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Bipartisan support for deposit guarantee with -

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Bipartisan support for deposit guarantee withdrawn

The World Today - Thursday, 23 October , 2008 12:10:00

Reporter: Lyndal Curtis

ELEANOR HALL: Bipartisanship over the Federal Government's unlimited guarantee for bank deposits
seems to have vanished with the Opposition leader, Malcolm Turnbull launching an assault on the
scheme.

Mr Turnbull says the unlimited guarantee has caused a crisis in money markets and inflicted
financial damage on the Australian community.

But the banking regulator has now come out to defend the Federal Government.

The head of the Australian Prudential Regulatory Authority says the Government acted at a time of
major global panic and he raised the question of what would have happened if it had failed to act.

In Canberra, chief political correspondent, Lyndal Curtis, reports.

LYNDAL CURTIS: The Treasury secretary, early on in his marathon grilling before a Senate Committee,
expressed his view that it would be better if the media didn't report on the sorts of policy
discussions going on in a time of economic stress.

It's probably not too hard to imagine what he'd be thinking today as the "Australian" newspaper
published in full, advice it says was to him from the Reserve Bank governor Glenn Stevens on the
options for imposing a fee on those with large bank deposits in return for getting the benefits of
the Government's unlimited guarantee.

And added to that, the last vestiges of the Opposition Leader's bipartisan support for the deposit
guarantee fading rapidly away on AM this morning.

MALCOLM TURNBULL: We have got a crisis in our money markets now which has been going on for two
weeks because the Government introduced an unlimited guarantee which has caused money, not just
small depositors but large deposits, to stream out of non-guaranteed institutions and funds into
the guaranteed ones.

This Government is out of control. They are making financial policy on the run.

LYNDAL CURTIS: After initially backing the Government's unlimited guarantee, Malcolm Turnbull is
now happy to point out the flaws.

MALCOLM TURNBULL: But if you make it unlimited you see the extraordinary distortions and
dislocations that the Reserve Bank governor is anxiously agitating the Treasury head about as we
see in the "Australian" today.

LYNDAL CURTIS: As Liberal MPs arrived at parliament for work, they were of one mind

JAMIE BRIGGS: They are now making policy on the run by introducing a new tax so this is a mess. A
complete mess.

MICHAEL KEENAN: It appears that the Government is just making it up as they go along on this matter
and they are making policy on the run.

DON RANDALL: It seems to be policy on the run doesn't it?

LYNDAL CURTIS: Labor MPs were doing what they could to counter the tide of accusation coming from
the other side and turn it back onto the Opposition and perhaps hoping to make Ken Henry breathe a
little easier.

SHARON BIRD: The Leader of the Opposition came out when we made the announcement and said he was
wholeheartedly supporting it. Now what that requires is to build confidence in the community and
part of doing that is actually engaging with support.

If he wants to talk about the details in a constructive manner to strengthen it, that is a
different matter to what he has been doing which is madly searching around for a criticism.

JULIE OWENS: Malcolm Turnbull doesn't have a position or he has got many positions. I think he
should be very clear about what his position in, is.

LYNDAL CURTIS: Back in the Senate Committees, the chief of the Australian Prudential Regulation
Authority was trying to inject some context back into the debate over why the Government did what
it did on deposits.

John Laker told the committee the previous support for an unlimited guarantee of only $20,000
changed as the panic on financial markets increased and as other governments acted.

JOHN LAKER: I think that there was a very palpable sense going into that meeting in, at the G7 and
the G20 at the IMF annual meetings that global financial systems were starting to stare into the
abyss at that point.

The question would have been, what would life have been like on Monday if the Australian Government
was alone in not taking part in concerted action?

LYNDAL CURTIS: And there'll be more global action, or at least another meeting called by the US
President George Bush, as announced this morning by the White House press secretary Dana Perino.

DANA PERINO: The President today is going to invite the leaders of the group of 20 countries to a
summit in Washington DC. That will be November 15th and it will be to discuss the financial markets
and the global economy.

The meeting will be preceded by a dinner the night before on November 14th at the White House
hosted by President and Mrs Bush.

LYNDAL CURTIS: But, with politics getting back to normal after the brief side trip into
bipartisanship, the Nationals Senate Leader, Barnaby Joyce was getting stuck into the Prime
Minister who'll be going to that November meeting.

BARNABY JOYCE: This guy is, you know, the eternal global wanderer. The problem is here in Australia
and we have these marvellous inventions these days called telephones. We have video conferencing.
We have a whole range of things that can keep him in our nation to do the homework here.

LYNDAL CURTIS: The Government and the regulators are working on the details of what fee people with
large deposits will pay for the deposit guarantee and at what level that should cut in.

The Treasurer has already said that the level will be above $1-million.

The Government may not have to legislate the change, and might be able to do it by regulation. That
would not have to go through the parliament although regulations can be disallowed in the Senate.

The Opposition, having put bipartisanship back in the box it came in, is leaving its option open on
whether it will back whatever the Government comes out with.

ELEANOR HALL: And that is chief political correspondent Lyndal Curtis in Canberra.