Interview with Madonna King
ABC Radio, Brisbane
4 October 2010
SUBJECTS: NRL Grand Final; Acting Prime Minister; Interest rates; Defence Budget; Afghanistan; Price on carbon; Wild Rivers legislation; Tax reform
KING:
Wayne Swan is the Federal Treasurer. He's also the Acting Prime Minister. Wayne Swan, good morning.
TREASURER:
Good morning Madonna. It was great to listen to that interview with Wayne [Bennett].
KING:
Well, you were happy to take second place next to Wayne Bennett, weren't you?
TREASURER:
It was certainly a privilege. I had a chat to him after the game. He was pretty happy. But you know, what an achievement in terms of, not just in terms of the history of rugby league, but what inspiring leadership he's provided to so many Australians, not only in rugby league but outside rugby league.
KING:
Well, speaking of history, this is your first day as Acting Prime Minister. How does that feel like?
TREASURER:
Look, it's an honour. It's an honour to fill in, if you like, to hold the fort for Julia when she's away doing pretty important work overseas. And there's plenty on at the moment, Madonna. I've been actually acting through the weekend. So I've been acting while I've been at home over the weekend.
KING:
Alright. There are a few things I want to get to this morning. On interest rates, do you believe as Federal Treasurer, there can be any rationale for banks to lift the interest rate above any increase in the official cash rate tomorrow?
TREASURER:
I don't believe, Madonna, there is any justification whatsoever for any bank to move above the official cash rate decision of the Reserve Bank. Banks are making healthy profits at the moment. Their net interest margins are back above what they were before the Global Financial Crisis. So I don't believe there is any case that the banks can make to move over and above any decision that may or may not be taken by the Reserve Bank tomorrow.
KING:
But what can you do other than just say that? Because in past performances the banks aren't listening.
TREASURER:
Well, I can call it as I see it. As you know, the banks can take that decision independently of the Government and they have done that on a few occasions. I can call it as I see it, and I have called it as I've seen it -
KING:
But is there-
TREASURER:
- and there is simply no justification for them to do that. And what I can do, Madonna, is to make sure that we put in place a set of arrangements in the system which makes the banking system as competitive as we possibly can. There'd be no doubt that there's been an impact by the impact of the Global Financial Crisis on competition in the industry. The job for the Government is to put in place a set of policies as we go forward to make it more competitive and we're doing that through the consumer law.
KING:
Or is there an argument that the ACCC should investigate the banks on the basis of collusion if several of them end up putting their rates up by 0.45 per cent that's been talked about this morning?
TREASURER:
Well, the ACCC has the power to make those investigations. I don't direct the ACCC, nor should I.
KING:
But would you like them to?
TREASURER:
Well, I can't indicate one way or the other. What I can say is that the ACCC has the powers to investigate collusive behaviour. But what I can do is I can put in place in the banking system new arrangements to ensure there is more competition. We've put in place tough new consumer credit laws for example, particularly in terms of unfair contracts. The other thing that the Government has been doing is we have been making very significant investments in Residential Mortgage Backed Securities, and that is producing some more competition in the system.
KING:
The banks say they need to make a profit and the cost of funding is continuing to rise. Does that argument wash with you?
TREASURER:
Well, it doesn't wash with me for the reasons that I was indicating before, that their profits are healthy, their debt-interest margins are back to the levels or above the levels they were prior to the Global Financial Crisis. There's no doubt there are other issues when it comes to the long-term funding profile of the banks, but they don't at this stage, in my view, justify them moving over and above an increase, if there were to be one, in the cash rate from the Reserve Bank.
KING:
The banks are facing the biggest class action in corporate history for allegedly overcharging millions of customers billions in penalties. Do you have a view on the penalty and the late fee regime adopted by most of our banks?
TREASURER:
Well, certainly. That's why we put in place the tough new consumer credit laws, particularly the laws that apply to unfair contracts and there's no doubt that some of the high penalty fees cannot be justified and that's why some of the banks have been forced through the pressure of public opinion, and through the actions the Government has taken, to begin to withdraw those very unfair fee regimes. And in fact, one bank has gone a lot further than other banks in doing that. And we've got to continue to keep that pressure on the banks to make sure we get more competitive outcomes.
KING:
From interest rates to Afghanistan, and Julia Gillard has made a lightning visit there. Can you rule out this morning any cuts in Defence in getting the Budget back into surplus in 2012-13?
TREASURER:
We've locked in a long-term funding profile for our defence forces. We had a very thorough consideration of the Defence White Paper through last year. We've put in place certainty in their funding arrangements. So I can certainly rule out the sort of speculation that is floating around this morning.
