST:

So does it justify the Reserve Bank’s decision to keep rates steady?

TREASURER:

Well, we have set a target for inflation which is 2 to 3 per cent over the course of the cycle. It is 2.5, being in the middle of that target, at a period in the cycle where the economy is growing, so you would have to say you can keep inflation low in this country, that is consistent with low interest rates, and that’s good news for home buyers.

JOURNALIST:

Good news for people in the twin cities as well?

TREASURER:

Good news for people in the twin cities. Good news for home buyers and if it is good news for home buyers it is good news for construction. And as you can see the construction that is going on here is a vote of confidence in the area and its economic future.

JOURNALIST:

Is this making you more confident about the coming election?

TREASURER:

Well, a government does what it can to so manage the economy as to keep people in work and give home buyers a break and over recent years our policy has lead to single digit interest rates, which the Labor Party were not able to match, and the lowest unemployment, sustained unemployment, in 21 years. So the record is there and people can examine it.

JOURNALIST:

Some of our local council list their (inaudible) and inflation rates for example (inaudible) local government costs have increased 5 per cent. What is going on?

TREASURER:

Well obviously they are not lifting them because of inflationary pressures because, as you point out, inflation is 2.5 per cent. So if you want to know why councils are lifting their rates in excess of inflation you will have to ask them I am afraid.

JOURNALIST:

The Federal Member for Herbert is pushing for a Vet school at JCU, where do you stand on that?

TREASURER:

Well he has raised it with me since I have been here and he has been a very, very powerful asset in Canberra and I pay tribute to all of the wonderful work that Peter Lindsay has done in this area. And with an advocate like him on your team you genuinely do pretty well.

JOURNALIST:

Mr Costello, should Mark Latham heed Peter Beattie’s advice and just get on with signing the Free Trade Agreement with the United States?

TREASURER:

Yes, Peter Beattie has stated the obvious which is that if Australia can get increased access for its goods and services into to world’s largest economy, the United States, it ought to take it. There are countries all around the world that are lining up for an agreement like this and if Australia gets the opportunity and walks away from it, then there will be another hundred countries in the world that will say, we will take your place. Now, anybody who thinks about this for a moment knows that this Free Trade Agreement is in Australia’s interests and Mr Latham should stop playing politics, stop being negative, acknowledge that he made the wrong call and get on and vote for the agreement…

JOURNALIST:

The manufacturing…

TREASURER:

…and if he can’t take my word for it, then perhaps he can take the word of every single Labor Premier in the country.

JOURNALIST:

…the manufacturing union has got some polling out this morning saying there is still a lot of disquiet about the FTA, particularly in some marginal Queensland seats. I mean, you say it is a good thing, but would you agree that perhaps the message is not getting out there?

TREASURER:

Well look, polls will come and polls will go, and you know, I would have to look at each one of those polls and the questions to try and give you an analysis, but I accept that polls will come and polls will go, but I don’t think the Free Trade Agreement should swing on a particular poll. I think it should swing on a hard-headed assessment of Australia’s interests. And Australia’s interest is, if we can get access of our goods and services into the world’s largest market, 300 million people, a goal which nearly every other country in the world is seeking but very few have been able to get, if we can do that, we should do it and it will be in our long term interests. And I think anyone who looks at this carefully comes to that conclusion. And this is not just John Howard and the Liberal Party and Peter Costello, you have got, Premier Beattie and Premier Carr and Premier Bracks all coming to that conclusion. The only person that can’t see it is Mark Latham to which we say: wake up.

JOURNALIST:

Mr Costello, another poll has found 72 per cent of voters believe the Budget was a bribe to buy votes, how do you respond to that?

TREASURER:

Well look again, polls will come and polls will go and I will have to look at every question before I give you an analysis, but as I move around Australia, people say a couple of things to me, they say one: families need help with raising their children and we are glad you did that; families need help with the birth of a child and we are glad you did that, they say that people like lower taxes and we reduced taxes, and people want a bigger investment in health and aged care which we also did. And I think if you can do those things and keep your economy growing and keep unemployment at a 21 year low and reduce inflation, that is the objective of economy policy. And there would not be that many other countries in the world that were able to do that at the moment.

JOURNALIST:

Has the Government decided whether we will send troops to Sudan?

TREASURER:

Well, the Government believes that if Australia can make a contribution in relation to the terrible refugee crisis in Sudan, we will. That will obviously involve some aid commitment. If there is a request for commitment other than that and it is a commitment that is within our resources to make, then we will look at that very carefully, yes.

JOURNALIST:

Can we keep affording to go overseas for all of these missions?

TREASURER:

Well, we have got troops in East Timor, we have got troops in the Solomon Islands, we have got troops in Iraq, we have got troops in the Gulf. Australia is part of peace keeping operations in the Middle East, so that is a pretty significant commitment and it could not have been done if the Government had not had substantially increased defence expenditure. Now, it is a question in meeting all of those legitimate needs of the resources you have and the contribution that you can make. You have to be wise about it, but I can, in relation to East Timor, in relation to the Solomon Islands, in relation to Iraq and in relation to the Gulf, I believe that Australian troops are distinguishing themselves magnificently.

JOURNALIST:

But can we afford to go over again?

TREASURER:

Well, we can afford all of those commitments and obviously we are affording all of those commitments.

JOURNALIST:

Should we take seriously the threat made by Woodside that they might pull out of their gas interests in East Timor?

TREASURER:

Yes. A development of a gas resource involves a lot of capital, a lot of risk and you get a market opening somewhere in the world and if you take it and everything comes together, you can make it profitable. If you miss the market opening or if the capital looks as if it is at risk, the development can sometime not go ahead and…

JOURNALIST:

Is Labor threatening the project then with their position?

TREASURER:

..well, I will just say it is up to the companies to announce whether or not the project is threatened, but I will just make this point, these projects don’t hang around forever, and if you miss the window of opportunity, there is only so much capital and the investors will move that capital to a project that will go ahead. Last question.

JOURNALIST:

Can we assume that a Federal election will be called soon? We have had yourself visit today, Mr Howard is here next week, we have had Mr Campbell up here and Mr Latham. What can the members of Herbert assume knowing that they are sitting in a marginal seat at the moment?

TREASURER:

Well, they can assume this, that sometime before the end of the year there will be an election and sometime before the end of the year they will get the chance to vote on a representative to send back to Canberra and if you want my opinion, Peter Lindsay is the best representative that they could choose. Thank you.