Interview with Lyndal Curtis
ABC Radio, AM Program
15 November 2010
SUBJECTS: OECD survey of the Australian economy; banking competition
CURTIS:
Wayne Swan welcome to AM.
TREASURER:
Good to be with you Lyndal.
CURTIS:
The OECD report lauds the Government's actions for avoiding a recession, but it does have a long list of things it would like you to do. If you are willing to accept the OECD's praise, do you also have to accept their advice?
TREASURER:
I'm certainly delighted to accept the report because the overwhelming majority of the report is a stunning endorsement of the Government's economic strategy. Yes, there is a detailed analysis of the pros and cons of individual measures, but even there: very, very supportive of the Government's approach.
CURTIS:
It does warn that there are inflationary pressures and says that as time goes on the spending cap you've put on will be harder to maintain. It calls on you to rationalise public spending, including cutting car industry and drought support payments. Are you looking at those things?
TREASURER:
Lyndal, can I just make this point, because this is where the report is very, very supportive of the Government. Yes, it does make an entirely sensible point that any Government has to have an eye on future expenditure and on financial sustainability, but it overwhelmingly endorses the Government strategy.
CURTIS:
In some of those specifics that it has looked at, one of those is the Mining Tax. It says your tax is relatively low and potentially distorts investment. Haven't you compromised the tax with your compromises on it?
TREASURER:
But here again Lyndal, it is supportive of what we are doing in terms of the Mineral Resource Rent Tax.
CURTIS:
But it does say that you could do more, that the changes you've made are potentially distortionary.
TREASURER:
It says it's a good idea. It endorses what we're doing with the revenue stream. It points to the importance of lowering overall tax rates, supporting small business, it does all of those things and yes, there is a criticism – it says we should do more with the tax. Well, what the Government has done with the tax is the right thing. We've reached agreement with the mining industry. We have a revenue stream which we can use to lower company taxation to give a significant tax cut to small business, and to invest in infrastructure. That's a great thing for the country.
CURTIS:
But it also suggests another option for the revenue stream – putting the money that the tax raises into a reserve fund. Wouldn't that better buffer the Budget, saving the gains in the good times for potentially when revenue falls?
TREASURER:
No I don't believe so, because the report also endorses what we are doing with the revenue stream and it endorses it in the context of lifting economic capacity which it says must be a central objective.
CURTIS:
The Greens have picked up some of the things the OECD has said, particularly on the low rate of the tax. The Greens Leader, Bob Brown, says he wants to return to the 40 per cent rate and he also wants to pick up the idea of the reserve fund. Isn't the reality that the numbers in the Parliament when you put the tax in will dictate that the Greens have the balance of power in the Senate and that you might have to pick up some of their ideas?
TREASURER:
No, we are going to stick to the agreement that we've made with the mining industry. It's good for the country. It's good for the Budget. It's good for investment in infrastructure. It's good for corporate Australia. It's good for small business, and we will fight for this in the Parliament because it's good for the economy.
CURTIS:
The report also looks at the NBN. There is a substantial amount of Government money going into this. It says there are substantial financial uncertainties and it would be better to roll it out more gradually. Given the amount of money going in, is it better to be more prudent?
TREASURER:
I think that the OECD itself has made the case to roll out the NBN because we are way behind in Australia, the OECD has made that point. But here again, could I just quote from the report: our NBN will improve Internet services for the entire population and promote further competition for private firms that rely on retail services. A very strong endorsement of the NBN overall.
CURTIS:
But it also says that you're risking creating a public sector monopoly because you're limiting the technologies available by shutting down the copper network and that that could limit the technological advances. Is there a reason to have a look at that again?
TREASURER:
No, but elsewhere it says it will promote further competition. Look, there are the pros and cons as I said before. This is a detailed economic argument. It runs through the pros and cons, but even here on the NBN it is overwhelmingly positive.
CURTIS:
On another issue altogether, not one of the big four banks has heeded your warnings about raising their variable home rates beyond the limit of the Reserve Bank. You're also facing action in the Parliament from both the Opposition and the Greens which comes before your banking package which is yet to be announced. Are you shutting the stable door after the horse has well and truly bolted?
TREASURER:
Not at all. We've made it very clear that we've got a second wave of competition reforms coming to build on the first wave of reforms which themselves have been quite substantial, but we've had bad behaviour from the four big banks. That's why we do need to put in place enduring reform. The sort of cheap-jack opportunism we've had from Mr Hockey – that will be tested this week. I mean, three weeks ago he was talking about re-regulating rates. Well, we'll see where he stands this week. When it comes to the Greens, I believe that they're genuine in their approach but they will get the wrong outcome. If you do what they want you will end up rationing credit and a lot of people will miss out.
CURTIS:
Why do you think the banks aren't listening to you?
TREASURER:
Well, the banks are just arrogant in the extreme, completely out of touch. That's why we need a second wave of competition reforms, and we will put those in place. We're determined to have enduring reforms over time. There's not one single thing that can be done in this area, there's a whole host of things that need to be put in place for the long-term and the Government is absolutely determined to do that
CURTIS:
Wayne Swan, thank you very much for your time.
TREASURER:
Thank you.
