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Pat Farmer; ANZ job ads; economy; road funding; Baby Bonus; interest rates; Alexander Downer


Monday, 5 August 2002


SUBJECTS: Pat Farmer; ANZ job ads; economy; road funding; Baby Bonus; interest

rates; Alexander Downer


It’s great to be here in Macarthur today and to open the electorate office

of Pat Farmer, who is doing an outstanding job in Canberra, one of the great

additions to the Federal Parliament and he enjoys widespread support from this

area and I am just here to support him, to open his office and to hope that

he’ll continue to win the trust of the people of Macarthur.


Treasurer, the ANZ job ads have just come out for this month, 0.6 per cent,

the third month in a row. Saul Eslake was saying that that means conclusively

they’re on the way down. Is that the way you see it?


We think that employment growth will continue over the course of the year,

in fact job vacancies are up about 9 per cent over the course of the year. But,

that will make inroads into unemployment over a period of time. We’re not forecasting

significant reductions in unemployment until next year, provided that the international

economy remains strong. The most important question at the moment is really

the United States economy. News over the weekend confirmed that the US economy

had three negative quarters, in 2001, that is a pretty substantial recession.

Australia, of course, defied the US recession. But we are not immune from world


We have got to keep our economy strong. We are the fastest, the strongest growing

of the developed economies, but all of these things are going to make the task

a pretty, pretty tough one, to stay there over the course of 2002 and 2003.


Last week, I think, you were talking about the impact on the real economy if

that happens. We are now seeing confirmation of shrinking jobs growth. That

can’t be much clearer though, can it?


Well, I think you have got to separate the American economy from the Australian

economy. Last week what I said is, if you have substantial falls, as you had

in the US stock market, sooner or later you would expect that to work into the

American economy. Now the American economy had a severe recession last year.

You have now had economic recovery in the United States, but extreme stock market

volatility. The risk that I have warned of, is that that volatility could flow

back into the American economy. How would that affect Australia? Well, it could

affect Australia by affecting our export markets. The United States economy

is the largest economy in the world and we are big exporters to the United States,

so if the US slows down that would affect our markets. But we have not seen

that moving back into the real economy of the United States yet. The real economy

of the United States appears to be still growing after that severe recession.

The risk is, if this volatility in the United States were to flow back into

the American real economy.


Most economists would forecast another reduction in jobs growth next month.

How would that put Australia then, more, in a much worse position, surely?


Well, it would leave Australia as the strongest growing economy in the developed

world. But, you know, having outperformed the world in 2001 and 2002, we don’t

want to get complacent. We can’t afford to be complacent about economic policy.

That is why the Government’s running a strong economic policy to keep Australia

at the top of the table in terms of world growth.


But Treasurer obviously, you know, this is a real impact and you’re concerned

about jobs growth, you have to be, don’t you?


Well jobs growth is continuing in the Australian economy. Jobs growth is continuing,

it is meeting new entrants into the market. The question is, it has to exceed

new entrants into the market before unemployment could fall. We forecast that

unemployment would fall over the course of 2002 and into 2003. And we have a

pretty strongly growing economy at the moment. Retail trade is good, interest

rates are at historical lows, inflation is low, we will be getting our GDP figures

in a month’s time. These are the important indicators as to where the Australian

economy is.


Mr Costello, one of the most important issues out here at the moment is the

on and off access ramps on the F5 Freeway. John Anderson came out here a month

ago and said that the Federal Government would give two thirds of the funding.

Why not fund the whole lot instead of this to-ing and fro-ing between Federal,

State and the Local Government as to who will pay for the one third?


I don’t know that there should be any to-ing or fro-ing. I think it is pretty

obvious if Mr Anderson’s offered to fund two thirds that between the other two

levels of Government coming up with the one third shouldn’t be that hard and

I am pretty surprised that they haven’t done so already. But if the State Government

and the local council want to also make a contribution, as you would expect

they would, for the local community and for the state community, it wouldn’t

be too hard for them to, I think, match the offer that Mr Anderson’s made, and

I pay tribute to the work that Pat’s done in relation to this.


