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Parliament House: transcript of media doorstop: interest rates, party reform, corporate governance.

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Subject: Interest rates, party reform, corporate governance

MCMULLAN: The Reserve Bank at its meeting today will be considering the future of interest rates. Always when the Bank meets in these circumstances its independent role to set the interest rates and it is not appropriate for Treasurers and Shadow Treasurers to speculate about what might be the outcome. But I hope that when the Bank is considering what should happen about interest rates it will consider the very powerful arguments that have been emerging that the economy is not as strong as it appeared when the Governor made his previous indication of policy. I hope they will look at the consequences of the drought. I hope they will look at the worrying signs in the job market, look at the prospects for housing, the volatility in the stock market, the worrying trends by various industry associations in their surveys of business confidence and business intentions. Those seem to me to constitute a powerful argument against increasing interest rates. There may be other matters the Board wishes to take into account in its independent deliberation. But I hope that the Bank will take those serious concerns and weigh them much more carefully than the Treasurer has done recently when he seems to pretend that there are no problems, and to be remarkably complacent about the state of the Australian economy.

JOURNALIST: But if inflation is a dangerous beast, if the Reserve Bank doesn’t move now from its very low historic levels, doesn’t that just mean it is going to have to act much more sharply and much more dramatically in months to come?

MCMULLAN: Well, at the end of the day that is a matter for independent judgement by the Bank. But my concern is that in Australia we do seem to be a bit frightened of growth. Inflation is within the bounds of the Reserve Bank’s accepted limits and there is no sign of upward pressure on inflation and I don’t see at this stage the reason to respond. But those independent matters the Bank has to look at, and I am not privy to all its information. I just really want to say: the Bank needs to be more concerned about the worrying trends in the economy than the Treasurer is. The Treasurer seems to be taking a ‘no worries’ view about the economy when every independent commentator is seeing that serious problems are emerging.

JOURNALIST: Well you seem to be saying a very negative message. How worried are you about how bad the economy is?

MCMULLAN: Well I think underlying, the Australian economy still remains fundamentally strong but I think there is no room for the ‘hands off the wheel, no


worries’ attitude that the Treasurer seems to be taking. There are signs of weakening. I don’t think they are signs of impending crisis. But I think there are signs of weakening such that responsible economic managers, Treasurers and Governors of the Reserve Bank should take those issues into account.

JOURNALIST: Sydney apartment prices are said to be coming down and might fall dramatically. Is that a sign that the bubble is bursting?

MCMULLAN: Well, the Reserve Bank did issue a thinly veiled warning that they thought that the property market boom was not sustainable and I thought their argument was very interesting. I was surprised that more people haven’t reported it and responded to it. I did see this morning’s indications about the apartment market in some of the capital cities and that research seems to me to be about right.

JOURNALIST: Are you worried about today’s Newspoll that Simon Crean, his credibility as preferred leader seems to be dropping?

MCMULLAN: No. A fortnight ago it looked like it was going up. I think a proper assessment of the last three or four months, maybe the whole year, is that public opinion has been remarkably stable. When you accept that there is a small amount of volatility inherent in the polling process, what we have really seen over the last four to six months is remarkable stability in public opinion, in voting intention and in assessment of the leaders, and it indicates that the Australian political scene is very evenly balanced between Government and Opposition - at about 50/50.

JOURNALIST: John Della Bosca is up in Sydney today trying to get together the factions to show that they are not supporting Crean’s moves to get rid of union power. Do you think that maybe this thing is dragging on for too long? They have got to try and solve it quickly?

MCMULLAN: Well, I think Simon has taken decisive action in calling the National Conference on. I am very confident that his proposals will be supported. They are right. They are necessary. We need to change the way politics is conducted in Australia. But when you propose big changes, the people who benefit from the existing structure always resist those changes. It is not surprising that they resist. I don’t criticise them for resisting. It is inevitable that the beneficiaries of the existing power structure will resist change. But change is desirable, necessary and inevitable, and Simon has done the right thing in proposing the changes and in calling on the National Conference, and I look forward to it endorsing his views so we can get on with the other important issues in the public debate.

