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Opposition questions PM's integrity -

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ELEANOR HALL: There is renewed pressure on the Federal Government today over just how it put
together its package of bank deposit and borrowing guarantees.

The Opposition is using a report in today's "Australian" newspaper to question the Prime Minister's
integrity, saying that Kevin Rudd is not levelling with the Australian people about the advice he
received from the Reserve Bank governor about the Government's unlimited guarantee on bank
deposits.

But the Treasurer has rejected the claim that the Reserve didn't support the blanket deposit
guarantee and the Finance Minister says the Government is not considering putting a cap on the
guarantee.

In Canberra, chief political correspondent Lyndal Curtis reports.

LYNDAL CURTIS: "Complete hearsay and unsubstantiated" is how the Treasurer's office describes the
story in today's "Australian" which reports the Reserve Bank wants the Government to cap its
deposit guarantee to stop a flight of money rushing out of areas not covered by the guarantee to
areas that are.

The Treasurer has, in a statement, rejected the more politically troubling claim the Bank strongly
voiced its concerns about the scope of the guarantee prior to the scheme being announced.

The Treasurer says the Government announced the blanket guarantee on deposits with the support of
the Treasury and regulators including the Reserve Bank governor.

More politically troubling because before the Treasurer's statement, Opposition MP's including
leader Malcolm Turnbull, were questioning the Prime Minister's integrity.

CHRISTOPHER PYNE: This is a very serious matter because Mr Rudd of course tries to play on his
integrity and his honesty with the Australian people with supposedly coming clean with all the
information.

But if the stories about the Reserve Bank are true this morning, he's been far from entirely honest
with the Australian people.

ERIC ABETZ: Kevin Rudd asked the Australian people and indeed the Opposition to take him on trust.
We did, he seems to have breached that trust in a very big way.

MALCOLM TURNBULL: These reports in the "Australian" do not just go to questions about the stability
of the financial system, or indeed to the competence of the government; they go to the very core of
the integrity of this Prime Minister.

LYNDAL CURTIS: Mr Turnbull says it's time the Prime Minister explained himself to the parliament.

MALCOLM TURNBULL: The time has come for the Prime Minister to start answering questions, to start
being accountable and start recognising that parliament has a role and it is to hold him to
account.

LYNDAL CURTIS: Malcolm Turnbull did warn on "Insiders" last Sunday the Government was facing
consequences from its decision to go beyond the $100,000 deposit guarantee the Opposition had been
calling for.

MALCOLM TURNBULLL: The short-term money market has been severely curtailed, the commercial paper
market has been curtailed.

Now that is a consequence of what the Government has done. When governments intervene in free
markets, they need to make no more intervention than is absolutely necessary because you can have
unintended consequences which are adverse.

LYNDAL CURTIS: The Investment and Financial Services Association believes people aren't yet taking
money out of non-guaranteed institutions and putting it into ones covered by the guarantee. But the
Association's Richard Gilbert told AM it's an issue of concern.

RICHARD GILBERT: Overwhelmingly there's good steady responsible behaviour but the financial
planning community is in contact with us saying that this is an emerging issue.

LYNDAL CURTIS: He's planning meetings in Canberra to work with Government to get a package for
groups which fall just under banks. Money-market funds such as cash management trusts, mortgage
trusts, and the cash elements in superannuation and bond funds.

He says there has been some pressure on funds as a consequence of the Government's actions.

RICHARD GILBERT: I think the Government in its own mind didn't envisage this happening and it
probably had good reason for that. But subsequent experience in America has shown that money-market
funds will come under attack once you guarantee bank accounts.

LYNDAL CURTIS: The Finance Minister Lindsay Tanner who, speaking to Sky News, says just because
businesses with a self interest complain doesn't make those complaints true, is leaving some room
open for change.

LINDSAY TANNER: We clearly will continue to monitor the detailed application of the measure, the
implications that flow from it because it's not a static world out there. The economy changes, the
international circumstances change, things that international regulators do change, so it's
necessary for us to keep a very close eye on developments.

LYNDAL CURTIS: But he says the Government is not to his knowledge considering putting a cap on the
deposit guarantee or extending it to foreign banks not incorporated in Australia.

The treasurer is also leaving room open for change saying the Government has said all along it will
consider any necessary refinements to the guarantee, following consultation with the industry and
regulators.

Mr Swan says he'll have more to say on these matters in time.

ELEANOR HALL: Lyndal Curtis in Canberra.