Channel Nine News
December 5, 2005ABS, tax havens, RBA, competition policy, MYEFO – Doorstop Interview, ABS House, Canberra
December 8, 2005Press Conference
Parliament House, Canberra
Wednesday, 7 December 2005
12.00 noon
SUBJECTS: National Accounts September quarter 2005, leadership, Robert Gerard,
competition
TREASURER:
Today’s National Accounts show there was modest growth in the Australian
economy in the September quarter.
That growth was 0.2 per cent for the quarter and 2.6 per cent through the year.
This comes after a stronger June quarter.
The non-farm GDP was stronger than the total GDP which indicates that the farm
sector was growing more slowly.
National income remains very strong. Real Gross Domestic Income is 4.8 per
cent higher through the year and this has been supported by higher prices for
commodities and very favourable terms of trade. In fact, Australia’s terms
of trade are now as high as at any period since the peak of 1974. What we are
now seeing going on as a consequence, particularly of the mining boom, is very
strong investment.
ABARE recently calculated that Australia had 84 projects in advanced stages
totalling $30 billion and $86 billion in projects at a less advanced stage.
Household consumption was moderate, growing at 0.6 per cent to be 2.7 per cent
higher through the year. No doubt this was affected by higher petrol prices.
And also, the housing sector continues to ease.
So what we are seeing in the Australian economy at the moment is the household
sector moderating, quite possibly people using the chance to build savings,
but economic growth now being led by business investment.
Unfortunately, exports continue to disappoint on the volume side. Even during
this quarter export volumes did not grow in the way we would have anticipated
and subtracted 0.3 of a percentage point from GDP growth.
A big part of the reason for that could well be that as the new investment
goes in, supply chains have to be stopped, for construction to take place; we
saw that at Hay Point with BHP, where BHP had to close the terminal for a period
to put in new investment. But what we would expect over the forthcoming quarter
is, as that investment begins to take effect, export volumes will continue to
grow.
Inflation remains contained despite higher petrol prices, with the inflation
indicator closest to the CPI and the National Accounts growing at 2.3 per cent.
The Australian economy continues to grow albeit at a more modest level in the
September quarter. It is supporting unemployment which is now at 30 year lows
and notwithstanding a very large increase in the terms of the trade, inflation
remains moderate.
We can’t afford to get complacent about this outlook. The minerals boom
will not last forever and we cannot factor in these sorts of prices forever.
Nor can we say that because demand is strong, Australia’s suppliers will
necessarily get contracts overseas. Australia’s suppliers have to beat
other producing countries by getting infrastructure in place so that they can
take advantage of those markets while they are strong.
The National Accounts do tell a story of a moderating household sector and
housing sector, the sector that we did worry about overheating some years ago,
being supported now by very strong business investment, a business investment
which will give Australia greater capacity in the years which lie ahead.
JOURNALIST:
Mr Costello, don’t these figures essentially show us we’re back
in “J curve” territory and what is your assessment about how long
it will take for that surge in business investment to boost the export (inaudible)?
TREASURER:
I am just trying to remember what the “J curve” was. Laura you
have been around a lot longer than I have. I am sorry, I take that back. No,
it doesn’t. What this shows us is that on very favourable terms of trade
business is now investing record amounts; amounts that we haven’t seen
in our lifetimes and terms of trade that we haven’t seen since the mid-70s.
But it takes time to get infrastructure in place. If you are building a new
train on the North-West Shelf for LNG, it takes time. If you are expanding the
capacity at Hay Point, it takes time. If you are going to reconstruct Dalrymple
Bay, it takes time. Now when the investment is concluded, I have no doubt that
exports will flow and flow very strongly. But it is a question here of lifting
that capacity. You saw in relation to October’s figures a narrowing of
the trade deficit. As this investment comes online over the course of this quarter
you will see that continue and you will see volumes begin to lift. Now, these
prices have given Australia very strong terms of trade, the only point I make,
and I made this point again, this will not be permanent. Every other country
in the world that is a mineral exporter will be trying to take advantage of
them. And we will be able to take advantage of them if we beat those other countries.
