Interview with Fran Kelly
ABC Radio National
23 November 2010
SUBJECTS: National Broadband Network; Banking Competition; Mining Tax
TREASURER:
Good morning Fran, it's good to be with you.
KELLY:
Wayne Swan, have you read the 400-page NBN business plan?
TREASURER:
Well, the NBN business plan will be presented to the Cabinet, Fran. I will be involved in the discussions there, but as you know, they are confidential. But I would like to make a couple of points about the NBN business plan because this is part of a very long process. As you would recall, first of all when we came to Government there was an independent expert committee including Treasury Secretary Ken Henry. That recommended to us that we go down the road of NBN because there were no private sector proposals that represented value for money. We then had a McKinsey study, a detailed implementation study by McKinsey and KPMG that went through all of the modelling, all of the financial arrangements, the network design and the business plan is being built on that. But we are still awaiting critical advice from the ACCC on the points of interconnection, that will be with the Cabinet by the end of the month and after we've received that we can of course finalise our considerations of the business plan.
KELLY:
You are the Federal Treasurer. It is a $43 billion spend, $26 billion of that taxpayers' money. Have you read the business plan yet?
TREASURER:
Well Fran, I have had my head in all of the detail of the NBN from day one. The McKinsey study, for example, is very important. That has been made public, that is out there for everybody to see but as I go through the detail of this I will not be commenting on that until we release the detail from the plan that is not commercial-in-confidence.
KELLY:
It's a pretty simple question though, Treasurer. Can you reassure the public that you've read it at least?
TREASURER:
I can reassure the public that I've had my head in all of the detail of the NBN and we are still going through critical Cabinet discussions regarding the NBN. When we've done that we can release those parts of the business plan that are not commercial-in-confidence.
KELLY:
Have you commissioned an external review to test the NBN business case?
TREASURER:
Well, it's just common sense. I see there's some reportage this morning. At every stage of the development of the NBN we have sought external advice. There's nothing particularly remarkable about that.
KELLY:
Doesn't it suggest that the Government doesn't trust NBN Co. to get its business case right?
TREASURER:
No, it doesn't suggest that at all. NBN Co is headed by a chief executive of international renown. The people on the board there are of the highest quality. But we as a Government go through due diligence, as we have from day one. I think what's got lost in this frenzied debate and the efforts of the Liberal Party to demolish the NBN, is the extent to which the Government has put in place a very methodical process to develop the NBN.
KELLY:
A very methodical process but I wonder if it reveals that the Government's a little gun-shy, a little over-cautious. I mean you pay the NBN Co. to run the roll-out of the national broadband but you don't necessarily trust their assumptions.
TREASURER:
I don't think that's the case at all Fran. What we are doing is normal commercial practice. I think that people would expect us to do that and we're doing it in the same way we have been doing it from day one. But what we've got here is a debate from the Liberals who want to demolish the NBN. They're not worried about the business case. What they want to do is destroy the NBN. You see, they're not interested in fundamental economic reform. What they want to do is destroy the Government.
KELLY:
That's not the case for Senator Nick Xenophon though, the Independent in the Senate who supports the NBN, but is not prepared to vote for the Bill currently before the Senate, the structural separation of Telstra, until elements of the business case are released publicly. He shows no sign of budging from that position. Would defeat in the Senate this week put the whole NBN at risk?
TREASURER:
Well, I can't speculate about Senator Xenophon. There's an important debate going on. The debate at the moment, Fran, is actually about structural separation, which is absolutely fundamental to microeconomic reform in this country and getting not only super-fast broadband, but a much more efficient and prosperous economy into the future. I know Senator Xenophon shares that objective. We'll go through all of the processes this week. We will have our discussions with Senator Xenophon but I can't put words in Senator Xenophon's mouth.
But I do know that people of good will are absolutely determined to see the structural separation of Telstra go ahead because this goes to the core of the failure of the Howard Government and the failure of this country to put in place super-fast broadband, and if the Liberal Party has their way we'll be stuck back in the horse-and-buggy era of communications and nobody wants that.
