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Monday, 25 October 2010
Page: 586

Senator FORSHAW (2:05 PM) —My question is to the Minister for Finance and Deregulation, Senator Wong. Can the minister inform the Senate about the importance of competition in the banking sector and why competition in the banking sector is important to Australian households?

Senator WONG (Minister for Finance and Deregulation) —I thank Senator Forshaw for his question and for his interest in this issue, which is of course fundamental to ensuring that we maximise the benefits for Australian families when it comes to the home loan interest rates on offer. We know that the global financial crisis had a very big impact on competition in the banking sector, something which might have passed by those opposite. Those on this side of the chamber understand the impact on competition in the banking sector that the GFC hit. It hit small lenders particularly hard, and this government acted to ensure that we took measures to boost competition in the mortgage market. These include helping small lenders fund their home loans, new loans to crack down on unfair mortgage exit fees and our bank guarantees. Those opposite might recall the $16 billion of investment in the AAA rated residential mortgage backed securities, which have been critical in supporting this important funding market.

The reason the government did this is that we understand that competitive pressures give banks the incentive to offer the best products to Australians at the best possible prices, and this includes encouraging banks to offer the most competitive mortgage rates. We understand, on this side of the chamber, that working families are facing cost-of-living pressures. The government’s reforms are aimed at boosting competition in the banking sector and helping Australian families, because competition means more choice for Australian consumers. This sensible approach from the government stands in stark contrast to that which is advocated by the so-called ‘economics team’ of the opposition. (Time expired)

Senator FORSHAW —Mr President, I have a supplementary question, and a very important one. Can the minister outline to the Senate the importance of independent determination of interest rates? Is the minister aware of any alternative approaches which would pose a threat to competition in the banking sector and therefore to Australian households?

Senator WONG (Minister for Finance and Deregulation) —I think everybody should know that the independence of the Reserve Bank is critical to ensuring stable economic management, and everyone should know that if interest rates were to be re-regulated that would, amongst other things, restrict the flow of credit to Australian households and Australian businesses. The Secretary of Treasury commented in estimates that re-regulating interest rates would hit lower income earners harder because, obviously, banks would ration credit. This appears to be a point lost on the shadow Treasurer.

The shadow Treasurer seems to be heading headlong down a path towards re-regulation of interest rates, a path that he cannot even convince his own colleagues to support. It was quite extraordinary last week watching the member for Canning describing the shadow Treasurer’s proposal as a ‘lunatic fringe’ idea from the man who seeks to be Treasurer. I see that Mr Turnbull has also tried to distance himself from this rather extraordinary proposition— (Time expired)

Honourable senators interjecting—

The PRESIDENT —When there is silence on both sides, we will proceed. Senator Forshaw is waiting to ask the next question.

Senator FORSHAW —Mr President, I ask a further supplementary question. Can the minister further inform the Senate of any significant risks to the Australian economy through additional regulation?

Senator WONG (Minister for Finance and Deregulation) —We know that the prospect of re-regulating interest rates is not the only economic thought-bubble that the opposition has come up with this month. I think it was quite extraordinary to observe the shadow finance minister recently appear to advocate some form of government intervention in relation to the dollar. I think everybody ought to know that Australia’s floating currency has, for more than a quarter of a century, served our nation well. Yet we see Mr Robb—supposedly one of the dries—coming out and saying that we should be looking at ways to impact on the dollar. It is interesting. I wonder what the former finance minister, Senator Minchin, would have thought about Mr Robb’s ideas. What was even more interesting was reading what the opposition colleagues thought about this. One is quoted in the Australian as saying:

“This is certainly not Coalition policy … this was just Joe being Joe.”

and another as saying:

“Joe and Andrew should wear tie-dye shirts and flares because they’re stuck in the ’70s,” …

(Time expired)