The Crest of the Commonwealth of Australia Treasury Portfolio Ministers
Picture of Wayne Swan

Wayne Swan

Deputy Prime Minister and Treasurer

3 December 2007 - 27 June 2013

20 July 2008

Interview with Greg Turnbull

Meet The Press, Channel Ten

20 July 2008

SUBJECT: Mark Vaile, Carbon Pollution Reduction Scheme, Bank Switching

TURNBULL:

Suddenly this week the Federal Government discovered it could cut fuel excise after all, but only to cushion the price effect of the proposed Carbon Pollution Reduction Scheme. Here to discuss it, among other things, Federal Treasurer, Wayne Swan.  Mr Swan, welcome back to the program.

TREASURER:

Good morning, Greg.

TURNBULL:

Well, can we go first to the politics of the day - the resignation from Parliament of Mark Vaile, forcing another by-election.  Well have now at least a double by-election with Alexander Downer's seat going. What’s the word from you?  Should Peter Costello make it a trio of by-elections?

TREASURER:

First of all, Greg, I'd like to wish Mark Vaile and his family well. But the other thing, Greg, is that Brendan Nelson ought to put an end to this by-election farce. We have got all of those sitting on the backbench like Peter Costello thinking about going. They ought to all go at once and they ought to save the taxpayer some money.  So, it's about time that Brendan Nelson put an end to this by-election farce that's going on. One by one, very costly by-elections. Let's see some action from Brendan Nelson.

TURNBULL:

What about the systemic problem, though? You talk about cost to taxpayers. Maybe it's reaching the point where we need a bond from candidates to say that they'll fulfil their contracts, serve a full term when elected. These people were elected just months ago.

TREASURER:

Well, the thing, Greg, is these circumstances are fairly unique. You have some long-term serving members. I think they ought to do the right thing. If they're sitting around doing nothing, they ought to get out. But the fact is the Liberal Party ought to organise for them to all go at once and just save the taxpayers some money.

TURNBULL:

Let's move to emissions trading, the issue described by Ross Garnaut as a diabolical policy problem. Just yesterday, Paul Kelly said that now the entire future of the Labor Party and the new Rudd Government rests on its response to climate change. Treasurer, you must be pretty nervous, and a bit, maybe, disappointed that this problem has arisen on your watch.

TREASURER:

No we're not. The fact is that the previous government didn't tackle climate change for 12 long years. So, it falls to the Labor Party once again to put in place the very big economic reforms which protect our economy and protect our society. So, we want to have a very mature conversation with the Australian people about this, because big economic reforms like this are not cost-free.

Could I say, we certainly welcome the bipartisan support from Brendan Nelson, at least, for the advertising campaign that we are going to run. Because we do need to have a detailed conversation with the Australian people about this scheme. It's so important to our future economic prosperity, and so important to the future of the planet.

TURNBULL:

Let's go to petrol prices, for a start. Aren't we entitled to be a bit cynical? For months now you've been ridiculing the Opposition for proposing a five cent a litre fuel-excise cut, saying it’s economically irresponsible.  Suddenly, fuel excises can be cut to offset a carbon effect.

TREASURER:

Greg, there's a huge difference between the position that we are putting in the Green Paper and what Brendan Nelson said in his Budget Reply. I mean, we've got a long-term economic reform here which is terribly important. He had an un-costed, un-funded thought bubble in his Budget Reply. There's a huge difference, because it is important that we do protect families and motorists in this reform, because petrol has increased 30 cents a litre this year alone, and 20 cents a litre since the Budget. And we don't intend to add to that with our Carbon Pollution Reduction Scheme. People who think that there should be a further increase in the price of petrol in those circumstances frankly, Greg, need to get their heads checked.

TURNBULL:

Yes, but surely a carbon pricing scheme is all about sending a price signal. Surely your cushioning mechanism is just a way of leaping for past the 2010 election.

TREASURER:

Of course it's about sending a price signal. There's a very big price signal that's already been sent. That's why we say petrol and transport is in the scheme for the long term, but given the price signal that has been sent, which is hurting families, there's no need to add to that burden, Greg. That would be completely economically irresponsible.

TURNBULL:

Yes, but a price rise on petrol is going to be waiting down the track some time, isn't it? At the moment, I think maybe five years away.

TREASURER:

It certainly will be waiting down the track in the sense that we have included transport fuels in the scheme. But what we've said is we will adjust that for the first three years and review it at the end of that period, unlike the Opposition, who've said they are now going to exclude transport altogether from the scheme, which is contrary to what they said, of course, when they were in government.

