SABRA LANE:
The Treasurer Scott Morrison joined me in the studio this afternoon. Thanks for coming in.
TREASURER:
Thank you.
SABRA LANE:
Have the banks and Labor embarrassed the Government into taking action?
TREASURER:
No because we have been taking action on this matter now for some time. I mean, after we were elected in 2013 we commenced with the Financial System Inquiry, which David Murray conducted, the Turnbull Government responded to that inquiry, as one of the first actions. On top of that, we acted on ASIC earlier this year to increase its powers and its resources. ASIC has more than the standing powers of a royal commission and today we've acted on the issue of transparency with an initiative we've announced with the House Committee on Economics.
SABRA LANE:
But the banks have effectively called your bluff. I mean yesterday none of the CEOs fronted publically to explain themselves. Back in May, when the Reserve Bank last cut rates, and in the shadow of an election campaign and the threat of a royal commission they all passed it on in full.
TREASURER:
Now they will have the opportunity to explain themselves in a forum that we have tailor-made for them to make those explanations.
SABRA LANE:
Bill Shorten has mocked your policy today, saying that you are giving the banks a $7 billion tax cut, and your solution today is to say to the banks, come to Canberra for lunch and give the Prime Minister an opportunity to wag his finger at them.
TREASURER:
Well Bill Shorten's a rank opportunist. Bill Shorten doesn't have a policy on this issue. He talks about a royal commission but into what, Bill? He hasn't got a terms of reference. One day it's about bank executives pay, the next day apparently now it's about interest rates and you can have a royal commission to that. One other occasions about financial advice. He doesn't have a policy all he's got is a whinge.
SABRA LANE:
But rank opportunism, we heard nothing of this idea during the recent election campaign, this has come out of nowhere.
TREASURER:
Well this is I think a practical way to deal with the transparency issue. We made it pretty clear that we would like the banks to explain these matters and not just on these matters. I mean Glenn Stevens already appears before the house committee on four occasions actually per year. Wayne Bias comes along and he appears. So this is the right committee and this provides a further opportunity for transparency but it's not in isolation. It's in addition to the ASIC measures, which are quite forceful, well resourced, and very powerful, and then also you've got the Financial System Inquiry which I remind people that included getting rid of these pernicious credit surcharging rates which is now coming in the final phases of implementation.
SABRA LANE:
You mention the head ASIC, the head of the RBA, they are government organisations. These are commercial businesses. Now the Australian Bankers Association today say no other commercial business is forced to parliament to explain their commercial pricing decisions. Who is next?
TREASURER:
No other commercial businesses sit in the unique position that our banks do with an implicit guarantee which effectively comes in through the financial claims scheme. No other private institution sits in the same way that these four pillar banks do within our banking and financial regulatory system and are so critical and fundamental to the strength and performance of our economy. So I think they are yes quite unique cases. They play a key role in our economy and they play a very successful role. This is about a stronger banking and financial system and our banking and financial system has weathered every storm that's come against it through the good regulation but I think also the strong enforcement of that regulation.
SABRA LANE:
How will a yearly appearance before a bunch of politicians change banking culture?
TREASURER:
At least yearly I should stress…
SABRA LANE:
At least?
TREASURER:
The committee has the opportunity to call people more regularly if it so wishes. This is an opportunity for transparency. I said not just on the issue of rates...
SABRA LANE:
But culture.
TREASURER:
This is about having accountability for culture. The banks announced also in April as you will recall a series of measures that they were undertaking to address culture. Now this provides an opportunity to them to provide an update on those measures. It provides them with an opportunity to explain what the impact of prudential controls are here in Australia but also broader international prudential changes and what the impacts are here on costs of funding and so on. So this is a constructive way of actually getting to the core of the issue, not some populist opportunity which others may be pursuing which has no interest of the shareholder or the consumer in mind, just a rank political opportunistic approach which I don't think makes our banking system stronger which is what our objective is.
SABRA LANE:
How can you compel CEOs to appear given that in April this year the Commonwealth Bank and Ian Narev refused to appear before a senate inquiry?
TREASURER:
I have no issue with them attending because I know they will. I've spoken to all of them and they are all happy to cooperate with this and they see it as a constructive way of dealing with the issues that I think are in the public domain rather than the alternatives that I think are being put by others which really I don't think solve any problems. They put problems off for years. What this deals with right now is a permanent arrangement where bank CEOs come before a parliamentary committee…
SABRA LANE:
A parliamentary committee, that's an interesting point. This is a house of reps government dominated committee. Why not make it a joint parliamentary committee so that we've got senators like Pauline Hanson, ‘Wacka’ Williams Sam Dastyari, give them the opportunity to talk to them?
TREASURER:
Well I've never heard that proposal in relation to the Reserve Bank or APRA. This has been the committee which has performed well in performing this task for many, many years and I don't think there's been any criticism of its role in providing that opportunity for the Reserve Bank or other senior officials to come and answer questions. It's been a very robust committee - for a brief period of time I served on that committee many years ago. And others who have gone onto other roles within government, it's a committee of members of the House of Representatives - the people's house - and they will have the opportunity to ask the questions of those bank chief executives as they currently do with the RBA and APRA.
SABRA LANE:
And if it doesn't change their banking culture what's next?
TREASURER:
Well I'm more optimistic. I'm more optimistic because I think the banks, I think the government, are working on ways that we can increase transparency, ensure that the controls that we have prudentially on the banks continue to work. This is an annual and more often as necessary health check on the financial systems reforms that we're putting in place, the cultural changes that they're pursuing, and the accountability of permanently, as the Prime Minister has stressed today, this isn't just a one off inquiry. This is a permanent process by when banks make decisions and for whatever reasons they make those decisions, then they get to turn up at the house committee and explain themselves. I think that's what the Australian people want, it's certainly what the government wants.
SABRA LANE:
Treasurer, thank you for coming into 7.30.
TREASURER:
Thanks Sabra.