JOURNALIST: What’s your view about the way they are waging their campaign though against the changes?

MCMULLAN: Well, people who have power always fight very hard to keep it, and it is inevitable that they will do so, and sometimes they find compliant journalists who will write it, but it doesn’t make it anymore powerful, and it doesn’t change the fact that the majority of the Party overwhelmingly supports Simons position and I am sure that at the Conference they will do so.


JOURNALIST: Is this the thing that is hurting in the polls? Is this the thing that is maybe saying to voters that they just don’t want to vote for you until they know what is happening?

MCMULLAN: Well, I don’t think the polls are actually hurting us. But there is no doubt that the process of reform is difficult, and Simon has taken on a very big challenge in changing the Party processes and changing the balance of power in the Party. But it is a necessary process. There has never been a successful transition from the Labor Party at the federal level into power, without reform of the Party in the process. And this is the necessary first step. Simon has had the courage to take it. I am confident the Party will support him in it.

JOURNALIST: What sort of concessions would you agree to to appease those who oppose the changes?

MCMULLAN: Well, I am not interested in trying to do deals. I think what you have to do is work out what is the right way to change the Party and then fight for it. So, what Simon has done, he has put down his views about what we should do, and he is now going to fight for it, and I think he will win.

JOURNALIST: Concede nothing?

MCMULLAN: Well, other people might have good ideas - you shouldn’t have a closed mind to ideas. But I don’t think this is a process by which we ought to be into backroom deal making. We ought to put out what we think is right and argue for it. That is my view about how you should argue policy, and it is my view about how you should deal with the Party reform process. I don’t think the public is interested in backroom deals and powerbrokers getting on telephone hook-ups and calling secret meetings - I think they want to know what people think, they want to hear what they have to say and then they want to see the outcome. The Party Conference is a very healthy public forum for airing those different views and people are entitled to disagree with the Leader - it is a free country. But I am very confident that Simon’s propositions are right and necessary and that his views will be endorsed by the Party.

JOURNALIST: Are there really significant changes or are they more ‘window’ dressing?

MCMULLAN: Well, they are very significant changes. It changes the way politics is conducted in the Labor Party. It opens the Party up to more views and gives more power to members of the Party. All those things are positives and they are just part of a necessary process of changing the way we govern this country, changing the way the political process is conducted in this country. There needs to be change across the board and the first thing you have to do is get your own house in order and that is what Simon is doing.

JOURNALIST: Are you saying there is no need for that phone hook-up today?

MCMULLAN: No, if people want to talk to each other, it is a free country. I don’t object to people talking to each other, I just think that their attempt to prevent change will fail and should fail.


JOURNALIST: Would you rather see someone like a senior New South Wales Minister like John Della Bosca running a campaign like this? Would you rather see him stop it?

MCMULLAN: Well it is up to John. I think that there are other senior Ministers in the New South Wales Government who recognise the merits of Simon’s proposal and who will support him and that is good. But, it is a free country and I don’t object to people expressing their views. I reserve the right to express mine, which I am doing now, so I can’t criticise other people for expressing theirs. But I think that their views are wrong.

JOURNALIST: On the subject of corporate governance, the Prime Minister today is warning businessman that there is very low tolerance of shonky practices out there in the community so they should shape up. Is that enough or should the Government be doing more to crack down on corporate governance?

MCMULLAN: The Government is asleep at the wheel about the issue of corporate governance. They have had reports before them for almost a year, and they have done nothing. They know there is a problem. Internationally people are moving ahead of Australia in the area of corporate governance, and the Government is asleep at the wheel. The Treasurer, the Prime Minister, all the responsible Ministers are taking no action. They are simply talking about the problem, as if that shows they are seriously concerned but no progress is being made and the interests of 8 million Australians with superannuation accounts, and the massive number of Australians who are now shareholders, are adversely affected by the Government’s gross negligence in failing to act on the issue of corporate governance.

JOURNALIST: What should they do?

MCMULLAN: Well, they certainly should act on the Ramsay Report which made recommendations to them last October about what they should do about the independence of auditors, and my colleague, Senator Conroy, will be having some more things to say later today about what they should do.