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

27 October 2008

Interview with Steve Price

Radio 2UE, Sydney

27 October 2008

SUBJECTS: Australian Dollar; Global Economic Crisis; Deposit and Wholesale Funding Guarantee; Julie Bishop/Plagiarism

PRICE:

Treasurer, Wayne Swan, as I said to you, is on the line. He's the man battling this global crisis. I wonder what he makes of the description over the weekend of the Australian dollar, by the London Financial Times, as the whipping boy of foreign exchange markets. The Treasurer's on the line. Thanks for hanging on. I appreciate the time.

TREASURER:

It's good to be with you, Steve. It's pretty important to have some direct communication at times like this, particularly when matters are so volatile on international markets, and of course, they do feed back into this country, as you've just identified in terms of the dollar.

PRICE:

What is Treasury telling you about why the dollar is being dumped?

TREASURER:

I think there's a variety of influences on the dollar, and I wouldn't speculate on those because in these uncertain times, that has its own impact. But the dollar has moved in circumstances not dissimilar to this in the past, and of course it's not all one way in terms of a depreciation of the dollar. That does bring some benefits to our economy in the situation we're in. It is carrying some of the weight of this global financial crisis, there's no doubt about that. But if you're in the tourism industry or if you're an exporter, this will certainly provide some relief. Because you see, Steve, the dollar had reached a record high only a short period of time ago. You've also got to look at its value relative to where it's been over time.

PRICE:

Can this global crisis get worse, Treasurer?

TREASURER:

We are in a very uncertain period. You know, Steve, when I was at the IMF meeting a couple of weeks ago...

PRICE:

I described it as you came back, you looked like you'd seen a ghost.

TREASURER:

Put it this way. One of the world Finance Minister's described it such as this in a meeting. They said, look, this global financial crisis has been going for some time. But they said in recent weeks it changed its face, and the Finance Minister said 'And the change in the face was very ugly'. And really, that is what has happened since about September 15. You might recall around that time was the time that in the United States Lehman Brothers went down. And of course, then there was the associated carnage which occurred on various stock markets around the world. So, we are living with that.

We are living with the impact on our share market. We are living with the impact on credit markets. We are living with the impact in terms of confidence. And that's why it's so important that governments, both internationally and domestically, address all of these issues and for us to do it internationally in as coordinated a way as we can. And that's one of the reasons why the Government has moved with things like a bank guarantee. It's one of the reasons we moved so quickly in terms of our economic security package. Because the lesson that I learned from other leaders who had been hit by this much sooner than we have been hit, was that early action was really the best way to go, and that's why we moved so swiftly in terms of both the guarantee and the economic security package. But when you move swiftly, naturally, that has impacts. And the other thing that I learned was that as you go through the fallout from this confluence, you've got to calibrate your policy along the way.

PRICE:

Well, you adjusted your bank guarantee on Friday. Is that it or could there be more changes to that?

TREASURER:

We certainly adjusted it. I had forecast that we would be adjusting it...

PRICE:

You did.

TREASURER:

... in the Parliament the week before that. We will take action on the advice of our regulators as we go through. The package that I announced Friday afternoon was on the unanimous advice of our major regulators and the Treasury - and that is as it should be. Because the one thing that we've got going for us in this environment are our regulators who are highly regarded, and we are working very closely with them. But there are other issues out there...

PRICE:

Just on that, did everyone underestimate the flight of capital from non-secured to secured, did they?

TREASURER:

I'm not sure they underestimated it, because a couple of things are happening at once here, Steve. There's no doubt that the guarantee has had some impact, particularly in terms of the short-term money market...

PRICE:

The money was moving already, wasn't it?

TREASURER:

Yes, it was moving already anyway, for a whole variety of reasons internationally. But I said in my speech in the House last Wednesday week that it would have some impact on short-term money markets and calibration would be required. But also what's happening in many of these other market-linked investment vehicles out there at the moment is of course you've got the fallout from what's happening on the share market, you've got the fallout from what's happening on the property market as well, and a number of these impacts certainly predate by a significant period of time the introduction of the bank guarantee.

PRICE:

Well, that's right. To use one example, City Pacific had frozen everything back in March...

TREASURER:

That's right.

