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Treasurer discusses first home saver accounts; interest rates; petrol prices; and Mitsubishi.



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TRANSCRIPT of

The Hon Wayne Swan MP Treasurer

INTERVIEW WITH RAY HADLEY Radio 2GB Sydney

5 February 2008

E&OE

SUBJECTS: First Home Saver Account; Interest Rates; Petrol Prices; Mitsubishi

HADLEY: The Federal Treasurer, Mr Wayne Swan, is on the line. Treasurer, good morning.

TREASURER: Good morning, Ray. How are you going?

HADLEY: Particularly well thanks. Look, I applaud the fact that you’re trying to help first home buyers via your first home savers account. If you could just take me through it? There are a lot of questions being asked here this morning. Is it means tested in any capacity?

TREASURER: No it’s not. It’s certainly not means tested but what we do do is make a minimum Government contribution of 15 percent and there will be people right up the income scale who will benefit from it.

What we’re going to try and do, Ray, is get a website up as quickly as we can to outline the scheme, to sit down with the industry, that is banks, superannuation funds, retail industry funds to get this going from the first of July this year and really the basic idea is for there to be a Government contribution for people who are buying their first home where they can save in an account and get concessions very similar to superannuation concessions.

And in that sense it’s quite historic and what it will enable them to do is accumulate a bigger deposit at a faster rate because these accounts will probably earn, in most cases higher interest rates that they would otherwise get in a bank plus the Government contribution.

HADLEY: And who will hold these accounts? Will they be specific? You’ll direct them somewhere where they’ll have to put the money?

TREASURER: Yes. They will be held either with the banks or the superannuation funds and we’ve got to get all that information out there. I understand people are interested. I’ve had a lot of interest today so we’re moving to get the

basics of the scheme out there. We’ve got to discuss it with the industry to get them set up. We want to get it up as quickly as we can because people will want to start

saving in these accounts so they can get some predictability and certainty in what the likely outcome is going to be depending on how much they save.

HADLEY: Okay. It’s over five years you say, before they qualify.

TREASURER: Minimum four years.

HADLEY: Minimum four. OK, I’m glad we’ve …Is it consecutive four years or some poor bugger has a bad year and can’t get that money and it extends over six - do they still qualify over a six year period if it’s four years.

TREASURER: Yes, they will qualify but we’ll get all of the detail out there and we’re also going out to consult with the industry. We’re not setting in stone in terms of every detail of the scheme. What we’ve put out there is the basics of the

scheme in terms of the Government’s contribution.

We want to sit down and talk to the industry about establishing the accounts and get all the ground rules sorted out and we won’t finalise those until we’ve done that consultation which is the only reasonable thing to do.

HADLEY: And in broad terms, after the four years where they lock it in, if they get 71 grand over the four years, do you jackpot it to the equivalent to 85 grand? Is that correct?

TREASURER: Yes that’s right.

HADLEY: In rough terms.

TREASURER: But that’s based on a ten percent contribution for two people based on average wages, so depending on how much you’re earning over time the Government contribution will be different.

HADLEY: Okay. First home owners grants, seven grand - it remains?

TREASURER: Yes, yes absolutely.

HADLEY: So it doesn’t go anywhere? You get that on top of that as long as you’re a genuine first home buyer?

TREASURER: But the point is that this is a longer term solution. It’s very important. It’s a savings solution. We haven’t offered this type of account in Australia before and in our current environment, Ray, it’s particularly important to be encouraging people to save.

HADLEY: Okay. That takes care of the people who aren’t in the market but there’s a lot of people at the moment, particularly in the north-west, south-west and west of Sydney who are sitting on the edges of their seats waiting until 2.30 this afternoon because it might push them over the edge.

TREASURER: That’s right.

HADLEY: You might have a lot of houses in western, and south western and north western Sydney coming onto the market because they might have to sell their places.

TREASURER: Yeah. I know there’s a lot of financial pain out there in south-west Sydney, western Sydney. I’ve been out there. I’ve seen the repossessions. I understand the problem but the decision today is a decision of the independent Reserve Bank and that independence we respect. In fact we strengthened that before Christmas.

The most important thing that we can do from the Federal Government’s point of view is deal with this inflation legacy. It hit a 16-year high in October, November, December last year and from day one we’ve begun work on a range of policies -

short-term, medium-term, long-term to deal with it and when it comes to housing affordability generally it won’t be just the First Home Saver Account. We’ll have further initiatives into the future, Ray, when it comes to dealing with the supply of affordable rental accommodation and also dealing with this problem of the cost of land and charges and so on and planning regulations, particularly in those outer suburbs where those costs are prohibitive.

