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Turnbull defends Hockey on banks -

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Malcolm Turnbull defends the Coalition's commitment to free market principles after Joe Hockey's
comments about bank regulation.


LEIGH SALES, PRESENTER: To discuss the day's issues in politics, I was joined in Sydney earlier by
the Shadow Communications Minister Malcolm Turnbull.

Malcolm Turnbull, good to have you with me.


LEIGH SALES: Let's begin with the issue that dominated politics today.

Wayne Swan says that Joe Hockey's comments about government intervention to influence interest
rates were incomprehensible and completely reckless. Were they?

MALCOLM TURNBULL: (Laughs). No, of course not. No, Joe's expressing the concern that many people
have about high interest rates and I think all Australians do in fact, and it's fair enough to be
having an open discussion about that. We should be having a debate about it.

LEIGH SALES: Would you encourage Wayne Swan to use various levers to persuade banks to keep
interest rates on hold?

MALCOLM TURNBULL: Well, the Federal Government hasn't intervened in interest rate management for a
very long time, if ever, you know, sort of back in the days - ancient history.

So I wouldn't be making any suggestions of that kind, but I don't think Joe was either. So I think
he was expressing a real concern, an empathy about the pressure that people are enduring because of
rising interest rates and the very large margins that banks are charging, and Joe's talked about

LEIGH SALES: I think he was saying, though, that he thought that levers should be used to influence
interest rates.

MALCOLM TURNBULL: Well, look, I didn't see - you know, I was asked about this on Fran Kelly's
program this morning and I haven't seen everything he said, but I read it. My understanding was
that he was expressing real concern and wanting to initiate a discussion about this, and that's
fair enough.

LEIGH SALES: Do you think that a lot of Australians would like the idea of a government taking
punitive action against banks if they're raising interest rates ahead of the Reserve?

MALCOLM TURNBULL: Well, look, I think most Australians recognise that we're best served by
competition in financial services and a free market.

You know, we've got a floating currency - that's been an enormous benefit for Australia. It's a
great shock absorber. Our financial system has come through the global financial crisis very well,
and it came through well because it was put in good shape with very significant reforms under the
previous Howard Government.

Now these were the reforms that Peter Costello brought in in 1997. And so we didn't have any of the
problems that the American or European banks did. So we've got a well-regulated banking sector. It
is competitive. There is concern about interest rates, and that's fair enough, and we should be
having a discussion about it.

LEIGH SALES: So, the re-regulation of banks then would be an idea that belongs on the lunatic

MALCOLM TURNBULL: Look, you're not going to put - you can try, as elegantly and eloquently as you
like, but you're not gonna put words in my mouth.

LEIGH SALES: The Tasmanian Liberal senator David Bushby said in a Senate estimates committee
yesterday that it could be quite useful for the Government to be able to use Section 50 of the
Banking Act to influence bank behaviour.

Between that and Joe Hockey's remarks, I'd be forgiven, maybe, wouldn't I, for thinking that the
Coalition is considering re-regulation of banks?

MALCOLM TURNBULL: Well, we certainly aren't saying that and I think the Coalition is a free market
coalition. We believe in the free market. We believe in less regulation rather than more. And I
think we'll be sticking with the free market and competition.

LEIGH SALES: If you're a free market coalition and you believe in less regulation rather than more,
then why is Joe Hockey talking about a social compact between banks, the community and government.
If Labor suggested that they'd be accused of being socialists?

MALCOLM TURNBULL: No, I think what he's talking - I think what Joe's - and really you should be
talking to Joe about this tonight.

LEIGH SALES: I'm just curious of your views as someone who ...

MALCOLM TURNBULL: No, but, look, I think there is - I think there - again, I don't want to be
interpreting Joe Hockey, but the banks do have a special relationship with their customers. They're
long-term relationships, there's an enormous amount of trust and confidence reposed by banks in
their customers, the people that borrow money from them and the people that deposit money with them
and of course that trust is reciprocated.

So, in those circumstances, I think it's important that banks be seen to really be looking after
their customers and really be customer-focused. And of course, they all work very hard to do that
and at least to create the impression that they are.

