STANLEY:
Mr Swan, good afternoon to you.
TREASURER:
Good afternoon to you, John.
STANLEY:
The Greens are saying John Howard would have been proud of this scheme because you've modified the impact on petrol and you're giving these free permits to some of the larger emitters certainly in the early stage. Have you gone soft?
TREASURER:
Not at all. What we have done is chart a middle course. We're putting in place an economically responsible carbon reduction scheme - a pollution reduction scheme - which is going to be introduced in a measured way. But I guess some people wouldn't be happy until they've closed down large sections of industry. We certainly do need to reduce our emissions and the scheme that we've put forward will do it in an economically efficient way, but I think it will also protect our prosperity. We saw the agenda of some people on the weekend John, up the Hunter Valley trying to close down the coal industry. That would be absolutely traumatic going into the economy of this country, or the economy of any country. What we've got to do is reduce our emissions and the best way to reduce emissions for the long-term is this carbon pollution reduction scheme that we've put forward.
STANLEY:
I mean, your electricity bill goes up, you're going to be obviously provided with an incentive to reduce your use of electricity. What about the coal fired power generators? What incentive is going to apply to them, certainly in the early stages to reduce what emissions they produce?
TREASURER:
Well certainly the whole scheme is designed to provide an incentive for there to be cleaner technology operating. Now coal fired generators will of course be impacted upon by this scheme, and that's why we've said in this Green Paper released today that we will be providing some assistance for them. There's no doubt there will be an impact upon the price of electricity and the price level in the economy over time. But the way in which we've designed the scheme is to provide essential protections for households on the one hand, and also businesses affected on the other, including coal fired generators.
STANLEY:
So, will they get free permits for the early part of this?
TREASURER:
No, we're not talking about giving out free permits to coal fired generators. There are particular industries which are energy-intensive, export-orientated, who will be issued with free permits because they trade in international markets and the consequence of not providing free permits for industries such as that is that they could move offshore with no consequent reduction in their emissions at all. So we've got to take into account the circumstances of those industries which are export-orientated and energy-intensive, and they will be given an allocation of free permits.
STANLEY:
You said that you're charting a middle ground. Does that acknowledge that if you really want to get serious about climate change you'd be taking this further, but you can't take it further because it would damage the economy too much?
TREASURER:
It doesn't mean that. I mean there are extreme positions on both sides here. You've got the Greens who want to close down the coal industry on one hand, irrespective of the economic and social consequences of that, and on the other hand, you've got a whole bunch of climate change sceptics who want to do nothing. We understand that we've got to reduce our emissions responsibly over time. We've got to do that in a way which is consistent with maintaining economic prosperity, protecting households who are adversely affected, and protecting the interests of industry, the legitimate interests of industry which we need to generate wealth and to create jobs. In the middle of that, what we've put forward is a responsible scheme which will reduce our emissions over time consistent with our obligations internationally through Kyoto.
STANLEY:
It looks silly though doesn't it to be talking about reducing petrol excise just weeks after having been dismissive of Brendan Nelson's similar suggestion?
TREASURER:
Oh, not at all. I mean we're not comparing the same things here. Petrol has gone through the roof in recent times. It's increased I think by about 30 cents or a bit more a litre this year alone. It makes no sense economically to be further increasing the price of fuel on top of that through our carbon reduction scheme. Absolutely no sense at all. The price impact that's out there has certainly already had a dramatic impact on the use of fuel. What we are saying is that fuel should be included in the scheme for the long-term, but given the price hikes that have increased dramatically in recent times, it makes no sense to add to that at the moment. What we've put in place is a scheme to transition through that.
STANLEY:
So, if petrol had been still around $1.20 a litre, $1.10 a litre, you wouldn't have reduced the excise?
TREASURER:
No what we're saying is that given the dramatic increase in the price of fuel in recent times, it makes sense to transition into this scheme and to provide some much needed relief for motorists who've already copped dramatic increases in the price of fuel. It makes no sense at all to add to that through this scheme in the short-term at all.
STANLEY:
So, in the medium and longer term, that'll continue, that the excise will offset always whatever carbon tax applies?
TREASURER:
What we've said John is that for the first three years we will engage in a cent for cent reduction for the impact of the carbon reduction scheme, and that we will review that periodically through that period and review it at the end of the three year period.
STANLEY:
So, essentially you're saying that the increase in petrol prices has done the job for you in getting people to perhaps think twice about using their car and their petrol?
TREASURER:
Well certainly we think there has been a dramatic impact in terms of car usage. That's important. It must be taken into consideration. For the long-term it's important to have transport fuels in the system so we've included them, but we are shielding motorists through that three year period. At the end of that period we'll review the arrangements we've put in place and come to a further decision then.
STANLEY:
Okay. And you're confident you'll have measures in place to compensate low and middle income earners for the effect of this?
TREASURER:
Well certainly every cent raised through the issue of permits and the sale of permits will be used to provide additional assistance to affected households on the one hand, and also to business on the other. Every cent.
STANLEY:
Okay, alright. So just one other question I've got to ask you on interest rates. When we last spoke you'd issued a warning to the banks not to raise rates. They've all lifted their rates since then. They're ignoring your warnings. There have been some fairly fanciful suggestions that the banks were scared of Peter Costello but they're not scared of you. Well they don't seem to be too worried about what you think, do they?
TREASURER:
Well they were putting up rates when Peter Costello was treasurer outside the Reserve Bank cycle. What we are in at the moment is a very dramatic episode in world financial markets, which is pushing up borrowing costs and they are being passed through by the banks. What I've said to the banks is be very mindful of what you're doing, because people out there have been hit by eight official interest rate rises over three years and a number of other unofficial ones passed on by the banks. People are really stretched, and the banks ought to be mindful of the impact of those decisions upon their customers. And that's one of the reasons why I've talked about putting in place our bank switching package, which should be in place fully by November this year.
STANLEY:
And it will be in place? There were suggestions that there were some hiccups with that.
TREASURER:
Well I read that story. I don't regard that story as being accurate. It will be in place by November this year so people can vote with their feet.
STANLEY:
Are you disappointed that at least one of the major banks didn't think alright, we'll hold off, we won't raise our rates, and we'll try and increase our market share by pitching our rate lower and going out into the market and trying to get more of the other banks' customers.
TREASURER:
Well John, I wasn't wildly ecstatic by what they did, but they take these decisions commercially and their customers will judge them in time.
STANLEY:
It doesn't look like great competition does it? You'd think one of them might think: well I'll pitch my price lower and it might give me an advantage, but none of them did it?
TREASURER:
Well that's true, but we are in very difficult times and the one advantage we do have in this country is our banking system has not been infected with the type of sub-prime problems that are existing in the United States and other parts of the world and for that we can be thankful. But on the other hand, I think some customers will be disappointed that their banks have chosen to move again in this way.
STANLEY:
That is an understatement Mr Swan. Thank you.
TREASURER:
Good to talk to you.