SUBJECTS: Global economy, short selling, Fuelwatch, Budget surplus, Malcolm Turnbull
BARRIE CASSIDY:
Chris Bowen good morning and welcome.
CHRIS BOWEN:
Good morning Barrie.
CASSIDY:
We are told that Australia is not immune from what is going on in the United States. How then will we fill the impact? What do we have to brace ourselves for?
BOWEN:
Well the international situation is of course fluid, but the important thing to remember is that Australia is placed as well, if not better than, any country in the world, to get through this crisis.
We have our big four banks all double ‘A’ rated. There are only about 20 banks in the world that are double ‘A’ rated and we’ve got four of them here in Australia. Our prudential regulation is very well respected – APRA has done a very good job in recent weeks and months – so we are very well placed to get through this turbulence that’s embracing the world.
CASSIDY:
But nevertheless, I’m sure you can see some impact. What about on the stock market and how that might impact on superannuation policies?
BOWEN:
We are seeing falls in the stock market around the world and that of course will have an impact on Australia and will have an impact on people’s savings plans. We will also see impacts on confidence. Confidence around the world has fallen to 1992 levels in every developed country; Australia is not immune from that. Of course, we also see impacts on banks financing ability.
So we will see impacts in Australia, but it is important to remember that we do have different fundamentals in our economy, as opposed to the United States or Europe.
CASSIDY:
Economists say that you should look at superannuation over five to seven year cycles, but self-funded retirees already retired might feel an impact. Does that mean that they will go onto pensions sooner rather than later and that will have an impact on budgets?
BOWEN:
There may be impacts depending on how big and how long this crisis lasts. The important point to remember is, as you say, to take a long-term point of view. We don’t give financial advice, but people can be assured that the Australia economy is very sound, very well placed, to withstand this turbulence, and there is a way to run in this international crisis.
CASSIDY:
On the other side of the ledger there is a suggestion today, in one of the newspapers, that you can use the $64 billion Future Fund to cash-in and go out and hunt for bargains, shares and buy parts of discounted companies. Do you see that as a prospect for the Future Fund?
BOWEN:
Well, the Future Fund is of course run by its Guardians at arms length from the government, and they will make the best investment decisions they can, with the mandate they have been given by the government. They’ll do that, I’m sure, on a very sound basis.
CASSIDY:
What’s the thinking in government on a timeline for the crisis in the United States, or will they be no end in this sense, that there could be a huge transfer of money and assets out of the United States and that could be a permanent thing?
BOWEN:
The one thing that is certain about the crisis is that it is fluid and that anybody who tries to predict when it might end is taking a punt. However, I would point to the President of the World Bank who said that he expects world growth to return more normal levels next year, in 2009. He would be well placed to make that judgement.
Anybody who goes out on a limb and says it will definitely finish at a particular point is taking a huge punt in the current environment.
CASSIDY:
But based on that sort of economic prediction, does this government simply ride it out, or do you look at new, regulatory measures so that what occurred in the United States can’t happen here?
BOWEN:
We have kept our regulatory framework under constant review during the crisis and my Treasurer colleague, Nick Sherry, has closely monitored that. We’ve announced our changes to the short selling regime, in conjunction with ASIC, they will take effect from the opening of the markets tomorrow. Nick Sherry has been working on those for some time, but the international circumstances over the last couple of days have made them more urgent.
Any more measures which are necessary will receive the attention of government and the two key regulatory agencies, APRA and ASIC.
CASSIDY:
Now you mentioned how important consumer confidence is, but one letter writer during the week suggested that if the government’s response to high petrol prices was Fuelwatch, who knows what they’ll come up to deal with the global financial meltdown. Now that does suggest that Fuelwatch is sitting there as a nasty political symbol?
BOWEN:
Let me say this about Fuelwatch, Barrie. If Fuelwatch is defeated in the Senate, and negotiations will continue until the vote, but if it is defeated in the Senate, the only people in Australia who will have the benefit that Fuelwatch provides, are the only people who live under a Liberal Government, in Western Australia.
Colin Barnett went to the people, in Western Australia, with a promise not to touch Fuelwatch, because in Western Australia Fuelwatch has been operating for eight years and people in Western Australia know about the savings that it can provide. They know it provides them with real information, which can help them drive their dollar further.
So Colin Barnett understood that it was very dangerous to play with Fuelwatch in Western Australia, in any way. This lays bear the hypocrisy of the Federal Liberals – in Western Australia campaigning for Fuelwatch where it has been up and running successfully for eight years but in the rest of the nation running a scare campaign on Fuelwatch.
Fuelwatch can give consumers the information they need and also deals with what the ACCC calls ‘the closest thing to collusion that you can get while still being legal’. Now the Federal Liberal Party, when confronted with the evidence, that the ACCC thinks that it is effectively collusion in the petrol market, shrug their shoulders and say ‘that’s fine’.
Well, it’s not fine for the government and we will continue to argue vigorously for the benefits that Fuelwatch can provide.
