Transcript No. 99/21

Hon Peter Costello MP

Doorstop Interview

Grand Hyatt Hotel
Melbourne

Friday 26 March, 1999

9.45 am

E&EO

SUBJECTS:

Manila Framework Group Meeting, Transparency Report, Asian economy, Ansett sale, Joint Australia New Zealand currency.

JOURNALIST:

Mr Costello, do you think the Asian crisis is now stabilising and we are seeing a turning point in those crisis economies?

I think youve got to look at it economy by economy. I think Korea has bottomed and turned, I think that there are positive signs in Thailand, we are still worried about growth in Japan, which is again looking flat, zero. But I think that if we can seize the momentum for reform we can build from here in Asia. And building from here in Asia, strengthening economic growth in Asia is good for Australia because we will recover some of our export markets, its good for the world economy. A strong Asian region is good for Australia. Weve managed to ride out the biggest economic downturn since the Second World War, but when the upturn comes it will be even better for our economy.

The Governments proposing a range of measures to improve transparency in financial systems. A lot of other organisations have done the same thing. Does the Australian model differ in any specific ways?

Well, were the first country thats ever released a Transparency Report. Today weve done something that nobody has ever done. There has been a lot of talk in the international institutions that you have got to improve transparency, but how do you go about it? Well, weve put something on the table today. We said countries should release reports, and we did one. And the IMF is now going to use this as a model to see whether it can be applied to other countries throughout the world. This is somewhere where we are leading the world in international reform. Now, one of the other things that we did was we introduced a Charter of Budget Honesty. It requires a Government to report on all of its liabilities, it requires a Government to announce if it goes into deficit, how it will get out again, it requires a Government to have independent costings of election promises. It is the state of the art in world financial reporting. The IMF is now using that as a model for other countries throughout the world. But today weve put another model, we did a Transparency Report and, I think, that this is such a concrete positive step forward, particularly for our regional neighbours to show what they can do, and where they can go.

But how far do you think it is before our regional neighbours will start adopting those sorts of reports?

Well, I think the sooner that some of our neighbours can improve their institutions, their transparency, the sooner you are going to see confidence grow in relation to those economies. So, we did something practical, we put something on the table, its a model that they can use, and I think that this will advance reform in some of our affected Asian regional neighbours.

Are you confident theyll follow suit?

Well, well be encouraging them and we are actually helping some of our neighbours in building these institutions. We are now running seminars to train them in corporate regulation, we are making our bankers available to train them in prudential regulation. This is important for Australia to help build institutions in our neighbours if we want growth to resume in our neighbours, and we do, because stronger Asian growth is good for Australia. Look, weve ridden out the biggest financial downturn since the Second World War, and weve come through it leading the world in growth. Imagine where Australia would have been if Asia had been booming. If we could have led the world in economic growth in an Asian recession, where would we have been if there had been an Asian boom?

Is Asias recovery under threat if they dont become more transparent?

See, you go through a crisis and people say that you have to reform the system, and then the crisis bottoms and people say, oh well, we can forget about the hard yards. The point I am making is, now that the eye of the cyclone has moved on, the mop-up is very important. And thats what building the institutions is all about now because another cyclone is going to come. We dont know now, but there will be further economic crises. We dont know what shape they will take. You start building the infrastructure now, you batten down the hatches, you put down deep foundations so that you can wear our and ride out the next cyclone.

Treasurer, are you favourably disposed towards the Ansett sale, the NewsCorp sale of Ansett to Singapore Airlines?

Well, look an application in due course will be put into the Foreign Investment Review Board, and it will come to me, I imagine. Well make a decision based on the national interest, but I would point out to you that Ansett Airlines, Domestic Ansett Airlines is already totally foreign owned. Its owned jointly by Air New Zealand and News Corporation, which is a foreign corporation.

Do you see any merit in a joint New Zealand and Australian currency?

Well, its not something that were pushing. Were, weve run a monetary policy through a pretty tight time, and I think it has been a successful one, so we are not pushing any changes in relation to that.

Is it something you will consider in the future?

Well, were not pushing it.

Treasurer, just on the issue of the transparency, has the IMF given you any indication of, or are there any feelings to what the IMF thinks of the Governments model that they have put up today?

Yes, the IMF thinks that this is a big step forward. And the IMF thinks that it can now use this as a model. It will put it out, it will see what the reaction is, it will hold it forward to other countries as something that they could engage in. That is the first point. The second thing is, the IMF is now talking about doing transparency reports itself, where countries havent done them.

And I think the IMF may well find this as a model for its own work. This is something weve put forward to the international community so that the international community has a model that it itself can work from.

Have you had any encouragement from your regional neighbours for this report, or is Australia going it alone on this?

No, I think it is broadly welcomed. And I think it will form the basis of some very concrete decisions. This is an important meeting thats happening here today. We have three of the G-7 nations; the US, Canada, Japan, weve got China, weve got all of the affected Asian economies, Hong Kong, Singapore. Theyre here to try and work on putting in place measures that will help Asia come out of the crisis and protect Asia against future financial crisis. This is a big thing for Australia and it is a big thing for Melbourne. And weve put something practical forward which will form the basis of their discussions.

Thanks.