World’s greatest treasurer on Queensland Debt

PShift: Could please introduce yourself?

Costello: Everyone knows who I am and that I was the world’s greatest treasurer from 1996 till 2007. I am currently conducting an audit of Queensland’s finances for the Campbell Newman government.

PShift: Wasn’t it Paul Keating who was voted by the World Bank as Australia’s first world’s greatest treasurer? Did he not set the benchmark for all subsequent world’s greatest treasurer’s?

Costello: Yes, however he followed banana republic style economics whereas I implemented sound Harvard business school economic management with a budgetary surplus in every year of my eleven years as Treasurer.

PShift: Keating was treasurer from 1983 till 1991 but he went on to become Prime Minister and won ‘the sweetest victory of all’ against the Liberal Dr Hewson.

Costello: Hewson lost the unloosable election by having poor economic policies and little idea when to implement them.

PShift: Didn’t Dr Hewson campaign on the need to broaden the tax base by introducing a goods and services tax?

Costello: Yes, but Australians were not ready for a GST in 1993, whereas I introduced that tax when it was politically acceptable.

PShift: Wasn’t the difference that Hewson had the guts to tell the Australian people before the election that he would introduce a GST whereas John Howard said that you would never implement in a GST but did so anyway?

Costello: You have your facts wrong there my friend. I told the Australian people that we would introduce a good and services tax in the 1998 federal election.

PShift: But you did so under cover of a Workplace Relations Act that banned strikes on the Waterfront and together with Chris Corrigan tried to cripple the Maritime Union of Australia? Plus you didn’t introduce the GST until the 2000 financial year.

Costello: It was time the wharfies were taught a lesson; that they could not hold Australia’s most important industry to ransom.

PShift: What is Australia’s most important industry?

Costello: Exporting minerals and coal.

PShift: Aren’t you suffering from Quarry vision there, Mr Treasurer?

Costello: Not at all, I am an economic realist.

PShift: Realist or rationalist, you did not put GST on exported goods.

Costello: Call me what you like, a GST on exports would ruin our international trade position.

PShift: Yet you made ordinary Australians pay 10% tax on essential goods they bought.

Costello: No, remember that we exempted food.

PShift: Only after the Democrats insisted on it… and you did not exempt all food, you imposed GST on pies from my local bakery.

Costello: Well, yes, Australians are great pie eaters and we had to broaden the tax base.

PShift: Why was that?

Costello: The Commonwealth had to impose a GST so that the states had insufficient funds to provide health services, schooling and roads.

PShift: I would like you to comment on the following extract from your Commission of Audit report into Queensland finances. At page 203 you state that you wish to restrict the use of public health and education to only “those that need it the most”. The language of your report sounds very altruistic it means that the government should only provide health and education in circumstances where “no other provider exists” (page 203)?

Costello: Well, we have to focus on the sustainability of the state’s capital program which means building and maintaining state infrastructure (page 205 of my report).

PShift: building infrastructure for mining companies?

Costello: Queensland is mining.

PShift: I thought you were going to say that Queensland is a hedge fund.

Costello: No Iceland is a hedge fund, Queensland is a quarry.

PShift: The 2007-8 budget shows how the Queensland economy was growing at 5% per year and the government was able to return an operating surplus of $268 million; yet, in the following year, we had a deficit of nearly $1 b-i-l-l-i-o-n dollars. Why did the wheels fall off?

Costello: The global financial crisis.

PShift: But didn’t the state’s revenue drop due to the lower taxation, decreased coal royalties and less GST given from the federal government (page 44)?

Costello: And that was made worse by natural disasters in 2010-11 and 2011-12 financial years.

PShift: You mean floods caused by climate change.

Costello: There were floods but those were natural weather events. It happens all the time in Queensland.

PShift: Floods used to occur every few years but now the floods are more extreme and occur more frequently.

Costello: I am not a meteorologist.

PShift: But you are advocating mining Queensland and one of those mines at Mount Morgan has turned the Dee River blue with toxic materials during the last flood. If the mine wall breaks under the pressure of flood that is the end of the Rockhampton drinking water.
What did you study at University?

Costello: I studied law at Melbourne University.

PShift: Unis were free then, weren’t they? Wasn’t that a Whitlam government initiative?

Costello: … and I did some commerce subjects as well.

PShift: Didn’t the state owned investment corporation invest $27 b-i-l-l-i-o-n dollars in ‘credit default swaps’ … the riskiest financial product on Wall Street?

Costello: I wish QIC had invested in CDSs – every Queenslander, no every Australian, would be a millionaire if we had.

PShift: Why is that?

Costello: Well a credit default swap was a bet against the entire US banking system. You see the second largest bank in America, Leehman Brothers went under in 2008. A few brokers on Wall Street bet that the there would be a massive default on housing loans and that is what happened. They made a packet.

PShift: What did the Queensland Investment Corporation invest in?

Costello: QIC bet that the housing market would stay good.

PShift: And they lost $27 b-i-l-l-i-o-n in public monies.

Costello: Essentially yes, but to bet against the American banks would have been the biggest punt since Gatum Gatum won the Melbourne cup at 100 to 1.

PShift: You mean to say that the publicly owned Qld Investment corporation was risking our superannuation money on the world financial markets in 2008-9?

Costello: Yes, but they placed their bets on the wrong horse.

PShift: So in the Audit Report you are recommending that the government sell everything to pay back the losses we made in 2008-9.

Costello: Well, if we don’t, borrowing for infrastructure will cost us more. In 2009 rating agency Standard and Poors downgraded Queensland’s credit risk from triple AAA to double AA+. So Queensland needs a fiscal repair strategy.

PShift: Hang on, didn’t Standard & Poors give Leeman Brothers a triple AAA rating while Leeman Brothers were trading in Certified Debt Obligations which caused the Global Financial Crisis.

Costello: And that is why the Queensland government now uses Fitch’s as its new rating agency.

PShift: And you recommend the government privatise everything to pay back the debt?

Costello: I have recommended government exempt policy advice from the sale of assets.

PShift: Sorry?

Costello: My report recommends that government sell everything except the provision of policy advice.

PShift: Why should the government retain policy advisors.

Costello: Well since i lost my job as the world’s greatest treasurer, I have become a policy advisor … I have to get paid somehow.

PShift: How much were you paid?

Costello: $3,300 dollars per day.

PShift: How will you spend it?

Costello: I am thinking of buying a condo overlooking the Brisbane River … you know as a sort of winter palace, a retreat from cold winters in Melbourne. Besides the condo is close to the Gabba so I can drop down and see the Brisbane Lions being thrashed by the Bombers.

PShift: I think we should leave it there.

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