JOURNALIST:
Mr Costello, do you think we rely too heavily on those prices particularly,
as a lot of economists are saying, you know the times are so good, now possibly
areas in tax reform, do you think we rely too much?
TREASURER:
Well, I just make this point. If a terms of trade improvement and a mineral
price improvement is going to be temporary you can’t count on it permanently.
You can’t say that we will make some permanent change based on a temporary,
favourable climate. Permanent changes will have to be based on the back of permanent
outlook. And so the point I would make in relation to the terms of trade –
I want to re-emphasise this to you – it is not our thinking that this
will last for ever, I wish it would. I am quite confident that the demand will
last for a long time, coming out of China and India. But as prices go up what
happens is every other country around the world starts boosting its capacity
– Brazil starts boosting its capacity, Indonesia starts boosting its capacity,
Argentina starts boosting its capacity – if you boost your’ s first and
fastest, you will get to take advantage of it. But you can’t rely on being
able to take unique or total or unchallenged or unrivalled advantage of these
changes.
JOURNALIST:
Mr Costello on the face of it 0.2 per cent growth in the quarter makes a 3
per cent target pretty hard to hit for the year. Do you think this quarter’s
low growth is an aberration?
TREASURER:
Well, we’ll be looking at our mid-year forecasts when we bring out the
Mid-Year Review. Our forecast is for a 3 per cent growth. I would agree with
you that this is a slow start to the year at 0.2 percent but all will be revealed
when the Mid-Year Forecast comes out, but I think 3 percent is still achievable.
JOURNALIST:
You said yesterday that your Mid-Year Budget would come out before Christmas
without any sort of surprises in the GDP (inaudible). Does this constitute
a surprise to you?
TREASURER:
No. This won’t knock-off the program to bring out the Mid-Year Review
but I’m glad we waited for these figures because as I said they’re
modest growth. Good growth, very strong business investment, a good quality
of growth but modest, particularly when you compare a 0.2 in this quarter to
a 1.3 in June. So I think it proves it’s worthwhile waiting for National
Accounts before you update your Mid-Year Forecast. Bear in mind, this is the
first quarter we have received in this financial year, in the ‘05-‘06
financial year. So when we go into our Mid-Year Review we’ve only got
one quarter of data for the whole of the financial year.
JOURNALIST:
Treasurer, given the economy is growing at a sort of modest pace and that the
terms of trade is at the best levels since 1974, where is the growth going to
come from when commodity prices come down.
TREASURER:
Growth will come in my view from exports for quite some time, particularly
if we can get this infrastructure and this investment in.
JOURNALIST:
…inaudible…
TREASURER:
Incomes are strong and profits are very strong. The company profit to total
factor income is the highest ever recorded in Australia. Now, if the housing
and the domestic consumption slows and the business investment and the exports
start picking up, wouldn’t it be lovely if in the years to come as they
come off again, household consumption is ready to strengthen again. If you
could do that, then you’d have continuing growth in an economy which has
already come quite a long way.
JOURNALIST:
Treasurer…
TREASURER:
Sorry, John, and then Jim.
JOURNALIST:
On these figures does it worry you that …inaudible… working more
but producing less? Productivity is so, well, negative.
TREASURER:
Well the ABS calls an end to the most recent productivity cycle and they’ve
done a report. We had a very strong productivity cycle in the late 1990s.
We had a strong one from the late ‘90s to 2003-2004. That cycle has now
ended. And I think the reason for that is as we know, growth has moderated
in the Australian economy, whereas employment is still very strong. So as a
consequence of that, your productivity is moderated and a new cycle begins.
What we’ve got to do is we’ve got to make sure we make every post
a winner over the years to come so we can keep that productivity going. A big
part of the reason for IR reform. I believe in relation to regulatory reform
we could do a lot more to get infrastructure built quicker and properly priced
in this economy. We ought to have a national electricity market, we ought to
have a national gas market, we ought to have one regulator over critical infrastructure
at ports, like Dalrymple Bay. You know, we’re one country, we’re
20million people. Do you think we can afford 8 competition regulators dealing
with our export infrastructure, you’re going to run out of good qualified
people to run those things and I don’t think we can afford it. Jim.
