Statement on Monetary Policy, Economy, New South Wales Economy, GST, Telstra, Inflation – Doorstop Interview, Senate Courtyard, Parliament House, Canberra

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Statement on Monetary Policy, Economy, New South Wales Economy, GST, Telstra, Inflation – Doorstop Interview, Senate Courtyard, Parliament House, Canberra

Doorstop Interview

Senate Courtyard

Parliament House, Canberra

Monday, 8 August 2005
12.45 pm

SUBJECTS: Statement on Monetary Policy, Economy, New South Wales Economy,

GST, Telstra, Inflation


The Statement by the Reserve Bank today on monetary policy notes that there

have been a number of favourable developments in the economy in recent times.

This is very much in accord with the Government’s view of economic developments.

I welcome the fact that the housing market has moderated, we are possibly seeing

a moderation in relation to consumer demand and in addition to that households

are taking the opportunity to consolidate their balance sheets. So what that

means is whilst the Australian economy continues to grow it does so at a sustainable

pace and with low inflation, and if we can keep our inflation low over the course

of the next year that is consistent with the low interest rate regime. So, policy

which has been focused on moderating some of the demand in the economy has been

successful and has underpinned low inflationary outcomes which is good news

for home buyers and good news for employers creating new jobs for more Australians.

Sustainable economic growth with low inflation will give us the kind of outcomes

that we want. It will give us a continuation of the low interest rate regime

and more jobs for Australians who are looking for them.


The exception to your story seems to be Sydney, what can be done about this?


Well Sydney, of course, seems to be lagging. New South Wales generally seems

to be lagging other States, the reason for that of course is the high tax policy

of the New South Wales Government. It is no surprise that the highest taxing

State is also experiencing subdued economic conditions, and there is a very

simple message here: if New South Wales wants to give a shot in the arm to the

economic climate, then it should be cutting taxes. We welcome the fact that

the vendor tax, which should never have been imposed, has now been abolished,

but there are stamp duties on mortgages and a whole host of other stamp duties

which the Commonwealth Government has identified, which are going to be abolished

in other States and should also be abolished in New South Wales.


Treasurer now that the Government has the numbers in the Senate, will you be

re-visiting the GST in an attempt to broaden the base as you originally wanted

to do?




On Telstra Treasurer, given the size of the Nationals demands there, are you

now ambivalent about proceeding with the sale?


Well, the point is this, that the Government is not a distressed seller. It

is not in the condition where we have to sell at any price. We have always made

it clear that the ownership of Telstra should be resolved and it should be resolved

on terms which are favourable for the Australian people. Now, I think that some

responsible suggestions have been put forward and some irresponsible suggestions

have been put forward. Obviously we consider responsible suggestions but we

won’t be considering the irresponsible ones.


Would a $2 billion fund set aside earnings to be used to spend on communications

in the bush, would that be economically responsible?


Well you know, there are various proposals that have been floated around but

one of the proposals that has been floated around I think is to set aside some

money, maybe $50 or $100 million per annum to ensure that services in regional

Australia are good. Now, obviously we have been setting aside more than that

in the past so I can’t say anything other than obviously provided the

need is there, that is responsible, it is something to be considered.


Treasurer, the new rights for working parents from the Industrial Relations

Commission, would you like to see the Government keep those under the reforms?


The Minister for Industrial Relations will be making a comment on that.


Getting back to ‘No,’ did that suggestion by Labor this morning

that you would consider reintroducing GST on food catch you by surprise?


Yes. You know, I know that the Labor Party decided at their tactics meeting

today that they would get out with a scare campaign but I would have sought

a more responsible one than that if I were them. It was just so far beyond the

bounds of credibility that I didn’t think it would fly for a moment. And

as somebody who went right through that debate and has been asked this question

I think, probably on a monthly basis over the last four years and having ruled

it out every month for the last four years, I couldn’t understand why

they went with that one today. I think their tactics are a little bit off. If

I were in the Labor Party tactics committee today and they decided to try and

run a scare on Senate control, I would have got a more believable one than that

particular one.


But what about the estimates committee, the restriction on estimate enquiries

in the Senate, it does smack does it not, of the Government not wanting to be

as accountable as it has been?


Well I think that would have been a better shot of trying to mount a scare

on that one, Paul, I think you are right, that would have been a little more

credible than the one they decided to run with – not true of course –

but a little more credible and perhaps they should have taken some advice from

you, Paul, in their tactics committee meeting this morning.


Are you surprised at the benign inflation outlook given high oil prices?


Well inflation is very low, at 2 per cent given world record oil prices,

to have inflation at 2 per cent is really an outstanding outcome.


Are the figures believable?


I believe the figures because they are prepared by the Australian Bureau of

Statistics but you would have to say that oil prices being what they are ordinarily

you would have expected that figure which came out to be higher. I think it

took the market by surprise but it just shows you how entrenched low inflation

is in Australia. It doesn’t mean that we can become complacent, we have

got to keep it there because the whole idea of economic reform is to keep the

economy growing with low inflation so that people can continue to have low interest

rates, that is what economic reform is all about.


Is the low domestic demand that the RBA has mentioned going to lead into lower

GDP growth?


Well we forecast that GDP growth would be more moderate in the forthcoming

year and what we are seeing at the moment is consistent with the Government’s

forecast. I think the story that the RBA is telling in its statement today is

the story that the Government has been telling over the course of the last six

months and we welcome the fact that their assessment is very, very similar to

our own.


Do you think the Reserve Bank got it wrong previously in its inflation forecasts?


Well, I think the Government got it right, let me put it that way.


Do you think that the March interest rate rise was unwarranted?


Well it is all too late to go back over those sorts of things.


Another one on Telstra, do you think the size of the Nationals demands are

out of proportion to the size of their constituency? Is there a danger that

we might be spending too much money on a small group?


Well look, you have got to be very careful about these so-called policies.

You know, I think Mark Vaile has put forward a policy which as I said, is certainly

worth considering. There are other people in the National Party that put forward

other policies but I think what Mark Vaile put forward is certainly worth considering.


But not $5 billion?


Well as I said, I think what Mark Vaile has put forward is certainly worth



To clarify Treasurer on that, do you think it is okay to set it aside in a

fund and that generates the $50 to $100 million?


Well look, you know, the point is forget the financing, forget the financing.

Stripped of financing mechanisms, if somebody says to you that there has to

be an annual sum to ensure that telecommunications in rural and regional Australia

keep pace, that is a fair proposition, that is what we have been doing in the

past. It is a fair proposition. Forget the financing mechanism, you know, whatever

the means that are chosen for the financing if it results in a fund being available

to ensure that rural and regional telecommunications are good and if that fund

is a reasonable amount considering what needs to be done, it is certainly worth

considering, that is my view.


Do you think Barnaby Joyce will get a warm welcome in the Party Room tomorrow?


I would expect so.


Very warm?


Very warm.


The Reserve Bank said house prices have been flat for 18 months now since the

bubble stopped growing, where do you expect prices to go in the next three to

five years? Do you think they will rise again?


What on houses?




I am not in the investment market. See you.