We have considered the issue of support for our Defence Forces and particularly our forces on the ground in Afghanistan at great length, and indeed in our last Budget we provided very substantial increases in force protection for our forces on the ground in Afghanistan to the tune of something like $1 billion. Our troops will get all the support that they need on the ground in Afghanistan. That is the point that the Prime Minister made when she was there at the weekend. They are doing a great job in very, very difficult circumstances.
KING:
And the debate has been flagged before the end of the year on our involvement there. How wide do you want that debate to be, and what will be the parameters?
TREASURER:
Well, we certainly welcome a parliamentary debate on Afghanistan. Members of Parliament will contribute and make their points of view known. I think that's very important that we have a debate about this very important commitment. Australians have lost their lives, indeed yesterday's rugby league grand final was dedicated to our fallen soldiers, and indeed I had the privilege of meeting some of the families before the game. These are very serious issues and they do deserve a thorough parliamentary and community debate, and the Government welcomes that.
KING:
When will that be, that debate?
TREASURER:
I can't give you a time at this stage, Madonna-
KING:
Will it be the end of the year? Are we thinking this month or next month?
TREASURER:
I can't give you the time, but it will be reasonably soon. I guess that's the best I can say.
KING:
From that, to carbon tax. And I want to ask you, is it your belief Australia will end up, after all these deliberations, with a carbon tax or not?
TREASURER:
Well, our economy needs a price on carbon because what we have to do is to give business the certainty so they can invest, but a price on carbon can be implemented in a variety of ways and a carbon tax is but one of those ways.
KING:
Well, what are the other major ways that you would consider? Because Simon Crean said yesterday the decision to put it back on the table did not mean necessarily going down that path, but what are the cheap alternatives?
TREASURER:
Well, I think what we need to do is to have an open mind. What the Prime Minister said was that we should have a thorough, wide, and deep community debate about this important issue. It's a very important issue for the future of our economy; it's a very important issue for the future of the environment and the sustainability of both our economy and our environment. So I'm not going to pre-judge the means by which that is delivered but an Emissions Trading Scheme is one, and as you know, we fought very hard for an Emissions Trading Scheme in the last Parliament. It nearly went through, but it was rejected by the Opposition and minor parties in the Senate - three times in fact.
So what we want to do is go back to basics. You want to get a consensus through this parliamentary committee process. We want to get the best advice and have an open discussion about the means to deliver a price on carbon.
KING:
Before the election the Prime Minister Julia Gillard ruled out a carbon tax. Does that make it hard to implement one now?
TREASURER:
Well, of course we've had an election and the result is one where the major parties even on the floor of the Parliament and minor parties and independents have the balance of power both in the House of Representatives and in the Senate. What the Prime Minister said during the campaign and, indeed, I said as well is that we did want to see a price on carbon but what we had to do as the first step was to achieve a community consensus.
KING:
But introducing a carbon tax. Would that then be a broken promise in your view, or does the make up of the Parliament change that?
TREASURER:
No, I think if you go through the statements of both myself and the Prime Minister, we talked extensively during the campaign and before the campaign about the need for a price on carbon. Given the result in the election, given the numbers on the floor of the House of Representatives and the Senate, we have to have an open mind about the means for delivering a carbon price. That's what we're seeking to do through the processes that we have outlined.
KING:
Do you have any concerns about Queensland's Wild Rivers legislation? It's currently causing a storm in Canberra.
TREASURER:
Well, there's a lot of controversy about this, and there's many claims and counter claims. That's why we've said that we will support a reference to the House of Representatives Economics Committee. Those who are opposed to the legislation claim that it will have a very damaging effect upon economic development in far North Queensland, particularly in indigenous communities. Well, let's examine those claims through the process of the House of Representatives Economics Committee and just see where the information really lies.
KING:
Business is calling for you this morning to consider a national tax structure for businesses because different states have different taxes. Is there a case for a national regime?
TREASURER:
Well, there's certainly a case for more national regimes in our tax system, yes there is. And I certainly would like to see greater harmonisation between the states when it comes to particular state taxes. And as you know, these matters have been discussed extensively in the Henry Report and I'm sure that the tax forum that we will have in the first half of next year will talk about these matters extensively. There are various views. Some people want a removal of state taxes and a complete national regime; others would like to see a harmonisation and so on.
KING:
What do you say to people who say it's useless having this tax summit in June unless all the options, including the GST, are on the table?
TREASURER:
Well, I know that there are some in the business community who are demanding that the GST be increased. The Government has said that we will not be changing the GST arrangements, and we will not. That has been a view we articulated during the last term of Parliament and we certainly put it forward very strongly in the election campaign. But that doesn't preclude in any way a pretty comprehensive discussion of the tax system in total and many parts of the tax system, including state taxation.
KING:
Wayne Swan, thank you and I look forward to you coming in and taking some listeners calls perhaps next time you're in Brisbane.
TREASURER:
I'd be pleased to do so, Madonna.