JOURNALIST:
Treasurer, after this slow start, as you put it, are you still confident that
you will, or Australia will still be able to at least meet the budget estimates
of growth?
TREASURER:
Jim, we’ll update our forecast in the Mid-Year Review, so I’m not
giving any formal forecast. It is a slow start to the year, but a 3 percent
growth would still be achievable, notwithstanding this slow start, but I will
give you a final word on that at the Mid-Year Review which will be before Christmas.
JOURNALIST:
Can you give a commitment today that you’ll hand down the Budget next
year?
TREASURER:
Well, I’m preparing the Budget and I’m preparing it to be handed
down by me. I’m not preparing it be handed down by anybody else. I can
assure you of that.
JOURNALIST:
Does the camera lie, Treasurer?
TREASURER:
It can. Yes, it can.
JOURNALIST:
What would you say to people who picked up the paper this morning…
TREASURER:
I would say this…
JOURNALIST:
…and saw you and John Howard are at each other’s throats?
TREASURER:
Well you wouldn’t have concluded that from that picture, would you?
JOURNALIST:
Well the other thing, …inaudible…
TREASURER:
What I would say is, as you know, I think we’d been seated together for
2 hours in the Party Room, for 2 hours in the Parliament, and I think after
that, for 3 hours in the Cabinet. We’d be on and off sitting next to each
other for 7 to 8 hours yesterday. If the camera snaps for 7 hours and 59 minutes
and you’re side by side, that’s not the picture they’re interested
in, you know that. And, sorry I should say that to our camera people, you know
that. I’m sure if I photographed you people here for 7 or 8 hours I could
get a shot where you weren’t looking at each other and that’s not
because you’re not friends, because I know you all love each other.
JOURNALIST:
…inaudible…
TREASURER:
Mr Brissenden, sir.
JOURNALIST:
Thank you very much. On the Robert Gerard matter, should the Tax Office have
referred the audit report alleging tax evasion, his tax evasion to the DDP,
as was apparently normal practice?
TREASURER:
That is a matter for the Tax Office. The Tax Office administers these things.
The Tax Office is solely responsible for these things. If you have any inquiries
as to procedures within the Tax Office, I suggest you direct them to the Australian
Taxation Office or the Tax Commissioner. And that is a matter for the Tax Commissioner,
which the Government has no engagement in and no control over.
JOURNALIST:
Does it concern you that there might have been, in inverted commas, a quote
from today from a former tax auditor, of ‘a major breakdown of protocol’?
TREASURER:
Well I don’t, you can say to me something is said in the paper, that
doesn’t make it true. If you want to know whether or not that is true,
or whether or not there is any basis for that, I’d suggest you ask the
Tax Commissioner. There is only one person that would know that, that’s
the Tax Commissioner. Now let me make this absolutely clear. These things
are handled by the Australian Taxation Office, they are not handled by the Government,
they are not handled by a Minister. You know, we’ve had to put up with
all sorts of things being thrown over recent days, this is just another one
which has no basis at all. You have a question about that, you put it to the
Australian Taxation Office.
JOURNALIST:
Treasurer, after you hand down the Budget next May, what’s your preferred
timetable for becoming Prime Minister?
TREASURER:
Well, look, I get asked this question on a daily basis, my answer is always
the same. There is no vacancy. We’ll deal with that if there is one.
That’s all I’m going to say. I’ve said that a thousand times.
I know you will ask the question over and over again hoping that you’ll
get a different formulation, hoping that you’ll be able to make a headline
out of it. That is the answer.
JOURNALIST:
Treasurer…
TREASURER:
Mr Shanahan.
JOURNALIST:
Mr Costello, you actually indicated that or acknowledged that you wouldn’t
force a challenge on the Prime Minister. Does that acknowledgment have a time
limit?
TREASURER:
Dennis, as I said the answer is always the same. I’ve just given it.
