Peter Costello

Media Transcripts

Economy, inflation, interest rates, Budget, superannuation - Doorstop interview, Parliament House, Canberra

 

Doorstop Interview

Parliament House
Canberra

Wednesday, 2 May 2007
2.05 pm

 

SUBJECTS: Economy, inflation, interest rates, Budget, superannuation

TREASURER:

When the Consumer Price Index figures came out for March last week, I made the point that they would be good for households and they would be good for the economy.  What they showed was that inflation had started decelerating and is now in underlying terms around the middle of our target range, about 2.7 per cent.  Of course we will be updating our inflation forecasts in the Budget which we are working on now to deliver next Tuesday, but it is important that we keep inflation contained, price rises low, that is important for households, it is important for the economy and it is important for interest rates.  And the fact that we have managed to see inflation decelerating has been good news for Australian households and the Australian economy.

JOURNALIST:

Treasurer, with inflation, with the inflation genie back in the bottle, you would be able to afford pretty big tax cuts, wouldn’t you?

TREASURER:

Well, this inflation genie has the capacity to go back in and out of the bottle.  The genie never actually disappears and it is something that you have got to always make sure you are working on to keep prices contained.  It is one of the reasons why we believe that living within your means and balancing your Budget is important and next Tuesday we will be living within our means.  We will make sure that the Commonwealth doesn’t spend money that it doesn’t have.  We won’t be going out and borrowing and for our part we will be adding to savings rather than borrowing and putting pressure on interest rates.

JOURNALIST:

When it comes to savings, does it concern you…

JOURNALIST:

(inaudible) surplus adds to inflation?

TREASURER:

The point I would make is this, that if the Commonwealth is living within its means, that is, it is not spending money it doesn’t have and not borrowing, then it is not putting pressure on interest rates.  But if a government spends more than it has and borrows the difference, if it goes out on to financial markets and starts borrowing, then its action puts upward movement on interest rates.  Now, some of the States do that.  They borrow.  They go out on to financial markets, they compete with households to borrow available savings.  The Australian Government will not be doing that.  We will not be borrowing, we will not be competing with householders, we will not be putting pressure on interest rates – in fact, the reverse.  We will be putting downward pressure.

JOURNALIST:

How big a surplus do you think needs to be retained to keep the pressure off interest rates?

TREASURER:

Well, we need to make sure we are not borrowing at all, we need to add to savings to put something aside for a rainy day and we need to keep pressure off interest rates and that is what I will be doing next Tuesday night. 

JOURNALIST:

With the amount of money that has been around in the Budget at the moment, how would you describe your relationship with other Ministers?  Have you been fending off applications for spending?

TREASURER:

Well, yes, I have been dealing with Budget bids for over a decade and Ministers are very active people and very intelligent people with good schemes.  But if you could afford everything there wouldn’t be any difficulty in politics, would there?  It is like a household.  If you can afford everything, then households wouldn’t have to budget, would they?  The fact that we have to budget is because you can’t afford everything and if you tried to afford everything the tax take would be so great that people would be groaning under the burden.

JOURNALIST:

When it comes to savings does it concern you that people still aren’t putting enough away in superannuation particularly how good the economy has been for the last…?

TREASURER:

I think people are putting a lot into superannuation and I think you will have seen over recent months very, very strong interest in putting new money into superannuation.  That is because we have taken tax off superannuation as from 1 July.  And if you look at the amount of money that is now being managed in superannuation, we think that Australia now has the fourth largest managed funds industry in the world.  When you think that Australia is about the 58th largest country in the world by population, how did we get to the fourth largest managed funds industry in the world?  It is because people are putting a lot of money into superannuation.

JOURNALIST:

Is that Paul Keating’s doing?

TREASURER:

The introduction of the super guarantee was part of that story, that is true, and the other big part of that story has been the superannuation co-contribution which has encouraged low income earners to put their own money in and the big leg of the trifecta was the abolition of all tax on money coming out of funds from 1 July and that is what is attracting a lot of money into that now.

JOURNALIST:

Treasurer, Bill Heffernan says (inaudible) Julia Gillard wouldn’t make a good leader because she doesn’t have any children, should he apologise for that?

TREASURER:

Look, I think the decision as to whether or not you have children is a very personal one.  And there are some people that can’t have children and I don’t think you can try and second guess couples or individuals.  This is intensely personal, it is a matter for them.  I don’t comment on anybody else’s lifestyle and I would suggest that nobody else comment on another’s lifestyle.

