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Transcript of interview with Tony Eastley: ABC AM: 13 December 2010: [bank reforms]



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Joe Hockey, MP Shadow Treasurer Member for North Sydney

INTERVIEW ON ABC AM WITH TONY EASTLEY

13TH DECEMBER 2010

E&OE………………………………………………………………………………………

TONY EASTLEY:

Good morning, Mr Hockey.

JOE HOCKEY:

Good morning.

TONY EASTLEY:

Tougher measures to control the banks, a better deal for customers, so says Wayne Swan, you must be pleased with that?

JOE HOCKEY:

Well, I would really want to be sitting here and saying this is a terrific package, but the fact is that there are so many elements.

TONY EASTLEY:

But he has picked up on some of your points from your 9 point plan.

JOE HOCKEY:

Well, they’re the elements that obviously, I like. I mean, the covered bond initiative is a good one, although I’d like to see some financial limitations on that and I’d to hear from APRA about the risks to the balance sheets of the banks. It is also the case that the Treasurer’s picked up on our price signalling legislation.

TONY EASTLEY:

What sort of mark do you give him out ten for this?

JOE HOCKEY:

Well, three out of ten and I’ll tell you why.

TONY EASTLEY:

You’re a mean marker.

JOE HOCKEY:

Well, you know, I’m tough on myself as well and that’s why I came up with a plan that actually delivers the substantive competition and stability that Australia wants and I say to you Tony, the Treasurer now says that his banking package is going to reduce interest rates. This morning, the Assistant Treasurer, Bill Shorten, refused to back up that claim. Now, Bill Shorten is a smart guy. He knows that what Wayne Swan has done, is he has oversold this package. He has oversold is as the golden bullet, the silver bullet if you like, that is going to deliver greater competition to the banking sector and Bill Shorten has pointed out that Wayne Swan has overreached.

TONY EASTLEY:

So you’re guaranteeing that it will not bring interest rates down?

JOE HOCKEY:

No, the best way to bring interest rates down is for the Government to cut back on its own expenditure.

TONY EASTLEY:

To be honest though, politicians don’t know whether interest rates are going to go up or down. Isn’t it the realm of the Federal Reserve?

JOE HOCKEY:

Well, no, no. Hang on, hang on. On average, over the 11 years of the Coalition Government, interest rates were lower than they have been over the three years of the Labor Party. Now, over the three years of the Labor Party, the cash rate of the Reserve Bank dropped to record lows because of the financial crisis.

TONY EASTLEY:

Alright, well let’s not go too much back into history. It was your attack on banks and your demands that the Government do something which probably prompted some of these measures that Mr Swan has announced. Can you give him credit for that and take a little of credit yourself?

JOE HOCKEY:

Well, I welcome the fact that he’s moving in some areas and there are some areas such as, as I said, covered bonds and price signalling and in fact, the rejuvenation of the corporate bond market, I see those as good initiatives. But, as David Liddy, the chief executive of the Bank of Queensland has said - and he’s the most experienced banker in Australia at the moment - as he has said , this delivers nothing for competition. It delivers nothing that is going to allow the smaller players to be competitive with the large ones.

TONY EASTLEY:

Well, I think some of the small players are saying that they appreciate what is being done in this plan and it will give smaller lenders a better go.

JOE HOCKEY:

Well, I don’t see how it necessarily can. I’ll give you an example.

TONY EASTLEY:

The Members Equity Bank, for instance, a small institution reckons Wayne Swan has got it right.

JOE HOCKEY:

Yeah, which is a union bank. You’d hope that it gets support from Member’s Equity, but for the ones that are really out there, the Suncorp Metways, the Bank of Bendigo-Adelaide, Bank of Queensland, they’re the banks that offer competition to the big four. Now take exit fees, where I was just verballed by Wayne Swan, typically…

TONY EASTLEY:

So you don’t support…

JOE HOCKEY:

No I don’t support, I don’t like exit fees but I just say to you that when the Government mandates exit fees to be abolished, it has unintended consequences. For example, smaller banks do not have the big funds management arm or the big superannuation arm or the big insurance arms that the big players have. So, ANZ and NAB have already abolished exit fees, because they’ve got, they’ve already almost doubled the RBA increase in interest rates, right? So, the smaller players don’t have that other source of income. Therefore, they rely more heavily on exit fees. So, it’s like a big balloon of water, Tony. If you push in at one side it’s going to bulge in the other and with the Government’s abolition of exit fees you are going to see an increase in application fees, an increase in maintenance fees and so on,

because unless the banks are prepared to take a shave on their profits, they’re still going to charge those fees.

TONY EASTLEY:

Well, it’s all very well for you to criticise that but what would you, Joe Hockey, do in that case? You don’t like exit fees. What do you do about the…

JOE HOCKEY:

Well, the starting point is you’ve got to generate more competition in a stable system and for example, for example we said, there’s no mention of small business in this package at all, at all. Why is a small business borrower who offers their home as security for the loan charged significantly more for a loan than a home borrower that has the same asset?

TONY EASTLEY:

I appreciate that. Let’s just go back to this exit fee business, though. You say you don’t like exit fees and you’re suggesting that the banks will make up their profits elsewhere if they lose that exit fee. What would you do about that? Would you regulate against it?

JOE HOCKEY:

Well, that’s one of the reasons why I put down in my nine point plan a proposal to look at what is the proper risk and return for banks. This is the big issue, Tony, and it hasn’t been dealt with here.

TONY EASTLEY:

But…

JOE HOCKEY:

Let me finish, let me finish, because it is important. Australian banks now are too big to fail and there is huge risk for taxpayers now that wasn’t around three years ago. Now, the banks are using the Government guarantee to take greater risks to get greater profits. That’s all fine, but it completely changes the dynamic when you have a bank failure and that is, that flows through to whether you can have competition in fees.

TONY EASTLEY:

But Mr Hockey, you’re suggesting there let’s investigation, let’s explore and I think those terms were used in your nine point plan. But that’s the very thing you criticise the Government of doing, of having too many inquiries about this lack of action.

JOE HOCKEY:

Wayne Swan said he’s been working on this for a year. If he’s working on it for a year why’s he setting up two task forces and embarking on a Government advertising campaign? And he says the creation of a fifth pillar is done simply by putting a health tick on building societies and credit unions. I mean, this guy should be in banking, he shouldn’t be Treasurer.

TONY EASTLEY:

So you’re not supporting…

JOE HOCKEY:

If you think you can create the fifth biggest bank in Australia by giving it a new marketing symbol why didn’t we think of that? Why hasn’t anyone else thought of that? I mean, it’s sheer brilliance from Wayne Swan. And I’d say to you, Tony, this is about having real reform. That’s why we called for a proper systemic review. That’s why we offered alternatives that Mr Swan hasn’t picked up on. Some of them he has, good luck to him for doing so. We’ll support parts of this package, but I tell you what, we’re going to keep Wayne Swan to his promise that this is going to reduce interest rates and reduce bank fees.

TONY EASTLEY:

He’ll be looking forward to that promise. Joe Hockey, the Shadow Treasurer ,thanks for joining us this morning on AM.

[ends]