I’m not deviating from it.
JOURNALIST:
Mr Costello, you said pictures can lie, how would you describe your relationship
with the Prime Minister?
TREASURER:
Very good. I’ve never purported to be married to the Prime Minister.
I do have a wife, I can assure, he has one too. But there’s the evidence,
I was at a Party Room meeting from 9.30 until midday yesterday, Question Time
from 2 to 4, Cabinet from 4 until 7. You’ve got to be able to work with
someone if you sit next to them for 7 or 8 hours in the day, Michelle. I mean
how do you go with your colleagues sitting next to them for 7 or 8 hours in
the day? Or rather I should say, how do your colleagues go sitting next to
you for 7 or 8 hours in a day?
JOURNALIST:
Is it a productive relationship still?
TREASURER:
Absolutely.
JOURNALIST:
Have you had better weeks Treasurer?
TREASURER:
Well these are just normal political weeks. You have an Opposition which tries
to do its darndest – that is its job. The fact that an opposition says
something doesn’t make it true. You know, let me make this point. The
great revelation yesterday was that Mr Ron Walker had apparently told me something.
Something which he himself hadn’t even been told, let alone told me. But
you know, that is all published and when it is comprehensively disproven let’s
move onto the next allegation, which will be in due course comprehensively disproven.
The one point I would make in all of these things – you know what I think
the important things this week have been? National Accounts – whether people
can get jobs. Interest rate announcement this morning – whether they can service
their mortgage. Industrial relations changes and whether that will boost productivity.
That is what I think the big issues of the week have been. I think that is what
the Australian public would think. And I will remind you of this, the Labor
Party said it was going to re-establish economic credentials in this term. Have
we had a question about the economy? Have we had a question about productivity?
Have we had a question even about foreign debt? I think that was going to be
one of their big issues. You know, they will be sitting around trying to think
to themselves how do we get through another two Question Times without dealing
with a major economic issue. And I think the Australian public, which is interested
in their jobs and their mortgages, are much more interested in those sorts of
issues.
JOURNALIST:
Treasurer, would it be good for export income and for consumers if there was
more competition on the Pacific aviation route to America?
TREASURER:
Look, you know my views, I always support competition which can give consumers
a better go and lead to better services, but the Pacific route aviation is something
that is before the Government and I won’t pre-empt that decision in anyway.
Mr Price, Sir.
JOURNALIST:
From your comments today on the radio Treasurer, you seemed to go further than
you have been before, a commitment to give the Budget and a comment about not
challenging. Are you saying that is the wrong interpretation?
TREASURER:
I am saying that I said today what I have been saying for a very long period
of time. A very long period of time.
JOURNALIST:
(Inaudible) haven’t you Mr Costello?
TREASURER:
I said today what I have been saying for a very long time.
JOURNALIST:
What do you say to your supporters on the backbench that wanted you to challenge
before, in the middle part of next year?
TREASURER:
I said today what I have been saying for a very long period of time.
JOURNALIST:
Do you think the man in the street would have any trouble accepting your argument
that you didn’t know anything about the Gerard matter given that it was
in newspapers? What do you think about the fact that it was widely known?
TREASURER:
Oh yes, oh yes, yes. There is a clip apparently in the Adelaide Advertiser
after the appointment. But on the basis of that clip I was supposed to know
before the appointment. Okay – first proposition. Second, and we can all put
up our hands here, we all of course were aware of that story in the Adelaide
Advertiser. Every person in this press conference who was aware of it can
now put their hand up. Of course the Opposition was absolutely aware of it,
they were on notice of it because they raised it in March of 2003. Or Kim Beazley
said they were too busy with the Iraq war in March of 2003 so I assume they
raised it in April, May, June, July, August – this is three years ago.
No press outlet to my knowledge before the Australian Financial Review last
week was apprised of this or reported this. No television, no Cabinet Minister,
you know the…
JOURNALIST:
Crikey (inaudible).
TREASURER:
…oh Crikey, well now we are in to reliable sources, Mr Bongiorno, I would
back the Ten Network against Crikey.
