Interview with Neil Mitchell

3AW

Wednesday, 8 August 2007

10.55 am

SUBJECTS: RBA decision on interest rates

MITCHELL:

Mr Costello, good morning.

TREASURER:

Good morning Neil.

MITCHELL:

Do you accept any blame at all for this?

TREASURER:

Well Neil, the interest rate moved this morning at the official level and you would expect it to be passed on in mortgages to 8.3 per cent.

MITCHELL:

Yes.

TREASURER:

The Bank made the point that the reason for this is our economy is strengthening, that is that growth is picking up and employment is picking up.  And the point I made in the press conference earlier, for 11 years of economic growth and 2.1 million jobs, to have interest rates at 8.3 per cent is still much, much lower than they were under the Labor Government.

MITCHELL:

You are saying that we are so well off, we have to hurt?

TREASURER:

I am not saying we are so well off, I am saying that the economy is much stronger than it was 10 years ago.

MITCHELL:

Does the Government carry any responsibility for the fact that interest rates have gone up what is it, five times now since the election?

TREASURER:

Well it all depends where you start from, Neil.  Because interest rates today are lower than when I became Treasurer.

MITCHELL:

I understand that but they have increased five times since the election.  Does the Government carry any responsibility for that or is it beyond your control?

TREASURER:

Well, the reason why interest rates have risen 0.25 per cent today is because the economy has strengthened – not because the economy has weakened but because the economy has strengthened.  Now I know, if you happen to be a homebuyer that will put additional pressure on your mortgage.  But it also means that your job is safer and that your incomes are rising.

MITCHELL:

Mr Costello, I understand all of that but the basic point and I have asked you several times now, does the Government carry any responsibility for the fact interest rates have gone up?

TREASURER:

Well Neil, they are going up because the economy is strengthening…

MITCHELL:

So it is good, it is good, and therefore we have got to have more pain.

TREASURER:

Yes, now why is the economy strengthening?  Well the economy is strengthening Neil, partly because of international factors but it is also strengthening partly because it has been the Government’s policy to strengthen the economy and get more people in work.  That is why this occurs, because you have got 2.1 million more people in work.

MITCHELL:

So the interest rate we, is this the interest rate rise we had to have?

TREASURER:

Well, nobody likes – no homebuyer likes interest rate rises – and as I said earlier it puts additional pressure on the home mortgage.  But the fact of the matter is that interest rates are lower today than they were at any time during the previous Labor Government – and that is after we have created 2.1 million more jobs.

MITCHELL:

Do you see a danger of another interest rate rise before the next election?

TREASURER:

Oh Neil, I wouldn’t comment on future movements because for the last 11 years I have declined to do it and I wouldn’t do it now.  But the important thing is that we keep inflation low.  That is why we need better industrial relations, that is why we need a Budget surplus, that is why we need to keep debt down to zero at the Commonwealth level, that is why we need experienced economic management.  Because if we don’t keep inflation low then the inevitable consequences follow.

MITCHELL:

Do you think some people are just too heavily committed?  Not just in house mortgages but with other debt?  Is that the problem?

TREASURER:

Well there are some people that do borrow too much, that is true.  And particularly with credit card debt and I always say to people, when you are borrowing build in a margin, because interest rates do move, prices do move and people do get sick and bad eventualities do occasionally occur.  And it is important that anybody taking out a loan builds in a margin.

MITCHELL:

Just finally, this won’t help your election prospects, will it?

TREASURER:

Neil, I think the issue that people are going to vote on is who are they going to trust to manage an economy which is in a pretty strong state and there has been a lot of impetus particularly from outside.  And I will make this point, that if you go backwards on economic reform and inflation gets out of control, you would expect under a Labor Government to see a lot worse than this.

MITCHELL:

Thank you very much for speaking to us.