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Rudd must backflip on bungled bank guarantees.



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LEADER OF THE OPPOSITION THE HON. MALCOLM TURNBULL MP FEDERAL MEMBER FOR WENTWORTH

RUDD MUST BACKFLIP ON BUNGLED BANK GUARANTEES

The Prime Minister and Treasurer have now been delivered a clear message from both the major banks and the Opposition that the Government must fix its bungled wholesale term funding and bank deposit guarantees.

Australia’s major banks (AFR, 21/11, p1) and the Opposition are jointly calling on the Government to:

· present legislation to provide for an appropriation to give effect to the wholesale term funding guarantee for Australian deposit-taking institutions; and

· wind back the unlimited bank deposit guarantee from $1 million to a cap much closer to that proposed by the Coalition.

Had the Government taken up the Opposition’s offer of bipartisanship these serious policy mistakes could have been avoided, and the necessity for us and the major banks to pressure the Government publicly averted.

As the Opposition has consistently stated over the last month, most recently on Monday, there is an urgent need for appropriation legislation to enable the speedy payout of any guarantee that is called upon - this being essential to properly give force to the guarantee.

Unless the guarantee is backed with an appropriation, the banks will not receive the benefit of the guarantee when raising funds in international money markets and neither will millions of customers through lower interest rates, fees and charges.

While not legally necessary to make the guarantee effective, it is desirable for transparency and accountability that the legislation also provide for a sunset date, a commitment for the guarantee to be on commercial terms, and appropriate reference to supervision by the Australian Prudential Regulation Authority.

I also noted on Monday that the Opposition would facilitate the speedy passage of the necessary legislation, but we required early notification and discussion with the Government to ensure the efficacy of the guarantee.

To date, I have not received a reply from the Government.

21 November 2008