TSO:
Coming up on the show today … it's all about the economy as the world's central banks signal plans to withdraw the extraordinary stimulus; we'll find out whether it's time for the Australian Government to do the same. Meanwhile it's heating up in the local banking space; NAB hiked its variable mortgage rate in line with the RBA and challenges the other majors to keep the lid on interest rate hikes. Well to help us through all this we are joined by a special guest host this morning, Assistant Treasurer of Australia, Nick Sherry. Senator Sherry, great to see you, great to have you here.
SHERRY:
Good morning, good morning to your viewers. Good to see you again.
TSO:
Yes, we do appreciate your time, it's been an extraordinary week in politics
SHERRY:
It certainly has, I'm just out of the hothouse of the Senate in Canberra, it's been a truly extraordinary week
TSO:
It's great to have you here this morning, we'll talk more throughout the show. And just to remind our viewers you might want to send us an email this morning, that address Squawk Australia CNBC Asia.com.
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And making a case for a second term in office is Ben Bernanke; he has been forced to defend his actions during the financial crisis. The Federal Reserve Chairman told a Senate Banking Committee hearing overnight the bank had been slow to protect consumers from sub-prime mortgages and should have done more. Mr Bernanke also said that as the US emerges from recession, he has the tools to rein in the massive stimulus.
TSO:
Well let's get more with Assistant Treasurer Nick Sherry, our guest host in this morning. Senator, we have seen pretty volatile markets lately, a bit choppy in terms of trading, some of this on the back of Dubai. When the news broke about what was unfolding in terms of credit woes there, did that cause any concerns for you or did you think Australia was very much shielded from what was going on?
SHERRY:
Well I don't think Australia's had any direct exposure, I think what it does indicate is that there are still glitches, if I can use that term, look we're going to see occur, and there are still levels of uncertainty in the rest of the world, and Australia fortunately has done very well comparatively, but whether it's Dubai or I notice there's been some focus on the level of Greek debt, issues in Eastern Europe, we're going to see those uncertainties from time to time. I think, importantly, they're not going to be a direct threat to the world economy, and certainly no threat to Australia.
TSO:
What you're highlighting though are potential fallout situations still down the track, there might still be issues for the global economy to deal with. In Australia we are in a situation, we are heading towards the … taking stimulus off the table. It's monetary stimulus right now, fiscal a little bit later on - are you concerned we are moving a little bit too quickly in taking away some this cushioning?
SHERRY:
Well, in terms of the Government's stimulus package, it actually peaked in the June quarter of this year, by the end of this calendar year - which is not far away actually, this year has gone so remarkably quickly – that by the end of this year the Government's fiscal stimulus will have effectively phased out, had an automatic phase out , and moved on; the cash stimulus phase to the longer term investment phase, investment in infrastructure, schools, investment of that type, which is important for long term productivity growth. I mean, importantly, about the stimulus in Australia, it's been very, very effective. Our growth - the only economy that at this point in time is larger than it was a year ago of the 33 advanced economies of the world, so it's been very effective.
TSO:
It's quite incredible isn't it - is to really look at that picture and how it's panned out despite all the shocks in the system. Now we've been talking about volatile markets, let's get to commodities now as we have seen some more action in that space too.
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TSO:
The National Australia Bank has thrown down the gauntlet to its peers, igniting competition in the home loan market. Yesterday the bank hiked its variable mortgage rate by 25 basis points in line with the Reserve Bank's move on Tuesday. NAB said it was determined to offer a better deal than the other banks after Westpac hiked its standard variable rate by 45 basis points. The mortgage rate for ANZ and Commonwealth Banks are still under review.
The Government was highly critical about the move, the Treasurer in particular was saying that there was no case for this. Westpac has been arguing that wholesale funding costs have …. What do you make of what's unfolding in respect of the challenges they're facing?
SHERRY:
Well cash rates are moving from the emergency lows of 3% because of the financial economic crisis and Westpac's decision I think was somewhat cynical, hoping to avoid scrutiny in the cover of everything that was going on in politics this week. But it's great to see an outbreak of such strong competition with NAB's decision, I think it is a significant difference in rates and it will be interesting to see what the Commonwealth and ANZ do as a result of NAB's decision.
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