WALEED ALY:
Eleven minutes past six. This has been described as the first serious look at the state of the nation's financial system since 1997. There are forty-four recommendations. It's called the Murray Review, and it suggests a range of things, including that banks should hold more capital.
Superannuation funds should be encouraging more people to take their super in form of a pension rather than as a lump sum. Credit card interchange fees should be cut. Seems like fairly serious stuff. I wonder how the government will respond. Maybe Steven Ciobo knows, he's the Parliamentary Secretary to the Treasurer, and he joins us know.
Steven, it seems to me this is landing something in your lap that seems to pull in the exact opposite direction, philosophically, to what the government has been pulling so far.
STEVEN CIOBO:
Not at all. This is a report to the government, and it's a report that's been undertaken by David Murray, a man with immense experience in knowledge of the financial services sector. This is a report that the government commissioned because it's been some time since the Wallace inquiry.
We thought it was time to take stock of the financial services sector now in Australia. That's exactly what we've done. We want to make sure that Australia continues to have a very robust and strong financial services sector. We want to make sure that we've got the continuation of what is already a fantastic superannuation system. We want that to continue in the future as well, Waleed.
WALEED ALY:
Sure. This is really arguments. The big headlines here are about more regulation, effectively. This is not a government that's been fond of that.
STEVEN CIOBO:
We're not necessarily opposed to more regulation, but we are a government that's committed to deregulation where it's appropriate to do so. Obviously, there are occasions where regulation for the sake of regulation isn't a step in the right direction, and there are other occasions where you have the opportunity to reduce the amount of regulation and to do so in a way that doesn't have a detrimental impact on the market or on consumers.
The recommendations that have been put forward are comprehensive, but I've stressed this is a report to the government, not a report of the government. What we intend to do now is take some time to consider the recommendations, to talk to stake holders, to talk to consumer groups.
In due course, of course, we'll respond in full to the recommendations that have been put forth.
WALEED ALY:
I understand it's not yet a report on the government. Indeed, that's the basis of me noting that it seems to be philosophically in a different direction. Some of the stakeholders have already started speaking. The big banks have started complaining that the idea of making them hold extra capital would be damaging. It will result in higher interest rates for consumers. Is there any validity to that argument?
STEVEN CIOBO:
I think the modelling that was done by the inquiry themselves found that there would be a small on cost as a result of banks being required to hold more capital. The trade off always with these things is, of course, the need for financial stability, weighed against the need for more competition.
Ultimately, you want a strong, solid, stable financial system. You don't want one that's completely free of competition, either. It's always with these things, balancing act. We've seen that Australia, during the GFC, had a very strong banking system. We saw our housing market, although there were price corrections across basically all markets, and in some, very significant price corrections, but that notwithstanding, you saw the housing sector hold up relatively very well compared to other places around the world.
The nation, there's always a trade off between competition and stability. That's why we asked David Murray to take this inquiry, so he could take stock of our financial sector.
WALEED ALY:
Do you have the political capital to push this through, particularly given the banks seem to have been lobbying pretty hard against the Opposition and towards you on issues like financial advice, after there was some big scandals, effectively unearthed about the way the financial advisors were keeping customers off, and the Commonwealth Bank were at the heart of that.
That clearly you've managed to get in your ear about that. You don't seem terribly desirous to upset them on certain issues. Are you prepared to take them on on something like this?
STEVEN CIOBO:
You're presupposing the outcome the government might choose to take. The point I was stressing to you is that we're going to consider these recommendation in the full light of day, and we're going to do so in consultation with various stakeholder's groups.
That's consumers, that's bankers, that's financial planners, that's superannuates, retirees, a whole range of people,
Part of the role of government is, of course, to consult on the recommendations, and that's exactly the next step in the process. What, ultimately, feeds out of the end of that consultation process that the government will undertake, will help to determine the path that we choose to walk down in terms of which recommendations we adopt, which ones we reject, and which ones we might seek to modify.
WALEED ALY:
The review makes certain statements of fact, effectively, what purport to be statements of fact. For example, we do not have a financial system that is ready for a serious financial shock. To go through something like the GFC, again, would be problematic. We're not in the best shape we could possibly be in here, and there must be reform.
Do you, at the very least, accept that?
STEVEN CIOBO:
Of course we accept that there is an important role for reform. Rather than reform, I think reform is part of evolution when it comes to our financial services sector. I mean -
WALEED ALY:
Are our current arrangements inadequate? That seems to be what the report says.
STEVEN CIOBO:
Sorry I missed that.
WALEED ALY:
Our current arrangements concerning our banking and financial sector inadequate. That's the assumption really, or the statement. This is what it's predicated on, this review, effectively.
