Peter Costello

Media Transcripts

Doorstop Interview Sydney

 

Transcript No. 2000/56

TRANSCRIPT
of
THE HON PETER COSTELLO MP
Treasurer

Doorstop

Sydney
17 May 2000

TREASURER:

Let me just say it is a great thing for Australia to be hosting the International Securities Conference here in Sydney today. This is a major event for the world regulators to be here. I congratulate the Australian Securities Commission for the work that it’s been doing and the important work of making sure that we have good strong corporate regulation both nationally and internationally.

 

JOURNALIST:

Mr Costello interest rates have gone up half a per cent in the United States. Does that make a rise here inevitable?

 

TREASURER:

When we set interest rates in Australia they’re set with a view to both domestic and international events. As you would have seen from the Reserve Bank statement when it moved interest rates by 25 points the last month, it referred to the domestic developments and the international developments. Obviously international developments have an influence on our economy but our monetary policy is set with reference to both domestic and international factors.

 

JOURNALIST:

This time around Treasurer the international influences are much stronger on our currency, so what influence would that have on a possible interest rate rise in Australia?

 

 

TREASURER:

Well, when people measure the Australian currency against the US dollar you’ve got to bear in mind that there are two currencies there, and if the US dollar is rising, as it is against nearly every currency in the world, that has the affect of showing the Australian currency movement by reference to a strong US dollar. And the US dollar has been exceptionally strong, the US economy has been exceptionally strong in the first part of this year. The authorities in the United States are obviously trying to take some of the fizz out of the equity markets in America. They’re obviously trying to put an influence in relation to growth which will bring it off the boil a little bit, that’s obviously what’s moved their mind over night. But the US dollar has been rising against every currency in the world, including the Australian dollar and the Euro and it is obviously a very strong currency.

 

JOURNALIST:

Treasurer is it a difficult time for the monetary policy in Australia with the tension between domestic economy and the international US economy, US dollar?

 

TREASURER:

I think it’s a, let’s go back a bit, in 1997/1998 we had an Asian financial crisis and a regional recession. And the problem in 1997/1998 was exceptionally weak world growth, particularly in this region. As we come into the year 2000 another problem emerges. That is exceptionally strong US growth. And the question which is now arising in the United States for the authorities is, how do we slow that economy? They are raising interest rates to get some slowing in the US economy. Now, that’s the problem for the world, and that impacts on Australia at the moment. But I keep making this point, that a stronger world economy is a better environment for Australia than a weak world economy, because it’s going to mean a pick up in our exports. Sure there are concerns about US growth which is too strong, and the authorities are trying to get that down and have more moderate consistent growth, but a stronger world economy is a better thing for Australia than the situation that we went through in 1997/1998 which was a regional recession. That will have benefits for us.

 

JOURNALIST:

Treasurer, Dr Mahatir’s statement overnight that Mr Howard’s a bully and warning him he should stay out of Asia, that’s a bad omen for business surely?

 

TREASURER:

Well look, John Howard as the Prime Minister of Australia is going to conduct Australian foreign policy in the interests of this nation. We have strong relations in the Asian region, we have strong commercial ties and we will follow those commercial ties and those commercial interests. I don’t think I would read any economic implication from those particular comments. In fact Australia is one of the stronger economies in the region with good trade ties, we have particularly strong economic interests in relation to North Asia, Japan and Korea, and I expect as those economies pick up, the Korean economy certainly picked up and Japan, we hope, is going to continue to pick up, but those commercial ties will strengthen.

 

JOURNALIST:

(inaudible)

 

TREASURER:

I don’t think it’s helpful to use those sorts of words.

 

JOURNALIST:

Mr Costello, the Australian economy is slowing. Can the economy handle further increases in interest rates?

 

TREASURER:

When you say the Australian economy is slowing, the Australian economy grew at a little over 4 per cent for the last three years. We think in the next financial year it will grow at about 3 -, which by Australian standards is above the long term trend, a little lower than the record of the last three years, but that was a record breaking performance. A growth rate of 3 - per cent over the next year would be considered a fantastic result for places like Europe and other developed economies. Places like Japan where growth has been zero to negative now for years. So 3 -, sure it’s slowing off its recent peak, but 3 - is good strong consistent growth and I’d certainly like to see that continue.

 

JOURNALIST:

Further increases won’t threaten that.

 

TREASURER:

Well, I never talk about future movements in monetary policy, as you know, because I could be misinterpreted one way or the other.

 

JOURNALIST:

Treasurer, the Head of the US SEC (inaudible) speaking today, he recently made a speech in the US regarding his concerns over big accountancy firms who’ll have a dual role in both auditing and providing policy to large companies, is that a concern in Australia as well do you think?

 

TREASURER:

Look, I think so. I think that some of these accounting firms are now taking steps to try and erect what are called Chinese walls, to separate your auditing business from their policy business. But one of the things that this Conference is working on actually is harmonising accounting standards, so you can have raising of money in financial markets across borders. Australia has been at the forefront of this. Australia has been one of the world leaders in corporate regulation. We’ve come through a very bad period in this country. In the late eighties our corporate regulation was slack, it was no good, and we started fixing that up in the 1990’s. We now have a regulatory model with the Australian Prudential Regulatory Authority, the Australian Securities and Investment Commission, APRA and ASIC, which is considered a world leader. The IMF has described this as path-breaking reform. Now, the corporate authorities have to continue their vigilance, but the regulatory structures which have been put in place, beginning in the nineties, but brought to a new international standard as a result of the Wallis Inquiry, which our Government instituted in 1996, has given us some of the best regulatory arrangements in the world. We’re making this a strength now. Once upon a time Australia was considered a risk in terms of corporate regulation. Today we are considered state of the art in the world, and that makes us a good base for business. It’s part of this Government’s push to make Australia a financial centre. As I said in my speech today, financial services now contributing double to gross domestic product, what the agriculture sector contributes. It doesn’t mean the agricultural sector is bad by the way, it just means this is a new industry, twice as large in its contribution to GDP as the agriculture industry, to get some idea of it. This is a country which has the second highest per capita ownership of computers in the world, sophisticated Internet which is showing all of the technological improvement you would expect in a new economy. This is a competitive new economy in Australia.

 

JOURNALIST:

(inaudible) accounting firms, is it something that our regulators are looking at at the moment . . .

 

TREASURER:

Well . . .

 

JOURNALIST:

(inaudible)…..has it come before you as Treasurer?

 

TREASURER:

. . . the issue has come before me and I, as I said earlier, the accounting firms themselves are starting to take some steps, and we encourage them to avoid any difficult situations they could possibly get into.

Thanks.

 

 

 

17 May 2000

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