JOURNALIST:
(Inaudible).
TREASURER:
I am going to take two more questions, you have had one Misha I think, Mr Lewis
and Mr Koutsoukis.
JOURNALIST:
(Inaudible).
TREASURER:
You did have one Mr Bongiorno, you had one.
JOURNALIST:
Mr Costello, on the leadership issue, you have never hidden your ambition to
become Prime Minister. You said in 1999 to Mr Hartcher here that you had one
or two budgets left in you. In 2003 you publicly aired your grievance over the
fact that Mr Howard was not prepared to stand aside. Weren’t your comments
this morning simply an acknowledgment for you that A) you don’t have the
numbers in the Party Room to mount a challenge, B) there is no appetite amongst
Liberal Party MPs, by and large, for a change of leadership and that you are
consigned to remaining Treasurer while ever John Howard want to stay on as Prime
Minister?
TREASURER:
Well I know what you are doing Steve. My answer on this matter today is the
same answer that I have given before and I am not moving from it and I am trying
to assist you with writing a story.
JOURNALIST:
Mr Gerard has never denied that he had that conversation with you about his
problem with the Tax Office. Is he not telling the truth and did you or did
you not have that conversation with him before you appointed him?
TREASURER:
What I said to Mr Gerard is that Mr Gerard would, like any other member of
the Reserve Bank Board, have to sign a declaration that his affairs were in
order. He was sent a standard form. It is the same form which has been sent
to every other Reserve Bank Board member. It is the same form that is used for
judges, for Tax Commissioners. The Commonwealth, this idea that the Commonwealth
whenever it makes an appointment reads court files in all of the registries
of all of the courts of all of Australia, it doesn’t happen. It never
has happened. Let me make this point, you know, suppose you have a Tax Commissioner
who you appoint. We don’t go round – and we appointed one recently
– reading all of the registries to see if there is some case against that
Tax Commissioner. Suppose you have got a Chief Justice, somebody who actually
enforces tax laws, you don’t go round to these registries. What you do
is you ask that person about their tax affairs and they give you a declaration
which is a standard form, not a targeted form, which is a standard form. And
that was the procedure which was done in this particular case. Now let me make
this point. This appointment was three years ago. You know, the way the Opposition
is going on, everybody in Australia has known about this for three years and
they just chose to sit on it for three years. Nobody in Australia, to my knowledge,
over the last three years thought this was an issue or raised it. So, not the
Opposition, not the media until last week, not a Cabinet Minister, not the Cabinet.
The procedure that was followed in relation to this matter was absolutely the
standard procedure. Now as it turns out I think over the last three years monetary
policy was pretty well run, was…
JOURNALIST:
Are you saying that…
TREASURER:
…hang on…
JOURNALIST:
…made was (inaudible)?
TREASURER:
…was the Reserve Bank Board in any way over the last three years compromised
in doing its duty? No. Was monetary policy run properly? No, policy was run
really, really well as far as I am concerned.
JOURNALIST:
(Inaudible) vetting processes at all?
TREASURER:
The vetting processes are the processes that I have described. They are asked
to give their own declarations…
JOURNALIST:
(Inaudible).
TREASURER:
…they are asked to give their own declarations. Now can I say we do not
have, we do not have an American style system. In America, as you know, private
detectives and investigators go over nominees for all sorts of offices. We don’t
do that in Australia. We don’t do that and it has nothing to do with the
Reserve Bank Board. It is not done for the Governor of the Bank, it is not done
for the Chief Justice, it is not done for the Governor General, it is not done
for the Chief of the Defence Force, it is not done for Ambassadors…
JOURNALIST:
(Inaudible), Treasurer.
TREASURER:
…the material that is done in relation to the Reserve Bank Board, which
I would have thought was probably less significant than Chief of the Defence
Force, Commissioner of Taxation, RBA Governor, Chief Justice, Governor-General…
JOURNALIST:
Are you disappointed that he didn’t tell you that he…
TREASURER:
…was exactly the same. Thank you very much.