SUBJECTS: Barnaby Joyce, competition policy, banks, interest rates, foreign investment, Tony Abbott, US debt, state debt, climate change.
KIERAN GILBERT:
Joining me on PM Agenda, the Financial Services Minister, Chris Bowen. Thanks for joining us.
The Government complains about the banks a lot but it doesn't seem to have much power to do anything. At least Senator Joyce is proposing something in arguing for greater divestiture powers.
CHRIS BOWEN:
Well, Senator Joyce has long had an irresponsible and populist competition policy. The difference is now that he's the alternative Finance Minister of Australia. He made a very significant [inaudible] the Opposition's economics policy. What he says is very important. What is not appropriate is a thought bubble from Senator Joyce, which would turn the way businesses work in Australia, not just banks by the way, but all businesses, on its head.
The Government could just, on a whim, decide we're going to break up, force divestiture of various companies. We're more than happy to have the debate, but it's got to be couched in sensible and well thought through proposals. What Senator Joyce is doing doesn't meet either of those tests.
GILBERT:
This is likely to be politically popular, with Senator Joyce saying, 'okay, let's take the banks on for a change'.
BOWEN:
Well look, the Government has acted over the last 12 months in several ways to help competition in the banking industry in what have been very difficult circumstances. We've backed the residential mortgage backed security market. we've instituted the deposit guarantee which has been of most benefit, frankly not to the big four, but to the smaller banks.
So what you've got to do is work through these things in a methodical way. We can all go out there and grab headlines, coming up with the most outlandish ideas, all of us could do that. But if you want to be taken seriously as an alternative Minister, as a policy maker in Australia, then you need to do better than Mr Abbott and Senator Joyce have done over the last few days.
GILBERT:
But what if the banks show some gratitude then, you know, that the bank guarantee was offered and those measures you've referred to. Why don't the big banks show some gratitude and actually listen to you for a change?
BOWEN:
Well, I made the point that the big beneficiaries of the deposit guarantee have been the smaller banks. But look, over the last few days we've made our views known about Westpac's approach. But also we've seen NAB take a very competitive approach. And this shows competition in the market. This shows we do see some competition for people's loans and deposits, so Senator Joyce going around saying, 'the end is nigh, we don't have enough competition, let's break them all up' is a particularly irresponsible approach.
GILBERT:
So you'd make no changes then, you're happy with the way the law is working even though the banks are getting away with blue murder?
BOWEN:
Well, we certainly wouldn't be adopting the erratic and irresponsible of just saying the Government should have the power to break up businesses. I mean, Senator Joyce says the Government shouldn't have the power to deal with climate change or put a price on carbon, but we should have the power to come in and break up businesses. We certainly won't be adopting that approach.
GILBERT:
What about the idea of an independent inquiry into what the banks are doing? Because it's fair enough for you to say, the Treasurer and others to say, 'look, we don't want them to raise rates', but we saw with Westpac and others that's what they're doing, and double what the RBA has done.
BOWEN:
Well, Westpac have done that. The NAB hasn't. The others are in between the two. Look, we need to keep in perspective the fact that the Australian financial system has been very robust. Yes, we do have issues in the Australian financial system but we haven't had to bail out any financial institutions.
And yes, we've made our views clear that the Australian banks shouldn't be increasing interest rates over and above the Reserve Bank rate. But banks around the world have done a lot worse in other circumstances, of not passing on reductions in interest rates around the world.
So we continue to make our views very clear to the banks and we see through the actions of the NAB and others those competitive forces taking place.
GILBERT:
So you don't think they're gouging the system? You don't think an inquiry is warranted of some sort?
BOWEN:
Well, we don't think an inquiry at this stage is warranted. We continue to make our views clear to the banks and the Australian customers continue to make their views clear and we see some response to that through the competitive pressures, through NAB and others taking a different approach.
