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."[13] 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.[14][15] 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.[16] 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.[16]
Costello developed a higher profile following the 1993 election, becoming Shadow Finance Minister (though apparently failing to become deputy Liberal Party leader). Costello came to be seen as an alternative leader to Hewson, especially through, but not limited to, the "sports rorts affair" where, at the urging of Costello and Hewson, Sport Minister Ros Kelly was forced to resign after it was revealed she had not handled sports' funding proposals properly.[17] 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.[18]
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.[19]
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.[20]
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.[21] 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[22] 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.[23]
Leadership aspirations
Under Howard
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.[19] When this did not eventuate, it is alleged that Costello became frustrated, particularly when Howard announced, in July 2003, his intention to lead the government into the 2004 election.
During the 2004 election campaign, Howard avoided saying whether he would serve a full term if re-elected, saying only he would remain as long as his party supported him. The government's subsequent success in winning control of the Senate raised further speculation that Howard would delay his retirement, and the prospect of a Costello leadership succession appeared to recede.
In July 2006, the alleged Costello/Howard succession deal was made public by Ian McLachlan. Costello confirmed the incident had occurred and that he shared McLachlan's interpretation of events.[32] 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.[33]
Under Howard
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.[19] When this did not eventuate, it is alleged that Costello became frustrated, particularly when Howard announced, in July 2003, his intention to lead the government into the 2004 election.
During the 2004 election campaign, Howard avoided saying whether he would serve a full term if re-elected, saying only he would remain as long as his party supported him. The government's subsequent success in winning control of the Senate raised further speculation that Howard would delay his retirement, and the prospect of a Costello leadership succession appeared to recede.
In July 2006, the alleged Costello/Howard succession deal was made public by Ian McLachlan. Costello confirmed the incident had occurred and that he shared McLachlan's interpretation of events.[32] 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.[33]
Press Gallery columnist Michelle Grattan described Costello's actions : "Costello doesn't have the numbers to blast John Howard out. But he does have the dirt to make him look bad, and he's throwing it.
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.[38] A week later, he indicated that he would be unlikely to serve out in full his parliamentary term of three years.[39]
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.[40]
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.[41] Media attention immediately shifted to whether Costello's decision cleared the way for a leadership challenge by
