2024 UCB National Conference: Peter Costello reveals his predictions for the year ahead

Peter Costello AC, former Australian Treasurer, joined the 2024 UCB Conference to deliver his predictions for the year ahead.

Costello first looked at current interest rates and said he doesn’t think they’ll continue to rise but also doesn’t believe they will go back to the historical lows of years gone by.

“Will interest rates come down? I don’t think they’re still going up. Inflation is now at 4.1 per cent. We’ve got to get inflation between two and three per cent. We’re still above the target. Even if interest rates come down, it’s not going back to the way it was. I would factor into your mind, what you’ve got to think as a business, is what is the long-term mutual interest rate. It’s probably around three per cent.

“Next year, I think unemployment will rise. It’s 4.1 per cent at the moment and it will go higher. Now this might be quite good for your businesses, it may help you with labour shortages. You might be in the kind of industry that doesn’t mind that. But it certainly is going to be heading up towards five per cent over the course of the year.”

He then turned his attention to China and how the impact of China going into recession would affect Australia.

“What will really bring Australia undone is if China goes into recession. The Chinese reckon they can grow their economy at five per cent. If the Chinese set a growth target at five per cent, you can count on one thing – it will grow at five per cent. But will it really be what’s happening in the economy?

“What else can go wrong? This energy transition can go wrong. It’s all well and good to say we’ll have zero emissions by 2050, but nobody’s got a practical answer for how we get there. It’s not just getting into the renewables and putting solar panels on everything. You’ve got to rebuild the whole transmissions system in Australia.

“Do you think farmers are going to want to put these high-voltage transmissions towers across their farms? How long is it going to take? By the time these farmers go to the land and environment courts. 2050 is only twenty-five years away. How long do you think it will take to build new high-voltage towers across the whole of Australia?”

Two years after his last appearance at the UCB Conference, Costello looked back at his predictions made in 2022, a year when Australia was just leaving the COVID lockdowns.

“I said at the time, and I still believe it, there was a massive overreaction to COVID. People are still getting it, yet out economy is going on just as it always has. We’re treating it as a very severe cold and we’re engaging in vaccinations. I would like to see a Royal Commission to go back and learn from all the mistakes we made through that period, because I tell you one thing – we’re going to have more pandemics.”

At the conference in 2022, Costello told the audience that interest rates in Australia had been low for too long and that inflation was about to take hold in the Australian community.

“The Reserve Bank Governor was saying that he could hold interest rates out until 2024. They could hold a .1 per cent cash rate out until 2024. I said it can’t be done. Interest rates have been so low for so long that inflation is going to take effect.

“At the end of April 2022, we got a March quarter consumer price index and we saw inflation take off. The Reserve Bank was forced to move interest rates in May of 2022. But not just in May. In May, in June, in July, in August, in September, in October, in November. Eight straight interest rate rises that year and five the next year.”

Costello explained that as productivity dropped as the age of Australia’s population rose and were no longer in the workforce, taxes would rise. He then touched on his thoughts on the Russia-Ukraine war, which he was surprised was still going on.

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