Interview with Neil Mitchell

3AW

Thursday, 26 July 2007

10.07 am

SUBJECTS: June quarter Consumer Price Index, housing affordability, sales of uranium to India, Mohamed Haneef, election, Kevin Sheedy

MITCHELL:

Speaking of money matters though, there’s a threat that interest rates are going up as a result of inflation figures as we reported yesterday.  On the line is Federal Treasurer, Peter Costello, good morning.

TREASURER:

Good morning Neil.

MITCHELL:

Fuel 9.1 per cent, food 8.4, vegetables 6.1, are you beginning to accept that people are battling a bit, people are struggling?

TREASURER:

Well fuel has gone up quite a lot, you are quite right, 9.1 per cent in the June quarter and that was the major contributor to inflation.  The better news is that in this quarter, which is the September quarter, it looks like it has come down a little, so right at the place that it was in the June quarter.  Food overall increased 1.7 per cent, the biggest increase, as you said, was in relation to fruit and vegies, but fruit has been very volatile for quite some time, mainly due to cyclone activity.  So overall the Consumer Price Index increased 2.1 per cent for the year, which would be one of the lowest we have had in the last 10 years.

MITCHELL:

So would you accept people are battling a bit, struggling?

TREASURER:

I accept that price rises for petrol have been quite significant and I think that will affect family budgets.  But you have got to put this in context Neil, 2.1 per cent over the course of the year would be one of the lower ones in the last 10 years.  And certainly before that, when inflation was rising at 5 per cent, and in some cases double figures, it would have been considered very very low.

MITCHELL:

So you are quite satisfied with this result?

TREASURER:

Well it is 2.1 per cent over the course of the year.  It is our aim to keep inflation between 2 and 3 per cent, so we are within our band.

MITCHELL:

So why do we get these reports about people in mortgage stress and rental stress, people who haven’t got the money to pay for housing, if they are not battling what’s the problem?

TREASURER:

Well you have got to be very careful when you see figures of mortgage stress.  I think those figures were prepared by the Housing Industry Association and they prepared figures on the basis of people who would be paying 30 per cent of their income in mortgage payments, now that is what they define as ‘mortgage stress’.  It is not repossessions, because repossessions are probably the lowest in the world.  What they define as mortgage stress is, as I said, when you are paying 30 per cent of your income in mortgage.  For some people that is a financial decision that they have made, and by the way includes people who are investors in housing.

MITCHELL:

Do you think people are over-committing themselves in other areas, whether it is a house or it is a new plasma screen TV or a flash car or whatever, is that what’s happening?

TREASURER:

Some people do over commit themselves, yes, some do but the majority don’t.  And at the current time when we have more people in work than ever before and unemployment at 33 year lows, because incomes are rising the community as a whole, the community as a whole has had wage increases which have far outstripped price increases.

MITCHELL:

But I keep getting this message from people, ‘we’re doing it tough’.  Do you believe people are doing it tough?

TREASURER:

I think people are always doing it tough Neil.  All of the indicators show, of course, that incomes are stronger now than they were 10 years ago and employment is much stronger.  So if you want to compare it to 10 years ago their position has improved, but does that mean people don’t have worries?  No, people always have worries.  But if you are worrying about getting a job, your worry should be a lot less today than it was 10 years ago.  If you are worried about interest rates, they are a lot lower than they were 10 years ago.  If you are worried about incomes, they are higher than they were 10 years ago.

MITCHELL:

Well speaking of interest rates do you accept that an increase is inevitable before an election?

TREASURER:

Neil, I put in place the policy that covers interest rates in this country, which is that we will shoot to keep inflation between 2 and 3 per cent and that interest rates will be targeted at keeping inflation between 2 and 3 per cent.  Inflation is currently between 2 and 3 per cent – that is good, we are happy with that.  Now the Reserve Bank is charged with making an assessment in relation to inflation.  The only thing I will say is that it is currently right where we want it. 

MITCHELL:

Well that means there is no need for an interest rate rise.

TREASURER:

Well I never comment on the future movements in interest rates.

MITCHELL:

You have gone very close.

TREASURER:

Well no, no, no.  I will explain our policy and I will explain what it is directed towards, but I am not going to give calls because if I give calls about directions of future interest rates it has an affect on the market, you know that. 

