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Treasurer 'not attracted' to government bank.



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2CN AM Treasurer 'not attracted' to government bank

04/12/2008

PETER CAVE: This morning The Federal Treasurer isn't denying the claims but says he doesn't favour the option of an infrastructure bank.

Wayne Swan joined us a short time ago in our Canberra studio and he spoke to Lyndal Curtis.

LYNDAL CURTIS: Wayne Swan the states have written to you saying the bank guarantee you put in place is hurting their ability to raise funds for capital works, they're asking for help. Is an infrastructure bank the way to do that?

WAYNE SWAN: Well most certainly the states have been in communication with the Commonwealth Government and in discussion with the state and federal officials about the difficulty they are having in raising funds in international financial markets.

That's not so much a consequence of the bank guarantee as a consequence of the state of international financial markets. For example, I'm told recently, one state has successfully borrowed in international financial markets because we have been in the middle of an international credit crunch.

Now it hasn't only been state governments that have had problems borrowing money. Our banks for example at various stages have to access the financial markets and it was very important for us to give the banks support to do that.

So, this is a far wider problem than the bank guarantee, guarantees are in place right around the world and many organisations in the middle of a credit crunch have had problems accessing capital markets.

So we've been discussing those issues with the states, we make no apology for that, that's a responsible thing to do because when the states borrow, they are borrowing for critical economic infrastructure which goes to the core of job creation and future economic prosperity.

But in terms of the ideas that have been presented to us, there has been a wide variety from both state governments and the private sector. And we're considering all of those and we've reached no conclusion.

LYNDAL CURTIS: Has…isn't infrastructure bank one of those ideas?

WAYNE SWAN: Well there have been a range of ideas that have been put to us by the both the private sector and by state governments.

But we've not reached a conclusion as to the directions we may take in terms of making sure that this country delivers the critical economic infrastructure we need for our future prosperity and most importantly to create jobs and to strengthen the economy during the global financial crisis.

LYNDAL CURTIS: The states have suggested the Commonwealth buy up state bonds on the understanding states would repay them, would an infrastructure bank allow you to do that without it having an impact on the Budget surplus?

WAYNE SWAN: No I've replied to Andrew Fraser, I'm not attracted to that idea and that's why I say, there are, have been a variety of ideas put forward by both state governments and the private sector.

We're considering all of those but we've reached no conclusion about any of them, but I would, I do want to make this point, we make no apology whatsoever for considering how we deliver critical economic infrastructure in this country because it was ignored for 11 long years under Liberal-National parties who threw the whole responsibility back to the states.

This is something that our nation must deal with 'cause it goes to the core of our future prosperity and most particularly in the environment we're in at the moment, to combating the global financial crisis.

LYNDAL CURTIS: Why aren't you attracted by an idea of an infrastructure bank?

WAYNE SWAN: I'm not attracted by many of the ideas that have been put forward to us…

LYNDAL CURTIS: But why not this one in particular?

WAYNE SWAN: Well, because I'm not going to go into the details of all of the ideas that have been put to us.

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But there are constructive solutions, the Government is going to responsibly work its way through those and when we've reached a conclusion, then we will announce it.

LYNDAL CURTIS: Will it in the end though end up with the Commonwealth having to borrow money to help the states out, will that be the bottom line?

WAYNE SWAN: No that won't be the bottom line, as I've said there are a range of ideas that are on the table, we'll work our way through all of those issues, we'll deal with them responsibly and when we've done that, we'll announce our conclusions.

LYNDAL CURTIS: The states have told you they can't see the problems in the bond market easing up before the end of the financial year. Are you considering making any changes to the bank guarantee in the light of the impact it's having on the states?

WAYNE SWAN: No I most certainly am not, because the bank guarantee does not go to the core of the issue here. It certainly doesn't go to the core of the issue here and as I've said to you…

LYNDAL CURTIS: But doesn't it make the banks more attractive than the states?

WAYNE SWAN: We are in a global capital market, there are bank guarantees in place from sovereign governments right around the world and there is competition for funds between the private and semi-government sectors and so on. This is a wider issue than a bank guarantee in Australia.

LYNDAL CURTIS: The Opposition says the Prime Minister is planning a delegation to the Middle East to drum up investment and making references to the Khemlani loans affair under the Whitlam government, are you concerned at any perceptions that and talks of an infrastructure bank may create?

WAYNE SWAN: Well all of that is just fairly petty, short-term politics from the Opposition who won't face up to the challenges that we face in this country, have no positive solutions and are simply resorting to a lot of, a lot of silly political games.

LYNDAL CURTIS: The economy grew in the September quarter by just 0.1 of a per cent that was before the worst of the financial crisis struck, can we really expect growth in the December quarter to be positive?

WAYNE SWAN: Well we've put in place our economic security strategy, there has been a substantial loosening of monetary policy by the Reserve Bank, they are two very big stimuluses which are going into our economy, there's a substantial reduction in petrol prices and there's been a depreciation of the exchange rate, all of those things…

LYNDAL CURTIS: So you think those will, those will flow through in the December quarter?

WAYNE SWAN: Well all of those things combined will certainly do a lot to strengthen growth in the face of this global financial crisis which has sadly continued to get worse.

LYNDAL CURTIS: And you still believe that Australia will continue to record positive growth?

WAYNE SWAN: Well the Government is certainly going to do everything within its power to strengthen our economy, to protect households and to protect businesses.

LYNDAL CURTIS: Do you agree with the head of the Remuneration Tribunal that Cabinet ministers are grossly underpaid and deserve a pay rise of over $100,000 a year?

WAYNE SWAN: No I don't but I've not seen those comments and we work hard in our jobs and we do it because it's our responsibility and that's what the people elected us for.

LYNDAL CURTIS: Do it for love more than a big salary?

WAYNE SWAN: Well they elected us for the salaries we're receiving now (laughs) and I don't know what the head of the Remuneration Tribunal has had to say overnight.

LYNDAL CURTIS: Wayne Swan thank you very much for your time.

WAYNE SWAN: Thank you.

PETER CAVE: The Treasure Wayne Swan speaking to Lyndal Curtis in Canberra.

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