TRANSCRIPT
of
HON PETER COSTELLO MP
Treasurer

Interview with Jon Faine, 3LO
Thursday, 13 September 2001
8.30am

 

SUBJECTS: Prime Minister, US terrorist attacks, Economy, petrol prices, Ansett,

FAINE:

Peter Costello is the Federal Treasurer. Good morning to you Mr Costello.

TREASURER:

Good morning Jon.

FAINE:

We’ll come to Ansett in a moment. The Prime Minister has, I understand, departed from Washington now. Have you spoken to him before he left?

TREASURER:

I spoke to him shortly before we went to bed last night and obviously he was in the midst of what was happening in Washington. Most of the city was closed down, he was received down at the Congress but as you might imagine normal engagements are not going on in Washington or New York anymore and so he is now heading home.

FAINE:

We are told that he had an in-detail briefing from the American authorities. What, if anything, has he told you about that?

TREASURER:

Well Jon, the American authorities are determined to bring to justice those responsible. There is, as yet, no news as to who they believe are responsible. But they have made it clear at a time of their choosing they will respond. And they will be looking for logistical support from their allies. And we are an ally of the United States and the Prime Minister has made it clear that Australia will support actions which are designed to bring justice to the people that are responsible. This is something now that is beyond the United States, this is terror that can affect all of us. And all of us have an interest in bringing an end to terror and in making it clear to people who want to perpetrate it that it will not go unpunished.

FAINE:

I have noticed a subtle shift in the statements being made by American authorities as they are speaking on American cable television being beamed direct into our lounge rooms and work places here in Australia. The initial response was almost to assume that you could identify Middle Eastern terrorists as responsible and that assumption now seems to be slipping. Now, I don’t know what, if anything, you have been told of American intelligence reports, but that subtle shift I have noticed.

TREASURER:

An important thing, I think, is the evidence. Nothing should be done until there is credible evidence of who is responsible. And once there is credible evidence then there should be a response. It doesn’t have to be done today, or tomorrow, it may take re-construction, painstaking re-construction for some time. Let’s make this point though, Australians have been killed. This was not just an attack on American citizens. Australian citizens were killed.

FAINE:

As have the nationals of many, many other countries.

TREASURER:

And we as a country have an interest in defending our citizens as much as anybody else, and we will co-operate in bringing justice. You can not let this kind of thing go unpunished. This is so organised, this is not just random, this is incredibly organised. And it shows that there is some kind of controlling mind behind this.

FAINE:

This is also a strike at the very heart of the financial centre of the world. The global economic impact is almost immeasurable, but now, most of the commentators and analysts in the financial press, online and in print are saying that the American economy almost certainly will go into recession. Do you agree?

TREASURER:

Well the American economy had stopped growing anyway. In the June quarter it had not grown and the expectation was that the September quarter would be worse. So, the American economy was teetering on the edge of negative growth anyway. What effect will this have? Well, I said yesterday, you do not want to overstate it. Look, this will have effects on the financial markets which have been closed…

FAINE:

And will remain closed for another day and a half or two.

TREASURER:

It will remain closed for another day. It will push up the prices of some very important commodities, such as oil, which is not going to be good for the American economy or ours. There will be large losses in insurance, large losses in insurance. And eventually that will feed back to everybody through re-insurance arrangements, right around the world that feeds back, and there will be a big loss. If it were to affect confidence in a big way it would have another effect. But don’t underestimate the US economy. It is a ten trillion dollar, US dollar, economy. It is a huge economy. What this, it could have done, is if it had put the financial markets or the banking system down that would have had a very severe effect for the world. But the banking system remained open in the US, they were making settlements yesterday. I can tell you in Australia our banking system worked perfectly yesterday, notwithstanding obviously through computers, we are doing settlements with foreign banks all the time, our stock exchange opened and the Australian markets were operating normally yesterday.

FAINE:

Do you think the intention was to bring the banking system as well as the stock market down, to close down the US economy?

TREASURER:

Yes. I think the intention was to bring down the US financial system. That if you could take out the World Trade Centre where so many of the investment banks operate from, which are drawing on the US banking system all the time, if you could bring that down I think the object was probably to close the US banking system. And if you could close the US banking system you could affect most of the banking systems around the world. Yes I do, I think that is why they chose the World Trade Centre, to bring down the investment and banking, or inflict damage on the investment and banking system, they chose political targets as well. It was an attack on political, financial, and military assets of the United States.

FAINE:

You have said oil prices will go sky high. That will translate in to what sort of retail petrol prices at the pump for Australia in the foreseeable future?

TREASURER:

Well you will see from the oil price at the moment you will get back to the kind of petrol prices we were having at the beginning of this year.

FAINE:

Over a dollar?

TREASURER:

And…

FAINE:

Is that right?

TREASURER:

Well, it takes a while to work through, Jon. The world oil price jumped back to the kind of prices we saw at the beginning of this year. Now, I hope they don’t stay there. It takes a while to work through the system. But if they were to stay there you would be back to the kind of petrol prices we had earlier in the year. Now, let us hope that this is the end of the terror attacks. Let us hope that those responsible can be found, and let us hope that life can go on normally and you will find those prices are returned to more reasonable levels.

FAINE:

What….

TREASURER:

It is a question of how long this goes on.

FAINE:

Moving to other things in a moment, talking about Ansett. We will be crossing back to New York to talk to one of the Australians who spoke to us on the phone yesterday in shock, undoubtedly and I wonder if he still is. But when does the Prime Minister get back to Australia?