MITCHELL:

Well do you agree, when you talk about whether people are doing it hard or not, do you agree that housing affordability is an issue, that people are struggling with it?

TREASURER:

Well for most Australians the fact that house prices have gone up is something they welcome.  That is people who have bought or are buying a house, they want to see the price of their house go up.  Now there is another class of people who do not own a home and want to get into the market, that class of people, first home buyers, do not want to see house prices go up.  Or if I could be more precise, they do not want to see house prices go up right until the day they buy a house, when they want to see them go up thereafter.  Now I think it is that group of people that are particularly worried about housing affordability.  It is helping the first home buyer get into the market.  That is the issue I think where housing affordability rears its head.  And we have the First Home Owners Scheme, which gives $7,000 to first home buyers.  I think we could reduce the cost of homes for the first home buyers with more land supply, with better planning improvements, I am now dealing with State Governments and I must say the Queensland State Government has just announced a big land release which they reckon will cut the cost of new homes by $20,000.  I would like to see stamp duty cut because that is another big cost for first home buyers.  I think there are many things that can be done here with a coordinated policy.

MITCHELL:

OK, can I ask you about a couple of other things, selling uranium to India, are you comfortable with the idea of us selling uranium to India?

TREASURER:

Well we can’t sell uranium to India at the moment because it is not a member of the non-proliferation treaty.  So there would have to be a change of policy by the Government and there would have to be safeguards put in place before the Government agreed to that.

MITCHELL:

Will that happen?

TREASURER:

Well it hasn’t happened to date.  There is speculation in today’s paper that the Government will look at that and if it comes to the Government of course we will look at it.

MITCHELL:

Are you aware that you are looking at it?

TREASURER:

I am aware that work is being done in the area, yes.

MITCHELL:

What would your view be then, would you sell to India if they didn’t change their position?

TREASURER:

I would want to know that there were very strict safeguards in place before we sold to any country which was outside the non-proliferation treaty.

MITCHELL:

And at this stage India doesn’t have those safeguards does it?

TREASURER:

I imagine that is what the work that is going on is going into.

MITCHELL:

Mohamed Haneef, do you agree that the case has been badly handled?

TREASURER:

I think that the Australian Federal Police did a very good investigation.

MITCHELL:

It doesn’t look it.

TREASURER:

When you get to the charges, our system is you have got an independent Director of Public Prosecutions, he looks at it, he decides whether there is enough to charge.  He is now having another look at it, obviously to assess the evidence and to assess what evidence is admissible.  And he will announce his decision I imagine in a couple of days.  But I think the Federal Police moved very quickly and very swiftly.  The DPP will have a look at the admissible evidence.

MITCHELL:

It doesn’t look good from the outside, it looks messy, it looks sloppy doesn’t it?

TREASURER:

We can’t say that Neil, until we know what the decision of the DPP is and for all we know the DPP might say it is very much on track.

MITCHELL:

John Howard said this week if he wins the election he will be Prime Minister in two years time, will you be Treasurer?

TREASURER:

Well let’s win the election first.

MITCHELL:

Do you want to be Treasurer?

TREASURER:

Well I am very focussed on being Treasurer.

MITCHELL:

After the election?

TREASURER:

I’m very focussed on being the Treasurer, we have got to win the election, I have got to be re-elected Deputy Leader.  There is a whole lot of ifs in that but I am very happy being Treasurer.  I think there are enormous challenges and although we are in a much better situation than we were 10 years ago I think there is still a lot of work to be done.

MITCHELL:

So would you be happy to be Treasurer after an election?

TREASURER:

I have said I would be very happy to continue to serve in whatever capacity, including Treasurer, of course I would.

MITCHELL:

For as long as the Party wants you.

TREASURER:

Well let’s not go there Neil.

MITCHELL:

Have you talked to the Prime Minister since this book came out?  John Winston Howard.

TREASURER:

Of course, yes.

MITCHELL:

Did you discuss what’s in it?

TREASURER:

Of course, yes.

MITCHELL:

Was he a bit grumpy at what you said?

TREASURER:

Oh, no.  We had a discussion about the whole thing and we had a discussion about the inevitable media that would come about; I think it has blown itself out.

