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Early Agenda -

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ASHLEIGH GILLON: From Oprah to federal politics, good morning welcome to AM Agenda I'm Ashleigh
Gillon. The government is under serious pressure to tinker with the banking reforms it announced
just two days ago with support from the Reserve Bank boss Glenn Stevens lukewarm at best and
opposition from the banks and the Coalition growing. The Senate enquiry into banking is underway
again this morning in Sydney with some of the smaller lenders about to give evidence. Here on Sky
News we'll be showing the highlights live and if you're interested you can watch the full
proceedings on Sky News Business Channel. For more analysis of the reforms and to look at the other
political issues around today I'm joined this morning by the Parliamentary Secretary for Climate
Change and Energy Efficiency Mark Dreyfus, good morning to you.

MARK DREYFUS: Good morning, Ashleigh.

ASHLEIGH GILLON: And here with me in the studio the Liberal MP Paul Fletcher, good morning.

PAUL FLETCHER: Good morning, Ashleigh.

ASHLEIGH GILLON: Mark, let's look at some of the things Glenn Stevens had to say yesterday. He
warned there could be unintended consequences from these banking reforms. One perhaps was that the
banks' shares went up to a combined value of some extra $3.4 billion yesterday, I'll check on that,
is that right? I'm not quite sure actually. It doesn't seem right now that I'm saying it. But it
did go up substantially yesterday on the back of these reforms. All this talk of cracking down on
the big banks, Mark Dreyfus, it doesn't seem to have been interpreted that way by the markets?

MARK DREYFUS: Well, the first thing is that I'm not going to be commenting on share prices,
Ashleigh. What we've got is here a comprehensive package of reforms. You need to look at all the
elements together and the purpose of the reforms is to make sure that we've got increased
competition for families across Australia and businesses across Australia in the banking sector to
make sure that they are getting their loans on the most competitive basis possible and there's a
whole lot of elements to this, it has to be taken as a whole, looked at as a whole. We've got
looking at portability down the track, banning exit fees in the future, introducing covered bonds
so as to increase the accessibility to of funding. All of these things taken together, and perhaps
I should add, empowering the ACCC, the Australian Competition and Consumer Commission, to make sure
that there can't be unconscionable raising of fees. Empowering them to make sure there can't be
anti-competitive price fixing. All of these things taken as a whole we think are a worthwhile
package that are going to improve financial conditions for families across Australia.

ASHLEIGH GILLON: Well, on abolishing those exit fees Glenn Stevens yesterday made this point, have
a listen.

GLENN STEVENS: The difficulty really is, of course, there are actually costs to the lender in both
establishing and terminating the loan but they're going to feel they need to cover so it's a
difficult area.

ASHLEIGH GILLON: So, Mark how do you expect the banks will cover those costs that Glenn Stevens was
just talking about for people terminating loans if they can't charge exit fees? They're just going
to add on extra fees and charges elsewhere aren't they?

MARK DREYFUS: That is a matter for the banks. What we're about is increasing the possibility of
people being able to change banks, to select the interest rate that is most favourable to them and
one of the measures that's going to be important in doing that is getting rid of exit fees in the

ASHLEIGH GILLON: Joe Hockey yesterday did say that he believed there would be some serious
consequences from abolishing those exit fees but even though he was slamming that plan he wouldn't
commit to the Coalition actually blocking the reforms, have a listen.

JOE HOCKEY: We want to see the details of this but if they're been working on this for 12 months,
Kieran, why haven't they got the legislation out now, right now, today? Why didn't they release it
yesterday? You know, this is why it's half-baked.

ASHLEIGH GILLON: Paul Fletcher, if these are so half-baked why can't Joe Hockey just say no the
Coalition won't be supporting it and we don't want to see the abolishment of exit fees?

PAUL FLETCHER: Well, Ashleigh you're right. The prices of the shares of the big banks did go up
yesterday and that really reflects the fact that this is a package which is essentially about
providing political relief for the government rather than about rate relief for consumers. Look,
the fact is Joe Hockey and the Coalition have taken the lead on proposing constructive reforms in
this area and what we've seen from Wayne Swan and the Labor Party is a desperate attempt to play
catch-up and we've now got a real mix of measures, many of which have not been thought through very
well at all. For example, this proposition that there should be a blanket ban on exit fees is
increasingly being criticised by economists who make the point that if fees are not charged in this
area the banks will simply seek to charge them in other areas and in policy terms it is not a good
idea to be having detailed government restriction on particular areas where fees can be charged.
The important thing is to have competition which is as vigorous as possible in the banking sector.
The problem that we have is that Wayne Swan has presided over a dramatic reduction in competition.
The market share of the big four banks has gone up from 63 per cent a couple of years ago to a bit
over 80 per cent now and he has presided over a market structure which has reduced competition in
banking and that in turn is bad news for Australian consumers.

