ALI MOORE:
To discuss the outcome of today's [Treasurers] meeting and the key issue of mortgage rates, I spoke to Treasurer Wayne Swan in Brisbane earlier today.
Treasurer, going into today's meeting with state health ministers, New South Wales wanted a third of the $150-million on the table to cut elective surgery waiting lists. Tasmania wanted a disproportionate amount and so did the ACT. In the end, was New South Wales the biggest winner?
TREASURER:
Well, certainly it's an historic agreement in terms of hospital funding and in terms of putting forward a proposal which will radically reduce hospital elective surgery waiting lists.
I think all of the states were happy with the allocation. This is only stage one of a four year program worth $600-million which goes to the heart of our objective of reforming health care in this country, working cooperatively with state governments, and really, that was the thing about the meeting today, the degree of cooperation. Instead of banging our heads together in some sort of battle, we got our heads together and came up with a cooperative solution.
MOORE:
You say "all the states were happy" , but as we noted, going into the meeting both Tasmania and the ACT wanted a disproportionate share. Was there some disappointment on their behalf?
TREASURER:
No, I don't believe so. I think all the states were happy. They understand that this is a program which will go for four years. They have different needs and different demands upon their services. But over time, I think we will reach agreement with them on each stage of the program.
But today, all of the states agreed with the allocation that they received and indeed, it was certainly one of those very rare meetings in politics where the spirit of cooperation dominated the policy formulation and really, that goes to the core of our ambition for the reform of Federal-State relations and it was just great to start with health and to start with an area where thousands of people have been looking for political leadership.
MOORE:
Beyond waiting lists, you also want to look at the entire system as Specific Purpose Payments and make them less bureaucratic, was there agreement on that front in today's meeting?
TREASURER:
Too right there was. For decades the states have been looking for a fundamental reform of this area and they got it today.
Our ambition is to reduce the number of grants by at least 75 per cent, to bring them down to, say, something like 20, from 90 separate grants.
Now we're not talking about changing the amounts of money, but getting rid of the waste and duplication and bureaucracy that has been involved in the administration of these grants so that money isn't soaked up by administration, it goes to front line service delivery.
MOORE:
So what was agreed to that end today?
TREASURER:
Well, what was agreed today was that we would radically reduce the number of grants, that we would look at a system of incentives on top of that when it comes to future reform objectives in the system, be it in health or many other areas of Federal-State relations.
MOORE:
So those incentive payments will be over and above the funding allocations?
TREASURER:
Yes, they will. We have an ambitious reform agenda. An ambitious reform agenda not only in health, but also in skills, in education and also in infrastructure, and to put that reform agenda in place, we are prepared over time in the interests of long-term national reform to lift the productive capacity of the economy, to put some more money on the table so we can achieve those objectives, because reform in all of those areas goes to our core objective of lifting productivity and, of course, putting downward pressure on inflation and, therefore, downward pressure on interest rates.
MOORE:
I want to get to interest rates in a moment, but first, how much more could states make for good performance, another 10 per cent, another 20 per cent?
TREASURER:
That's the subject of negotiation through the COAG (Council of Australian Governments) reform process. We will have another meeting through the premiers and the Prime Minister at the end of March most probably, and we will be discussing how those reforms are rolled out over a three year period.
So we will negotiate with the states the nature of that incentive payment over time.
MOORE:
Treasurer, the other key issue is the economy, you've called some of the recent rate hikes by the banks excessive and you've urged people to vote with their feet. But if people do want to register a protest against the increased interest rates, where do they go, given that virtually every bank has now increased rates without an official rate rise?
TREASURER:
Yes, well I have said very clearly that I regard some of the increases by some banks as being excessive and not justified by the increase in borrowing costs that have flowed through to them from the US sub-prime mortgage crisis.
I've done that, I have not done that lightly, I've done it on the basis of evidence presented to me by senior officials who are independent and very experienced in this area. And some of the rises from the banks I don't believe are justified by the increasing costs that have flowed through from the US sub-prime crisis. I've said so.
So, therefore, I've said that customers who are unhappy with their bank ought to vote with their feet. That's why I've said I'll be looking at a range of measures to ensure that people do have portability if you like with their accounts.
So I've asked the Treasury for a report and I will certainly be talking to the banks about this issue in the weeks ahead. Because if we want to have a competitive market, it's essential that people can without unreasonable blockages move their account.
MOORE:
When you look at the bank that's come in for the biggest criticism from you, that's the ANZ, they argue that it's too simplistic just to look at the interest rate alone, that you should be taking into account things like monthly fees. Some charge them, some don't. Is it too simplistic just to look at the interest rate?
TREASURER:
Well, the ANZ did not make that argument when they spoke to me about their rate rise. I spent a fair bit of time talking to officials and regulators and looking at the evidence that they presented and I simply formed the view that the increase of the ANZ was excessive and could not on its own, be justified by the increase in borrowing costs which flowed through from the sub-prime crisis. And I still believe that to be the case.
MOORE:
Well, this review of fees that's underway with the aim of trying to make switching banks easier, if the review does find that the fees are excessive, what power do you have beyond jaw-boning? Can you legislate to ensure that banks change their fee structures?
TREASURER:
No, I'm not talking about legislating, but it involves issues which are broader than just fees. There are a whole series of issues involved in the portability of accounts and people moving their accounts from bank to bank. I will approach this in a rational way; I will approach it in a way which is based on the evidence that is put before me.
The Treasury is looking at all of these issues. I've yet to receive their report and I've yet to have a session with the major banks about all of those issues. I'll give them plenty of opportunity to put their point of view to me. But at the end of the day, as I've done in recent weeks, I'll form my own view and when I disagree with what the banks have got to say, I will say so and I will prosecute my case very, very powerfully.
MOORE:
But you'll rule out legislation?
TREASURER:
I'm ruling out legislation. We don't regulate the banks when it comes to fees and charges in this economy, it's not a centrally planned economy. But what we need to have is a competitive market.
There there are impediments to competition, I will make sure to my utmost ability that we improve the competitive arrangements so people can have real choice.
MOORE:
If the answer's a competitive market, is it time to remove the four pillars policy, which prevents the four big banks from merging, time to introduce more competition?
TREASURER:
I'm not talking about removing the four pillars at the moment, Ali.
MOORE:
You're ruling that out, as well?
TREASURER:
I'm ruling that out absolutely. I have done that on many occasions and I'm doing it again now.
MOORE:
More broadly on the economy, unofficial inflation numbers out today point to another official interest rate rise in February, our share market has already had the weakest start to a year for 17 years. Given the nervousness on markets, the inflationary pressures, the uncertainty about the global picture, what's the outlook for Australia?
TREASURER:
The outlook for Australia is still very good. The fundamentals are good, but we are not immune from the fallout from the US sub-prime mortgage crisis and I've said that very clearly. And we're certainly not immune from a slowdown in the United States' economy, which will have second round and third round effects in this country. But having said that, the fundamentals in this economy are still good.
MOORE:
Given those inflationary pressures, is now the time to be handing back $31-billion in tax cuts?
TREASURER:
Well, people out there have earned those tax cuts. They've worked very hard and they are subject to very considerable cost of living pressures.
We've made it very clear that in this fight against inflation the Federal Government has to play its part, which is why we've put forward during the campaign $10-billion worth of savings. That's why we've said through the current Budget process we will be searching for more savings.
Restraint is exercised by the Federal Government just as restraint ought to be exercised by those banks who have engaged in excessive interest rate hikes.
MOORE:
Treasurer, many thanks for joining us.
TREASURER:
Good to talk to you.