Assistant Treasurer, Minister Assisting for Financial Services & Superannuation and Minister for Competition Policy & Consumer Affairs
5 March 2012 - 18 September 2013
Interview with Marius Benson
5 June 2012
SUBJECTS: Reserve Bank, interest rates
David Bradbury, the Treasurer Wayne Swan says the conditions are right to cut rates if it wants to. What does he mean by that?
Well the Treasurer is making the point that our budget policy, our fiscal policy which has been very much directed towards returning the budget to surplus, is ensuring that when the Reserve Bank meets, it will have the freedom and the flexibility to take decisions based upon targeting the matters that it sees fit. Obviously the Reserve Bank is focussed generally on the strength of the economy as a means of regulating aggregate demand, but also the central bank is focused on the task of fighting inflation. The fiscal policy position that we have is one that gives the banks the freedom and flexibility to take decisions that it sees fit.
It is an independent Reserve Bank but you would like to see it cut rates.
It's not appropriate for me to be trying to jaw-bone the Reserve Bank into taking a decision today...
The Treasurer does it to a certain extent, he says there is scope there for you to do it.
The scope is there but I think the point that the Treasurer is making is that as far as the Government's fiscal policy is concerned, and that is the main lever that the government has at its disposal, there is nothing from a fiscal policy perspective that should be making the decision of the monetary policy decision makers any harder than it would otherwise be.
Is cutting rates especially in light of last month's big rate cut a bit of a vote of no confidence in the economy?
We have to be careful as a nation that we don't become a country that is so obsessed with seeing the glass as being half empty all the time rather than half full. Sometimes in the political world we see people saying, well stronger unemployment means that we won't have the prospect of a rate cut so that's bad for the economy. You hear people say that when there is a rate cut that the economy is softening. I think we have to take a bit more of a measured view of all of these indicators and all of these factors...
If there is an official rate cut today, can the banks afford to pass it on in full?
We would be expecting that any relief that is provided to the banks in the form of a cut to the cash rate should be passed on. That is not only what the government would expect but what consumers would be expecting and I think that certainly, over the time that we've been in office, have been encouraging greater competition in the banking sector. A very significant part of that is giving consumers the ability to make judgements and choices about who they bank with, by banning exit fees, by making the exercise of switching easier for people, we've given consumers a little bit more power in the equation and I know that many of them are exercising that power. In the end, it's having a competitive system where people are prepared to take their business, to walk down the street and bank with another institution. That's the biggest driver of ensuring that banks continue to be competitive and offer consumers the best services.
Is there anything further the government can do to cause the big banks to pass on the interest rate cut in full apart from the issues you've raised in the past about encouraging people to change banks if they want to?
We're not in the business of regulating commercial rates, that's not the sort of intervention we think is appropriate for a government in a market economy such as ours, but we do think that to the extent where there is focus and transparency on funding costs and the decisions that banks take, that does give consumers the visibility and information they need in order to make these decisions about who they bank with and whether or not they're getting a good deal or a not so good-a deal with the bank, if they're not happy with what they're getting they need to go down the road and find someone who is giving them a better deal.
David Bradbury, thanks very much.
Good to talk to you Marius.