Early political career In 1990, Costello defeated sitting member
Roger Shipton in a preselection ballot for the comfortably safe Liberal inner-east
Melbourne electorate of
Higgins, the seat once held by
Harold Holt and
John Gorton. He entered the
House of Representatives at the age of 32. Costello made his maiden speech in May 1990 and mentioned "government should be subservient to the citizen; the Executive accountable to the representative parliament; and the monopoly give way in the face of the individual." Following the resignation of
Andrew Peacock, Costello voted for
John Hewson to replace Peacock as Liberal Leader and Costello was made shadow minister for Consumer affairs and later Shadow Attorney General. However, Hewson, despite launching Peter's local campaign in Higgins, was said to have been suspicious of Costello due to his admiration for John Howard; and is alleged to have made it clear to Costello that he would not be appointed a Minister in a Hewson government. On one occasion Hewson accused Costello of bad mouthing him to journalist
Laurie Oakes, which Costello denied. Hewson's shock defeat at the
1993 election, Costello believes, can be attributed to Hewson lacking the experience to know which things to try to change and which things to avoid trying to change. Costello believed Hewson fought everyone from Churches and Welfare groups over the GST to the Superannuation and Medicare organisations and recipients. Costello claimed he found it hard to promote the Liberal party's zero Tariff policy to the car industry. Hewson was deposed as Liberal leader in May 1994, Costello supported
Alexander Downer for the leadership, becoming his
Deputy Leader and shadow Treasurer. But what may well have prevented Costello from challenging Hewson for the leadership himself was an accusation by Victorian Liberal Premier
Jeff Kennett that Costello and his friend, former Victorian Liberal party president
Michael Kroger, had undermined Hewson's leadership prior to Hewson calling the leadership spill. However, when Downer in turn resigned in January 1995. Costello did not seek the leadership, instead supporting
John Howard. It was later alleged—in July 2006—that this was due to a December 1994 meeting of Howard, Costello and
Ian McLachlan in which Costello is said to have agreed not to challenge for the leadership in 1995 and Howard is said to have agreed to stand aside after one and a half terms as prime minister for Costello to take over. Howard denied that this was a formal arrangement. In 2009, Hewson stated that Costello's best chances of becoming leader were at the 1994 leadership spill (which Hewson noted with irony) or when Downer stood down 7–8 months later. Costello became the longest serving Deputy Leader in 2006, breaking the record held by the party's first Deputy Leader
Sir Eric Harrison. He also spent all but the last two years of his political career on the front bench.
Federal Treasurer (1996–2007) The Liberal/National coalition headed by Howard won the
1996 election, defeating the Keating government on a 29-seat swing, and Costello became Federal Treasurer at age 38, the same age at which Howard himself had become treasurer in 1977. He oversaw the return to and maintenance of federal budget surpluses, which enabled significant reduction in government debt. Costello brought down twelve consecutive Federal Budgets, including ten surpluses. During this period he eliminated the Commonwealth Government net debt of $96 billion. He also sold 2/3rds of the Reserve Bank's substantial gold holdings at a record low price. Inflation, interest rates and unemployment all fell and remained generally low during Costello's term as Treasurer. Tax reform became a major policy focus for Costello. Although John Howard had promised during the 1996 election campaign that he would "never, ever" introduce a GST, it returned as Liberal Party policy for the
1998 election. It was passed through the
Senate with the help of the
Australian Democrats. Until July 2005, Costello's own agenda of labour market deregulation remained blocked by the government's lack of a Senate majority. In 1998, Costello and his wife Tanya, along with
Tony Abbott and his wife Margaret, successfully sued author
Bob Ellis for false statements he made about them in his book
Goodbye Jerusalem. Costello advocated for change to a republic at the
Australian Constitutional Convention 1998. He rejected any suggestion that Australia was not already an independent nation and said that the Australian Constitution works "remarkably well". It was the institution of monarchy that was the crux of his argument for change: Costello supported the
1999 referendum on whether
Australia should become a republic. After the 2001 election, he attracted criticism for not securing funding for a key election promise to extend the
Medicare safety net. In 2002, The
Baby bonus scheme was reintroduced by the Federal Government of
Australia in the 2002 budget was aimed at offsetting the expenses associated with bearing a child. The scheme was also introduced as a means of increasing Australia's fertility rate and to mitigate the effects of Australia's
ageing population. Costello famously had a slogan to encourage Australians to "have one for mum, one for dad and one for the country". In February 2006, Costello caused controversy during a lecture at the
Sydney Institute when questioned about the government's refusal to legally recognise same-sex marriage. He stated, "I think we do recognise the rights of gay and lesbian people in Australia. We do not criminalise [their] conduct or behaviour." He also pointed out that the law was changed in 2004 to recognise same-sex couples with regards to superannuation. He stated that marriage should only be recognised between
heterosexual couples. Also during the same speech, Costello criticised "mushy misguided
multiculturalism," warning immigrants that the acceptance of Australian values was "not optional."
Leadership aspirations Under Howard (left) and Peter Costello (right) at the
International Monetary Fund 2002 annual meeting Costello expected to gain the Liberal leadership some time during Howard's second term as prime minister, as per Howard's alleged December 1994 offer. Howard denied the claims repeatedly, stating the continued public drama displayed "hubris and arrogance" and that the leadership was the party room's to decide, not a prize to be handed over by leaders to successors. Press Gallery columnist
Michelle Grattan described Costello's actions : Despite tensions between the Prime Minister and the Treasurer, nothing further came of those events. Neither Howard nor Costello took any action to remove the other from office, or resign. However, on 12 September 2007, amid renewed leadership tensions and a series of unfavourable public polls, Howard confirmed he would step aside well into the next term, if re-elected, and that Costello would be his "logical successor". A federal election was held on
24 November 2007. An
exit poll of 2,787 voters by Auspoll, commissioned by Sky News, included a question on the statement "I don’t want Peter Costello to become Prime Minister". Fifty-nine per cent agreed, while 41 per cent disagreed. The
Coalition lost the election.
In opposition (2007–2009) Costello was widely expected to assume the Liberal leadership after the 2007 election, but the day after the election, in a surprise announcement, he said that he would not seek or accept the leadership or deputy leadership of the Liberal Party. This was after
John Howard, in his concession speech on the night of the election, specifically endorsed Costello as the next leader for the Coalition. A week later, he indicated that he would be unlikely to serve out in full his parliamentary term of three years. However, as opposition leader
Brendan Nelson struggled, speculation mounted that Costello would change his mind and seek the leadership. In August 2008, he ruled out challenging Nelson, but did not comment on the prospect of Nelson stepping aside in his favour. Finally in September 2008, just before the release of his memoirs,
The Costello Memoirs, Costello specifically re-confirmed that he would not be seeking leadership of the party and would leave politics at a time that suited him. Media attention immediately shifted to whether Costello's decision cleared the way for a leadership challenge by
Malcolm Turnbull (who was the shadow treasurer at the time).
Tony Abbott described the decision as a great loss to Australia and to Costello himself, who might continue to have regrets for the rest of his life at what might have been. Costello remained as an opposition backbencher. On 18 September 2008, Costello was appointed to the
World Bank's new Independent Advisory Board, (IAB), which will provide advice on anti-corruption measures. On 15 June 2009, Costello announced that he would retire from Parliament at the
next Federal election. However on 7 October 2009, Costello announced he would be resigning from Parliament when it resumed later in the month. He resigned on 19 October 2009, triggering the
2009 Higgins by-election. Costello's departure came just prior to the ETS crisis that lead to Malcolm Turnbull losing the Liberal party leadership to Tony Abbott. ==Post-political career==