03-November-2010
Portfolio Media Releases, The Economy
Topics: Interest rate rises, Labor’s reckless spending and borrowing, competition in the banking sector.
E&OE
CHRIS UHLMANN:
Andrew Robb isn’t it just a bit simplistic to say that interest rates rise because the Government is spending too much?
ANDREW ROBB:
Well interest rates rise for all sorts of reasons but one of the key reasons that they having been rising more than they should is because this Government has been recklessly spending, they’re still borrowing $100 million every day, they are out there putting pressure on interest rates through that borrowing and spending and they refuse to do anything about it.
They’ve got the Reserve Bank putting the pressure on, putting the brakes on and they’ve got the foot on the accelerator. Now they have got to do something in their own area of fiscal spending to try and take some pressure off interest rates.
We needn’t have had this seventh increase in interest rates if the Government had done its job and cut back the reckless spending that it’s now doing.
CHRIS UHLMANN:
The Government says that it’s going to actually return to surplus faster than anyone has and it’s got a two per cent efficiency dividend which applies across the entire public service and that it is making savings.
ANDREW ROBB:
Well again, Penny Wong, who has just taken over as Finance Minister and clearly you’ve got the training wheels well and truly still on, she’s saying yesterday that they’d made $82 or $84 billion of cuts, now $35 billion of that for Penny Wong’s benefit, is actually tax increases so the sort of verbal gymnastics that is going on within the Government to try and explain what is a totally unsatisfactory financial situation, is bizarre.
For the Finance Minister of the country to call $35 billion worth of tax increases as cuts to their spending, beggars belief.
This is a Government whose economic team - Gillard, Swan and Wong have lost control of the economy in many respects. It’s been a huge humiliation what has happened over the last 24 hours with interest rate increases and the Commonwealth Bank coming in on top of it and of course the first three months, they’ve had a $25 billion increase in the deficit, predicting $41 billion for the year, already in the first three months they’ve chalked up 25.
CHRIS UHLMANN:
Well everyone talks a good game on the banks and Joe Hockey has a nine point plan out. I notice four of the points are investigations, what in it would bring down, or put pressure on the banks to not lift interest rates out of cycle?
ANDREW ROBB:
Well the competition, there are several steps there which would increase transparency; there are steps that would ensure no price signalling went on. These sorts of things would help competition because bear in mind what we’ve seen in the last 18 months is the trashing of 25 years of build up of competition within the banking sector.
St George for instance is a classic. Wayne Swan authorised the take over of St George by Westpac, now we have missing another major area of competition…
CHRIS UHLMANN:
But most of the competition was killed off by the Global Financial Crisis because the products they were selling were no longer able to be sold.
ANDREW ROBB:
Wayne Swan authorised the takeover of St George by Westpac. Now we have missing another major area of competition.
CHRIS UHLMANN:
Most of the competition was killed off by the Global Finance Crisis, because the products they were selling were no longer bale to be sold.
ANDREW ROBB:
Most of the competition was because of government policy decisions, which led to a panic and the reduction or people withdrawing money from long-standing trust funds, which closed almost overnight, because deposits were being withdrawn and placed in the four big banks who had the guarantees.
We saw that with so many smaller organisations and we saw the lack of protection for the derivatives markets, so RAMs and Aussie Home Loans and all of these other smaller institutions, which were providing important competition, they all went to the wall, no they got bought up, bought up by the big four.
So we are now back really in the early ’80s in terms of concentration of ownership within the banking sector, where as we had had 25 years from both sides of politics encouraging a build up of competition, that’s the thing that’s been decimated.
CHRIS UHLMANN:
Just looking at some of the elements of your nine point plan though, giving the ACCC power to investigate what’s called collusive price signalling essentially they will be monitoring what the bank executives say, now that’s completely fraught isn’t it? That really won’t have much beyond the effect of making bank executives just watch their tongue.
ANDREW ROBB:
Well, there is no one thing by itself, but the ACCC has said that if you are going to have a situation where you have just got really four big players in the market, rather than potentially dozens, of course we’ve lost most of the foreign banks have now gone back home again because they really had no protection here in this market.
So if you’ve got just four big banks they want to put the pressure on them to make sure they are not telling one another what they are going to do, so that they all work in concert and you remove the competition.
By itself it will not fix the problem. None of these issues or none of these nine points by themselves will fix the problem, but we certainly need a ‘son of Wallace’ inquiry, which is one of the nine points, because the issue of how we reinstate, how we allow competition to re-emerge, a very difficult one, very hard to unscramble the omelette now, that’s been created by this government’s policies over the last 18 months.
CHRIS UHLMANN:
Just two quick things, the Greens are proposing fixing the gap between what banks pay for their money and the interest rate they can charge, is that at all a good idea?
ANDREW ROBB:
No, we’ve been through all this. From the ’70s, when capital started to move in real time around the world, it meant that all of our sectors needed to be market driven, needed to be competitive.
We got into that in the banking sector early in the 1980s and it’s been a very constructive roll-out of competition until the last 18 months, when so much of that was trashed by the measures that the Federal government undertook, without looking across the sector.
CHRIS UHLMANN:
Just finally, how are you getting on with Joe Hockey, there seems to have been some disquiet in the last couple of weeks on the Coalition benches?
ANDREW ROBB:
Well, Joe and I get on very well I’ve got to say. We worked together hand-in-glove through the campaign, we talk to one another every second day. He and I are good friends and good professional colleagues, so there is certainly no disquiet there between us and hopefully we are both making a solid contribution.
Because on the other side, they talk a lot, but they do nothing. And I’d say the alternative, the government’s economic team, the three there are really. They’re lightweights.
They’ve had a big humiliation over the last 24 hours and with the loss of control of their spending, it must be a great worry for so many Australians. I think it’s why so many people are unsettled by the current financial situation.
Media Contact: Cameron Hill on 0408 239 521