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Transcript of joint press conference: Parliament House, Canberra: 21 October 2008: RBA deposit guarantee warning.

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21 October 2008


Subjects: RBA Deposit Guarantee Warning.



Thanks very much. The Prime Minister must come into the House today and make a ministerial statement clearing up the mess he has created by his mishandling, his confused mishandling, of the deposit guarantee matter.

On the 12th of October he gave a press conference in the Prime Minister’s courtyard. Many of you will have been there. And you will have heard him say when he announced the unlimited deposit guarantee, and I’m quoting the Prime Minister, “the measures I have announced today” the Prime Minister said, “are based on the advice of Australia’s economic regulators. The measures I have announced today have been the product of extensive deliberation between myself, the Treasurer and other ministers who are members of the strategic policy and budget committee of the cabinet.”

Now he has expressed the same sentiment on many other occasions. Shortly after that he said to Parliament that he was acting in accordance with the regulators’ advice on this difficult matter rather than taking short term populist positions in order to secure a headline.

Now the Australian people and the Opposition took him on trust. We took him on trust and we believed that the deposit guarantee was as recommended to him and his Government by the Reserve Bank of Australia, which is I remind you the regulator that is responsible for systemic stability. This is the Reserve Bank’s special jurisdiction.


Now it is clear from reports today that far from advising that the Government have an unlimited guarantee, the Reserve Bank gave advice which was very different.

The Prime Minister has not been level with the Australian people. He said he has been level with the Australian people but he has been anything but. As a consequence we are seeing disruption in financial markets and we are seeing confusion. He must clear this up and he must clear it up today. He has treated Parliament with contempt. He has gone to many other venues, on television programs; he has given a speech at the Press Club. He has made no ministerial statement on this matter. He has not allowed a debate on this matter. He has treated questions seeking information with indignation and no facts.

The time has come for the Prime Minister to step into the House of Representatives and make a ministerial statement and clear up this mess of his own making.



For the past eight days the Coalition has been asking the Government to release the advice, the evidence, the analysis upon which the decision in relation to the bank deposit guarantee and the spending package were made. The Government has refused to release any information, any evidence, specifically any advice.

Today it is reported that the Prime Minister not only didn’t accept the advice of the Reserve Bank, he acted contrary to it. This morning the Finance Minister Lindsay Tanner said that even though he was the acting Treasurer over the weekend of the 11th and 12th of October when the decision was made to put in place an unlimited bank guarantee on deposits, he is unaware of any Reserve Bank advice. He was the Acting Treasurer at the time. The Prime Minister came out and said that there had been extensive deliberation with all ministers who were involved in the Strategic Policy and Budget Committee. That includes the Finance Minister, yet he says he’s unaware of any advice from the Reserve Bank that would underpin this extremely significant decision.


When you say ‘clear it up’, would you like to see a cap imposed on the deposit guarantee? And is your $100,000 you suggested previously, would that be adequate or should it be higher?


Well we recommended a $100,000 figure. We said at least $100,000. The aim with any deposit guarantee is to set a cap at a level that looks after households and small businesses but is not so large that it starts to have the impacts that we’re seeing today and that you’re seeing reported in the press on the financial system and money markets generally.

But what we really want to know, Phil, is what does the Reserve Bank say? I mean, Mr Rudd has clearly misrepresented the Reserve Bank of Australia. He’s


misrepresented the Reserve Bank of Australia in the midst of a financial crisis and what we need to know is, we, the Australian people need to know - all of us - and the Parliament needs to know is what does the Reserve Bank recommend the cap should be, what does it recommend the deposit guarantee should be? And then I’m sure we will all support the Government acting on the advice of the Reserve Bank. Mark…


The Treasurer’s put out a statement today Mr Turnbull and he says the Government, “announced the blanket guarantee on deposits on October 12 with the support of the Treasury and our regulators, including the RBA Governor, today’s report is wrong to claim otherwise.” So are you accusing the Prime Minister and the Treasurer of lying?


