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

6 June 2012

Interview with Ten Breakfast

SUBJECTS: Interest rate cut, QANTAS, Queensland Day

HOST:

Wayne Swan, the Treasurer joins us now. Wayne good morning to you, thanks for your time.

TREASURER:

Good morning, good to be with you.

HOST:

I was watching some news or another yesterday and the telecaster, the expert was saying well it doesn't look like we're going to pass the full rate on this time either. But it is too early to tell, do you think any of the four main banks will pass the full discount on?

TREASURER:

Well I can't speak for the four main banks, but my view very strongly is that they should pass it on in full.  They are very profitable, their net interest margins are back to where they were prior to the global financial crisis, their return on equity is high. Now we've had the equivalent of five rate cuts since last November, 50 basis points last year which was passed through in full, then we had another 50 basis points before this cut and they didn't pass that through in full. I think they ought to pass this 25 basis point cut through in full for the reasons I've just outlined. If you've got a $300,000 mortgage at the moment, you're paying something like $3,500 a year less than you were when the Liberals were last in government, so mortgages have certainly come down considerably.

HOST:

The banks are using the excuse that the cost of borrowing offshore... is that a valid excuse?

TREASURER:

No I don't believe that it is and in fact they've now switched their argument and they're saying it's the high cost of their domestic deposits. Our banks are pretty well funded. It is true, there is a vulnerability with offshore funding, but most of them have secured their funding for some time now. Of course they would argue that the cost of their domestic deposits has gone up and that is why they have not done the pass through. But if you look at the overall metrics here - their profitability, their net interest margins - I just don't believe it is justified.

HOST:

Alright, can we talk about a couple of other quick things, obviously the shock news of the drastic profit downgrade of QANTAS yesterday saw the share price drop by 19 per cent and the profit downgraded by 91 per cent. Are you concerned for the future of QANTAS?

TREASURER:

Look I think QANTAS is facing some challenges, they've been talking about those challenges for some time now and there are challenges in their international business. That's for their board to deal with. Naturally I follow these matters, but I don't comment on share market movements. QANTAS is a great Australian company in a very tough, competitive environment out there.  It's impacted in particular by the volatility in the global environment. Now of course that is one of the challenges we face in our economy overall. Domestically, we are very strong compared to what is going on in the rest of the world.  QANTAS' domestic business is also very strong.

HOST:

Yes, and needs to be because that lifeblood is being sucked out of that with the cost of running the international operation. Etihad of course have been given the ok to purchase four per cent of Virgin Australia and there is concern that they obviously want more.  If they get more they may well squeeze QANTAS out of the domestic market. Would you be interested in making sure that Etihad does not get more than four per cent of Virgin Australia?

TREASURER:

Well first of all foreign investment matters are matters before the foreign investment board, I don't comment on those as Treasurer. But in terms of the general competition framework in the airline industry, those are matters which are handled by our regulator the ACCC.

HOST:

But is that something that concerns you as someone who's obviously intimately concerned about the economy?

TREASURER:

What concerns me is that we have a competitive aviation sector. I'm not out there in government picking winners in terms of the commercial operation of the airline.

HOST:

You are a Queensland MP of course, at Lilley there.  Today is the day that Queensland shines, and yet there doesn't seem, we were talking to our reporter this morning, he said you know given this is the day that Queensland, there doesn't seem to be much in the way of balloons and celebrations. Do you think that's down to Campbell Newman, has he sucked the lifeblood from Queensland?

TREASURER:

No, I certainly wouldn't be accusing him of that. I, like Campbell Newman and like everybody else, am a very proud Queenslander; it's the best part of the country to live. We've got the best surf, the best looking mob of people in the country, we've got the best football and the best beers, so I'm a Queenslander proudly today.

HOST:

Fantastic. I think Campbell Newman's going to want to make sure you didn't spend too much on that scarf because he doesn't want money thrown around on this particular day. Wayne, thank you very much for joining us today, enjoy your celebrations for your home town.