But a lot of people are feeling the pinch because of higher interest rates, and in particular
they're concerned about the spread, the margin between the bank's borrowing cost and the price at
which they're lending the money.

LEIGH SALES: Let's turn to the NBN and move onto something different.

MALCOLM TURNBULL: That's a relief.

LEIGH SALES: The Coalition opposed the structural separation of Telstra during the election
campaign. Now you think that there's a strong commercial case for it. What has changed?

MALCOLM TURNBULL: Well I think the Coalition has always been opposed to forcing Telstra to do
something with a gun at their head. As you know, Senator Conroy's approach is to say, "Unless
Telstra does what I want, unless it does a deal and effectively sells its customer access network
to the new $43 billion government-owned telecom's monopoly, the NBN, unless Telstra does that, I
will use my power to stop Telstra bidding on wireless spectrum."

Now we think that gun-at-a-head approach is absolutely illegitimate.

As to the question of whether Telstra's network should be separated from its retail business, in my
view, there is a strong case for that to happen in terms of competition, in creating a more level
playing field, and that's been made by thousands of people over many years.

I think there's also a commercial case to be made for it on behalf of Telstra shareholders, though
they're not my responsibility.

My big concern with the NBN is this is the largest single infrastructure investment in our nation's
history. The Government refuses to do a cost/benefit analysis, has not published any business case,
refuses to allow the NBN's works to be subject to the public works committee of Parliament. We have
never had a government invest so much money with so little scrutiny, so little accountability. And
that's why I'm moving a private member's bill to have the NBN referred to the Productivity
Commission, which can then give an impartial and informed and speedy analysis of it and look at
alternatives, and really answer the question, you know: what is the problem we're trying to solve?
Is this the most cost-effective way of solving it? What does it mean for productivity, for the
economy and so forth?

LEIGH SALES: Well, Senator Conroy says there's been ACCC advice on this, that there's been an
implementation report that did a complete financial analysis. Why is that not enough?

MALCOLM TURNBULL: Well, the implementation study was not a cost-benefit analysis, it didn't
consider alternatives. It was simply a study to examine how - get McKinsey's advice as to how the
Government should implement the policy it had decided upon. So it was a very, very limited,
deliberately limited.

Now, what Senator Conroy should have done was given this whole issue over to the Productivity
Commission, or another expert body, but I don't think there's anybody on the same level as the
Productivity Commission, and then we would have got all of these answers to the questions that
people are asking.

LEIGH SALES: But the chance of you being able to get that up is pretty slim, would you admit, given
that the independents seem pretty keen on the broadband network? They don't want anything to delay

MALCOLM TURNBULL: But this won't delay it. This does not have any impact on the construction.
They're building the test sites now.

LEIGH SALES: So then what's the point of doing the analysis if the construction's already going
ahead, if it's already happening?

MALCOLM TURNBULL: Well it's an eight-year project, and if the reference to the Productivity
Commission was made in the next few weeks, the Productivity Commission would report by May. By May
they would have built out some more test sites, but they would be a long, long way from building
the network, so there would still be time to take account of the advice of the Productivity
Commission and make some changes.

I mean, let me give you just one example. Senator Conroy says the objective is to give everybody
100 megabits-per-second broadband to their home.

Now we can - there's a big question as to whether that really is something the Government should be

But, here's a fact: nearly 30 per cent of Australian households are passed by Telstra and Optus'
HFC cable. That cable can run at 100 megs per second, and indeed Telstra's turned their's up in
Melbourne to do just that.

Now, why are we having that infrastructure literally thrown out? Under the contract with Telstra
and under one he proposes to do with Optus, those companies will be precluded from using that HFC
cable to compete with the NBN. I mean, this is the most anti-competitive measure.

He's creating a massive government monopoly, and so anti-competitive is it that the legislation
exempts it from the provisions of the Trade Practices Act.

LEIGH SALES: Let me just ask you one more question about the structural separation legislation
before we move on.

The Telstra CEO, David Thodey, wants some amendments put forward to that including appropriate
checks on regulatory decision-making. Are those the sort of amendments the Coalition would consider
putting on?

