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Transcript of doorstop interview: Parramatta: 8 October 2008: pension; international financial crisis; interest rates.

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8 October 2008


Subjects: Pension; international financial crisis; interest rates.



We’re here at Parramatta. I’m here with Senator Marise Payne, Liberal senator from New South Wales who is based just over here in Parramatta. And with the newly elected Liberal Lord Mayor of Parramatta, Tony Issa. Tony is the senior Liberal in government in New South Wales. He is the only Liberal lord mayor in New South Wales and the only Liberal lord mayor in New South Wales history. Is that right, Your Worship? Very well done.

Today has been a very interesting visit. Many of you will have seen Carol, the pensioner we met with in the shopping centre here. And I just wish Kevin Rudd would look into more eyes like Carol’s because she is really struggling on the pension. She described it to us very powerfully and she knows that we’re fighting for her and for many others like her. And it’s about time Kevin Rudd looked into the eyes of all of the Carols in Australia and recognised that we need to do something about the age pension today.

It’s not just a question of putting it off until another inquiry reports and feeds into another inquiry. We have a Government that is hopelessly out of touch. A Government whose leading members say it is impossible for them to live on the pension. Well Carol is living on the pension, just, and she wants the Government to do something about it right now. A Government that is in touch with the people would act now.

Now we’ve given them the opportunity. Senator Payne and her colleagues in the Senate, as you know, passed the bill, voted for the bill that would increase the single age pension by $30 a week. We brought it down to the House of Representatives and


it was rejected. There’s a lot to be learnt from Carol and the many other, many, many other pensioners who are struggling like her.

I’ll just say a little bit about the financial crisis. We’ve seen further falls on global markets overnight, we are in for a rocky road ahead, we know that. But I repeat that I have great confidence in the strength of the Australian economy thanks in large measure to the hard work of the Coalition government over 11 and a half years. We have a federal government with no net debt, having paid of all Paul Keating’s debt. We have well regulated banks and a well regulated financial system. We don’t have 15 per cent of our mortgages in the sub-prime category in Australia, we have less than one per cent. And so we are better situated than other countries but we are not immune. So we are in the midst of a storm, we will get wet, but we won’t sink.


On the issue of the full one per cent being passed on to consumers, the Commonwealth Bank this morning announced a $2 billion takeover of BankWest. That would suggest that they are well placed to pass on - if they can afford to buy BankWest can they not afford to pass on the full one per cent?


Well my view is that the big banks can afford to pass on the whole, the full one per cent. Now they’ve chosen not to do so and they have presented their arguments for that.

But my real criticism is directed at Mr Rudd and Mr Swan because it was our Prime Minister and our Treasurer who last week ran up the white flag on interest rates. They are the ones who decided that they would not speak up for borrowers, they wouldn’t speak up for small business, they wouldn’t speak up for homebuyers. They would just open the door for the banks to pass on as little of the rate cut as they chose.

Now I think homebuyers and businesses and borrowers all around Australia have got to ask themselves if we - the Opposition - had not put a stake in the ground for small business, for homebuyers, for the borrowers of Australia, do you think we would have got 80 per cent of that rate cut passed on? Do you think we would have got what we have? The fact is we stood up for the whole of the community; Kevin Rudd opened the door for the banks to do as little as they chose.


Specifically on BankWest though, is that evidence of your argument?


Well I think it demonstrates the financial strength of the Commonwealth Bank. The Commonwealth Bank is here buying, spending $2 billion to buy another bank. That’s not the action of a bank that is under dire financial pressure. Now I am delighted that the Commonwealth Bank is strong, I’m not commenting on the merits of their acquisition of BankWest. There will be regulatory approvals and processes to go


through there with the ACCC and the Treasurer and so forth. But it does speak to the strength of the Commonwealth Bank.

And it also speaks to this. I have said for some time that we should not regard this financial crisis as being all bad news for the big banks. What we are seeing is a reduction in competition. We’ve already seen the non-bank lenders, the smaller financial institutions basically exiting the mortgage market because of the higher funding costs. And now we’re seeing the second tier of banks, like Bank West, being bought by the big banks. Suncorp Metway in Queensland is in discussions with the big banks, a number of them we believe, with a view to it being acquired.

So what will happen is that in this crisis comes a time of great opportunity for the big banks. They will…competition will diminish, they will acquire smaller institutions and they will emerge from it stronger. And that’s why it is more important than ever to have political leaders who are prepared to put a stake in the ground for small business, for borrowers, for homebuyers.


Do you believe the Government is to blame for the banks not passing on this full interest rate cut?


Look, I’ll only go this far. I have no doubt, no doubt whatsoever that if we had echoed the Treasurer and the Prime Minister last week, if we had said the same things they had, then we would not have got 80 basis points passed on. I’ve got no doubt that it was our pressure, our standing up for the borrowers, for the whole of the economy, the whole of the community that has encouraged the banks to pass on more than perhaps they would have liked to.


Does the fact that it was a 100 basis point cut say that Treasury and the Reserve Bank know something about weakening demand in the Australian economy that the rest of us don’t?


Well I think it’s an indication that, look, you’ve got to take the Reserve Bank at its word. If you look at their statement yesterday there were two points they made. First they said that they thought economic conditions were weakening or softening and so this big, this unusually large rate cut is in response to that. And secondly - and this is a very important point - in that statement Glenn Stevens, the Reserve Bank governor said, they were making this big cut because they wanted there to be a significant reduction in costs to borrowers - “a significant reduction”.

In other words, they wanted borrowers to get some relief and that is exactly what we’ve been saying. Our interest has been for the borrowers. We don’t, we’re not criticising the banks. We’re not bank-bashing. The banks are entitled, like any business to set their prices as they see fit - they’re not regulated. But it isn’t a matter


for politicians, in our judgement, to stand up for and defend one section of the business community against everybody else.

So what we’ve said is we believe the banks have the financial capacity to pass on the whole of the rate cut. We believe that the interests of all of the community should be taken into account. And we believe that by putting that stake in the ground borrowers have got more relief today than they would have done without it.


Is this your first trip to Westfield Parramatta?


No, it’s not. I’ve been out here before. I had a very pleasant time coming out on the train today and I will be heading back into the city later on today. But I’m not a stranger to Parramatta, not by any means.


And how does it compare to Bondi Junction Westfield?


Well, let me see, what can I tactfully say, well, they’re all big. All Westfields have a similar look but it’s a big, spotlessly clean Westfield and they were very kind to admit us today. But we met a lot of people there and I just repeat, perhaps if I can just end this doorstop on this note - probably the most important person we met today was Carol. Carol became quite upset and I hope…Tony and I moved away so Marise could comfort her because we didn’t want her to be embarrassed with the cameras, but that was the face of real economic hardship, that’s the face of the people that Kevin Rudd has forgotten.

Thank you very much.