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

Deputy Prime Minister and Treasurer

3 December 2007 - 27 June 2013

27 September 2009

Interview with Paul Bongiorno

Meet The Press, New York, USA

27 September 2009

SUBJECTS: Economic stimulus; G20 Leaders' and Finance Ministers' meeting in Pittsburgh; Executive Pay; Climate Change; Global Financial Crisis.

BONGIORNO:

Good morning, Treasurer.

TREASURER:

Good morning, Paul.

BONGIORNO:

Just going to that report on the $82 million worth of stimulus payments that went to people living overseas - it does strengthen, does it not, the Opposition's argument that perhaps our stimulus package wasn't as well designed as it should have been.

TREASURER:

No it doesn't, Paul. I mean the Opposition will go to any lengths to hide their embarrassment at failing to support the stimulus and, in fact, if they would have had their way, Australia would be in recession right now. Thousands - tens of thousands - more Australians would be unemployed and thousands of small businesses would have went to the wall. Now, social security payments go both ways. Other countries make them to people resident here and we make them under social security agreements payable overseas. That was the case when Mr Abbott was a minister in the previous government, when Mr Turnbull was a minister in the previous government and when Mr Hockey was a minister in the previous government. You know, it's been quite surreal to be at the G20 where you've had conservative ministers around the table all supporting economic stimulus, all recognising the need for financial guarantees like the bank guarantee, all of those ministers sitting around the table supporting those measures, but the conservatives in Australia opposing them root and branch.

BONGIORNO:

Well, Treasurer, the news that the G20 will take a very tough line with finance executives' salaries. It does seem looking at it that what the G20 wants is tougher than the legislation the Government currently has before the Parliament.

TREASURER:

No, we've signed up to the G20 process. Indeed, the work of APRA in Australia was the basis of the recommendations that have come from the Financial Stability Board. The essence here is to link executive pay in the financial sector to the long-term performance of the company. And of course, at the core of the global financial crisis has been the fact that obscene pay packages have been made to executives as their financial institutions were melting down.

BONGIORNO:

But our legislation doesn't do that, does it? It's only looking to payouts, rather than bonuses along the way.

TREASURER:

We are doing a number of things. We have legislation before the Parliament which the Liberals are frustrating when it comes to termination payments. This legislation is some of the toughest legislation in the world. But we are dealing, through the G20, through APRA and through international bodies, to put in place a broader framework for the financial sector that is tough but fair, and it makes sure that executive pay in the financial sector is linked to long-term value creation. And that's what we signed up to at the G20 and that is what is being opposed by Mr Hockey and Mr Turnbull.

BONGIORNO:

Well, while you were away, Paul Keating worried that our big banks have been given too much market power and he holds you partly responsible.

KEATING GRAB (Wednesday):

With St George, I would never have agreed as Treasurer to allow St George to go into Westpac, because you go from six banks - or seven banks - to four. And in the end, what they'll do is, working on the basis - never give the suckers an even break - they'll simply put the margins up.

BONGIORNO:

Well, obviously, there's not a lot of love lost for the banks, but do you regret allowing Westpac to take over St George?

TREASURER:

No, I most certainly do not, and I don't regret keeping in place the Four Pillars policy that I announced back in June last year. But on a broader point, we've been through a global financial crisis. Yes, we do have great strength in our banking system, but when this global financial crisis really hit last September-October, there could have been very, very substantial damage to the Australian banking system. And by putting in place the bank guarantee we supported all of our deposit taking institutions and that was absolutely fundamental in keeping credit flowing in the Australian economy. It is the case that because of the global financial crisis some institutions more than others find it difficult to raise their funding. That's a consequence of the global financial crisis. But the bank guarantee has been fundamental in supporting all of our banks and we make no apology for that.

BONGIORNO:

There's no doubt that our four big banks are doing extremely well, in fact better than we all thought they would. Is it time for Australia to follow the example of the United States and end the bank guarantee?

TREASURER:

Well, decisions in this area will depend on market conditions. The United States made their announcement on this timing for them some time ago. But we will act when market conditions allow. This is something which we are in consultation with our regulators about. But at this stage, we believe the bank guarantee should remain in place.

BONGIORNO:

Time for a break.

[Commercial break]

BONGIORNO:

You're on ‘Meet the Press' with Treasurer Wayne Swan. And welcome to our panel: Jessica Irvine, the 'Sydney Morning Herald'. Good morning, Jessica.

IRVINE:

Good morning.

BONGIORNO:

And Steve Lewis from News Limited. Good morning, Steve.

LEWIS:

Good morning, Paul.

BONGIORNO:

The emissions trading negotiations brought on a long-distance duel - letters at 5,000 kilometres, as the Government pressured Malcolm Turnbull to meet a deadline for amendments. He seized on these remarks from the Prime Minister.

PRIME MINISTER GRAB:

We are into these negotiations big-time. But you know something - our domestic emissions trading legislation was also voted down by our Senate a very short time ago. That doesn't impede me from being active in these negotiations and my observation of President Obama is it doesn't impede him either.

TURNBULL GRAB:

How can he say in America it isn't vital to have legislation enacted before Copenhagen, but then say, in Australia, it is?

IRVINE:

Good morning, Treasurer. Isn't it clear from those comments there from the PM that you don't actually need to have the legislation on ETS passed by Copenhagen – that you can still be an effective negotiator and that that's actually just a piece of political grandstanding on your part?