PRICE:

What do say, though, to self-funded retirees - and I think if you and I had a large amount of money locked in one of these funds today we'd be feeling, you know, anxious about it. It is your life savings - what do you say to those people?

TREASURER:

What I say to them is that we are working our way through these issues with that part of industry methodically, systematically. What I'd say to them is take your time to make your assessments because what is happening with most of the funds is a freeze on redemptions, it's not necessarily on income. That is very serious, very serious for some people. So we are [working] through our regulators and I've personally been talking to people over the weekend, about how we can work with them. The most important thing here is for people to soberly assess what is going on. That's what our regulators are doing.

PRICE:

Well, I spoke to Centrelink's Hank Jongen on Friday after your comment about going to the dole office...

TREASURER:

No, no, I didn't say that. That is just not true. What I'd said on Thursday night late, I'd spoken to David Deverall from Perpetual who had just announced a freeze on redemptions. That had then subsequently been reported as meaning that there was a freeze on the distributions of income. Now of course that is not the case with that fund. And what I'd said on Thursday night, I cleared up that issue - yes, there was a freeze on redemptions, no there wasn't a freeze on distribution - but I said insofar as there are some people out there who may have suddenly had their income stream cut off altogether, then there is hardship assistance that can be available. That's what I said. And in this frenzied environment, that was turned around by some as me saying that everyone who was in trouble in one of these market-linked investment vehicles should go to Centrelink. And that is not what I said. It wasn't the spirit of what I said and it's not what the record records that I said.

PRICE:

So, you were saying - I'm a bit confused about that - Perpetual, yes, are still paying their interest payments...

TREASURER:

No, no they're still paying the income...

PRICE:

Yes, exactly. So, what was your advice in regard to Centrelink?

TREASURER:

That there are some funds where income streams have been cut off altogether, you see.

PRICE:

Yes, I raised City Pacific. That's one of them.

TREASURER:

That's right. And in those cases, what I was saying is if there is a case where income is suddenly cut off. So you're out there at the moment, you've got not much money and all of a sudden your only income stream ceases, right? Or let's take another example, you could be on a part pension. You may only be getting a small part pension but suddenly your investments have shrunk in value. You're entitled to walk into Centrelink and say can I have a re-evaluation of my assets...

PRICE:

Of the deeming rate?

TREASURER:

Well, more than that. Also of the assets test. And it could be as a consequence of what has gone on at market you are actually entitled to more part pension. That's what I was saying.

PRICE:

How cranky are you about the way the Opposition's playing this?

TREASURER:

I think it's deeply, deeply disappointing, because they said they supported the guarantee. They then spent the next week and a half trashing it. They've now said that they only have a policy guarantee up to $100,000, but they also now appear to be saying that they will provide a guarantee to every market-linked investment in the country.

PRICE:

Are they adding to the nervousness of Australians?

TREASURER:

I think they did. I think they did through some of their parliamentary tactics over recent weeks. But look, I don't really want to go there. This is too important to the future of the country, too important to confidence, too important to those people who unfortunately have been caught by these events and are experiencing discomfort. I don't want to be having a debate of a political nature with the Opposition. What I want to really do is make sure that we as a government work as closely as we can and talk to people directly about why this is happening. People need to understand why it is happening and where and how we are acting. That's why I'm really keen. I'm sorry I couldn't have got on last week, Steve, but we had Parliament.

PRICE:

That's fine. I appreciate it and when you get a moment, and I don't intend to take up any more of your time, I'd love you to come in and perhaps take calls from people.

TREASURER:

And let me assure you, I'm keen to talk as directly with as many people as we can because when you can't do that, you have your remarks turned upside down, and that happened with the remarks about Centrelink. They were meant as a comfort to some in the community who may have suddenly lost altogether an income stream and are sitting there and saying, 'gee, how am I going to pay the rent next week'. You know, there are some people in those circumstances, and because of the nature of this crisis, because it's having such unpredictable effects around the place, we do need to hear from people and we do need to be talking to them.

PRICE:

Just before I let you go, have you ever given a speech where you think bits of it have been plagiarised? I see Deputy Liberal Leader, Julie Bishop's in trouble again.

TREASURER:

Once again, you would expect better from a Shadow Treasurer, but I guess it's probably a window into why there isn't an alternative economic policy, I guess.

PRICE:

Appreciate your time. Thanks.

TREASURER:

Good to talk to you.