KELLY:
Well Treasurer, I have spoken to Senator Xenophon and he says he isn't prepared to pass this structural separation bill until he sees the NBN case. Will the Government defer this legislation until after the business case is released in December?
TREASURER:
Fran, I am not going to speculate about that. What we have to do is to get this key legislation passed. Senator Xenophon is an important person in the Senate. We will continue discussions with Senator Xenophon and other independents and other minor parties, but I'm not going to go on speculating about that on air this morning.
KELLY:
You would recall Parliament in December to deal with it, if that's the only way you can get it passed?
TREASURER:
I think my previous answer replies to that question as well, Fran.
KELLY:
Banking reform is another issue before the Parliament at the moment. The Coalition has stolen a march on the Government, introducing a bill to end price signalling by the banks. Now, that's a power that the ACCC has been calling for and it's something the Government shares, isn't it? Why won't you vote for this?
TREASURER:
Well, Fran that is absolutely laughable. Joe-Come-Lately has not stolen a march on anybody. This Government has put in place over a period of time, very substantial reform of the banking system, including a range of reforms to increase competition in the banking system, dealing with unfair mortgage exit fees for example, providing a source of funding for the smaller lenders so they can compete against the bigger banks and, of course we are in the process of putting in place a further raft of reforms which are all very important.
Now, Mr Hockey read in the newspaper that we were discussing price signalling with the ACCC and he had a thought bubble and decided that he would produce a bill, despite the fact that the Liberals at the last election didn't take any policy to that election on banking and when Mr Hockey gave his Budget reply in May this year he called for reform of trade practices and didn't mention price signalling. The bill that he's put into the Parliament yesterday is not well thought out, it doesn't actually –
KELLY:
What's wrong with it?
TREASURER:
Well, the fact is that it's got a test in there called an effects test which would create great uncertainty in the economy. We've been working methodically for some time with our regulators to put in place a range of initiatives which will further enhance competition in the banking system, including price signalling.
KELLY:
Does your broad agenda include plans in your banking plan to beef up measures for the building societies and mutuals to make them more competitive? Is that how you're going to build them up to the fifth pillar?
TREASURER:
Well, I certainly think that we've got the capacity to build a new pillar, based on the combined competitive power of our credit unions and, of course our building societies.
KELLY:
How are you going to do that? Are you going to give them access to cheaper funding, better government-backed securities?
TREASURER:
Well, can I just make this point; they are already accessing our Residential Mortgage Backed Securities initiative. That's one of the things that kept them alive during the global financial crisis. What kept them alive during the Global Financial Crisis was our financial claims scheme. What I've said is with the further reforms that we want to put in place that they will further assist many of the smaller lenders, not just the banks and building societies, but the other regional banks for example, and others in the system, and I will be announcing those initiatives next month.
KELLY:
Wayne Swan, your head of Treasury, Ken Henry, was in Parliament yesterday giving evidence to the Senate inquiry into the Mining Tax and he said the mining boom could be the biggest external shock to the economy ever experienced in Australia. Do you agree with that?
TREASURER:
Well Fran, I began talking about this, and you would well recall that, when we released the Henry Review in Canberra one week before the Budget earlier this year and our response to that was also front and centre of the Budget. We are absolutely determined not to make the same mistakes that the previous government made at the height of Mining Boom Mark I. And that's why we've got such a broad agenda. That's why we've got a Mineral Resource Rent Tax. That's why we've got such a big agenda when it comes to education and skills. That's why we're determined to put in place a company tax cut. That's why we're determined to assist small business. This is part of our response to Mining Boom Mark II which does present great challenges and great opportunities for Australia.
KELLY:
When will we see the final details of that Mining Tax, Treasurer?
TREASURER:
Well, the group headed by Mr Argus has been talking with industry and they are now concluding their report. I couldn't give you a date for that report this morning, but I think we'll see it by years-end.
KELLY:
Just finally Treasurer, this is the final sitting week for the year. Do you think we'll get the Telstra separation bill passed on Thursday?
TREASURER:
Well, I'm an optimist Fran, because this is an absolute must for Australia, for economic reform, but particularly for regional Australia.
KELLY:
Wayne Swan, thank you very much for joining us.
TREASURER:
Thank you.
