TREASURER:
I’ve only got a few minutes this morning so I’m going to have to be relatively brief, but I’ll endeavour to deal with as many questions as I possibly can.
This morning there’s been an announcement from the ANZ. I think what this announcement from the ANZ shows is that we are not immune from developments in global financial markets. But I think we shouldn’t lose sight of the fact that we do have a strong, well-regulated banking sector which is capable of withstanding the fallout from these international developments.
Now, I think it’s a very sensible thing for the ANZ this morning to make provision for these potential losses. These potential losses come from decisions, investment decisions, poor investment decisions taken over a period of years, as well as the fallout from the global financial market events.
From day one this Government has said that it is important that financial institutions declare their positions. That sort of transparency is very important, and that’s what we’re seeing today.
Over the weekend the Prime Minister and I have been talking to the regulators – the RBA and APRA – so we shouldn’t lose sight of the fact that we do have world-class regulators who are looking at these issues all of the time and we still have a very strong, well-regulated banking system. And if there was any country in the world that had the capacity to withstand the full force of these developments, particularly on international financial markets, it is this country.
Over to you.
JOURNALIST:
Bank lending has fallen by about 20 per cent so far this year. Do you think that increases the risk of a hard landing for the Australian economy?
TREASURER:
No, I don’t necessarily accept that at all. But we are not immune from international financial market developments. And you would be aware that events in those markets in recent weeks have been difficult, once again pushing up borrowing costs for banks which has a flow-through effect to the operation of domestic institutions, pushing up borrowing costs both for households and also for business. That’s just a fact of life.
JOURNALIST:
You said it was important that institutions disclose their position, but the NAB got some criticism on Friday for not disclosing earlier, surprising the market. Are you happy with the level of disclosure and the timeframe (inaudible)?
TREASURER:
Can I just say this point: I think it’s very important that chief executives and boards of banks accept responsibility for their circumstances. In the case of both of those banks – the NAB and the ANZ – most of these matters have been previously disclosed but what they are now doing is making additional provision. So, the disclosures, I think, have been working and it is also very important to understand that both APRA and also the RBA have had a very close eye on all of these developments over a long period of time.
JOURNALIST:
(inaudible)
TREASURER:
It is up to the banks for them to make their statements about these matters. I gather one other bank this morning has made a statement. Banks made further statements on Friday and I expect that will be the extent of what we hear at this stage. But as you know, these things change over time. But I’m advised by the regulators that they are satisfied that all of our banks have made full disclosure.
JOURNALIST:
Can you assure Australians that this isn’t some sort of slowly unfolding disaster, that we won’t see other financial institutions making similar decisions?
TREASURER:
As I said before, we have first-class regulators. They have been working with our deposit-taking institutions constantly since these matters first arose last August. What we are dealing with here today in terms of the ANZ, and their Chief Executive has made it very clear, is that we are living with the consequences of some poor investment decisions that in fact go back years. Over and above that, you’ve also got the fallout of what’s occurring in global financial markets and that is, therefore, impacting upon some investments also made years ago by some of these institutions. But I’m satisfied that our regulators are satisfied that the disclosures are satisfactory.
JOURNALIST:
Treasurer, given predictions by some that the fallout from the sub-prime crisis is only one-third of the way through, at what point does it become reckless for the Rudd Government to introduce an emissions trading scheme, to impose a blanket carbon tax?
TREASURER:
I reject the premise of the question. What we are charged with is disciplined economic management. We brought down a Budget which made provision for a substantial surplus. We did that for a variety of reasons, but one was to provide a buffer against the emerging global uncertainties that were obvious in May, and I think that was a very wise decision. Also to make sure that all of our regulators are on the job, and on the job they have been, working diligently through the period that we’ve been in government and in the period before.
But in terms of protecting the prosperity of this economy for the long term, we certainly will not shirk our responsibility to deal with the really tough and hard decisions of the future which we are required to make if we are going to protect future prosperity. Dealing with dangerous climate change, and not dealing with it, has a very substantial cost. Not dealing with dangerous climate change has a very, very big impact on the economy. So, going carbon clean is a growth strategy for the future and a prosperity strategy. And we will deal with that in a responsible and measured way, and that’s why we’ve got a Green Paper out there at the moment to discuss these issues in a mature way with the Australian people. But we’re not going to shy away from taking the tough, long term decisions that are required to underpin the future prosperity of this economy and this society.
JOURNALIST:
Treasurer, you said that there’ve been poor investment decisions made by banks. Should that be reflected in the remuneration packages of the CEOs and the boards, and should they be held accountable for decisions made?
TREASURER:
As I said before, I think it’s very important that both the boards and the chief executives are held accountable for the decisions that they take. And when it comes to their customers, they will take decisions about the performance of their bank. I mean, one of the reasons why I’ve pushed so hard for the full implementation of a bank switching strategy is that customers do have the capacity to vote with their feet.