TREASURER:

I think he will probably be back some time tomorrow.

FAINE:

He wouldn’t be relying on Ansett to get home would he?

TREASURER:

No, he will be coming in on an international carrier.

FAINE:

He wouldn’t be able to rely on Ansett to get anywhere. Ansett into the hands of voluntary administrators. Are we looking at complete collapse for Ansett if the banks withdraw?

TREASURER:

Well let’s make this point, you know, just so the listeners are not unduly worried. Ansett is still flying today. What happens with an administrator is an administrator goes in and takes the place of the management and that puts a moratorium on people recovering their debts. So an administrator can run an airline for as long as the administrator believes it is in the interests of the creditors generally, and the employees.

FAINE:

The banks control what the administrator does. If they continue to offer support Ansett can keep flying. Are you asking the banks to support the administrator to keep Ansett in the air?

TREASURER:

Yep, so far the banks, as I understand it, have. And what we are asking is time to be given to the administrator to be able to look at the books and to find out what the situation is. Jon, we don’t know the state of the books. Air New Zealand, which is the owner, would know the state of the books. They are going to make an announcement today. When Qantas went in to have a look at buying it, Qantas came back saying it is much worse than anybody has been led to believe, we don’t want to buy it. So the idea is, and I am asking the banks to hold off, for the administrator to go in, for the administrator to have a look at the state of the books and for the administrator to find out whether he can get somebody else to buy the airline and keep it running in the interests of the employees.

FAINE:

If there was that prospect it would have been explored by Air New Zealand, by everybody, until now, by Ansett’s own management. They have spent months looking for someone to buy them, Peter Costello, why do you think there may suddenly now be something to happen that hasn’t been able to happen in the last few months?

TREASURER:

Well because, one, the Ansett management obviously had trouble running the airline in a profitable way. I don’t blame the employees in any of this. I think the employees have been magnificent people, but obviously we look back on it and the management has had a lot of problems. Secondly, Jon, we want to make sure there is no stone unturned. At the end of the day, at the end of the day one way or another, somebody is going to buy these planes and these routes.

FAINE:

Yes.

TREASURER:

Now, the question is, to what degree do they buy it as a going concern…

FAINE:

Yep.

TREASURER:

…or to what degree do they just buy it as single assets. Now,…

FAINE:

But you didn’t answer my question. Those …

TREASURER:

… the administrator, I hope, will find someone who might be interested in it as a going concern. I saw the pilots talked about a management buy-out yesterday.

FAINE:

Do you think that would be a good idea?

TREASURER:

If it worked it would be a fabulous idea, if it worked. I don’t know if the pilots have got deep enough pockets. I think this is going to take a lot of money. But, this is what happened in the United States, there was a management buy-out of some of the airlines. Now, I don’t know, nobody knows how deep your pockets would have to be, and I have got to say to you it looks, I would be very surprised if the pilots had deep enough pockets. But if they did it would be fantastic, wouldn’t it? We want to make sure that everything that can be done to keep this, these employees, in their jobs, in this airline, is done. We don’t want to leave a stone unturned.

FAINE:

Does the Government guarantee workers their entitlements?

TREASURER:

The Government, well obviously, if you can keep the airline going that is the best guarantee of entitlements.

FAINE:

Very unlikely at this stage?

TREASURER:

If you can’t, the Government has schemes in place which underwrite them, but I can assure you we will…

FAINE:

Do you guarantee that workers will get their entitlements?

TREASURER:

Well, they are guaranteed under a Government scheme. There is a Government scheme which has caps, and that is guaranteed, that Government scheme. But that only kicks in for those employees who are unable to continue to work. We want to try and talk with the administrator to see if we can keep as many in employment as possible.

FAINE:

And in regional Australia, just in Victoria, Kendell, Hazelton, there are regional airlines that are wholly owned subsidiaries of Ansett…

TREASURER:

Sure.

FAINE:

…what do you want to have happen to them?

TREASURER:

Obviously we have to keep those lines open. I think the Government will have to put in place some measures to keep services in country areas where there is no other competitor. And eventually look for another group to come in and to pick them up and operate them.

FAINE:

Seventeen minutes to nine. Peter Costello you were overseas, John Howard was overseas, when this Ansett problem came onto the boil. Has it been mis-managed by John Anderson? That is certainly the view of the aviation experts and business commentators around the nation.

TREASURER:

No. John is the Deputy Prime Minister and the Transport Minister. And so he, as Transport Minister has responsibility to manage this. I think he has done a very, very good job in difficult circumstances.

FAINE:

Well, nobody else does?

TREASURER:

Well, these are difficult circumstances Jon. At the end of the day you have got to remember this, who was responsible for running Ansett? It’s directors and it’s management who happen to be all Air New Zealand directors and management. John Anderson wasn’t running this airline.

FAINE:

But John Anderson was warned that it was in trouble and didn’t do whatever it was that needed to be done?

TREASURER:

Well, I am not sure the experts can say, you know, if you had have done `A’ it would have cured the problem. I think the problem here was that Ansett was in such a financial situation the company directors and the management didn’t know what to do. And we are exploring every avenue today. It is, you know Jon, it is not just an easy thing when you have got a company which is going down to say, oh, we will do `A’ and it will all be fixed. This was a company which was in a lot of trouble and I think John Anderson has managed a very difficult situation magnificently.

FAINE:

We’ll see how events unfold today. Thank you for your time on both issues this morning.

TREASURER:

Thank you very much Jon.