HOST:
Federal Assistant Treasurer, David Bradbury, joins us on the line. Assistant Treasurer, good morning to you?
BRADBURY:
Good morning to you Ross, how are you?
HOST:
I'm well. I wonder if you want to take the opportunity to be one of the first members of the Gillard Government to congratulate the ANZ on its incredibly healthy profit return this morning. I don't know whether you're up with the figures, $2.92 billion for a half year profit.
BRADBURY:
Well, look it is a healthy profit and I think we should all acknowledge that that's a good thing for the economy. One of the gloomy spots around the globe over the last few years has been where banks in various countries have struggled to turn a profit. The consequences of that have been very serious for those economies that have experienced that. The issue of bank profits really does paint some of the backdrop to the debate that we are now undertaking around whether or not banks will pass on the full effect of the cash rate cut.
HOST:
When you see a profit return like that, can there be any justification, David Bradbury, in the ANZ not passing on the full cut?
BRADBURY:
Well, look, clearly you have to look at the profitability of the banks and ANZ has released some results that show they are doing very well. They're a very profitable bank and that is a good thing. But the other aspect that you have to have a look at is the cost of funds. But when you look at both of these metrics, whether it be banking profits or the cost of funds, all the evidence seems to be, particularly in the first half of this year, that those cost pressures are starting to ease. Now, it's in that context that we are arguing that the banks should be passing on the maximum amount of the cut that the RBA effected on the cash rate yesterday.
But the other dimension to this is that clearly, it's a private market place out there. Banks will take their own independent decisions around how they want to price their services. But, as a government, we have been very much committed to trying to give people the opportunity, a greater opportunity, to take their business away and walk down the street and go to another institution where they can find a better deal. And just on that, I should make the point, Ross, that we're now looking at somewhere in the order of about one million home loans in the system that will not be subject to exit fees and by the end of next year, we're expecting that to increase to about two million. These are initiatives that we put in place to try and make it easier for customers.
HOST:
But where do you go to. I mean the banks are in lockstep on this a lot. It's all well and good to say shop around, find, you know. It's a hassle, it takes a lot of time and effort. Banks, somehow manage to find a way to hit you with, changing banks and with closing down accounts and all that sort of stuff. Where do you go?
BRADBURY:
I think that people should certainly be, I'm not going to provide financial advice to people as to who they should bank with, but have a look at the smaller lenders, have a look at the credit unions and the building societies. In some cases these institutions are offering mortgage rates in the order of about one per cent cheaper than the big banks. So there are some bargains to be gained.
The other aspect of this is if you go and you find a better price elsewhere, don't be afraid to go back to the institution that you're currently with and to serve it up to them and say, look I've been offered a better deal down the road, if you can't match it, then I'm going to pack my bags and head down the street. I think that many consumers are starting to do this. Many consumers are seeing that you do actually have some bargaining power in this arrangement, particularly where people start to act collectively.
HOST:
Just on the ANZ and its profit announcement, the ANZ has also taken up this idea that it's going to act independently, I better get this date right, David Bradbury, because others haven't, every second Friday I think it is of the month, they'll make a decision and they've already said they won't meet until next Friday week, to talk about this. And then it will take another week if it's going to pass on any cut. I mean, is that acceptable?
BRADBURY:
I think the marketplace, and consumers, will judge the ANZ on the basis of what they're offering. I think…
HOST:
Do you think, as the Assistant Treasurer, do you think that's appropriate?
BRADBURY:
The point that I would make is that, one of the things that most consumers have been most cynical in the past has been that there's been a much quicker rush to jack up rates when the RBA has increased the cash rate than there has been to reduce those rates. If an institution is out there saying, well we want to consistently deal with this by meeting on X day of the month and on that basis, we'll make our decisions, then that's a judgement call they're making out there in the marketplace. I would have thought that there's a real opportunity here for other institutions to show their good faith by passing on that cut as soon as possible, to get in ahead of any movement or any decision ahead of the ANZ and there's a real window of opportunity for the other banks to get out there and to show that they are committed to passing on the maximum flow through.