No, what the, what Mr Swan’s statement doesn’t say, and which is what we need to know, is what cap did the Reserve Bank recommend, what was the advice of the Reserve Bank…what advice did the Reserve Bank give? Now, Mr Rudd - and I don’t think anyone would disagree with this - Mr Rudd deliberately created the impression that the Reserve Bank had recommended an unlimited deposit guarantee. Now, unless the Reserve Bank recommended an unlimited guarantee and is still recommending an unlimited guarantee, the Prime Minister has misled us.


Mr Turnbull, in the last (inaudible) you’ve had something of a distinction between the wholesale funding guarantee arm which Ms Bishop has raised a number of concerns about in Parliament and at that deposit which you’ve been largely supportive of. Are you now saying you have concerns about both? And if you do support a cap, what should the cap be set at?


Well, I think I’ve answered that. Where the cap should be? It should be a level that causes as little interference with the markets, as little dislocation or disruption to the markets as possible while at the same time giving security to households and, in particular, small business. And that is why, if you look around the world, deposit guarantees of this kind all have caps, as far as I’m aware, and they are in the order of $100,000, $200,000 - sums of that level. But I’m not aware of any comparable country that has established an unlimited deposit…depositor guarantee. So it was a, you know, a bold step I suppose. The Prime Minister is proud of taking bold action apparently but I don’t think the Australian people expect him to take action that is contrary to the advice of the Reserve Bank of Australia.


What cap would you like to see at the wholesale level?



Well, the issue at the wholesale level, Paul, is different. This involves the Government offering in return for a fee a AAA government guarantee of a banks borrowings - and that could be anything from $500 million, it could be a huge facility. Now there are a couple of things about this, but the most important point here is that it must be the subject of legislation. The Prime Minister is clearly - based on his answer to my question in Parliament yesterday - proposing to take on enormous contingent liabilities, running possibly into hundreds of billions of dollars, which will go onto the balance sheet of the Australian tax payer, to do that without any legislation. Now that must be the subject of legislation. It is an outrage if it is not and it is an affront to the Parliament and it’s an affront to the Australian democracy to think that our Government could take on liabilities of that kind without any consideration by Parliament.


Mr Turnbull you obviously see this as a breach of faith and trust. Is this grounds to break your undertaking of bipartisan approach to the crisis?


Dennis, we give the Prime Minister, we’ve offered the Prime Minister, despite his scorning it, bipartisan support in the response to this crisis. We’ve taken him on trust as far as….well right through it we’ve taken him on trust of course, but particularly with respect to this deposit guarantee where he has said, bear in mind that he did this with the advice of the regulators and he created the very deliberate impression, repeated again and again that he was acting with the advice…in accordance with the advice of the Reserve Bank of Australia.

I think what we need now is very clear. We need to know precisely what the Reserve Bank’s advice is and the Government should follow it - and we’ll support the Government in following it - but we need to know precisely what the Reserve Bank says the deposit guarantee should look like because it’s pretty clear from today’s news that the Reserve Bank does not support an unlimited guarantee. Now just one more question.


Mr Turnbull how will you use your numbers in the Senate on these issues - firstly on the deposit guarantee, are you willing to slowdown the deposit guarantee to subject it to scrutiny or amend it if necessary? And secondly on the wholesale guarantee, Andrew Murray raised the idea yesterday with me of the Senate using its numbers to pass a motion questioning the wholesale guarantee if it’s not subject to legislation?


Well I think the first step is for the Prime Minister to come clean. He has created a mess here. He’s created a lot of confusion. He’s pursued headlines. He has not proceeded in a business-like, in a competent, in a Prime Ministerial way. The time has come for him to walk into the House of Representatives, not a television set, not a


doorstop, walk into the House of Representatives and make a comprehensive ministerial statement that deals with these issues, to have that debated and then to answer questions - but provide information in response to questions, not just indignation.

Thanks very much.