SUBJECTS: RBA's cash rate decision, economic management, Austrade's Financial Services Benchmark Report, Peter Costello
HOST:
Last night, Financial Services Minister Chris Bowen launched an Austrade report highlighting the strength and resilience of Australia's $4 trillion financial services sector. The Federal Government is using the GFC as a marketing tool; trying to bolster Australia's reputation as a regional financial services hub, all to attract more international investors. Chris Bowen spoke with our business editor, Sheryl Bagwell.
CHRIS BOWEN:
I see every challenge as an opportunity and the opportunity for Australia here is that we are getting through this crisis better than any comparable nation in terms of the real economy, and our prudential regulation has stood the test, and for some time, the world's investors will be looking for a stable place to invest where they know prudential regulation is sound and they know financial institutions are well-run and Australia has a lot to point to as we come out of this crisis in terms of being a very attractive place for the world's investors.
SHERYL BAGWELL:
Does this week's interest rate rise strengthen your case because it sends a signal that the Australian economy is out of the woods?
BOWEN:
Well I don't think we're out the woods but as the Reserve Bank has said – they've indicated that the recovery has begun and this is not something that many nations in the world can point to. So we'll certainly be pointing - whether it's because of that decision, or more generally - be pointing at the fact that the real economy has done well and that our financial services sector has done relatively well through this crisis.
BAGWELL:
That sounds like a bit of a mixed message though. You're telling the world that Australia has weathered this crisis better than nearly any other advanced economy but domestically you're still saying we're not out of the woods.
BOWEN:
No I don't think it's contradictory at all. I think it's largely inarguable that we have done better than most other countries but what we're saying here is that there is still considerable potential for international shocks which could impact on Australia and the economy growing better than any other comparable country in the world. So this still has some way to go before we can say its growing fast enough to keep unemployment static. But we are pointing out that there are many countries in the world who would give their right teeth to have economic figures we're returning in Australia.
BAGWELL:
Indeed, the financial services benchmark report that you've launched puts Australia at the top of the list of economies which have been the most resilient to economic cycles this past year. What do you put this down to?
BOWEN:
I think there are a number of factors. I think our links with Asia have been important. I think the strength of our financial system has been important – that's partly due to our good prudential regulation, that's partly due to good management, that's partly due to the four pillars policy. And I think that the stimulus from the Federal Government and the Reserve Bank have been very important.
I think there's a range of factors, all of which have been important and a combination of which has been important to seeing us through.
BAGWELL:
Where would you put government policy in that list? At the top of it?
BOWEN:
Well very important. Yes, I think it is in my view very clear that Australia would have gone into recession without the stimulus package. I think our bank guarantees have been very important in terms of ensuring continued confidence in our financial system in a very tense period in our international economy.
So, I think government intervention has been very important but of course, all the elements have been important; the private sector flexibility, the prudential regulation and the strength of our financial institutions.
BAGWELL:
The former Prime Minister John Howard said it's had more to do with Peter Costello's stewardship of the economy which lasted eleven years rather than anything that the Rudd Government has done since. Mr Howard was paying tribute to the former treasurer – now he's resigned. Would you give Peter Costello some credit too?
BOWEN:
Well Mr Howard – I suppose the Liberal Party would say that. We've said all along that there are a number of elements which have gone into Australia's success. Mr Costello was Treasurer at the time of the greatest mining boom in Australia's history and Australia did very well through that period because of the mining boom.
We have paid tribute to Mr Costello's role in the G20, setting that up. He also played an important role in prudential regulation, we acknowledge that. It's also not accurate to claim that he has, if you like, the majority of the credit for Australia's financial and economic successes of Australia in the last two years.
BAGWELL:
If you are telling the world Australia is doing well and doing better than most other advanced economies, might it also be time for the Government to change its mind, to withdraw its bank guarantees now for example?
BOWEN:
No, the bank guarantees are still very important. The wholesale guarantee is still very important in assisting particularly smaller institutions in raising funds offshore. The retail guarantee is important in terms of confidence. There are many countries in the world with guarantees in place at the moment and we would withdraw them in consultation with our colleagues in the G20 and it should be done in an internationally coordinated fashion.
HOST:
That's Chris Bowen, the Federal Minister for Financial Services, Superannuation and Corporate Law; he was speaking there with our business editor Sheryl Bagwell.