HOST:
Let's put this into simple language about the Reserve Bank's decision yesterday. If they make a decision as momentous as the one yesterday, what does that say, David Bradbury, about how the Reserve Bank sees the Australian economy travelling at the moment?
BRADBURY:
I think the best evidence of how the Reserve Bank sees the Australian economy travelling is the words of the Reserve Bank in their statement. Now, they have acknowledged that growth is patchy and there are some areas of softness in the economy. But I have to say Ross, that shouldn't be news to any of us. I think we've all been saying that and certainly that's at the heart of the Government's economic narrative. We've been arguing for some time that the structural change that's occurring, in large part driven by the high Australian dollar, we are seeing parts of the economy that are not in the fast lane of the mining boom and that's why at the heart of what we're trying to do through the Minerals Resource Rent Tax, which we've now secured passage of through the Parliament. But a key element of that is to ensure that we have a cut to the company tax rate. Now that's something that will be coming before the Parliament when we next meet and we'll certainly be calling on all parties to recognise that those companies out there that are not in the fast lane do need some tax relief.
HOST:
If the Reserve Bank, which it did, finds that the economic conditions are weaker than expected, is that a reflection on the economic management of the government of the day. I don't want to make it too simplistic, but is that not the case?
BRADBURY:
Let me just make this really clear point. When the Liberals were in power and interest rates were cut, they heralded it as being a tribute to their economic management…
HOST:
Which by the way I think Wayne Swan did yesterday as well, did he not?
BRADBURY:
… when, we're in government and the same follows, all of a sudden, the glass is half empty, as far as Mr Hockey is concerned. The reality here is that we are running, and you'll see when we hand down our budget next week and we're committed to returning the budget to surplus, we are running a very tight fiscal operation here. We want to make sure we are living within our means as the government and as an economy. And that is absolutely critical that we do that. Let's just have a look at the broader outlook. We've got inflation contained, now the Reserve Bank won't cut the cash rate unless inflation is contained, we have low unemployment, we have growth returning to trend and we have a record pipeline of investment coming into this country.
HOST:
We have a housing industry that's in trouble and we have consumer confidence which has gone through the floor.
BRADBURY:
But just hang on a minute there, Ross. A housing industry that's in trouble. Go to places like Florida, where house prices are 30 per cent lower today than they were before the GFC hit, and you can recognise that there has been a global impact of the global financial crisis on asset prices. There has been housing bubbles in other economies. Australia has not experienced that same difficulty, but are we experiencing a period now where housing growth and housing prices are not increasing at the same rate as we saw previously. Well, yes that's true…
HOST:
I wouldn't want to be comparing our situation in the housing market here to the United States. I mean, we didn't have the toxic debt problem that they had in the States and the banks were much more controlled.
BRADBURY:
Ross, who do you want to compare us with? You pick the country that you want to make the comparison with and I will guarantee you we will come out on top. Pick the country. If it's not the United States, who is it, Ross?
HOST:
Sweden. Let's go Sweden.
BRADBURY:
Ok, well what's the situation in Sweden.
HOST:
You tell me. You put the challenge out there, I'm putting a country up. Tell me, Sweden, how do we stack up alongside Sweden, David Bradbury?
BRADBURY:
I can tell you that when it comes to asset prices in this country and house prices, that they have plateaued. They have come off the boil just a little bit, but when you look globally, you look at the impacts that have been felt all around the world, as an economy we are a standout performer and that's what the IMF has said and any international commentator that has assessed the relative merits of all the economies throughout the globe will acknowledge that the Australian economy, you know things are not perfect, but we live in a world where there is global instability and uncertainty. I've got to say that there is no country in the world that I would rather be at the moment other than Australia. That doesn't mean we've got things perfect, but I think we've got a solid platform to continue to grow into the future.
HOST:
It's 17 to nine on 666 breakfast. My guest is David Bradbury, the Federal Member for Lindsay and the Assistant Treasurer. David Bradbury, let's talk about the elephant in the room. According to The Australian today, Julia Gillard has been abandoned by key backers in the NSW Right. Now, the last time I checked you were a member of the NSW Right, have you abandoned Julia Gillard?
