Costello tips end of the cheap debt era

FUTURE Fund chairman Peter Costello has warned the age of cheap debt is coming to an end and Australia’s inflated asset prices will return to their long-term norms.

The former federal treasurer says the world is still awash with cheap money from the global money-printing spree that followed the 2008 financial crisis.

“This is not the norm and one day it will go back to a situation like it was,” he said at a summit hosted by lobby group the Financial Services Council yesterday. “It is going to turn and interest rates will normalise and you’ll need to think — where will you be when that happens?

“I spend a lot of time thinking about that situation.”

Mr Costello said global growth had been weak since 2008 and while the Australian economy was showing signs of life, the recovery would not usher in conditions like those experienced before the crisis.

“While it will pick up, the recovery won’t be the world we knew in the ’ 80s and ’90s,” he said. “I think it will be a lowreturn environment for some time ahead.”

Mr Costello, who is also chairman of broadcaster Nine Entertainment, set up the Future Fund last decade while he was treasurer to cover superannuation liabilities for federal public servants.

The fund now manages assets worth about $130 billion.

The former Liberal MP also said yesterday that there was no justification for a royal commission into the conduct of Australia’s major banks or other players in the broader finance sector.

Opposition Leader Bill Shorten has been calling for a royal commission into the scandal-plagued sector.

Mr Costello said a royal commission was a last resort when there was a need to establish “some kind of schematic illegality” within an institution — a circumstance that did not apply to Australia’s banks.

“We’ve got a royal commission into youth detention — the suspicion is the Territory government might be covering up; a royal commission into sexual abuse, because the suspicion is institutions are covering up,” Mr Costello said.

“If you wanted to break up the banks, you wouldn’t need a royal commission to do it.”

Mr Costello, who was Australia’s longest-serving treasurer, said the only possible point of a royal commission into banks would be if stakeholders wanted to try to establish “personal liability for financial failures”.