MITCHELL:

Do you?

TREASURER:

Yeah.

MITCHELL:

You don’t think people care that you were so critical of the Prime Minister, because there is still that speculation that you can’t really work with him after an election.

TREASURER:

Look I think if you have read the book you would be hard pressed to actually find in the middle of that book a critical statement.  Of course by the time the promoters had finished with it you would have thought it was on the front page in neon lights.  Read the book Neil…..

MITCHELL:

I have I have got it in front of me, I’m interviewing the author in a minute.

TREASURER:

You will be hard pressed to find it.  I must say I think the publicist did a great job, I think the author will be very happy with himself.

MITCHELL:

Do you really do a good impersonation of John Howard?

TREASURER:

No.

MITCHELL:

Do you want to show us?

TREASURER:

No.

MITCHELL:

That’s a surprise, why are you in strife?  Why is the Government in strife?  I mean you keep telling me the economic figures are good, we are in touch, all these sort of things.  What has it gone so sour?

TREASURER:

Well I think, I think the economic indicators are good but I think there are a lot of people in the public who think to themselves, ‘oh well this just runs itself’.  You know, 4.3 per cent unemployment, budget balanced, interest rates at 8 per cent, no debt, the establishment of the Future Fund; this is a good economy, it is running itself, we can afford to put in a pack of inexperienced people who have bad policy.  Now my message to them is you can destroy things very quickly.

MITCHELL:

That doesn’t explain why you are on the nose, that explains why they might go for Labor, why are you on the nose?

TREASURER:

I think that people think they can afford to have a bit of a change without it having much effect on them.

MITCHELL:

Then why would they want to change?

TREASURER:

Well you know I think there are always a lot of people that always say, ‘well you know, one group of people have been in government for a while’, they get interest in the possibility of change.  They think that there wouldn’t be any risk and…….

MITCHELL:

Is this change for change sake?

TREASURER:

Well I think there are a lot of people that say, ‘oh well two teams, give one a go, let’s have a look at what the other team can do’, and if they think there is not going to be any risk then they half consider it.  But at the end of the day my point would be: it’s your job, it’s your business, it’s your mortgage.

MITCHELL:

But what have you done wrong?  Have you done anything wrong?

TREASURER:

Well as you move around and you talk to people, and obviously I do talk to people a lot Neil, and people don’t raise with you particular policies.  Let me say this to you Neil, I have never had anyone say to me, ‘I will vote for Kevin Rudd because I like his policy on X’, because he doesn’t have any policies.

MITCHELL:

Well are they just sick of John Howard?

TREASURER:

I think as I said earlier, that they think there are two teams in politics, one has been there, they have done a good job but you know they are sort of interested in looking at the alternative and if it doesn’t appear to be a risky alternative they will be half attracted to it and my point is that it is a very risky alternative.

MITCHELL:

Would you have a better chance of winning than John Howard?

TREASURER:

I’m not a candidate.

MITCHELL:

But you are a political observer of some experience would you have a better chance of winning?

TREASURER:

No, I’m not a candidate Neil so I am not even thinking about that.

MITCHELL:

Couldn’t you just have a ‘no comment’?

TREASURER:

Not even thinking about it.

MITCHELL:

All right thank you very much.

TREASURER:

Very good to be with you Neil and all the best.

MITCHELL:

Saint Kevin?

TREASURER:

I got a message from my son yesterday and he said, ‘my world is collapsing, I have known nothing but Sheeds’.  And I think there will be a lot of Essendon supporters that will think that, after 27 years.  They can’t even remember another coach, he has been a great personality, he has been one of the amazing promoters of the AFL, he has been the face of the Essendon Football Club for 27 years and as I said yesterday, this is the end of an era.  And all credit to him, 4 premierships, 880 games as a player or a coach, he is a wizard, all credit to him.  From the club’s point of view the club has got to go on to a new era now.

MITCHELL:

Can you use your influence and have the game against the Eagles moved to Melbourne?  Have a good farewell?

TREASURER:

I’ll make one prediction, whoever wins that game there will be a lot of coat waving going on.

MITCHELL:

Thank you very much for your time.

TREASURER:

See you Neil.