Transcript No. 2000/28

TRANSCRIPT OF

TREASURER

Mr Costello can we ask you about the retail figures today? You must be disappointed.

The third consecutive month. What does that mean for interest rates?

Well retail trade figures which came out for the month of February showed that in the

month they were down and over the year they were up about 3 per cent. Now a 3 per cent

rise over the course of the year is quite a moderate rise. You wouldn’t say that

there was any excess consumer demand shown up by those figures, what you’d be saying

is that retail trade is showing some moderation off a very high base earlier in the year

showing moderate but substantial growth over the course of the year.

But Treasurer, the fact that the retail trade figures were suprisingly down in February

does that mean the economy is slowing?

Well you would have to say that in relation to retail trade, retail trade has slowed

off the record growth that we were experiencing last year. And what it’s now showing

is a 3 per cent growth over the course of the year which is quite moderate and actually

shows the absence of any excess consumer demand.

Is there any justification for a rate rise next week, do you believe?

I never comment about the future movement in interest rates but I make the point that

we have recently in Australia had increases in interest rates, principally because the

world economy is strengthening. As I said yesterday, a strengthening world economy is

actually good for Australia and you saw a good strong trade result yesterday with exports

up 6 per cent. You’ve seen a moderation in relation to retail spending with

today’s figures and the figures of the last two months and what that’s showing

is that growth, the composition of growth in the Australian economy, is switching from

consumer demand more on to the production and export side. So what happened in the

Australian economy is when the markets to the north collapsed, growth was kept strong by

consumer demand. As the markets recover growth is going to switch out of consumer demand

and increasingly into exports. And that’s actually a broadening of the growth

performance in the Australian economy.

But surely it means the Australian economy is not as strong as you thought it was.

Well we think that the Australian economy is growing at a fair clip between 3 and 4 per

cent. And this is quite consistent with that.

How will today’s figures contribute to whether or not there is an interest rate

rise?

Well I don’t want to comment on any one month’s figures. What we do is we

look at all the indicators. You take a strong export performance yesterday, you see a

moderation in relation to retail trade. What that tells you is that the Australian economy

is still growing and growing strongly but the composition of growth is changing. It’s

changing from consumer demand to production and exports and that’s actually a good

thing. As our trading partners pick up in growth and we have strong export growth then

you’re going to see growth being maintained in a way which will produce long term

jobs.

You said yesterday that it wouldn’t be a bad thing if there were some interest

rate rise, do those figures today change your mind at all?

What I said yesterday was that interest rates had risen in Australia as they have

around the world because the world economy is strengthening and it’s not an all

together bad thing for the world economy to strengthen. In fact it’s a good thing for

the world economy to strengthen. Because that will give us more export opportunities. And

so I welcome growth in the world economy. We’ve been doing it on our own for the last

two years. As Asia went through the biggest financial collapse in our lifetimes the

Australian economy was the only economy in the region that kept out of recession and we

were out of recession because our growth was primarily coming from strong consumer demand.

Now as the world comes back we have greater export opportunities. Growth in the world

economy is a good thing, is a good thing.

What do you think of the ATO’s , what do you think of the ATO’s review of

private rulings? Is this going to be confusing for businesses?

Well I don’t think anything that has been announced is going to be confusing for

business at all. The Australian Taxation Office has a duty to apply the law in its rulings

and it’s got to make sure that the application is proper and correct. I don’t

think there is anything confusing about that.

Do you think it’s a distraction from the implementation of the GST?

Do I think what’s a huge distraction?

The Petroulias affair. That’s affecting it’s…

I don’t want to comment about any particular case that is before the courts for

obvious reasons. But if there is an allegation that somebody in any government agency has

done something wrong. What you do is that you call in the law enforcement authorities, you

ensure that there is a proper investigation. If there is evidence you lay a charge, you

proceed it through the courts and if there is a conviction punishment follows. That’s

what you do in any government agency whether it be Social Security, whether it be Tax,

whether it be a government department, whatever the agency, and that’s what’s

happening here, and have a system of law enforcement in this country which is being

followed to the hilt. And as it should be. And as it would be in relation to any other

agency.

Do you think public confidence has been fundamentally undermined in the ATO by this

affair?

I think the fact that the ATO was able to bring in law enforcement authorities, that

the ATO was able to lay charges, as it is required to do under the law, shows that the ATO

has acted in accordance with the law, as it’s obliged to do.

But surely the integrity of the Office is now in question? Public confidence must be

shaken by this surely?

I think that the public would want to know if there was ever an allegation of

wrongdoing in any government department that the law enforcement authorities would be

called in and that they would gather evidence which is precisely what has happened in this

particular case. And it would happen in the ABC if there was somebody in the ABC that was

under a cloud. The law enforcement, you’d want to know that the law enforcement

authorities had been called in.

But we’re not administering people’s tax returns though are we?

Oh no, the ABC is spending 500 million dollars of taxpayers funds. And if there was

anything wrong in the ABC what you would want to know is that the law enforcement

authorities could be called in, that a charge could be laid, that it could go to the

Court. We wouldn’t say as a consequence that, you know, all reporters therefore were

under a cloud in the ABC. We would say that that’s a proper thing to do.

Mr Costello do you want Reserve Bank Governor to become more forward in explaining

interest rates?

Could you move forward please?

Sorry, sorry, I’ll take two last questions. Sorry.

Could you look over here please?

Oh, sorry yeah.

Your comment on the ILO decision?

What decision is that?

The criticism of Australia and it’s workplace relations agreements.

Oh well look I think if there’s any official comment from the Government on that,

that’s a matter for the Minister for Industrial Relations. Who I am sure is on top of

the issue and will give a comment.

Should private rulings be reviewed by the ATO now?

The ATO has a system of giving private rulings where somebody comes along with a

complicated transaction and asks how the law applies to it. And people seek those rulings

because they want to have some surety as to how the law is going to be applied to a very

complex transaction. Now it’s a system that works well for the Tax Office and

it’s a system that works well for people that are seeking the rulings. And I think

you’ll find that anybody who’s had one of these complicated transactions will

say that it’s a way of ensuring that there is clarity in the law and certainty in

commercial transactions. And obviously they are both objects which we would want to see

continued. Thanks.