CASSIDY:
You mentioned that Australia is well placed to ride out the financial storm, but for that surely you have to give the credit to the previous government. They provided you with a $22 billion surplus, they paid off debt.
BOWEN:
We have taken steps to increase the surplus while the Federal opposition is doing its best to blow holes in the surplus. Mr Turnbull talks about bipartisanship at the same time as his colleagues in the Senate, with his approval, are trying to undo large parts of the surplus. So if he wants to have an argument about responsibility, it needs to be placed in the here and now. We need to argue about what’s happening in the Senate, right here and right now.
CASSIDY:
Sure, but he says that if you were to block those measures, it would cost half of one percent of revenue?
BOWEN:
It’s a big proportion of the surplus. The savings measures that we have in the Senate are a big proportion of the surplus. Mr Turnbull can make all sorts of statistics about the total impact on the budget and total expenditure and revenue, but when push comes to shove, we are talking about the size of the hole he wants to blow in the surplus.
CASSIDY:
Kevin Rudd tried to reach out to Brendan Nelson on bipartisanship; Malcolm Turnbull has returned the favour on bipartisanship. Wouldn’t it help all-round if you at least conceded that the previous government set this country up well to withstand this sort of crisis?
BOWEN:
We’ve said all along that the fundamentals of the economy place us well to withstand this crisis. They are: the size of the surplus, which we increased at the Budget, our links to China and the commodity boom, which no government – there’s or ours can lay claim for, and well respected prudential regulation – done by APRA, ASIC and the Reserve Bank. So these are the fundamentals that will see us through this crisis, in a good situation, and well placed.
CASSIDY:
Wouldn’t it be an even more attractive proposition to go to Brendan Nelson, on a bipartisan basis, because he has had considerable experience in this area. He was once head of Goldman Sachs for example?
BOWEN:
I think you mean Malcolm Turnbull…
CASSIDY:
…sorry.
BOWEN:
It’s a moving feast.
On the issue of bipartisanship, Mr Turnbull during the week, allowed Joe Hockey to question the viability of our health funds. A very dangerous thing to do at this time of turbulence. He is blowing a hole in the Budget surplus and we don’t know yet who the Shadow Treasurer is. There appears to be a faction fight and Mr Turnbull doesn’t seem to be in control of the argument within his own party, as to who his Shadow Treasurer is.
So it’s a bit hard to have a discussion about bipartisanship when you have these sorts of events going on.
You have our Budget strategy being undermined in the Senate. I’ve got to say, the Greens have shown more economic responsibility in the Senate, in the last week, than the Liberal Party has. I must admit, I never thought I’d be in the situation to say that, but the Greens have become one of the economically responsible parties in the nation, while the Liberal Party throws economic responsibility out the door.
CASSIDY:
You say that the country needs confidence right now, is then the wrong time for Kevin Rudd to leave the country?
BOWEN:
Not at all. A number of business people have said to me in recent days that it is important for the Prime Minister to be travelling to the United States next week, to be in touch with the key decision makers in the United States. Mr Turnbull, when he was Shadow Treasurer, said it was important for him to go to the United States. He seems to think that it is more important for the Shadow Treasurer to be in touch with these decision makers than the Prime Minister of the day.
I make the point, the Prime Minister has been overseas, I think it is 43 days this year. It was not uncommon for John Howard to be overseas for well over 60 days a year. So I think we are seeing a bit of hypocrisy from the opposition and Mr Turnbull in particular.
The bipartisan thing to do, quite frankly, is for the Prime Minister to go to the United States with our best wishes, in order to ensure that the links with the key decision makers in the United States are strong as they possibly can be.
If Mr Turnbull really wants bipartisanship, that wouldn’t be a bad start.
CASSIDY:
Do you expect what the polls tell us, that this country has suddenly become more competitive?
BOWEN:
Polls will go up and polls will go down Barrie. We are not yet half way through our first term. But the key point is, in relation to policy, Mr Turnbull had the chance to wipe the slate clean when he became leader, to take a more economically responsible approach. He said when he was Shadow Treasurer that the fuel excise cut was bad policy. Now he is leader, he says it remains his policy, even though he thinks its bad policy. So we will be taking the debate up to Mr Turnbull on policy terms and the polls and the punditry will respond accordingly. But it’s not our job to respond to that, it’s our job to get on with the job in what are very difficult economic circumstances.
CASSIDY:
Well you have watched both Kevin Rudd and Malcolm Turnbull for a while. Who has the biggest ego?
BOWEN:
Working closely with the Prime Minister, he’s a very good listener; he takes advice very well; he’s very in touch with the Australian people, and he is very keen to remind the rest of us in the Ministry that we need to be out holding our mobile offices and attending community cabinets. Not to lose touch with what the average person is thinking and what the average person expects of us.
So if there’s a debate about that, my money is with the Prime Minister as being the more in touch, anyday.
CASSIDY:
Thanks for your time this morning.