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Government under renewed fire over guarantees -

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Government under renewed fire over guarantees

The World Today - Friday, 24 October , 2008 12:10:00

Reporter: Lyndal Curtis

ELEANOR HALL: With seven more cash management funds announcing this morning that they are freezing
the assets of their investors the Federal Opposition has ramped up the pressure on the Government
to abandon its unlimited guarantee on bank deposits and the proposed compulsory fee for large

The Prime Minister met the CEOs of Australia's four major banks in Canberra last night and the
Government says it is reviewing its guarantee policy.

It's also advising people who are facing hardship because of the financial crisis to speak to
Centrelink about getting help.

In Canberra, chief political correspondent Lyndal Curtis reports.

LYNDAL CURTIS: The details of the fee the Government will charge for large deposits going to
institutions covered by the guarantee haven't yet been revealed.

The Prime Minister and Treasurer met last night with the chief executives of Australia's big four
banks. They met for around an hour and the talks have been described as constructive.

With the decision by some funds to freeze some payments because of the move of money out of
unguaranteed institutions into the ones that are, the pressure for the Government to announce what
fee it will impose on the bank deposits guarantee and how it will do that is growing.

A spokeswoman for the Prime Minister says the Government is aware of the unintended consequences of
its guarantee decision. The Treasurer Wayne Swan is advising people who are having difficulty and
experiencing large losses to contact Centrelink.

WAYNE SWAN: In so far as there will be a significant number of people who may be affected by the
fact that they can't necessarily access their capital in a timely way, those people of course
should investigate whatever opportunities they have through Centrelink to see if they can access
temporary support under conditions in Centrelink.

LYNDAL CURTIS: The Human Services Minister Joe Ludwig says Centrelink is looking at what it can do.

JOE LUDWIG: The Government and ASIC are monitoring the situation closely. They're conferring with
our regulators about the circumstances.

We've also instructed Centrelink to undertake a system wide re-evaluation of all shares and other
financial assets held by pensioners and that's to ensure that the new value of their holdings is
used to determine the rate of pension they receive.

We can also, if they've had a large loss of income, then we can encourage them to go through, don't
self assess, and apply for the pension, which Centrelink can process within 28 days.

There's also other work that we can talk to them about. We've got trained financial advisors that
can also assist.

LYNDAL CURTIS: But the Opposition claims that some people have been turned away because they have
savings. Malcolm Turnbull has criticised the Treasurer for his Centrelink advice.

MALCOLM TURNBULL: It just shows how out of touch Mr Swan is. When he is confronted with this mess
that he has created, there's no doubt about that this is the consequence of his poor economic
management, the best he can say to people whose life savings have been frozen, is oh, just go down
to Centrelink. I mean it is a contemptuous comment and it just shows how out of touch he is.

LYNDAL CURTIS: He's also called on the Government to abandon the unlimited guarantee in favour of
one with a cap.

MALCOLM TURNBULL: Mr Swan and Mr Rudd have created a terrible mess here. There is no question about
that. And I'm sure if they had their time over again they wish they hadn't made the grand gestures
they did on the 12th of October.

But in terms of where we go, how we get out of the mess they've created and move forward, it should
be at a level recommended by the Reserve Bank. What that will do is limit the amount of money that
will have an incentive to move out of non-guaranteed funds and institutions into guaranteed ones.

LYNDAL CURTIS: He says the Government should also abandon the plans to introduce a fee although
says people could pay one if they wanted a guarantee for deposits over the cap.

While the Government hasn't indicated if there are any plans to abandon the unlimited guarantee, it
has questioned what Mr Turnbull is proposing, saying it's already doing much of what he calls for
by setting a level at which deposits are subject to a fee.

ELEANOR HALL: Lyndal Curtis reporting.