Interview with Tracey Grimshaw

Tuesday, 27 September 2005
7.07 am

SUBJECTS: Petrol prices, terrorism, Labor Party

GRIMSHAW:

Well, if you thought it couldn’t get any worse, drivers are now being warned we could eventually be spending $2 a litre for petrol. Federal Treasurer, Peter Costello is in the US and he has just come out of a high level meeting with two of the world’s most powerful money men Head of the US Federal Reserve, Alan Greenspan and World Bank President, Paul Wolfowitz, and Mr Costello joins us now live from Washington D.C.. Treasurer thank you for being with us. I would imagine that you all talked oil prices in that meeting?

TREASURER:

Well, oil prices have risen very spectacularly here in the United States over the weekend because of the fact that there has been a second hurricane Hurricane Rita.

GRIMSHAW:

Hmm.

TREASURER:

And as a consequence of that the production in the Gulf of Mexico has been closed down, 100 per cent production has been closed down. But the good news is that it looks as if the refineries have not been severely damaged so that when the production opens up again, although the oil price will be high, you wouldn’t expect to see the kind of spikes that were caused by Hurricane Katrina which was a couple of weeks ago.

GRIMSHAW:

What sort of spike? What sort of pain should be we batten down the hatches for at the pump?

TREASURER:

Well, the world oil price is high as you know, but the fact that the hurricane, the first hurricane, affected capacity meant that a lot of the oil couldn’t actually be refined into gasoline or as we know it petrol. That caused huge spikes. There was a fear that the second hurricane, which has just passed through this weekend, would do the same thing. In fact in the United States in some places you can’t get petrol. There are queues about a couple of miles long because supply is down. But the good news is that as the capacity re-opens the refining capacity should come back so that you won’t see the kind of spikes that we had as a result of Hurricane Katrina. Things should settle down a bit more I would say in the next two to three weeks.

GRIMSHAW:

Okay, but maybe an increase in the short-term do you mean?

TREASURER:

Well, all of the oil production of the Gulf of Mexico is closed still as we speak.

GRIMSHAW:

Right.

TREASURER:

It was closed over the weekend in the United States but as I say because there has been no further long-term damage, when it re-opens over the next couple of weeks you should see pressure come off. So I would hope that you won’t see another spike, things will come down over the next two or three weeks.

GRIMSHAW:

All right. Okay. Treasurer, you have announced a higher than expected Budget surplus, you know, quite significantly higher than expected. Is there still no case for the Government to cut excise and give people 1 or 2 cents relief at the pump?

TREASURER:

Well Tracey the excise doesn’t go up as the price goes up. We cut excise and we abolished indexation back in 2001 so it is 38 cents a litre. It is only 38 cents a litre if the price is $1 and it is still 38 cents a litre if the price is $1.30. The movement in petrol prices is not a function of tax. It is a function of the world oil price

GRIMSHAW:

Sure but

TREASURER:

and refining capacity

GRIMSHAW:

Sure, but if you have more money

TREASURER:

and until you get the world price down it won’t change it.

GRIMSHAW:

I understand that argument. But if the Government has more money at its disposal, if you have a higher than projected Budget surplus, I guess you have the capacity to cut that excise and offer some relief.

TREASURER:

Well, what we did in 2001 when we cut the excise of course is we abolished indexation. So it hasn’t moved since 2001 and it won’t. The reason why you have seen prices go from a dollar to $1.30, it has got nothing to do with tax and it can’t actually be fixed by tax. You can’t make a significant in-road against a non-tax problem by fiddling with the tax situation. This is a world-wide problem, it is a world-wide price effect, we’re seeing it here in the United States , it is happening throughout Europe and the world. Unfortunately it is something that we will have to live with while the world oil prices are as high as they are.

GRIMSHAW:

All right. I understand that your next set of meetings, after you speak with us perhaps, is with intelligence, at this stage unnamed intelligence agencies. Can you tell us who you are meeting with and what will be the nature of those briefings?

TREASURER:

Oh well, you know I have had meetings with people in the economic sphere and over the next day or so I will have some meetings just in relation to the strategic situation, just to discuss matters relating to defence and terrorism and the strategic situation while we are here. And that will happen over the next day or two.

GRIMSHAW:

Anything specific that you are expecting to learn?

TREASURER:

Oh well I think it is important that we keep an eye particularly on the terrorist issues around the world. This is a threat to Australia and Australians and we share our intelligence obviously with the United States which has a great store of intelligence and they have some perspectives that they bring to this issue. We have some perspectives that we bring and an exchange I think is in the interests of all concerned as we confront the scourge of terrorism.

GRIMSHAW:

Terrorism and security is firmly on the national, the domestic national agenda here right now obviously with the COAG meeting today. The Premiers want sunset clauses on the Prime Minister’s new terrorism reforms if you like, terrorism laws. Do you see some merit in that?

TREASURER:

Well, I think we have got to change the laws and I think we have got to have the laws which will protect Australians. Whether you want to review then in a few years time I suppose is something that will be discussed today. But I think the important thing is that the Government has all the weapons at its disposal to arrest people who would kill or maim others, that would do a terrorist act inside our country. It is no great consolation to the survivors and the family members to arrest people after the event. The critical thing here is to stop the events happening in the first place. And a terrorist summit that can bring forward a range of powers which can be used to protect innocent lives is a terrorist summit which will do good for the Australian people. And that is what I would be supporting.

GRIMSHAW:

All right. Just finally Mr Costello, former Labor Foreign Minister Gareth Evans in his new incarnation with the International Crisis Group is going to give a speech in New South Wales tonight where he will say that Jemaah Islamiah on the International Crisis Group’s understanding has effectively been dismantled. Does that fit with the Government’s view? Is that what the Government believes?

TREASURER:

Well, we welcome the fact that some of the bombers and some of the organisers have now been convicted. That has been a definite strike against terrorism. But the bomb makers are still at large and whilst you have bomb makers at large and whilst you have people that are still prepared to take those bombs and to do damage with then you can’t really say that the threat has dissipated. Look, good progress is being made and good co-operation is being made, but if you try and call an early victory we may relax and I wouldn’t, for one, be a person who relaxed in the threat of terrorism. We know that it can harm innocent people. We know the terrible tragedy that Australians have already suffered and we have to be alert for as long as it takes to secure the safety of the Australian public.

GRIMSHAW:

All right, just a final question on opinion polls and these will be the sort of opinion polls that will make you happy I am sure. The Labor Party has done a pretty good job of cannibalising itself in recent weeks with the Latham Diaries. Kim Beazley’s popularity has taken a dive and Julia Gillard’s is on the rise. What is your assessment of that?

TREASURER:

Well, I still think the problem is with the Labor Party itself. It is the Labor Party that elected Mark Latham and put him forward as the man to run Australia . I don’t think anybody would see that as a wise decision. Now they have elected Mr Beazley and they put him forward. Well, make your own conclusions about their judgement same people and they gave us Mr Latham. And I think we can all see with hindsight – even they can see with hindsight – the mistake that that could have been for our country.

GRIMSHAW:

All right. Thank you for your time this morning.

TREASURER:

Great to be with you Tracey, thank you.