Transcript No. 99/01

Hon Peter Costello MP

Press Conference

Thursday, 28 January 1999

12.30 pm

E&EO

SUBJECTS: December quarter CPI, Republic

TREASURER:

Well the consumer price index today which showed that inflation in Australia was running at 1.6 per cent through the year, confirms that Australia now is in the top ranks of the worlds best performing economies. To have an inflation rate around about 1 per cent or a little over means that pensioners dont have prices rising on them, families can keep their savings together, business can invest with certainty, the economy can remain strong. It means that peoples savings have been protected and it means that living standards are rising, because wages are rising faster then prices. And this shows that we are decisively in the top ranks of the worlds best performing economies now, and over the course of the Governments three years in office, weve now had inflation around about 1 per cent, under the Labor Party it averaged 5 per cent per annum, so that gives you an indication of how things have changed and what a truly terrific consumer price index outcome this is.

What about interest rates?

Well weve got interest rates now in Australia as low as they have been. You can now get an introductory home mortgage loan under 5 per cent, and you couldnt have done that in the last thirty years at any time.

And thirty years ago you couldnt have done that on a full valuation of your home. So, we now have in Australia the best interest rates, weve seen in over a generation. Great news for homebuyers who are saving incredible amounts on their home mortgages. So with low inflation it means that we can keep these interest rates low. And if we can keep interest rates low it means that we can help homebuyers and small business.

Is it likely to last?

Well, if you keep producing low inflation results like this, weve got an inflation result today of 1.6 per cent. It means that you can keep interest rates low. The fact is that not only are interest rates low, but we have been able to keep them down by getting a good inflation performance. And if we can keep inflation down then we can keep those interest rates down at these historically low levels.

What about the prospects though going forward during 1999 for inflation.

Well, I think that to have inflation down at 1.6, we forecast that it may rise slightly, but certainly not above our target of 2 to 3 per cent over the course of the cycle, means that weve got a cushion, if you like, for future developments. This is a better than, better than top marks performance, which gives us a cushion against adverse developments in the future, adverse developments in Asia or in Latin America or in all of the other trouble spots in the world.

Just on another issue, in relation to the republic. Do you think it is time that you took at leadership role on that issue?

Well I made clear my views on the issue at the Constitutional Convention last year, and theyve remained my views and during the course of this year, I will be taking part in the debate. But weve got important work to do first. Weve got to fix the Australian taxation system.

Do you think it might be too late if you leave it .?

Well, to fix the tax system?

No, if you leave it a bit late to take a leadership role?

Well, no, we cant leave fixing the Australian taxation system. This is a once in a century opportunity, and we have got from now until June to do that, and I intend to make every post a winner.

.. your brother and Premier Kennett on ARM leadership. Do you think Mr Turnbull should go?

Ill leave that to the ARM, they can make their own decisions.

Treasurer for the tardy ABC Radio, can I get your reaction to the figures?

Well, for the tardy ABC Radio: Consumer Price Index outcome shows that inflation in Australia in the last year rose by 1.6 per cent. That means that Australia, decisively now, is in the top class in the worlds best performing economies. It also means that we can keep interest rates low, and it means that because wages arent chasing prices, people are getting wage increases, real wage increases, as a reward for low inflation. And that means that in the midst of a world which is very volatile and unstable, right throughout Asia, Latin America, Eastern Europe, the Australian economy stands strong and productive and growing. And these are the benefits of good economic policy.

Mr Costello can you elaborate on your comment that the fact that inflation wont rise above the 2 per cent level creates a cushion for adverse outcomes in the future. What does that mean?

Well, I said coming off a base of 1.6 per cent, means that we have a cushion in relation to our target, which is 2 to 3 per cent over the course of the year. Now, over the course of the year as weve forecast in the Budget, we expect there to be some wage pressures, but because we have such a low base, we dont think those pressures will actually affect the target that weve got. It doesnt mean that were going to be breaching the target that weve got of 2 to 3 per cent.

So youre confident we wont be breaching it because we are so low now?

Well the fact that weve got a great starting point means that weve got a cushion against the outcomes in the future. Thats what I mean.

What do you think of Malcolm Turnbull, how, the job hes doing?

Oh look, I dont mark Malcolm Turnbull. Hes presumably got members and they presumably vote for him and I will leave that up to them.

Thanks.

Do you think there is room for a new Party to keep Phil Cleary quiet?

Nobody can keep Phil Cleary quiet. You know, I was in the Parliament with Phil Cleary for three years, and I must say I enjoyed his company, but to try and keep Phil Cleary quiet would be like trying to get a Collingwood supporter to vote for Essendon. It just cant be done.

Do you think he is doing more harm than good?

Well I dont mark Phil. I mean, you know, in his time he was a pretty good ruck rover.

Thanks.