JOURNALIST:

When Dean Mighell went over the top describing the Prime Minister as a stain on the bed sheet of Australian politics, he was condemned by both Mr Rudd and Ms Gillard, and yet there seems to be a reluctance from the Prime Minister, the Foreign Minister and yourself to be as critical of Senator Heffernan.

TREASURER:

Well frankly, I don’t know what a skid on a sheet is.

JOURNALIST:

That is not the point…

TREASURER:

Well, well, you know, it was a very strange comment to make and I don’t think it did him any credit…

JOURNALIST:

(inaudible) apologise?

TREASURER:

…if you are asking me do I think you should comment on a person’s decisions in relation to having children, the answer is no.  Whether it is Bill Heffernan or whether it is anybody else.  It is not his business and it is not my business and I don’t think you should make those comments about any other people. 

JOURNALIST:

Should he apologise then?

TREASURER:

Well, I have just made it clear, he shouldn’t have made those comments.  He shouldn’t have done it in the first place.  I don’t think it is his business, I don’t think it is my business, I don’t think it is anybody else’s business what couples do or what individuals do.

JOURNALIST:

The point is he is criticising her qualities because she doesn’t have children.  What about that sentiment?

TREASURER:

Well, I don’t agree with him.  I think he shouldn’t have said it.

JOURNALIST:

You are one of the Party leaders, should he apologise (inaudible)?

TREASURER:

Well, as I said, he shouldn’t have said it in the first place. 

JOURNALIST:

Is he a dinosaur?

TREASURER:

Well you know, now you are going to ask me whether people who call others dinosaurs should apologise.  The only point I would make is it is nobody’s business who has children or what their reasons are.  I don’t comment on it and I suggest other people don’t comment on it.  To be frank with you, I don’t think it is the stuff that is important in politics.  The stuff that is important in politics is what affects people’s lives.

JOURNALIST:

Mr Costello, one way to deliver people a tax cut that wouldn’t put pressure on inflation of course is to pick up Labor’s idea of reducing the taxes on superannuation, on contributions to superannuation, why isn’t that something that you would be interested in?

TREASURER:

Well, I don’t know that that is Labor’s policy.  I would be very interested to hear it.  I would be very, very interested to hear it.  You see, Labor used to say: ‘minor, almost infinitesimal cut in relation to contributions tax which is only 15 per cent,’ the Coalition said: ‘abolition of all exit taxes which can be as high as 45 per cent.’  Now, when we introduced that, Labor ummed and aahed but I thought their latest instalment was they supported that reform.  So I don’t think that could be their policy.  But you wouldn’t know, would you?  If you wanted to know what Labor’s policy on superannuation is you may have to ring Greg Combet in the ACTU to find out. 

JOURNALIST:

What is your view on Labor policy of super fund managers making, and company directors taking ethical decisions with greenhouse and so forth before they invest?

TREASURER:

Look, I think there is a place for people who want to invest in a particular fund to do so.  If somebody wants to advertise a fund that will only invest in certain types of stocks and appeal to the public on that basis and the public invest, then I think there is a place in the market.  But I think the most important thing for superannuation trustees to bear in mind is they have a duty to maximise returns for their investors.  And if you are putting your life savings into superannuation and it is going to be what you retire on and you are expecting it to support you for 20 or 30 years, you want to know that trustee is doing their best for you.  And I don’t think it is up to the Government to come along and tell the trustees where the money ought to go.  I think it is up to the Government to say you discharge your obligation to maximise the return for your investors. 

JOURNALIST:

Treasurer, is the economy looking better now that it did at the end of last December?

TREASURER:

I think that price pressures have decelerated since the end of last year, I think that is the case.  But we are still in this hundred year drought and it hasn’t broken.  Nobody should think that the drought has broken.  Scientists are telling us that there is a 50 per cent chance that it will but it hasn’t broken yet and if you happen to be in the middle of that drought which is affecting one of Australia’s great industries – the agriculture industry – things are looking probably worse now than they were at the end of last year.

JOURNALIST:

But do you think the pressure will be off interest rates for some months to come up to and including the federal election?

TREASURER:

Well I have said what I have to say on that.  Thank you very much.

2 May 2007

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