TRANSCRIPT

THE HON PETER COSTELLO MP

Doorstop

Senate Alcove Courtyard

Parliament House

Thursday, 11 September 2003
12 noon

SUBJECTS: Labour Force, Senate Reform, Interest Rates, Australian

Dollar

TREASURER:

Well, today’s unemployment figure of 5.8 per cent is the lowest

unemployment rate in Australia since January of 1990. It is the lowest

rate in 13 years and we saw in the month, 80,000 new jobs created, 63,000

full-time jobs, and even on quite strong participation rates, a fall

in unemployment below 6 per cent to 5.8. And we haven’t seen that since

Paul Keating’s recession of 1990. This is the object of economic policy,

to grow an economy so that people get job opportunities. And what makes

this quite remarkable, is, it has come at a time when the international

environment is so weak, when we have had an American recession, when

we have had the worst drought in a hundred years, when we have had the

SARS virus affecting our tourist trade. And it indicates that the domestic

economy in Australia is very strong. We have seen that in relation to

retail trade, we have seen it in relation to the consumer confidence

figures that came out yesterday, showing consumer confidence was 16 per

cent above its long term average. We have seen it in relation to business

confidence that notwithstanding, this is the remarkable thing, notwithstanding

a very difficult environment which is as bad as we have had in decades,

the Aussie consumer has been confident, supported by low interest rates.

Consumer confidence has been up supported by tax cuts, 80,000 jobs came

about in the month and unemployment is now at 13 year lows.

Now these figures bounce around a lot – let me be the first to say that

– but the thing you can take away from these figures, is that in the

midst of that very difficult international climate, the good news is

more Australians had jobs…

JOURNALIST:

Where to from here? How low can it go?

TREASURER:

Well, you look back for a short period of time, in the very late 80s,

we were below 6 per cent, and then if you want to go back further than

that, you would have to go back to 1981 to see Australia below 6 per

cent. Now, I think we could lock unemployment in below 6 per cent if

we could get our industrial relations policy through the Senate. If we

were to reform the Australian system of industrial relations we could

lock these sorts of figures in. And again I call on the Opposition in

the Senate to pass those reforms. Now, let’s really make a concerted

effort to lock in low unemployment in this country. We have got a historic

opportunity here, and if Australia grabs it we can go to territory we

haven’t been in for a long time.

JOURNALIST:

But without Senate reforms Treasurer, (inaudible) saying it is unlikely

that the rate would stay below 6 per cent for any length of the time.

TREASURER:
Well, these figures will bounce around. Look, I think last month

you looked at a figure that said 50,000 job losses, this month, 80,000

job gains. In reality that doesn’t happen from month to month. I have

always pointed out in relation to the Labour Force that it bounces around.

But the thing you can take away from this, is, that this is a 6-per-cent-below,

in the most difficult trading conditions that we have had in decades.

And if you can do that in the kind of trading conditions we have had

in the last quarter and are going through in this quarter, imagine if

all those things turned in our favour. Imagine if the drought turns,

and imagine if the world economy turns, and hopefully the SARS virus

is turning, that will give you cyclical improvement. But the thing we

wait for, we yearn for in Australia is the structural change, the labour

market change. We would have an opportunity in a generation to lock in

low unemployment if we could get our policy through the Senate.

JOURNALIST:

Are there any implications for inflation Treasurer, with these figures?

TREASURER:

I don’t think that I see any implications for inflation, no, and I think

inflation expectations are quite low.

JOURNALIST:

Do you see…

JOURNALIST:

Does this give the Reserve Bank more scope for considering an interest

rate rise?

TREASURER:

The picture of the Australian economy which I have been painting for

some time now, is a domestic economy which just defies international

negativity. You have got an international situation which is as bad as

it has been. And here we are on September the 11^th, two years

after the worst terrorist outrage we have seen, we are one year after

the Bali Bombing, we have been through a war in Iraq, we have had a new

virus discovered, we have got a weak world economy. And yet the Australian

consumer is confident, optimistic, supported by low interest rates and

tax cuts. And isn’t that great news, that in the midst if all of those

challenges, it has managed to create more job opportunities for people

in Australia.

JOURNALIST:

So do you think the next movement in rates will be up or down Treasurer?

TREASURER:

Well, I mean do you expect me to answer your questions.

JOURNALIST:

With so many positive, with so much positive news about the economy though?

TREASURER:

Well let me ask you, any other questions?

JOURNALIST:

Are Australian consumers too confident though as lending figures out

today that show more rises in personal debt, do you think that we do

have to slow down a little?

TREASURER:

Well, Australian consumers are confident we know that. We saw that in

the consumer sentiment survey yesterday, but there are reasons for that

confidence. One is that there are more job opportunities than there has

even been in Australia. You would expect them to be confident. The confidence

survey is the other side of these unemployment figures. They are also

enjoying the lowest interest rates in 30 years, so there are reasons

for that as well. The only thing I would say is this, that confidence

at this time, remarkable as it is, has actually been good for the Australian

economy because it has kept domestic strength at a time of international

weakness. And what we look forward to is a turn in the international

conditions.

JOURNALIST:

Are you surprised at the resilience of the Australian economy and are

you willing to declare it unbeatable?

TREASURER:

This is remarkable resilience. This is extraordinary resilience. At a

time of such international difficulty the Australian consumer is confident

and that has kept the economy going and keeping the economy going has

created the jobs which has contributed to the confidence. So, the circle

has gone round, and it has been a positive circle all round for Australia,

and you know, this is what economic policy is about. At the end of the

day when you hear people talking about growing an economy, remember at

the end of the day, the object is to give people job opportunities, the

kind of opportunities we are seeing at the moment.

JOURNALIST:

Have you decided on a date yet for MYEFO, and with the way the economy

is going at the moment are you expecting to upwardly revise your forecast

on economic growth in the coming year?

TREASURER:

Well bear in mind this, that the actual outcome for the last financial

year was a little weaker than we forecast. It came in at 2.7, we forecast

3 in average terms. You see, you have got two factors going on here.

You have got enormous domestic resilience and international weakness.

As I said at the time of the National Accounts, all of that growth, that

domestic growth which contributed 1.5 per cent to GDP in the quarter,

was taken away by the international economy. So when we are looking at

growth forecasts we have to take both of those factors in. One working

incredibly well for us, one working against us.

JOURNALIST:

Your dollar ran up on this data Treasurer, is the Australian dollar continuing

to be a hurdle for our exporters in the third quarter?

TREASURER:

Well, I said when the dollar was going through a period of weakness two

years ago, that there was a super-competitive exchange rate, it was great

for our exporters, that no longer applies. That is an added difficulty

for them. Add to that difficulty, the fact that the world is weak, there

is not as much demand for their products, that is making life more difficult

for them. But the good news, is, for the agricultural exporters in particular,

the factor that was even worse than both of those – drought – could be

turning. I am not going to proclaim the end of the drought, but I am

going to say, that it is a little more positive than it has been for

the last 12 months. OK thanks.