BRADBURY:
No I haven't and I have no knowledge of any of these matters that are the subject of these reports. So, I think that it's always easy for articles to be peddling stories with unnamed sources, but the reality is that the Prime Minister is getting on with the job. As a Government, we are very much focussed on one of the signature policy programs of any government and that is the Budget that we will hand down next week and to be honest I think that is where our focus is and that's where it should be and that's where people expect it to be.
HOST:
Has there been discussions at a factional level in recent days about the leadership of Julia Gillard?
BRADBURY:
I'm not aware of any.
HOST:
You haven't been involved in any at all?
BRADBURY:
I'm not aware of any.
HOST:
Are you aware of any of your colleagues who have maybe have been Gillard supporters up until now who are now starting to waiver?
BRADBURY:
Not aware of any.
HOST:
Would they have cause to waiver. Would you be surprised if they're wavering?
BRADBURY:
I've ruled out any of these discussions going on as far as I'm aware. I'm not going to speculate whether people should be having those discussions. I don't believe we should be. I think we've just got to get on with the job of doing what is before us and that is handing down a budget in difficult economic circumstances, albeit much better than most other countries in the world. But returning the budget to surplus is the right thing for us to do at this point in time and that's no small feat but we will put every effort into doing that.
HOST:
Is Julia Gillard in your opinion still the best person to lead the party.
BRADBURY:
Yes.
HOST:
And will she be there for the next election as the leader?
BRADBURY:
Yes.
HOST:
Absolutely confident about that?
BRADBURY:
Yes.
HOST:
What's the feedback you're getting in your electorate, which is marginal of course, you're in the seat of Lindsay which was held by Jackie Kelly before you came in and won the seat. What's the feeling there, David Bradbury? You must be nervous.
BRADBURY:
We are engaged in implementing a significant policy reform program. It is of a scale that in the future people will look back on and they will say this was a great reforming Labor Government in the finest tradition. But when people write those histories, they often look back through very rose coloured glasses about the nature of the challenges that those governments actually faced when implementing these reforms. The alternative, Ross, is that we take all of the easy decisions that governments like those in Europe have taken for generations and that only lands you in one place, that's economic disaster. We are not prepared to shirk the economic reforms or the tough decisions of today in order to leave that sort of mess for future generations. Others in other parts of the world are prepared to do it. I think that regardless of who is in power in Australia today, if you are serious about tackling some of these long term challenges then I think we all recognise that there's difficult decisions which must be taken.
HOST:
Which is all incredibly stirring, but if you're sitting in a marginal seat, then you also must have one eye, I admire you for saying that the future of the country is incredibly important and it is, but in a marginal electorate you must also have one eye on your best electorate prospects. The best chance you have, David Bradbury, of extending your term, another four years. Are you concerned at the moment that this might be it for you and come the next election David Bradbury will be history?
BRADBURY:
Politics is a brutal sport and you can be here today and gone tomorrow but it's not about the length of time you spend warming the seat, it's about the reforms that you implement, the changes that you make in the best interests of the country. If people choose to judge people like me and others within the Government on the basis that we made those hard decisions and were turfed out for doing it, then that's a legitimate judgment for people to form. But equally, I'd much rather have that epithet written on one's political career than to be said that you stood for nothing, you did nothing other than warm a seat for a period of time. Obviously there's got to be a balance. These are difficult challenges for the Government. We're committed to making these reforms. And if you look at the things we've done, hard things, pricing carbon, not the most popular thing you'll ever do in your life, but in the end if we're serious about tackling climate change, both sides of politics allege that they are, if you're serious about it a market-based mechanism is the best way to do it. That's what we've done. Other governments have failed, but future generations will benefit from the hard decisions we are taking.
HOST:
David Bradbury, I'll leave you with this piece of valuable information. According to The Economist Sweden's housing market was dangerously over valued late last year and it now looks like the bubble may have burst. Radio Sweden reporting that house and home prices in the country have dropped 11 per cent in the last month of 2011. So there you go.
BRADBURY:
Thank you very much for coming back and vindicating…
HOST:
We were both on dangerous ground there with Sweden. I'll tip my lid to you. David Bradbury, good to talk to you.
BRADBURY:
Thanks very much.