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Treasurer discusses interest rates; switching banks; inflation; ATO crackdown on high wealth individuals; and paid maternity leave.



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INTERVIEW WITH STEVE PRICE

RADIO 2UE SYDNEY

1 APRIL 2008

SUBJECTS: Interest Rates; Bank Switching; Inflation; ATO Crackdown on High Wealth Individuals; Paid Maternity Leave

PRICE:

The Treasurer is on the line. Good to talk to you again.

TREASURER:

Good morning, Steve. Good to talk to you.

PRICE:

I know you're busy doing the Budget. Did you happen to see any of that Four Corners last night?

TREASURER:

Yes, I most certainly did. I mean, some of those stories would really break your heart. And certainly that story of the Sudanese family is one that is just unacceptable and I don't know the circumstances that led to it, but I certainly think the bank that was responsible for that ought to be taking immediate action. What the regulators say to me is that that sort of practice is not widespread. That is the sort of practice that has occurred in the United States and has led partly to the sub-prime crisis there, with all of its fallout for the rest of the world. Fortunately, we don't have the same volume of that happening in this country, and that's a good thing. But where there are instances of that sort of behaviour, then we need to deal with it. Which is one of the reasons, Steve, that last week at COAG in Adelaide, the Commonwealth agreed with the States that the Commonwealth would take control of mortgage lending and other forms of consumer credit, which to date, have been left with the States and it's been left in gridlock in COAG for three or four years.

PRICE:

So, what is at your disposal to do there? Can you tighten up the controls over lenders?

TREASURER:

Well, certainly there's been some unprofessional conduct. There's no doubt about that. And for a long time there has been concern about the lack of regulation for the activities of mortgage brokers. Well, mortgage brokers, under the arrangement we reached with the

Transcript of 01/04/2008

States last week, will now come within the regulatory control of the Commonwealth Government. You see, it's been split between the Commonwealth regulation and State regulation. We're now going to pull mortgage lending into complete Commonwealth regulation. And if you looked at the program last night, we really do need to do that. So, I'm pleased we've moved so speedily on this question.

PRICE:

How far down the track are you in making it easier for us to swap banks when we feel that we can get a better deal somewhere else?

TREASURER:

Well, Steve, we are a long way down the track. I put this position to the banking industry in January. We now have an interim arrangement where somebody should be able to walk into their bank branch and be given most probably in writing a list of all of their accounts. And we hope to get to the point by November where that can simply come out automatically, be in the hands of the customer and they can walk down the road and more simply change their account.

There's also some issues to do with exit fees and so on which we're having a very serious look at through the regulator, ASIC, and I certainly hope that we can make some progress in that area as well. It's really important in this environment that people have the opportunity to vote with their feet if they're unhappy with their bank.

PRICE:

Do you get the feeling that the banks are now more likely to act outside of the Reserve's advice?

TREASURER:

Well, this is a complex area. We've had something like eight interest rate rises in a row, official cash rises, which have put additional payments on someone with a mortgage of $250,000 of something like $330 a month. And on top of that, we've now had some unofficial rises which have been prompted by increases in the cost of borrowing caused by the US sub-prime crisis.

So, what I said when this began back in January was that we'd put in place the bank switching package to at least make sure there was some competition, so that if customers felt that they weren't getting a fair go from their bank they could walk down the road.

But the other issue here is, of course, the impacts on this economy and the banking sector of the US sub-prime crisis. And the banks have to take a decision, on the one hand, between the needs of their shareholders, and on the other, their customers who have been really hit with eight interest rate rises-plus in a row.

PRICE:

The figures the Reserve are tossing around - they're meeting right now - many economists believe there won't be a rise. I know it's difficult for you to have a view on that, but do you think it's likely we won't get a rise this afternoon?

TREASURER:

Well, Steve, I just never speculate on...

PRICE:

I understand that.

TREASURER:

The RBA is independent. What I can say...

PRICE:

When you're looking at those inflation figures today, though, they're still seeing them pretty high, aren't they?

TREASURER:

They are but we accept the objective of taking the weight off monetary policy through making our fiscal policy much more disciplined in Canberra. And we've talked about that from day one - a Five-Point Plan to tackle inflation over time - and we're putting that in place through the Budget process. I've just come out of a meeting of our Expenditure Review Committee for the Budget. We've been meeting constantly for many months now, because we understand how important it is to put downward pressure on inflation and therefore downward pressure on interest rates, and that is a central objective of the Budget that's coming down in May.

PRICE:

How tough's that Budget going to be?

TREASURER:

Well, it's going to be a tough Budget, it's going to involve some pain, there's no doubt about that. We've got to put in place the settings which not only put downward pressure on inflation but also make the investments for the future so we can lift the productivity of this

economy and create wealth without creating inflation in the way in which we have in recent years.

PRICE:

I notice the Australian Tax Office, this story is in the Financial Review today, have made it very clear to wealthier Australians that you can't, if we catch you doing the wrong thing, say, 'well, that was my adviser who told me to do that, I didn't understand it'.

TREASURER:

Absolutely. I mean, Australian families who work hard and do their bit are entitled to expect that wealthy people actually pay their fair share. So, the Tax Commissioner has launched this program which is looking at something like 1200 wealthy individuals who have assets over $30 million, and is making it very clear he's going to make sure they do pay their fair share and that it will be no excuse to say that somebody else told them not to do it.

PRICE:

So, you can't say, 'look, I was unaware of the complexity of this arrangement and I wasn't trying to break the law, I got conned into it'?

TREASURER:

That's right. It's a very important program. The Tax Commissioner is quite sincere and targeted in his approach. That's a good thing for all taxpayers. Because we are giving tax cuts after the 1st July which are predominantly aimed at low and middle-income earners, and of course our capacity to do that into the future depends upon our capacity to ensure all Australian taxpayers are paying their fair share, including this 1200 wealthy grouping.

PRICE:

I know you've got to get back to that meeting. One final question; the debate about paid maternity leave's back on the counter. Sharan Burrow, who I talked to yesterday, from the ACTU, believes the Government should introduce 14 weeks of paid maternity leave, the dates and length of time on maternity leave is up for argument. Will the Federal Government look at funding maternity leave for all Australian women?

TREASURER:

Well, Steve, we've said we'll have a look at it. We understand that Australian women are performing a very difficult balancing act. They're increasingly participating in the workforce and participating in bringing up the next generation of young Australians so they're deserving of support. But we'll take the responsible long-term decisions through this Budget. There are significant cost implications for the Budget so I can't say much more than that. But we're having a look at it and we have referred the matter to the Productivity Commission, who's coming back to us later this year or early next year.

PRICE:

So, it won't be any clearer in the Budget coming up?

TREASURER:

Well, as I said, I can't comment one way or the other when it comes to Budget measures at the moment. We know where that leads to.

PRICE:

Good on you. Appreciate your time very much. Thanks a lot.

TREASURER:

Good to talk to you.

Contact: Matt Coghlan 0415 098 050