There is no doubt that Paul Keating and Peter Costello have both been
very successful Treasurers, but a few extra points should be made about
their respective records after Christian Kerr’s interesting commentary
last week.

Keating’s reforms of the financial services sector were profound and this is where Costello has really let himself down. The Latham Diaries reveal that Keating would be tempted to return to Parliament if he could “f*ck the banks.”

Indeed, Keating did keep the banking cartel in check, firstly by
introducing foreign competitors and then by keeping the pressure on them
to deliver good and cost-effective services for consumers.

Banking is an essential service, yet in this area, Costello has
tolerated a series of major mergers, then sat back and done
nothing while a rampaging cartel has gouged consumers mercilessly.
Costello is now responsible for the sector which generates more
consumer complaints and hatred than any other. But he does absolutely
nothing to pull the big banks into line, instead allowing them to
dominate funds management and become a ridiculous 30% of the entire

While Keating has to be held responsible for “the recession we had
have” and 17% official interest rates, it is very easy to forget that
Australian interest rates have been comparatively higher than its major
competitors during the Costello years. World interest rates were high
in the 1980s and early 1990s and they’ve been much lower across the board
globally since Keating’s defeat in 1996.

Just as Hawke and Keating benefited from the drought breaking in the
early 1980s, Howard and Costello have also been phenomenally lucky that the
emergence of China as an economic powerhouse has given us the best
terms of trade in 30 years. That Costello is still running a $57
billion annual current account deficit – equivalent to the 6% of GDP
when Keating made his famous banana republic comment – with such
favourable prices for our goods does him no credit whatsoever.

Costello is also partly responsible for Australia’s booming imports and
consumer debt after triggering a ridiculous housing bubble with the
halving of capital gains tax and all those first home owner grants.

That said, Costello should be congratulated for finally tackling
unfunded superannuation, something Keating never did. And the GST
reforms were welcome, although these were largely the work of John

Similarly, the budget surpluses have been bigger and more sustainable
than Keating’s efforts as Treasurer, although former Treasurer Howard
did hand Paul Keating an appalling deficit blowout in 1983 which was
even worse than the one handed over by Prime Minister Keating in 1996.

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Peter Fray
Peter Fray
Editor-in-chief of Crikey
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