TRANSCRIPT

THE HON PETER COSTELLO MP

Treasurer

Doorstop Interview

Senate Alcove Courtyard

Parliament House, Canberra

Thursday, 9 December 2004

12 noon

 

SUBJECTS: Labour force figures

JOURNALIST:

Is it good news today for Christmas?

TREASURER:

I think this is the kind of good news for Christmas that every Australian will

welcome. The fact that more Australians than ever before are in work and unemployment

has fallen again to 5.2 per cent, the lowest level of unemployment in 27 years.

Now, in the month of November, there were 28,000 new full time jobs created.

It is almost 1,000 jobs a day and they were full time jobs in the month of November.

Over the course of the year 2004, there have been 250,000 new jobs created in

Australia and 187,000 of those have been full time jobs. That is the equivalent

of two capacity crowds at the MCG in full time jobs over the course of 2004,

which has given more Australians than ever before the opportunity to work.

Now the unemployment figures bounce around quite a bit, I have always made

that point, but the significant thing about this is that for 15 months now the

unemployment rate has been below 6 per cent. And what that tells you is that

unemployment has moved down a notch in Australia. It can bounce from 5.2, 5.3,

5.5 – it can bounce around and you can get a correction from month to

month, but the significant fact is now for 15 months unemployment has been below

6 per cent.

We haven’t been in this territory for 27 years – since the 1970s, the

late 1970s – and to have had the run of economic growth that we have since 1996,

we have seen the payoff in jobs. 1.4 million more jobs in Australia than there

was back in 1996.

Economic policy is all about getting good outcomes for people and families

and if you can get more people in work, if you can get to a situation where

those that are looking for work can find it, then our society will be stronger

for it, and it will be one of those Christmases where more Australians will

have more opportunities than they have had for a long time.

JOURNALIST:

But with the economy clearly slowing, can this momentum be maintained?

TREASURER:

Well, for 15 months now unemployment has been below 6 per cent…

JOURNALIST:

But looking at the future, the coming months?

TREASURER:

…and our economy continues to grow. And it is not all plain sailing out

there in the economy. We are going to have challenges – I keep on saying

we are going to have challenges – just as we had challenges in the past.

We had an Asian financial crisis, we had the worst drought in a hundred years,

we had SARS and terrorism and war. We have had challenges over the last eight

years and we will have challenges in the future, but if we can keep our economy

growing then we can keep people in work.

JOURNALIST:

What challenges is the economy facing in the future?

TREASURER:

Well, we have got challenges that I have identified in relation to oil prices.

There are challenges in relation to the exchange rate which is making things

harder for our exporters. There are always challenges and we just have to keep

reform going in this country so that we can meet those challenges.

JOURNALIST:

Is there a danger this will feed through into wages growth though, these low

figures?

TREASURER:

Well, there is no reason that it should. Let me make this point – one

of the reasons why we have been able to have low unemployment in Australia is

that we haven’t had wages break outs. In the past, when we have had lower

unemployment the tendency has been for people to try and increase wages and

if you increase wages then you make firms less competitive and you put pressure

on interest rates. Now, we haven’t been in this territory for 27 years.

There is no reason why people can say that the Australian economy can’t

sustain a 5 per cent unemployment rate, but it won’t sustain it if we

have wages pressures building up. Let’s just keep wages growing as they

are in real terms, the economy growing, productivity improving and we can sustain

low unemployment.

JOURNALIST:

There has been an argument over the years about what is full employment in

Australia. Is 5 per cent close to it?

TREASURER:

Well, back in the early 1990s, the OECD thought that full employment in Australia

was 6 to 7 per cent. Now we now know that was wrong. We now know that we could

take unemployment lower. We are now heading down towards 5 per cent. Many people

regard 5 per cent as full employment in Australia…

JOURNALIST:

Do you?

TREASURER:

…that seems to be the general consensus. Well I don’t know. If

we can get it lower we can test that proposition as well.

JOURNALIST:

And can we get it lower?

TREASURER:

I think if we reform our industrial relations system, I think if we encourage

enterprise bargaining, I think if we encourage productivity, if wages growth

is restrained, if we can change unfair dismissal laws, we have the opportunity

in a growing economy to take unemployment lower.

JOURNALIST:

Treasurer, how do you reconcile the obvious strengths in the labour market

with the weakness in the National Accounts?

TREASURER:

Well the weakness, look, there are two factors that I remarked on at the time

when the National Accounts came down. Firstly, exports were weak and the biggest

attraction from growth in the National Accounts came from net exports and exports

were weak.

The second thing is we have seen a slowing in relation to the housing sector.

A slowing that I have been calling for, for two years – and it is not

unwelcome. I say this, I said this in the Parliament yesterday – it is

not unwelcome. You couldn’t expect to have the kind of price increases

that were going on, occurring year after year without a major adjustment. So

what we are looking at in relation to the housing market is an orderly readjustment

and I think there are signs of that coming through. So you are getting an orderly

readjustment on the domestic side and the National Accounts were also principally

explained by the net export position.