HADLEY: In relation to the people, and I appreciate you are looking after people who aren’t in the housing market, but those who may be forced out of the housing market by the increase in mortgages, and this most recent one. We accept that you can’t take responsibility for that, but they’re looking for what’s going to happen in June, July, August, September, through there, it’s a double whammy because if they’re forced back into the rental market, there is a rental shortage, rents go up from 200 to 250, from 250 to 300. It’s a never-ending cycle. Does the Government have any way of stopping this cycle?

TREASURER: Well, there’s no silver bullet, Ray. What we can do is put in place a range of policies, particularly on the supply side but also policies like we announced yesterday but the most important thing we can do is deal with inflation. We didn’t cause the inflation but we absolutely accept responsibility for dealing with it.

HADLEY: Okay. So you’ll put in place things that you hope, but what if at 2.30 this afternoon … Do you find out before the rest of us by the way if…

TREASURER: I don’t.

HADLEY: So you just get it like the rest of us do? Do you start head-butting the wall if it goes up by one half of one percent rather than one quarter of one per cent?

TREASURER: I think I’ll be as distressed as anyone else in the country. I mean we’ve all got an interest in dealing with the housing affordability crisis and everyone in the community has got an interest in dealing with this inflation problem because inflation is not just a question of higher interest rates, Ray. As everybody listening to this program knows, prices have been going up across the board.

When you get elevated inflation it eats away at living standards so dealing with inflation is also about helping punters get by. There’s ten rate rises in this cycle. Six in the last three years have left a lot of punters under a lot of financial pressure.

HADLEY: You talk about the punters. A young bloke pulled me up at the shops the other day. I don’t know him and he said, ‘I wanted to ring you about something’. I said ‘what’s wrong mate’?

He said ‘we live out here in the south western part of Sydney. I work at the airport. My bride works in the city’. He said, ‘I’ve got to drive in my car because there’s not much public transport there’. He said, ‘Do you know how much it costs me in tolls a month to get to work and from work’?

I know there’s a rebate if you live in south western part of Sydney but I suspect he doesn’t use that particular road. He must use the M7, M2 type thing and it was some astronomical amount of money. I mean, you know, I think he said something like 900

bucks or maybe it was 1600 a quarter he said. It was a lot of money.

TREASURER: Sure, Ray. We understand the pressures that a lot of average workers are under which is why we committed to the tax cuts. They’re very important to reward the hard work, like the guy you were talking to, to reward their hard work. And also a range of other initiatives that we’re going to put in place through the year - the education tax refund that we’re working on and committed to, to help people with the education of their kids. There’s also the 50 per cent out of pocket childcare costs. All of these sorts of things recognise that financial pressure. We understand it.

HADLEY: On of the things I’ve barred on the program out of frustration is discussion of petrol prices because I’d have three hours of talkback about it’s $1.52 …

TREASURER: [inaudible]

HADLEY: Well it is but you see, that’s one of the inflationary trends. I mean these cowboys, these billion dollar oil companies seem to run their own race with the ACCC nipping at their heels - they’re like a little blue cattle dog trying to herd four million head of sheep.

TREASURER: Well, until recently the ACCC was tied up. It wasn’t allowed to bite at anybody’s heels and we’re about to unleash the cop on the beat in the ACCC. There are a couple of factors here as you know. There are international prices - nobody can do anything about that but people shouldn’t have to pay one cent more than is fair at the bowsers in a competitive market

HADLEY: Yeah, but you and I both know that that doesn’t account for $1.20 on Tuesday and $1.48 on Friday.

TREASURER: I couldn’t agree more and finally the ACCC has started to work through all these issues and when we get our Petrol Commissioner in place, I think we’ll be in a stronger position to deal with it on a competitive basis.

HADLEY: Any news on Mitsubishi in Adelaide? They’re having a meeting in Tokyo this morning they said.

TREASURER: Not yet, Ray, but I feel for the workers down there. If the decision goes the wrong way it’s going to be a big blow.

HADLEY: Do you think we’ll get 2000 people without a job the way it’s shaping at the moment, because apparently they’re saying they just can’t compete?

TREASURER: Well, the manufacture of cars in this country does pose a lot of challenges for us and the manufacturing industry has had to cope with the high dollar and a number of other factors in recent years.

We’re working with the industry on all of those things. I don’t think once again, like inflation, there’s a silver bullet, but we’re on the job.

HADLEY: Okay. Alright, well it’s likely by the end of the day we’re confronting a one quarter of one percent interest rise and for the poor people of Adelaide, 2000 people out of work which for them will be not a very good way to start 2008.

TREASURER: We’ll have to see.

HADLEY: Thank you, Treasurer.

ends