Transcripts

DOORSTOP INTERVIEW 9.30AM TUESDAY 20 AUGUST

20th August 2009

9.30AM, TUESDAY 20 AUGUST, SYDNEY

E&OE………………………………………………………………………………………

Subject: Coalition’s CMBS/RMBS market proposal, ETS, tax, Australia’s relationship with China, National Party

JOE HOCKEY:

Now’s the time for the government to try and get some competition into mortgage lending in Australia.  The fact that the four major banks absolutely dominate mortgage lending means that home borrowers will be worse off over the medium and longer term.  And if there is no competition in mortgage lending then there’ll be no competition in small business lending.

Small business is facing a terrible time in the years ahead. There won’t be enough money and there won’t be affordable money to help them to grow their businesses when Australia will really need it. 

So I would say to the government, take our advice on how to solve the problem.  We put forward today a positive proposal on trying to fix the mortgage market in Australia so there’s real competition and that will also lead to real competition in credit cards and also real competition for small business lending.

JOURNALIST:

What needs to be done to encourage that competition"

HOCKEY:

Well first of all you need to fix the markets.  The fact that the government has pulled back, offered a guarantee and said that its work is done is not enough.  The government needs to look at greater intervention in particular markets to try and stimulate competition to give smaller players the opportunity to compete with the Big Four banks.

We are not going to have real competition in home lending or in small business lending until there is more competition against the Big Four banks, and today we have offered a positive solution.  I can go into the technical aspects of it, you asked me not to but I’m happy to.  

What we’re suggesting is that the government extend its Triple AAA guarantee to what’s called the wholesale funding markets of RMBS and CMBS and if it extends its guarantee to those markets, then superannuation funds and others will start to buy up some of those mortgages and in turn, if that isn’t enough the government should bring some of its massive borrowing program forward and buy into those markets as well. 

If it does that then it’s an alternate source of funding for the small players to the need for bank deposits.  Ultimately if you’ve got competition in home lending, you’ll have competition in small business lending and there is a growing feeling amongst Australia’s more than 2 million small businesses that it’s going to be damn hard to get borrowings and affordable borrowings over the next few years.

JOURNALIST:

Joe you’ve just called on the government to have greater market intervention, those were your words.  Isn’t that contrary to Liberal ideology and isn’t that what you’ve been criticising the government about? About interfering in the market?

HOCKEY:

Well it’s where the government seeks to control markets and in our case we’re facilitating markets and we’re doing it very differently.  The government has extended a guarantee to the banks and the banks are using that guarantee to borrow money offshore and to provide little competition in residential lending in Australia.  If you want to have real competition the smaller players in Australia – credit unions, smaller banks, some of the other mortgage lenders – are going to have to get their financing from somewhere.  And they can get it, with our plan, from superannuation funds, from a range of other sources, from people who are prepared to invest again in the Australian market place.

Now our suggestion is a kick start, it’s not ongoing intervention.  It’s a kick start to a market that is not functioning, and that market not functioning means that small players aren’t able to compete with the big 800-pound gorillas which are the big banks.

JOURNALIST:

Inaudible

HOCKEY:

Well this is the road to Damascus for Penny Wong because the government was resisting any attempts by the Coalition to negotiate an outcome on the emissions trading scheme.  We welcome the fact they are ready to talk.  It has been like climbing a mountain, it’s been a huge task to get the government to agree to negotiate.  Now we’ve got the renewable energy targets through the Parliament, that’s a great thing.  It’s good for Australia to have agreement in Federal Parliament.   We’re offering agreement in relation to an emissions trading scheme, we hope the government sees sense once again.

JOURNALIST:

When will you start negotiating?

HOCKEY:

Well we got 80-90 per cent of what we wanted in relation to the Renewable Energy Bill.  There’s a voice that needs to be spoken for all those business people out there that are thinking of closing their businesses as a result of these government initiatives and that’s what we’re doing.  We’re speaking up for those that may not have the capacity to speak up.

JOURNALIST:

So when will you start? When will you start negotiating?

HOCKEY:

We’re ready now, we’re ready to start chatting away now.  You don’t need to have Korean peace talks to try and get this going. It’s two sides of Parliament.  When we’re in government we often spoke with the Opposition.  Until now, this government has not been prepared to do it but hopefully their attitude has changed.

JOURNALIST:

The Coalition has been raising some concerns this week about potential recommendations coming out of the Henry review inaudible what’s happened to tax reform inaudible what’s happened to tax reform in the Liberal party?  Malcolm Turnbull championed it in Opposition.  As I understand it, Dr Ergas has written a report for yourself and Malcolm Turnbull inaudible

HOCKEY:

Well because the government is carrying out, with all the resources of Treasury and all the submissions of the private sector, a massive review of taxation – albeit quite qualified because it can’t look at the GST or superannuation.  So we’ll be very interested to see the full report, the submissions and the modelling so that when we do have a debate about taxation in the lead up to the next election, we are debating apples with apples and not apples with oranges or apples with pears or apples with anything else.  I think that is vitally important otherwise we’re talking two different languages.  So that’s why we need to have the basic formulas used by the government in its Henry Review deliberations before we can outline our plans for Australia’s taxation system.

JOURNALIST:

So you’re waiting for the Henry Review?

HOCKEY:

Yes that’s right, because otherwise you are talking in two different languages.  As a principle, we believe in providing incentives for business to grow.  As a principle, we are strongly opposed to capital gains tax on the family home and they’re the starting points for us.

JOURNALIST:

In regards to our relationship with China, why do you think the relationship has deteriorated?

HOCKEY:

I think the relationship has deteriorated because the Prime Minister was pretending that he was extremely close to China.  He was trying to outdo John Howard in the relationship with China.  The Prime Minister at first took a very sycophantic approach to China.  He took the approach that he was closer to China than any other country and in doing so he burnt the relationship.

It’s quite extraordinary that a Prime Minister who prides himself on his diplomatic experience could burn off a very significant relationship with a very significant regional partner.  We always said that the relationship with China needs to be one of mutual respect, but you should not go down the path of fawning  or being sycophantic to a foreign government like the Chinese government or any other government for that matter. 

Unfortunately the Prime Minister went too far in his attempts not only to be China’s closest friend but to lecture them on the way they should live and behave.  In doing so he blew up the relationship with China and quite frankly it’s the price that Australians are going to pay for a Prime Minister that pretended to be something that he wasn’t.

JOURNALIST:

Do you think that that relationship is able to be mended?

HOCKEY:

I would hope so. I would think any relationship that is in difficulty can be mended. You know there are more than 1 million Australians who each night speak a Chinese language at home and we have deep, long-standing links with China but it cannot be a relationship where one party fawns over the other.  It needs to be based on mutual respect and not being afraid to have an honest an open relationship, but also using the right diplomatic channels to send the right message.

JOURNALIST:

There’s also a report about the Nats and Senator Joyce has admitted that the Nationals are considering jumping ship from the Coalition.  Are you worried about that?

HOCKEY:

Well there are lots of things to worry about in life, I don’t know that’s one of them.

JOURNALIST:

But they’re openly discussing it…

HOCKEY:

Look, the National party is entitled to its view, the Liberal Party is entitled to its view.  It’s a marriage and from time to time there will be an argument over the kitchen table but hopefully the marriage still lasts.

JOURNALIST:

So you’re not worried?

HOCKEY:

No, not at all.   It’s just going through the pains of a marriage isn’t it, like any marriage.  Interesting children though.  I think we’ll leave it there, thanks everyone.

[ends]