Peter Costello, treasurer, Australia
The dark cloud of economic gloom that hung over the world economy did not spread to Australia in 2003. Instead, the country returned to accelerating economic expansion, growing by as much as 5% on an annualised basis in the second half and easily outstripping average growth across the OECD area.
Late last year, the IMF gave Australia the thumbs up, citing sound fiscal and monetary policy. Forecasts suggest gross domestic product will grow between 3.5% and 4.5% during 2004, cementing the country’s track record of being one of the OECD’s fastest-growing economies. Average OECD growth is forecast at just 3%.
Treasurer Peter Costello felt justified in crowing about these achievements, announcing a doubling of the budget surplus for the year to June 2004, to A$4.6bn (0.6% of GDP) – the sixth surplus in the past eight budgets. Mr Costello’s skillful fiscal management is what earns him recognition as The Banker’s finance minister of the year for Asia.
Mr Costello is driving a determined long-term agenda, having published the first Intergenerational Report in 2002. This is a projection 42 years into the future, assessing public expenditure needs, the state of public finances and spelling out the consequences of current trends.
“We are not facing a crisis – not yet – but some difficult choices will need to be made sooner or later if we are to maintain, and indeed continue to improve, living standards and well-being for all in our society. And the sooner we make the right choices, the better placed we will be to overcome these problems,” Mr Costello told the Queensland Press Forum late last year.
Principal among his concerns is Australia’s ageing population and the drain on public expenditures that this will pose in the future. It is not enough, says Mr Costello, to meet near-term growth targets; the economy must increase labour participation and productivity to grow per capita incomes.
For now, Mr Costello has a firm hand on the tiller and there are few obstacles in the way. Central bank governor Ian Macfarlane even indicated in December that the persistent worry of rampant house prices was abating.
With unashamed designs on the country’s top job, Mr Costello was disappointed when incumbent Prime Minister John Howard quashed earlier suggestions that he might step aside ahead of elections this year.