STEVEN CIOBO:
I'm not sure that's a fair reading of the report. Let's be honest. We've just weathered a pretty intense test of our financial services sector in terms of the GFC. Australia weathered that in relative terms, quite well. The financial services sector has continued to evolve. There is, of course, need to see a continuation of that evolution. A better alignment between policy objectives and the sector itself.
These are things that aren't really political in the sense of Liberal versus Labor or anything like that. What we've had is a stock take of the financial services sector by David Murray and his committee.
There are people that understand the sector very well, and I think we take on board their assessment, we have, as I said, bounced that off stakeholders, and ultimately, in due course, we'll make a determination about what we think is the best way forward based on what we believe to be in the national interest.
WALEED ALY:
Do you have any intention of considering getting rid of the tax base around negative gearing at the moment, which is something that David Murray seemed to have firmly in his sights with some aspect of his review.
STEVEN CIOBO:
Look, I know that observation from David Murray, and ultimately this will feed into the tax white paper. We have indicated all along that we want next year to be a comprehensive review of Australia's tax system. Whether you're a Liberal supporter or Labor supporter or a National, or independent, whatever, everyone's got an opinion on what they believe the tax system should be like and whether or not we're collecting too much, not enough tax.
That really is what's guiding our decision to have a comprehensive stock take in Australia's tax system.
WALEED ALY:
So any negative viewing on the table. Do you actually, this is something you'll actually consider.
STEVEN CIOBO:
Well, it's something that will, no doubt, will be canvassed in the tax white paper. That is something that the tax white paper is going to look at in terms of the review of Australia's taxation system.
WALEED ALY:
So as a government you have an open mind to getting rid of negative gearing?
STEVEN CIOBO:
As a government, we haven't ruled anything in our out when it comes to Australia's tax system. We want there to be a national discussion on what tax system is going to best suit our nation going forward, and then on the back of that tax white paper, there'll be a position adopted by government.
I think it's a great thing that as a country, we're in a position where we can have a full and frank discussion about our tax mix and our tax policy, on an ongoing basis. We want Australia to be strong, we want Australia to be stable. I think looking at that tax mix is the appropriate thing to do.
WALEED ALY:
Just on the political front, you no doubt would have seen and no doubt had many heated and passionate discussions with your colleagues about the poll that's come out today, and has been widely reported as disastrous. Particularly as far as Tony Abbot himself is concerned, on levels of trust about him. He's now behind Bill Shorten as preferred Prime Minister. Bill Shorten's regarded as more trustworthy and more competent, which is fairly extraordinary for an opposition leader early in his term, to be in that sort of position.
Why is it that Tony Abbot's not trusted?
STEVEN CIOBO:
Well, look, I'm not in a position where I can make an assessment about being a political commentator on why one think or why another. What I would say is this, Waleed. As a government, we're elected to restore the nation's finances. I've said before and I'll reiterate. We're borrowing currently a billion dollars a month just to pay the interest on the debt that Labor left behind.
As part of our effort to improve the nation's finances, we've had to make a number of decisions, which we know, and I understand, are unpopular. We know that there are elements of Australia who do not like hearing the message we cannot continue to spend the way we have been, and we need to make reforms in a range of areas to get our nations' finances back under control.
WALEED ALY:
It's not about the not liking the message, it's about them saying that I trust the message. There have been too many broken promises and they don't trust the leadership. Do you acknowledge that the electorate has a point?
STEVEN CIOBO:
What I acknowledge is that we've had serious financial challenges that we've got to overcome. What I acknowledge is that we came into government being told by the Labor Party that the deficit would be $18 billion and the deficit ended up being $48 billion, which represents, in one year alone, a $30 billion black hole.
WALEED ALY:
So a raft of promises simply has to be broken, then.
STEVEN CIOBO:
What it means, the Prime Minister's made this point. Take, for example, ABC and SBS funding. The Prime Minister's acknowledged there's been a reduction from $5.5 billion dollars down to $5.2 billion.
As a government, we say to Australians we think that reduction from $5.5 billion to $5.2 billion in the current context of a $48 billion deficit after literally hundreds of billions of dollars worth of deficit, and in the context of there being deficits going forward as well, we believe it is an appropriate thing to do.
Some people don't like the fact that we've done that. I acknowledge that, I hear what they're saying and I accept that they're upset with us for doing that. Ultimately, I am determined, as indeed I believe every member of the Abbot Coalition Government is, to make decisions we believe in the national interest because we simply cannot continue to mortgage our children's future to pay for today's spending.
WALEED ALY:
All right. It's a slightly separate argument of the trust issue, but I suppose, if you don't mind they're related, we'll see what the electorate ultimately does when they meet the full force of your argument in the New Year. the Steve Ciobo, thank you very much for joining us.
STEVEN CIOBO:
It's a pleasure, thank you.