13-December-2010
Portfolio Media Releases
Topics: Government banking proposals, Labor's reckless spending, Coalition priorities for 2011.
Click here to watch the interview
VIRGINIA TRIOLI:
For more now we’re joined from Melbourne by the Opposition Finance spokesman Andrew Robb. Andrew Robb, good morning, good to talk to you again.
ANDREW ROBB:
It’s nice to talk to you Virginia. Yes, I've left my mobile phone somewhere else too so we're safe on that front.
VIRGINIA TRIOLI:
I’m glad it’s a long, long away from us. Now, looking at the reforms announced yesterday by Wayne Swan will the Opposition support them when they come before Parliament?
ANDREW ROBB:
Well, we’ll see it when it’s finalised. Many of these measures, of course, are going off to review there’s a couple of committees, I think, formed, there's other measures which, you know, there's no real sense of what the final form of it will look like. Things like the covered bonds which we support, but we want to see the final legislation but there's certainly some reasonable elements in parts of this package but overall it doesn't do anything to solve the original problem.
If you think about what caused all this focus in recent weeks, it was the banks putting up their interest rates over and above the level recommended by the Reserve Bank.
Well, if you look at the whole package yesterday, there is not one thing in that package which will stop the banks doing what they did and that is increasing interest rates above the Reserve Bank recommendations. So this is smoke and mirrors in many respects.
VIRGINIA TRIOLI:
But what more could be done? As the Financial Review has commented this morning in a piece I actually found quite apposite by David Crowe, that unless you want to overturn the free market in Australia and in particular as it affects the banking sector there's not much more you can do to prevent them?
ANDREW ROBB:
The problem is Virginia, what really caused this, I mean there’s been 25 years since the early '80s building up substantial competition for the four big banks and yet in the last two years because, if you look at it, the botched implementation of the guarantee programs on deposits and on wholesale funds, the Government panicked, they brought in those guarantees – there was a need for guarantees – but they brought them in a way in which substantially advantaged the big four banks. As a consequence St George Bank has gone, Bank West has gone, Challenger has gone, Aussie Home Loans is gone, Rams is gone and a host of others they've all been gobbled up by the banks.
25 years of competition built up in this market place has disappeared overnight. Much of it approved in the end by Wayne Swan himself. Now, they can't replace that overnight, I agree. That's why we need more than anything else, is a ‘Son of Wallace’ review.
We need to go back to square one in a sense to see how we can restore that critical competition. This is tinkering at the edges in large part. This is Wayne Swan making out he's doing something when in practice it is all smoke and mirrors, it is politics.
There is no major substance in these things. Two or three of these things have got merit but they're not going to deal with the problems and in fact in many respects, you know, interest rates could well go up in some areas rather than go down because of what we've heard announced yesterday.
VIRGINIA TRIOLI:
What about the elevation though of building societies and credit unions and the like, that surely has to be welcomed by the Opposition?
ANDREW ROBB:
The problem is that, all of the measures that have been introduced for the building societies and credit unions, in many cases they're going to advantage the bigger banks more than those smaller institutions.
The small institutions need more liquidity. Things like the covered bonds and the listing of government bonds on the ASX, they're a good thing but of course the big banks will be more advantaged than the smaller institutions. The granting of some moniker or symbol that the credit unions can use, well if that's the best that can be done to improve their circumstance well, I’ll go he.
The thing is a PR campaign, that's what we've got. Wayne Swan said he'd been working on this for 12 months and what he's done for the credit unions is give them a PR campaign and a symbol they can stick on the front of the bank to say that the deposits are guaranteed and, you know, this is in many ways, it's insulting to suggest that this is some fundamental reform.
In fact you look at all the major commentators this morning they have pooh-poohed this set of proposals as just smoke and mirrors.
VIRGINIA TRIOLI:
Graeme Samuel himself who was on our program today from the ACCC, he was actually kicking back at some of those commentators and quite forcefully saying they have not looked at the proposals properly, they don’t understand them if they're making these criticisms. I've never seen Graeme Samuel really a captive of any side of politics, that was his independent view. So he was saying particularly as it affects price signalling, that it is a very strong bit of policy.
ANDREW ROBB:
The price signalling is by itself a constructive measure but again it's not going to change banking as we know it and he can make valid points …
VIRGINIA TRIOLI:
Sorry to jump in there Andrew Robb, but don't we always in this conversation get back then to just the cold reality, leaving aside politics, the cold reality of actually just what you can do to fundamentally change banking unless you want to regulate the sector?
ANDREW ROBB:
Well, first and foremost what is driving, what is the problem people have got? It's high interest rates. We've got the highest interest rates in the western world. What is putting pressure on interest rates that can be addressed? Well, the Government spending. If the Government had spent $13 billion less last year, $13 billion, which was quite achievable, then interest rates would be possibly up to 1 per cent less than they are now.
VIRGINIA TRIOLI:
Possibly, possibly.
ANDREW ROBB:
Well, Access Economics said for every $13 billion less in government spending it's about a 1 per cent reduction in interest rates. That's $4,000 a year to the average family, the average mortgage. Now that is doing something serious, it is immediate, the Government could start that tomorrow.
Most of these measures announced yesterday, they're off in the never, never. It will take years for some of these to have any effect and then it's only at the margin.
Honestly, Wayne Swan is totally misleading the Australian public today to suggest that this is some fundamental reform. It is not fundamental reform, it's tinkering at the edges.
If they really wanted to address the pressure that families are facing, six families a day are vacating their houses because they can't afford the mortgage, there are thousands of others under threat, if the Government seriously cut back its spending, so it's not out there competing with the credit unions and the building societies for funds. Interest rates would be lower, families would have more money in their pockets and the Government would get a lot of praise for doing something constructive and positive, not all this smoke and mirrors, this spin over substance.
VIRGINIA TRIOLI:
Andrew Robb, this could be our final conversation for the year and I note with interest at the weekend that Julia Gillard made the observation that next year 2011 was very much break for the Government. Coming into the New Year what will be the particular focus for the Opposition? How are you pitching 2011 in terms of what the Opposition has to achieve?
ANDREW ROBB:
Our principal job is to keep the Government accountable. We have to look at whether they're achieving what they said they would. That will be a big part of our focus next year. The Government has again promised so much. What, it’s three years now and I think most people will say that they've been all talk and no action on just about every front. It is make or break for this Government in my view.
Our job is to try and expose whether they've done that job or not. At the same time we are going to have a big year of contact more widely with the electorate, with business and with community groups and all the rest so that we can further sharpen the big body of policy that we took to the last election. We need to be ready, if this Government collapses over the next 12 months, we need to be ready with a solid agenda that we can take and put in place in Government.
VIRGINIA TRIOLI:
Big if there, but we’ll see what happens next year. This year proves anything could happen in politics, so I don't think we should be ruling anything in or out, should we? Andrew Robb, good to talk to you have a good Christmas.
Media Contact: Cameron Hill on 0408 239 521.