JOURNALIST:
The alcopops tax is likely to get knocked off in the Senate now…
TREASURER:
Well, I don’t accept…
JOURNALIST:
When are you going to introduce the legislation or are you going to keep Australians paying a tax that (inaudible)?
TREASURER:
I don’t accept that the alcopops tax will be knocked off in the Senate. What I do accept is the Liberal Party’s now in bed with the liquor industry and what the Government is doing is doing something very constructive about binge drinking, as well as closing a tax loophole that was a substantial advantage to sections of the liquor industry. We’re going to fight for this proposal because it is part of our responsible Budget and we anticipate getting it through the Senate.
JOURNALIST:
A mechanical question, Treasurer. If it is knocked off in the Senate, what happens to the money that the Government has collected?
TREASURER:
I’m not buying into those hypothetical situations.
JOURNALIST:
It’s a matter of the law. What will happen…
TREASURER:
Laurie, we are going to fight for our $22 billion surplus. It is needed and required, given the economic circumstances we’ve just been discussing.
JOURNALIST:
So, do you keep the money or does it go back to people?
TREASURER:
Laurie, I’m not going to cross that bridge in this press conference. We’re going to fight for it.
JOURNALIST:
You’d have no law entitling you to take that money…
TREASURER:
What we are doing at the moment is entirely legal and it has been done before by many governments, and it will be done again. This legislation will pass the Senate and it is needed because it is part of our Budget surplus which is required to tackle the inflationary challenge and provide that buffer against international uncertainty that I was talking about before. And those in the Senate who want to oppose it will have it on their head if it doesn’t pass.
JOURNALIST:
How much is the Government taking each week, Mr Swan, on the alcopops?
TREASURER:
I’m not buying into the figures here. I’m happy to supply them to you. I’m quite happy to give you all the background – not a problem.
JOURNALIST:
What will your message be to Don Voelte when you meet him this week? He wants free permits for LNG. What will you be telling him?
TREASURER:
I’ve already met Don Voelte. I’ve been very active. I’ve also met with many others in the energy sector over the last couple of weeks. We had a very productive meeting. He presented a lot of material to me. I told him I would look at it. I said the Government was determined to introduce our Carbon Pollution Reduction Scheme in a sensible and measured way, we understood the importance of the LNG industry to the country and to its future prosperity, and we’ll work our way through the issues he raised with me during the Green Paper process. That’s what I said.
JOURNALIST:
What is your takeout of business reaction so far to the emissions trading scheme? What do you think needs to be adjusted and dealt with as a priority?
TREASURER:
Well, Michelle, you know, the Green Paper’s barely a month old and we’re going through a series of consultations. We will continue to go through those, take them on board as we produce the White Paper.
But what do I make of it? They understand the need, unlike the Liberals, to tackle dangerous climate change. I mean, the Liberals are so gutless they can’t even front up to the problem, and now it’s become the tool of various forces in the party room in their jostling for the leadership. This is too important an issue for Australia to be subject to that sort of treatment in the Liberal Party but that’s the stage they’ve got to because they are simply incapable of facing up to the long term challenges that are essential to our future prosperity. And of course, as you know, that’s one of the reasons we are now living with 16-year high inflation. They wouldn’t face up to it when they were in government and now they’re in Opposition they’re even more incapable of facing up to those problems.
JOURNALIST:
Treasurer, what’s the departmental advice telling you and the Government about this alcopops tax? Is it actually working? Is it doing anything about binge drinking or are people just shifting off into other…?
TREASURER:
Too right it is. I mean, you’ve got to be really wary about listening to the special pleading of the liquor industry in this. They will take any set of figures and slice and dice them at any time to suit their argument. Because they were making a motza out of this and the consequence was an explosion of binge drinking and also it was at the cost of revenue. As I’ve said on so many occasions, what they were basically doing was if you sat down to watch the footy and you had your bottle of Bundy Rum, you were paying a lot more in tax than someone who had an alcopop. Well, what we’ve done is level the playing field there. They made a motza out of that, we’ve put an end to it, now you’ve got their special pleading out there. Well, they can go jump.
JOURNALIST:
But has it actually reduced the consumption of alcohol?
TREASURER:
There’s no question that it is having the impact that leading experts thought it would have had. It is doing that and you can’t pull one set of figures out of the middle of an issue like this which plays out over time and bend them the way the liquor industry has done so.
JOURNALIST:
Do you have your own figures that prove it’s working?
TREASURER:
We are confident that this is having the impact where it needs to happen, which is with teenage binge drinkers.
JOURNALIST:
I know you’re a Rugby League fan. Just quickly, the NRL’s facing a $2 million contract breach. Should Sonny Bill be made to honour his contract?
TREASURER:
Let me just say this. It has been a fantastic season for Rugby League and I don’t think Rugby League is going to miss Sonny Bill one bit.