GILBERT:
The new shadow Finance spokesman has made some comments about Chinese investment in Australia, wanting to clear up the confusion, as he says, between the state-owned enterprises investing in Australia. You've been very critical of him, but isn't foreign investment always clouded with controversy when the [inaudible] looks at each of these proposals? For example, the $20 billion dollar proposal by Chinalco to have a tie-up with Rio Tinto. You were just lucky that Rio walked away in the end. They're always clouded in confusion, aren't they, these sorts of investment proposals?
BOWEN:
Well Kieran, there's been a bipartisan consensus in Australia for 30 years that foreign investment is a good thing, that foreign investment creates Australian jobs and recapitalises the Australian market. And without that foreign investment, Australia would have a lot of trouble raising the necessary capital. So look on the right and the left for at least 30 years and that's been the consensus, until the ascension of Mr Abbott and Senator Joyce to the Opposition leadership.
Now we see Senator Joyce running around, not just yesterday, but for several months, criticising foreign investment, particularly Chinese foreign investment. Now we say that all foreign investment is welcome in Australia. We have appropriate checks and balances in relation to sovereign foreign investment. The Treasurer further clarified the situation in his speech yesterday.
But what's not appropriate is an economic policy-maker, an alternative Minister of Australia, arguing that foreign investment is a bad thing. In our view, you need to start off with some leadership on this and be making the case that foreign investment is a good thing.
GILBERT:
Okay, but 16 proposed foreign acquisitions over the last 20 years have been blocked. Two in the last year, in terms of Chinese investments, so you must share at least some of Senator Joyce's concerns on that front.
BOWEN:
And many, many more approved. Many, many more than that approved, Kieran. The vast majority of foreign investment under the previous administration, under this administration, is approved. And so it should be. And can I say, we need to remember that foreign investment goes both ways. Australian companies invest around the world, and in fact, often that outweighs the foreign investment coming into Australia. So you can't say, 'it's okay for Australian companies to go off and invest in Europe and America and yes, China, and not have investment into Australia'.
GILBERT:
But Chris Bowen, it's about the state-owned enterprises, that's what he's raising and clearly if you've blocked two Chinese investments in the last year alone, you share some concern as well, at least to some degree.
BOWEN:
Well, we have appropriate checks and balances in place, Kieran. We have a process through the Foreign Investment Review Board. Senator Joyce's position, I think, from what I can read in to his comments, is that he thinks that all state-owned investment into Australia should be banned. That's a grossly irresponsible approach.
GILBERT:
But we should, do you concede, that there needs to be a clearer approach?
BOWEN:
Well, I don't think that's what he's saying. He's saying that it should be banned and we certainly don't support that.
GILBERT:
But what do you think? Do you think that there is scope for stronger rules and more clarity on this?
BOWEN:
Well, I think we've got the balance right. We have the process through the Foreign Investment Review Board, which makes recommendations to the Treasurer. And the process works. The Treasurer yesterday outlined that process and outlined the clarity that this government brings to the process and I can tell you Kieran, any opposition – it might be an easy, quick, cheap headline that Senator Joyce excels in to make these sorts of comments but if he ever becomes the Finance Minister of Australia, he'll find it a lot more complex than that.
GILBERT:
Okay, on the other issue that he's raised, the possibility that the United States could default on its massive sovereign debts. Now we heard the Prime Minister earlier in the program accusing Barnaby Joyce of making it up on the run, being irresponsible, but why not at least discuss that? If that is a possibility, as remote as it might seem to most, why not at least consider it?
BOWEN:
Well Kieran, I thought the most remarkable thing about Senator Joyce's comments were partly the comments about America – and I say, look the American Government is AAA-rated, it's got access to deep bond markets, it has the capacity to raise taxes if necessary; those comments were bizarre – but what were particularly bizarre and particularly irresponsible were his comments about Australian states. I mean, he said that there was a risk of Queensland defaulting on its debt. I mean, that is an extraordinary thing for him to say, an extraordinarily irresponsible thing for him to say.
