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

7 December 2011

Interview with Sabra Lane

ABC Radio, PM program

7 December 2011

SUBJECTS: National Accounts, Interest Rates

COLVIN:

The Deputy Prime Minister and Treasurer Wayne Swan says the GDP figures are "an exceptional result" for Australia, but he says future growth results are likely to be lumpy. Mr Swan's been spruiking the strong figures today, while delivering a public backhander to the big four banks, which are still yet to say whether they'll pass on yesterday's Reserve Bank interest rate cut to their customers. Mr Swan spoke to chief political correspondent Sabra Lane.

TREASURER:

Well this is a standout result for Australia. We've got strong growth on the back of very strong business investment; we've got solid growth in consumption as well; we've got incomes that are rising but we've got inflation which is constrained and we've got unemployment that remains low. So that's an exceptional result when you consider what's going on elsewhere in the global economy, particularly what's happened to confidence and how that's been transmitted through financial markets to Australia. It's an exceptional result.

LANE:

You've warned that future growth results will be lumpy. What do you mean by that?

TREASURER:

What I was talking about there is this massive investment pipeline. It's something like $455 billion in resources alone and we've seen that kick in, in the results that we've got today. Very strong increases in businesses investment, and I was just pointing out that as we go through the years ahead that will come in lumps, although it will be relatively evenly spread in the next few quarters.

LANE:

Treasurer, is the Christmas Grinch alive and well? The big four banks obviously don't feel that positive about the economy as they're not passing on yesterday's Reserve Bank interest rate cut in full, if at all. Have you phoned them personally in the last 24 hours to let them know that you're angry about that?

TREASURER:

Well I've certainly told the banks both publicly and privately over a long period of time my views about the need for them to pass on rate cuts from the Reserve Bank.

LANE:

Have you done it though in the last 24 hours?

TREASURER:

I don't talk about conversations I have directly with individuals but I've spoken frequently with those people who run our major banks; they're very well aware of my view and my view is that they are very profitable, the big banks are extremely profitable, but we've also got a lot more competition now in our banking system than we've seen in some time, which is why you've had the Bank of Queensland out, ME Bank out, who've already said that they're going to be passing on the rate cut in full.

And what I say to those people who may be unhappy or angry with their banks if they don't intend to pass on the full cut, that they can walk down the road and get a better deal.

LANE:

But the full measures of your bank switching package don't start until July next year, they've still got a while to wait don't they?

TREASURER:

Well they are all not introduced as yet, that is true; for example the one page fact sheet is coming, but you saw the change in behaviour, for example, when we announced we were going to abolish mortgage exit fees for new loans and we have now abolished them for new loans. They dropped a lot of fees at that stage because they do know that they do need to be competitive.

The other thing we've done and you've seen the impact of is, we've put a massive investment into RMBS [Residential Mortgage Backed Securities] and that has been important to support our smaller lenders, our smaller banks and our credit unions and that's why for example Bank of Queensland and ME bank are in a position to provide the competition which we see in the market this very day.

LANE:

Are the banks harming Australia's economy by failing to pass on this cut?

TREASURER:

Well first things first; we haven't yet seen the decisions from the major banks.

LANE:

The longer they hold out though it's more likely that they won't pass it on; it's a kind of price signalling if you like.

TREASURER:

Well, what I say is they should be passing on that rate cut.

LANE:

The Government helped the banks out during the global financial crisis; would you help them out again if Europe develops into a full blown crisis, in light of what they've done this week?

TREASURER:

Well, I have to make judgements about managing the economy and of course we came through the global financial crisis and the global recession in better shape than just about any other developed economy and we can see that continuing here at the moment. Part and parcel of that was responses we put in place to stabilise our financial system and we put in place a set of arrangements where the banks had to pay for the bank guarantee and that provided income to the Government and to the people of Australia. But what I say to the banks now is do the right thing by your customers and make sure that when it comes to competition in the system you're seen to support competition.

LANE:

The Opposition Leader Tony Abbott says you have no authority on this; you jawbone on this issue a lot but the banks don't listen to you at all.

TREASURER:

Well, when Mr Abbott was last in government the cash rate was 6.75 per cent; it's down to 4.25 per cent. People were paying a lot more money for their mortgage when Mr Abbott was in the Howard government and there were 10 interest rate rises in a row in the final period of the Howard government.

He doesn't really have any position to talk from, and when it came to the competition reforms we took to the Parliament, Mr Abbott and Mr Hockey and Mr Robb opposed the abolition of mortgage exit fees.