TURNBULL:

Now, the captains of industry have been queuing up to say that this initial options paper has put forward a proposal which is not only going to be expensive, but inequitable within and among them. What are you going to do to placate them?

TREASURER:

Well, what we have said for those emission-intensive, export-orientated industries, then there will be the provision of some permits, but, of course, there are a limited number. So, we'll take our time to talk to industry, to those people that have been making the commentary in the press - and by the way, we expect a lot more of that sort of commentary - we'll sift our way through all the genuine claims and of course we'll sort out some of the hollow claims and, at the end of the day, we will put forward a responsible position, a position which is economically responsible and affordable, and which protects those export-orientated industries that are emissions intensive.

TURNBULL:

Well, just quickly, what do you make of the posture both on industrial relations and emissions trading lately adopted by Qantas? We've got Geoff Dixon talking about 1,500 job cuts, routes to be lost, and a cost to domestic aviation from your emissions policy of $100 million.

TREASURER:

As I said before, this scheme is not cost-free. We're happy to talk to Geoff Dixon and others about the application of the scheme, but I would note that international aviation is not included in the scheme. And that certainly is a major benefit to Qantas. 

TURNBULL:

We'll take a break there. When we return with the panel - what the global economic jitters mean for Australia and interest rates.

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TURNBULL:

You're on Meet the Press, where our guest is Federal Treasurer Wayne Swan. Welcome to our panel this morning, Jessica Irvine from the Sydney Morning Herald, and Philip Clark from Radio 2GB.

With so many Australian families now under severe mortgage stress as the banks lift their interest rates without prompting from the Reserve Bank, Federal Treasurer, Wayne Swan, this week had a faintly familiar message for bank customers and for the banks themselves.

TREASURER (Tuesday):

What I would say to them is that they do need to exercise some restraint, and what I've said to customers is vote with their feet, which is why we are working very hard on putting in place a bank switching package so that customers who are unhappy with their bank can more readily shift their account.

IRVINE:

But Treasurer, where do you expect people to go when all banks are putting up interest rates?

TREASURER:

The first thing, Jessica, is that the bank switching package is very important, because while there might be a familiar or similar figure across the banks in terms of the standard variable rate, there are plenty of discounts around. So, there's plenty of variety out there if people have the capacity to vote with their feet. But I recognise people are under tremendous financial pressure and that the decisions taken by the banks to lift their rates outside the official Reserve Bank cycle are commercial decisions for them. And there is a balance that they have to find between the needs of their shareholders on the one hand, and customers who've been hit for six by a large number of rate rises in recent times. And the banks ought to take those decisions very carefully, and that's why it's very important that we put them under competitive pressure. And part of that competitive pressure that needs to be there is a fair dinkum bank switching package. That's what we will have in place, in full, by November.

IRVINE:

You've got the power to very directly influence competition in the banking sector. You've got something coming to your table - a merger between St George Bank and Westpac. Why not, instead of foisting the burden back onto consumers, use your power to stop that from going ahead?

TREASURER:

I don't comment on individual proposals that come to me that I have to take decisions about.  But could I say, the Government does have an eagle eye on competition in the banking sector. We're very keen to see the banking sector to be as competitive as possible, and that's why I'm very keen on getting this bank switching package in place.

CLARK: 

Mr Swan, can I get your thoughts on the international economic situation? Overnight, the IMF released its report on the world economic outlook, pretty much saying this is going to be the most difficult time for nearly a quarter of a century that Australia is facing, and the world is facing. You've got queues of people in America lining up outside banks to withdraw funds.  The depth and spread of that crisis and liquidity internationally, sparked by the US, is still rumbling. Are we over it here in Australia, or are we insulated from it? Where do you think it's going?

TREASURER:

Well, Philip, we are certainly not immune from these international events and it's true to say that we have possibly the most difficult set of global economic conditions in over 25 years. But having said all that, we should also have a good look at the underlying strength of the Australian economy as well. We have a very strong Budget surplus. We have high commodity prices. And thankfully, we do have a very strong banking sector, which is not infected by elements of the sub-prime crisis that are impacting elsewhere in the world. So, whilst we can't be complacent about what is going on internationally and whilst it does have an effect here, one of the effects is pushing up borrowing costs, which are flowing through our banks. The other one, of course, is pushing up borrowing costs for business. But taking all that into account, you'd rather be in Australia's position than the position of many other countries in the world. So, we just need to temper that pessimism that's coming through internationally by really refocusing on some of the underlying strengths. But there is fallout here, and we can see it daily.