ASHLEIGH GILLON: We have seen a few experts though recently over the last few days saying there is
already enough competition and that competition has increased in recent years and recent decades. I
mean, Glenn Stevens was talking about yesterday, but back to my question about legislation. Is the
Coalition going to try and block this in the Parliament?

PAUL FLETCHER: Well, as you heard Joe say there, we will study the details but we are struck by the
fact that this is a desperately cobbled together collection of measures designed to meet a
political imperative because Wayne Swan and the Labor Party have been left embarrassed by the fact
that it was Joe Hockey, the Shadow Treasurer, who took the lead on proposing policy reform in this
area. We introduced a private members bill into the House several weeks ago to deal with price
signalling and while we certainly welcome the fact that Labor is catching up with us on this issue
the fundamental point is that there's a number of elements of what's been proposed that have not
been carefully though through. So, we are, of course, are going to carefully study the detail
before we commit in terms of how we're going to respond.

ASHLEIGH GILLON: Mark Dreyfus, the government could be in strife here. The Independents and the
Greens, they're all saying that these reforms just don't go far enough?

MARK DREYFUS: Well, you've got on the one hand the Liberal Party criticising the package and the
kind of wrecking behaviour that we're used to from them, on the other we've got, and this is the
consequence of the finally balanced Parliament, we've got the Independents and the Greens wanting
different things. We say that this is an appropriate package, it's a measured package and taken
together as a whole it's going to improve competition in the banking market place. That's what
families across Australia are looking for, Ashleigh.

ASHLEIGH GILLON: Mark Dreyfus, Paul Fletcher, do stay with us. We do know that coming up we'll have
more on the banking reforms today. We'll see in the Senate inquiry APRA, Choice, the bosses of some
of the smaller lenders like Aussie Home Loans and ING will be giving evidence and their reaction to
these reforms before that Senate inquiry. We'll be back.

Welcome back to AM Agenda, Paul Fletcher and Mark Dreyfus are with me this morning. Mark Dreyfus I
want to get your reaction to these reports today that the government's about to sign this new
memorandum of understanding with Afghanistan which would apparently open the way for hundreds of
asylum seekers to be sent home. What exactly does that mean for asylum seekers? Does it mean, for
example, that they'll be ensured that they'll be treated well when they get back to Afghanistan?
What does that memorandum, what's it all about?

MARK DREYFUS: The Minister has made it clear that he's been working for some time with the
government of Afghanistan on a memorandum of understanding that deals with the circumstances in
which people who've been rejected, whose asylum claims have been rejected can be returned to
Afghanistan and it's an important part, obviously, in any system for dealing with unauthorised
arrivals. We'd prefer that people went on a voluntary basis after their claims are rejected, if
they don't it's important to have a memorandum of understanding such as the one the Minister's
working on to make sure that it's done in an orderly way. As I say it's an important part of the

ASHLEIGH GILLON: And it is a win for the government, isn't it, Paul Fletcher, to get this actually
signed, as it looks like it will be any day now, because at the moment hundreds of asylum seekers
from Afghanistan are in a bit of a limbo state?

PAUL FLETCHER: Well, Ashleigh, if it get's delivered it will be an important outcome but, of
course, this is the government which also promised we were going to have a regional processing
centre. This is a government which has made a lot of promises that haven't been delivered on. It is
important because there's some 6,000 people in detention centres right now and that includes a
significant number of people whose application has been heard, they've been denied refugee status
and they've therefore required to return to their homeland but until a agreement is in place that
hasn't been possible. So, if it's delivered, yes, of course, we welcome it but this government
unfortunately does have a track record of promising that things are delivered well before they're
actually delivered.

ASHLEIGH GILLON: Okay, we we'll be waiting with bated breath for that to happen. We'll certainly
probably take the pressure off our systems if it does happen in the next few days as expected. On
another issue, Mark Dreyfus, you have just arrived home from the climate talks in Cancun. What was
the mood there after those disastrous Copenhagen talks? Has Cancun good the world back on track or
do you think we are still a long way away from a global deal on climate change?

MARK DREYFUS: I think we're absolutely back on track and there was a very fine spirit of
cooperation. The Mexican President gave a terrific speech at the conclusion of the conference where
he talked about the spirit of Cancun having established again that multilateral negotiations can
work, can produce an outcome that assists the world in the fight against climate change. And what
we saw was an anchoring of the pledges that were made, the emissions cuts, pledges that were made
after the Copenhagen Accord. We saw an establishment of the Green Climate Fund, we saw steps taken
for adaptation measures to assist the most vulnerable countries, steps taken on assisting with
stopping deforestation and what it means for Australia, this agreement having been reached, is that
we are on track for the legally binding agreement that we're looking for, for emissions cuts for
all major emitting countries. What it means here in Australia is that we will now move on to do the
single biggest thing we can do which is establish a carbon price, and that's what we're going to be
working on over the next several months.