What about, there’s this $12 million worth of Sustainable Region Funding over

3 years that the Federal Government’s given to Macarthur. So, could the shortfall

be, the $2 million that we need, could that be used from that funding?


Well, that’s for sustainable regions and you don’t rob Peter to pay Paul. We

want good sustainable regions and we want the ramps. And we have got two thirds

contribution from the Federal Government, it shouldn’t take too long before

the other levels of Government, I think, kick in.


Mr Costello, twice in Campbelltown in less than a year, very good. This area

is known as Nappy Valley to a lot of people and the Baby Bonus has copped a

bit of flack out here. Are there any plans to review it for the next financial

year, or any plans for paid maternity leave?


Well, the Baby Bonus is a new payment which has never been there before. It

is in addition to Family Payment Part A, Family Payment Part B. It is in addition

to the maternity allowance and it is in addition to child care, and it is a

Baby Bonus which has never existed before, which is $500 to $2500 per annum,

for 5 years. Now, the sums that are involved in that, obviously, are much larger

than any sums that would be available for maternity leave, which I think is

14 weeks. So, the Baby Bonus is certainly a very substantive financial incentive

which has never been there before. People are now starting to get it…


So you’re pretty happy with how it’s working?


…and I think it has been warmly welcomed by people who are beginning families.

And I would say to people who are beginning families that they should apply

to it, but not just for that of course. That is in addition to Family Payment

Part A and Family Payment Part B, the maternity allowance and also the Government’s

provision in relation to child care. And I think one of the biggest changes

that emerged out of the tax reforms of the Government, was the way in which

it improved opportunities in relation to child care.


What about fresh tax incentives? Is the Government having another look at that,

is there any possibility of that?


Well, we were elected in November, October, November last year, and we have

already introduced another new financial incentive – the Baby Bonus – for families

with children, so, you can’t do everything at once. But I am very pleased that

we have been able, in the last 8 months, to have been able to introduce this

entirely new incentive for families. And of course, that is an addition to all

of the other family benefits which the Government has in place.


Do you think, talking about the mortgage belt out here, that people can stand

another rise in interest rates, because it is being looked at this week?


All I would say is, when our Government was elected mortgage interest rates

were 10.5 per cent and now they are about 6.5, which is, what, a 40 per cent

decline in interest rates. So, that has helped a lot of families and I think

one of the things that home buyers know, is that Liberal policy has helped,

very directly, in buying homes. Now, those mortgage interest rates are at all

time lows, leaving out the events of September the 11th, 30 year

lows, and they have helped a lot of families. And, it does not come about by

accident, it is careful economic policy and we intend to keep careful economic

policy going.


Given those circumstances people have overstretched now, and I read this morning

that they are even giving up their Pay TV to meet the mortgage rate. If it gets

any tougher they might have to hand over, so, do you think now it would be good

to hold the line?


I don’t comment on future movements in interest rates and that’s the end of



Do you believe that people have actually overstretched and any that huge movement

forward would really put the real economy under pressure?


Well, you have got to remember this, as you bring interest rates down, one

of the reasons you bring them is so that people can borrow, so it would not

surprise, if, on the lowest interest rate in 30 years, people have borrowed.

That is part of the strategy, that is what kept the home building industry going

when the world was going into recession. How did Australia avoid recession when

the world went into recession, when America went into recession, when Japan

went into recession? Well, one of the things was that we gave incentives to

home buyers, and on low interest rates people took up the money. So it is no

surprise that they would borrow. That is one of the reasons why you have low

interest rates.


Mr Downer has apparently made some comments today about future leadership.

Would you be happy to have Mr Downer as a deputy in any Costello-Liberal Government?


I have got a lot of respect for Alexander Downer and for the work that he has

done. I think he has been a very fine Foreign Affairs Minister. I have worked

closely with Alexander over a number of years and I think he has got an enormous

contribution to make. And I am sure he will make it in whatever capacity he

can, both now and in the future. And the only advice I would give him is stick

to the Foreign Affairs and give up the singing.