IRVINE:

Treasurer, talking about pushing up costs, if I can take you back to your emissions trading scheme, you've estimated there will be a one per cent increase in the cost of living associated with that scheme. The Reserve Bank Governor, Glenn Stevens, last week called into question whether that would be a one-off or whether there will be a gradual increase in prices. How can you still claim that this will only be a one-off?

TREASURER:

No, I didn't think he called that into question. I think he was entirely consistent, Jess, with his previous comments. He said that they would look through the initial one-off impact - that was the previous statement that he had made - and he said in his previous statement, I think, reflected that when he was answering your question - that there might be some second-round effects which they would look at.

As you know, Jess, the Treasury and the Reserve Bank meet regularly talking about these issues. As we move through the Green Paper process through to the White Paper, I'm sure there will be discussions between the Reserve Bank and the Treasury on these questions, the impact on inflation and so on.

But in the first instance, what Governor Stevens I think said, correctly, is that the Reserve Bank would look like through the initial one-off when they were taking decisions about interest rates.

CLARK:

Mr Swan, it seems to me the whole Carbon Reduction Scheme is an example where Canberra policy-makers are well ahead of the community on this in terms of their understanding of what's going on. Everyone is concerned about the environment, but under this plan, the Government has got to say to people the costs of living for you, your household costs, your transport costs, and a whole range of associated things from your power and gas onwards, are all going to increase. The question most people would want to know is by how much? We all care about the environment but how much are we going to have to pay?

TREASURER:

Well, of course, there was some indicative modelling in the Green Paper, Philip, that was released last week which talked about an inflation impact of about 0.9 per cent, given a certain carbon price. All of those figures will be firmed up as we go through and get the Treasury modelling and produce the White Paper.

CLARK:

So, at this stage, you don't know how much?

TREASURER:

We said there was some indicative figures of 0.9 per cent, Philip. That was put out. But those figures will be firmed up as we go through the process. But that's why, Philip, we spent so much time in the Green Paper putting in place the essential protections for households and outlining the need for additional assistance to business which will be affected. It's very important that that is provided and that's why we spent a lot of time in the Green Paper talking about this. And that's why we do need to have a very mature conversation, a fair dinkum conversation, with the Australian people. Because what we do know, Philip, is if we don't act now, the costs of not acting will be far higher later. If people are worried about food prices now, if we don't act on climate change, what's happening with food prices now will just be the tip of the iceberg. So, we have to act now, it does involve a cost, and we do need to have a mature conversation with the Australian people about this important reform - perhaps the most important economic and social reform in about 25 years.

TURNBULL:

Treasurer, could I ask about the mature conversation you need to have with Senators. Under the new dynamics of the Senate, is it going to be the case that the eclectic group of Senators holding the balance of power - that you might shy away from them and actually try on this issue and others to, may I put it, as snuggle up to the Liberals?

TREASURER:

Of course, the Liberals have been consistently inconsistent on their approach to climate change and the scheme that we put out last week. We'd like to see the Liberal Party show some economic responsibility in the Senate and support our proposals. Because they did, at one stage, before they lost government, say they were in favour of a cap and trade scheme. But they've been all over the shop.  Only Friday night, Tony Abbott was saying the jury was out on the science of climate change. You've had five or six positions from different spokespeople out there. Of course, Mr Turnbull has had about seven or eight different positions himself. So, what we'd like to see is some economic responsibility from the Liberal Party so that when this important economic reform which can secure prosperity for Australia goes to the Senate, it can go through with the support of the Liberal Party.

CLARK:

Mr Swan, do you acknowledge that almost nothing that the Australian people do in relation to this Carbon Reduction Scheme is going to make a difference to Australia? It really depends on global leadership? We need to face that, don't we? Nothing we do here is going to make a difference to us.

TREASURER:

No, I completely reject that. What we will do will make a big difference for Australia and I think it will make a big difference for the world. What we do in terms of public policy through our Carbon Pollution Reduction Scheme will make a big difference. What individuals do in their communities and in their homes will also make a difference. So, I think those two things combined mean that, as a country, we can move forward and secure economic gains from this important reform. Many other countries in the world, 28 countries in Europe, are acting. Twenty-odd states in the United States and Canada are acting. We can get some great advantage from acting now. If we delay the cost will be far greater later on.

TURNBULL:

Mr Swan, we're just about out of time. Very quickly, Labor is not contesting the Mayo by-election. Should Labor contest Lyne, Mark Vaile's seat?

TREASURER:

I couldn't comment on whether we will be contesting that seat, Greg. It's only just been announced. That's a matter for the Party organisation. I'm sure they'll have a look at it and get back to you.

TURNBULL:

I'm sure they will. Thanks very much for joining us this morning.

TREASURER:

Thank you.