MALCOLM TURNBULL: Well we're having a look at all of those issues. There are some issues about the
procedures and procedural fairness and I know Telstra's raised some of those. We're having a close
look at it. It's a pretty detailed piece of legislation and we'll be discussing it in Shadow
Cabinet and the partyroom next week before we obviously move any amendments in the Parliament.

LEIGH SALES: You're the former water minister, so I wanted to ask you a few questions about the
Murray-Darling Basin.


LEIGH SALES: Would you agree that what Labor is contemplating is not that much different to what
the Coalition was proposing during the election, which was, to quote Tony Abbott,
carefully-targeted water buybacks plus much more efficient use of water?

MALCOLM TURNBULL: Well, that's really where the Labor Party has failed. The big idea that we had in
2007 in the national plan for water security, which was what started this whole program of water
reform, was that we knew we had to recover some water, a large amount of water, from agriculture
and other human uses back for the environment. I mean, the rivers were - the river system was in
very real danger.

LEIGH SALES: So that's a given.

MALCOLM TURNBULL: That's been a given for years. I mean, there has been a massive increase in
diversions of water for irrigation and the Murray-Darling Basin since, say, the late '50s.

LEIGH SALES: So what's the difference then, because they accept that?

MALCOLM TURNBULL: Well, the point is, firstly, how much water do you have to recover? And there's a
big scientific and environmental argument about that. That's a subjective issue. You've gotta come
to a judgment there.

But then how do you get it back? Now, we were careful in creating the act to provide for the
consideration of all the socio-economic circumstances, because what we want to do ideally is to
have more food and fibre, or at least no less food and fibre, made or grown with less water.

In other words, we want to make every drop count. And that's why the centrepiece of our plan was
massive investment, over $6 billion of investment in water-saving infrastructure, lining channels,
replacing open channels with pipes, and it is that part of the water-saving infrastructure
investment that Labor has completely failed to carry out.

LEIGH SALES: But they're proposing $5.8 billion worth of water infrastructure.

MALCOLM TURNBULL: Well, they've been in government for three years; they haven't spent - they've
spent hardly any of it. I mean, it is - you know, they can say they're proposing it; where is it?

LEIGH SALES: Are the claims of job losses and the possible deaths of rural towns being exaggerated?

MALCOLM TURNBULL: Well, there certainly would be - you know, if you have less water in a district,
there'll be less - all other things being equal, there'll be less agricultural activity and unless
there are other industries taking up what has been lost, then there will be job losses.

But you see, again, this is the key point: we have used water very wastefully in Australia. Our
track record on water efficiency in this country has been very poor until recently.

We have the technology to improve it massively, you know, with piping channels, with using subsoil
dripper tape, tapes that go under the ground, that literally drip water into the roots of the
plants, they use it very effectively with cotton, for example, as opposed to flood irrigation.
Massive savings.

You can get the same output with about 30 per cent of the water. Now, that's the type of thing that
we were setting out to support and as water minister I was promoting. You know, this was the only
silver lining in that terrible drought, because as Benjamin Franklin said, "We won't know the value
of water until the well is dry," and people woke up to the need for reform.

LEIGH SALES: Well let me pick up on the drought because we've seen the end of the nine-year
drought. Does that buy a bit of time? Could it mean that water cuts can be less drastic or
stretched out over a longer period of time?

MALCOLM TURNBULL: There's gotta be subtlety in water cuts. The critical thing to understand about
water in Australia is it's very, very volatile. We don't get the same amount of rain every year -
sadly, as we all know. We are the land of droughts and flooding rains.

Now, when the environment needs more water in these flat rivers systems like we have in southern
Australia is when there is rain. So, during the dry times, the environment drought - the
environment is not used to getting any water and the river's not flooding.

But the mistake we made was in over-regulating the river, taking too much for irrigation. When you
did get a small flood, you know, some good rain, none of it would go out into the floodplains, into
the red gum forests, into the wetlands, supporting all of the floodplain ecosystem.

So reclaiming water for the environment has to be done very intelligently and strategically and so
you can recover more when times are wet, when of course there's a lot of water, so it's of less
value to farmers, and recover less for the environment when times are dry and when it's actually
really vital to keep permanent plantings alive, you know, trees and vines and so forth.

LEIGH SALES: Malcolm Turnbull, thank you.