Every Australian government except for Queensland and Tasmania is AAA-rated. Queensland and Tasmania are AA-plus. Australia has been voted by the World Economic Forum as the first nation, first in the world, at the lowest risk of sovereign debt default. And for Senator Joyce, who now is Shadow Finance Minister, his comment get noted around the world, to say that the risk of an Australian Government defaulting on its debt was the most irresponsible thing that an economic spokesperson has said in my memory, going back a long time. Going back through Oppositions of both persuasions, I cannot think of a more irresponsible and erratic thing that an economic spokesperson for either party has said in the last 20 years.
GILBERT:
Well, Tony Abbott's been derided on another matter, for suggesting that an increase on the Emissions Trading Scheme, that the targets for 2020 would add $400 billion to the cost of that scheme. You've suggested he's basically made a $250 billion gaffe. But isn't it fair for him to ask you to come up with the revised numbers, the revised modelling that you say was given and released publicly in October last year? A lot's changed since then.
BOWEN:
But that's not what he did, Kieran. He said there was no modelling. He appeared blissfully unaware of the modelling. He said the Government has never released the Treasury modelling, but of course we have.
GILBERT:
It's out of date now, isn't it?
BOWEN:
But that's not what he said. Now, if he was to be taken seriously, if he wants to be taken as a credible spokesman, he needs to get his facts straight. If he's going to come out and say there's no modelling, he needs to be right. He was wrong. He didn't say that the modelling is out of date; he said it hadn't been released.
GILBERT:
If it's out of date, it may as well not exist, if it's irrelevant.
BOWEN:
Well, I disagree. There is no evidence that the modelling is out of date. The modelling stands and Mr Abbott appeared unaware of it. Now, this underlines a more serious point, Kieran, and that's policy on the run. These sorts of mistakes happen. If you haven't thought your policy through, if you're just simply going for the quick grab, you're going for the cheap headline, these sorts of mistakes will happen.
Now, the Australian people have a different view about Leaders of the Opposition. They expect the alternative Prime Minister to have serious, well thought-out policies and proposals embedded in facts, arising from factual research. The early track record of Mr Abbott is particularly poor on that.
GILBERT:
But the Government hasn't done a very good job in clearing a lot of this up. In terms of the Emissions Trading Scheme, why hasn't the Government spent more time trying to explain what it's all about? It seems you've left a vacuum there, a vacuum of knowledge on this very complex piece of legislation.
BOWEN:
Kieran, it is a complex piece of legislation. It's a complex problem. You know, I read in The Economist magazine this week that they described climate change as the most difficult political problem that the world has ever faced.
GILBERT:
So you should have done more to explain it.
BOWEN:
I'm underlining the fact that it is complex and difficult. And when you've got an Opposition willing to make cheap, populist points not based in facts, that makes it harder. I accept that point.
But look, we've laid out the Emissions Trading Scheme. We went to the last election with the policy of introducing an Emissions Trading Scheme. We've been talking about this now for 12 months. We've been talking about the fact that there's a compensation scheme in place for low and middle income earners, the fact that 90 per cent of Australian families would receive more in compensation than the increase in costs.
Now, Mr Abbott can say, firstly, he says there's no such thing as man-made climate change. Now, he's used some very strong language to say that. Then he says, 'even if there is, I can fix it at no cost'. Well, you can't, Kieran. And that's the fact and eventually that will catch up with him. If he wants to go around saying, 'we'll fix it just by planting more trees', well that won't work. Now, sooner or later he is going to have to tackle the very difficult policy issue if he wants to be taken seriously as the alternative Prime Minister of Australia.
We've done it. Yes, it's difficult. Yes, it has political costs. We've always said that the easy thing to do would be not to do this, but it's the right thing to do for the nation and the future. We're prepared to take those short term political hits because it is the right thing to do. Mr Abbott can go around collecting the cheap headlines; we'll get on with the job.
GILBERT:
Financial Services Minister Chris Bowen, thanks for your time today.
BOWEN:
Pleasure Kieran, good on you.