TREASURER:

No I think that would be a complete misreading of our position and the Prime Minister's statements. I mean Mr Turnbull will twist and turn and go to any lengths to avoid fronting up to this issue because, bear in mind the history of it - we've had a green paper, we've had a white paper, we've had legislation. We've got the whole business community wanting certainty for investment and also the credibility of the country as we sit there at these critical negotiations. Because Australia has a very big stake in putting in place a substantial response to climate change - one of the hottest and driest nations on earth. So being there with our position is important and we have worked very hard over 18 months and the Liberals cannot twist and turn their way out of this. It's just the dinosaurs in the Liberal Party who will do anything to frustrate this piece of legislation.

IRVINE:

And yet you've said you are prepared to negotiate with the dinosaurs, as you say. And I wonder how far are you prepared to go? For instance, the coal miners have hired the Kevin '07 creators to push for more compensation. Have you got more money to push this through in November?

TREASURER:

Well, we're genuine about having a dialogue with the community. We have been in negotiation with a variety of industries over a long period of time. At the end of the day we'll do what's in the national interest. We've put forward in this particular area some proposals. There'll continue to be discussion. But that doesn't take away the responsibility of getting this broad framework in place via legislation. No country on this globe has a greater interest in ensuring that there is a substantial response to climate change than Australia.

LEWIS:

So Mr Swan, just picking up from that, does that mean that there is further compensation on the table for areas like the coal sector?

TREASURER:

No, it doesn't necessarily mean that at all, Steve. But we are engaged in a genuine dialogue. We do want this legislation passed. But we can't tolerate the frustration of the Liberal Party. We can't contemplate their continued disunity in this vital area. Business certainty demands we get this in place so business can get on with the job of investing in the new technologies of the future.

LEWIS:

Treasurer, out of the G20 we heard an announcement that subsidies for fossil fuels will be phased out over time - part of the campaign on climate change. What would that mean for Australia? Is that a benefit for us or would it actually cost the budget?

TREASURER:

No, I don't believe that is an issue for Australia. We are putting a price on carbon via the Carbon Pollution Reduction Scheme and we are, of course, putting in place transitional assistance for both households and industry over time. But I don't believe it has implications for us. It is aimed particularly at some massive subsidies elsewhere in the world which do need to be removed over time.

BONGIORNO:

Well, Malcolm Turnbull is accusing the Government of politicising Treasury Secretary Ken Henry. The Opposition says Mr Henry, who is to give evidence to a Senate inquiry into the stimulus, is nothing but an ambassador for the Prime Minister.

TURNBULL GRAB:

Dr Henry is committed to his program. It's his program. I wouldn't expect him to do anything other than defend it vigorously, which is what he's doing.

LEWIS:

Treasurer, has Dr Henry become too partisan in his support for the Government and of the stimulus package?

TREASURER:

Dr Henry is a public servant of the highest integrity. He has provided support to the previous government. He is putting in place the policies of this Government. He is an apolitical public servant. The problem we have here is that Mr Turnbull and his colleagues will go to any lengths to ridicule Dr Henry. I think it's unacceptable. It's yet another example of the misjudgement of Mr Turnbull and Mr Hockey and, in particular, the fact that they are so hostile to the stimulus and so embarrassed that the stimulus has worked in Australia and supported so many businesses and jobs. So Dr Henry then becomes a pawn in their political game. They should desist from this sort of behaviour.

LEWIS:

Mr Swan, just back on the issue of executive salaries, the Government does have legislation before the Senate, but it really deals with the financial sector. We've seen in the last couple of weeks Geoff Dixon, the former CEO of Qantas, walk away with about $11 million. That is clearly unacceptable to most people, and I'm sure to yourself. What's the Government going to do to actually clamp down on these sorts of obscene payouts to CEO's?

TREASURER:

Well, the legislation in the Senate deals with termination payments across all sectors. The guidelines through the G20 are concentrating particularly on the financial sector, but when it comes to all sectors of the Australian economy, that's the reason that we have put in place the Productivity Commission inquiry. This is quite a complex area. There's no silver bullet here in terms of a solution. That's why we've asked the Productivity Commission to examine this in great detail.

LEWIS:

And its report comes out on Wednesday. If the draft report comes out on Wednesday, are you committed as Treasurer to putting in place measures that would actually clamp down on some of the obscene salaries paid to CEOs?

TREASURER:

Well, I can't pre-empt a draft report of the Productivity Commission, so the draft report will be subject to community consultation and discussion. But the Government is very serious in this area. We were very serious with the proposals that went through APRA to the Financial Stability Board and have now come through in a slightly amended form through the G20. That, I think, demonstrates our bona fide that we need to have action in this area. The public, and I think many others in the community, are just sick and tired of some of these obscene packages which don't reflect long-term wealth creation in the enterprise.

IRVINE:

One of the other messages that have come out of the G20 really strongly is that we're actually moving from a situation, from crisis to recovery, and Ken Henry actually said last week that he's pretty sure that unemployment in this country won't get a as high as 8.5 per cent. It will be something lower than that. And presumably that means that also Government debt will be something lower than that and growth something higher. Can't we just assume that now that when you release your next set of Budget forecasts, that it's going to paint a rosier picture for us?

TREASURER:

Well Jessica we have done better than anticipated at Budget time. But, of course, the mid-year forecast will come towards the end of the year. I don't intend to pre-empt that. What we do know is that the stimulus we've put in place has been quite successful in supporting employment and in supporting business and it will be a good thing if our forecasts in the future show that unemployment won't necessarily go as high as forecast some months ago. But that's really a matter for the mid-term review.

BONGIORNO:

Thank you very much for being with us, Treasurer Wayne Swan.