JOURNALIST:

You referred to, a couple of times to the net export problem. Are you going

to take a fresh look in the context of the 2005 Budget at how the Government

can boost exports?

TREASURER:

Well, the Government is always looking at boosting exports. The most important

thing that we think you can do is you can make your domestic economy as competitive

as possible to help your exporters. There are some factors that are outside

the control of the Government, exchange rate factors which have made life –

and I have said this over and over again – made life harder for Australia’s

exporters. But we do think it is important to keep the domestic economy as competitive

as possible to help Australia’s exporters.

JOURNALIST:

Treasurer on another matter, do you think it is a good idea, this mutual obligation

proposal to give a remote Aboriginal community petrol bowsers if they keep their

kids and their house clean?

TREASURER:

I think it is a terrific idea, this is mutual obligation, this is parties helping

each other. The community gets helped, the community in turn helps the kids.

Let’s be clear about this, this is all about helping the kids. Helping

them with health, helping them with hygiene. Nobody has forced anybody to enter

into this agreement, it has been entered into because improved petrol will be

good for the community and improved health will be good for the community. And

I welcome it, I think it is the kind of mutual sharing of responsibility which

can lead to much better outcomes.

JOURNALIST:

Are there better ways to help a community like that though where there are

petrol sniffing problems?

TREASURER:

Well look, you are quite right, it is important that we work on educating kids

against petrol sniffing, you are absolutely right about that. And it is important

that parents and community elders work on explaining that with kids. But to

be frank with you, I don’t think that banning petrol sales is feasible

in a modern society. Petrol will always be sold and it will always be used.

It is a question of educating kids that the use of petrol is in a car, not in

a milk carton.

JOURNALIST:

Treasurer, Government backbenchers are meeting to discuss weaknesses in tax

and welfare. Are you gearing up for some more large scale tax reform next year,

especially after July 1, and along what lines?

TREASURER:

Look, we have got proposals to reform the tax and welfare system that we announced

two years ago. We are still trying to get through the Senate reforms to Disability

Support Pensions. So this is very much on the agenda and what we will do is

we will finish what we have already announced, let those measures take affect,

but whilst we work on finishing those measures if there are further improvements

that can be done we will look at those as well.

JOURNALIST:

(inaudible) Xstrata’s proposed takeover of WMC at this point?

TREASURER:

Well look, if somebody makes a successful offer for a company it is conditional

upon foreign investment approval. And if they put in an application for foreign

investment approval that will be considered as all of these things are and they

will get a fair hearing as all people do and it will be done in accordance with

commercial in confidence. I won’t be giving any off the top of the head

decisions here in the courtyard of Parliament House before the application has

been lodged.

JOURNALIST:

Some Government Senators have called it maverick and marauding and sort of

axing jobs all over the world and so on, what would you…?

TREASURER:

Well, they can put their submissions to the Foreign Investment Review Board

too.

JOURNALIST:

Do you have a release date yet for MYEFO?

TREASURER:

Look, I have said that if we can release it before Christmas we will and we

are working very hard to see if we can do that.

JOURNALIST:

Coming back to the main game, it has been reported that you have warned Government

MPs that there is a risk of recession ahead. Can you spell out what you meant

by that?

TREASURER:

Well that report is false. I notice that there was a newspaper that carried

such a report today. Can I tell you, if I had said that Australia risked a recession,

I don’t think it would have been on page 32 of the Herald Sun, would

it? I think it might have made another news outlet in a more prominent place.

What I said, and what I was quoted as saying, was that people don’t want

to think that the economy is all plain sailing. There are challenges, that is

what I said, and what are those challenges? The challenges are that we have

got oil prices at very high levels, we have got the fall of the US dollar, we

have got a high exchange rate, we have got to manage the slow down in the housing

market. Now, is it unusual to have challenges? Well, no. I have been through

an Asian financial crisis, a US recession, the worst drought in a hundred years,

SARS, terrorism, the war in Iraq.

JOURNALIST:

Is Australia therefore recession proof?

TREASURER:

So, you know, you have got to hand it to some of these inventive headline writers.

They are pretty good. You go and ask the headline writer what he meant by it.

JOURNALIST:

The dollar has come off quite a lot in the last couple of days, is that a welcome

move from your point of view?

TREASURER:

Look, I welcome the fact that a more competitive exchange rate helps our exporters

and I acknowledge the fact that a high exchange rate makes it harder for our

exporters. The Government doesn’t target a particular exchange rate, we

float our currency. But we recognise the impact that the currency has in relation

to exporters in particular.

JOURNALIST:

What is your New Year’s message to the market for the business community?

What would you like to see?

TREASURER:

Well, I would like to see business continue to be profitable, I would like

to see business continue to invest. I think there is room for a lot of investment,

particularly in the resources area, which will help the export position. And

I would like to see business continue to create jobs because jobs is what it

is all about – job opportunities for young Australians, people to have

the opportunity of meaningful work. The lowest unemployment in 27 years is something

that I think all Australian will take pride in. Thanks very much.