ASHLEIGH GILLON: Paul Fletcher, are you as confident that Cancun has healed the wounds of

PAUL FLETCHER: Well, I'd certainly be interested to ask Mark whether the Australian delegation
included the hundred or so people who went off to Copenhagen last year. But, I think the important
point is this: it's very hard to know what the Gillard government actually stands for when before
the election we were told that there would be no carbon tax, that was apparently a commitment from
Ms Gillard. After the election it seems there's a different approach being pursued and the real
problem here is that while Labor may be in government it's the Greens who are really in power and
it's the Greens who are in many ways driving the agenda of this government and so we hear all kinds
of promises. We're told next year's going to be a year of delivery, well, again, let's wait and see
whether this government can actually deliver. Unfortunately it's been driven by politics, on the
other hand we've had a very consistent policy on climate change. Our direct action policy is the
policy we took to the 2010 election and it's the policy that if we were in government we would be

ASHLEIGH GILLON: Mark Dreyfus, one of the government's green schemes, I know there are a few things
in there you'd like to respond to, I just want to specifically ask you, though, about the Cash for
Clunkers scheme. This is, of course, announced before the last election. The plan is that the
government will pay a $2000 rebate to people who trade in their old car for a new green car. The
scheme has already been delayed by six months, now we've learnt that the scheme will cost 15 more
times than an ETS to reduce carbon with the Innovation Department putting the cost of abatement at
around, I've got it here, $4.30, $430 per tonne. What is the point of this scheme? It was plagued
by problems in the U.S, it's tough isn't it to find a supporter either from the environmental lobby
groups or from the car industry for it?

MARK DREYFUS: The point of this scheme is that cars are responsible for around 40 tonnes of carbon
emissions every year in Australia and it's important to look for ways of reducing that contribution
to carbon pollution that's made by cars. But, what is very clear to me is that it's not really open
to the Opposition to be criticising this scheme on the basis of it's supposed cost of achieving
carbon emissions when the only thing they've ever put forward is an incredibly expensive set of
measures that's going to cost the taxpayers vast amounts of money for very little impact on carbon
emissions with their so called direct action scheme. And I do want to go back, as you said
Ashleigh, to something Paul just said a moment ago. The real problem, he referred to a real
problem, the real problem is that we've got an Opposition Leader in this country that thinks that
the science of climate change is absolute crap. I've just come from a conference, a world
conference of 194 countries, not one of which, many of them represented by their heads of state or
their environment ministers, and not one those 194 countries is in any doubt about the climate
science, not one of them is in any doubt of the absolute need for us to get on, reduce carbon
emissions worldwide and the way that we will be going about it in Australia is by setting a price
on carbon because we know that that's the most efficient way, that's the cheapest way in which
Australia can make its contribution to the global effort. It's, one of those schemes is that ...

ASHLEIGH GILLON: Let's get Paul Fletcher's take on that. With the number ...

PAUL FLETCHER: Ashleigh, the point being ...

ASHLEIGH GILLON: ... climate sceptics in the party, is the Coalition out or touch with what the
rest of the world is doing?

PAUL FLETCHER: No, let's be clear on this. We have a policy which we took to the election which
remains our policy; the direct action plan involves allocating a substantial amount of money to
find least cost carbon abatement. It's designed to use the market mechanism to apply contestable
process so we have a well thought out policy on this. We wouldn't have a policy on this if we
didn't believe there was a problem that needed to be addressed.

ASHLEIGH GILLION: There are a number of climate sceptics, though, within the Party, probably more
than in other major conservative parties around the world, would you think?

PAUL FLETCHER: Ashleigh, let's talk about the policy we took to the election and which remains our
policy which is the direct action plan which is about allocating substantial amounts of money to
identifying the least cost means of carbon abatement which would be, I'd suggest to you, much more
cost effective than things like the Cash for Clunkers scheme that you mentioned which as you
rightly pointed out, has the fundamental problem that it's an extremely expensive way to engage in
carbon abatement.

ASHLEIGH GILLON: Look forward to having this discussion with both of you in the New Year. I think
this is going to be an issue that dominates 2011. Paul Fletcher and Mark Dreyfus thank you for your
insights this morning.

MARK DREYFUS: Thank you, Ashleigh.

PAUL FLETCHER: Thanks, Ashleigh.