26 October 2015
Transcript - #2015029, 2015

Interview with Ray Hadley, 2GB

SUBJECTS: Superannuation; self-funded retirees; mortgage rates; the Government’s plan to reduce excessive credit card surcharges; Cabinet; North Sydney by-election; Rugby World Cup.

RAY HADLEY:

Treasurer, good morning.

TREASURER:

G'day Ray.

HADLEY:

On the front page of The Daily Telegraph and other News Limited papers there's a story about what you are going to do help women re-entering the workforce regarding superannuation. Is this part of a bigger picture for superannuation? This is one arm of what you intend to do or hope to do?

TREASURER:

The Prime Minister made it pretty clear that we are not ruling anything in or out on superannuation now. We are having a good look at it and one of the key issues that has been fed back to us which we know very well already is that people over the course of their working life can have their work patterns disrupted. Now, for women in particular that has been known for a long time but it is not just women, as you know, it is a lot of carers as well. You've got a lot of people listening to the programme today whose life's events have meant that they have had to move out of the workforce and that means when it comes time when they do go back into the workforce they are sort of behind the curve in terms of trying to build up their superannuation again. So, this is just identifying that this is one of the issues of the many that we have to address. I mean the Labor Party just sees superannuation as something to tax, we see it as someone's pathway to independence in retirement and not being on the pension if we can avoid that and that is what we are seeking to achieve.

HADLEY:

Self-funded retirees and we tend to forget them because they basically are independent and look after themselves.

TREASURER:

They are heroes.

HADLEY:

Thanks to them for doing what they have done but apparently a retired couple needs an annual income of about $58,500 to live comfortably and comfortably might be one person's comfort and another person might be uncomfortable at that level. A single person needs $42,000. To do this you need a retirement income, investment income, of $640,000 for a couple and $545,000 for a single. Now, is that achievable for people already well into their careers before compulsory superannuation was introduced? It is a lot of money.

TREASURER:

  Well, it is one of the reasons why it was introduced 25 years or so ago and it was to ensure that we started changing that when people went into retirement age that they wouldn't have to be dependent on a pension. So, I think we have to go back to basics when it comes to superannuation. Over the last 25 years it has come to mean many things to many people but its principle role is to ensure that over the course of your working life you are putting money away to ensure that when you are retired that you can be as independent as possible. Now, that means that over time there might be people more on a part pension than a full pension. There might be some people who aren't on a pension at all and it is our objective to try and support them to be independent. One of the things that has happened over the last 25 years, is I think we have become more aware of how things change over a person's working life, peoples working patterns are far more flexible today and we need to have a superannuation system that, I think, reflects those changes in people's lives. There are many different pathways to get to where we want them to get to which is independence in retirement and the system at the moment can be quite rigid.

HADLEY:

You are the boss of fiscal policy as the Treasurer, now you'll have to call me sceptical. I don't have your background or training, however, we have got the banks gouging their customers because of statutory regulations they say. Now, call me suspicious, call me a sceptic, we have got one bank announcing – Westpac – .2 of one per cent increase, ok. The next mob come out and say .15, that's' better than the .2. Then in succession, I think NAB were next with .17 and then ANZ brush on home after Westpac, CBA, National. Look, I am a dummy but I sat here on Friday and said don't be surprised if the ANZ go .175 or .18 or you know to be under that 2. Now, if it looks like a duck and quacks like a duck – it's a duck. It looks like collusion to me. It's not coincidence, surely.

TREASURER:

Well, collusion would be pretty serious and that's what the ACCC would look at and I am not suggesting that but what I think it does demonstrate, Ray, is these are commercial decisions of the banks. Now, I don't welcome anybody's annual payments going up that they have to make. Jenny and I, we have an average mortgage and we know what that means for the household budget. The banks will make their own decisions. Now, the Government doesn't force them to put interest rates up – they make their own decisions about that and one of the things that I think we have to bear in mind is, a small business out there will have changes to their costs all the time. Now, they can't just run out there and then increase their prices because they know that that will impact them in how they are trying to make a living. Now, the banks are strong and that is a good thing for our economy and they make handsome profits, that is all true. They make a commercial decision to actually put up the price for their customers. Now, what I am saying is I am not going to give them a leave pass to do that, they can't blame the Government for their commercial decisions – that is their decision and they need to justify it to their customers. What we have done as a government is last week you might recall we said we were going to ban these profiteering surcharges on credit cards and we will be introducing that as quickly as we can. That is the situation where the merchant might be only charged half a per cent and then they will charge one, two, three sometime s up to 10 per cent on the fees. So, we will change the things that we can change to keep these costs down. We got rid of the bank deposits tax as well. So, we will change the things we can but I am never going to give the bank a leave pass for putting up its rates.

HADLEY:

I know collusion is a very strong word and the banks will react unfavourably if the Treasurer were to…

TREASURER:

Well, it would be illegal.

HADLEY:

Well, they wouldn't do anything illegal would they? But if Maccas and Hungry Jacks said tomorrow I am putting up my Big Mac and the equivalent at Hungry Jacks whatever that might be by 10 cents…

TREASURER:

Well, I would go to Oporto's if that were the case and competition is the key.

HADLEY:

And you know what I would go? I would go to Pirate Pizza Dural and buy my hamburgers there. However, the bulk of people are doing business with Westpac, CBA, ANZ, NAB – they haven't got an Oporto for me to go to. I mean they do have some other bank lending structures, and I understand that there are other banks – not the big four but other banks and there are other brokers that we could go to.

TREASURER:

That's right. So, you can shop around.

HADLEY:

You can but there is an expense involved and people are nervous, you know it's a young couple, as an older couple, they have got a $300,000 mortgage like you and your wife have, I noticed over the weekend, or they have a $500,000 mortgage, "oh gee, if I go there what happens if they jack it up." They have got a big advantage over other people, banks, and they have got to be very careful how they wield it.

TREASURER:

This is why I think it is important that customers must hold them to account and don't accept a line which says, 'oh the Government made us do it'. No, the Government didn't make you do it, for the banks, they decided to put their profits and their return on equity. I mean the return on equity for these major banks is around about 15 per cent. That is almost double what it is in Europe. Them having a strong return on equity is a good thing for a strong banking system but equally they are in a position to actually pass these costs on and a lot of small businesses aren't and I just won't give them a leave pass on it.

HADLEY:

How do you even prove that they are doing it to suit their own needs – can you ever prove it or you just have to take their word that they are highly reputable people who would never be involved in doing deals behind closed doors between themselves?

TREASURER:

I do think our bank CEOs are reputable people, as are their boards and there are serious laws that they would be breaking if they did anything like this. I don't think anyone is suggesting that.

HADLEY:

Well, I don't think there would be a paper trail but there might be a phone call, "oh mate what are you going to do? Oh .2. I'll go .7 you go .18, .15 you know."

TREASURER:

I think what I have to focus on is what are the things I can change and what are the things I can do something about. The surcharge profiteering that we have seen, we have done something about that. Now, Bill Shorten goes out there and screams at the clouds and carries on about this. I mean Wayne Swan use to do this every time when rates would change, he would pretend that he had some sort of magic wand. I just think you have got to be up front with people and I think banks have to be up front with people and if they have chosen to increase their rates because they didn't want to absorb a cost, well that is what they have done. Their shareholders might be happy about that, I suspect they are. In the case of Westpac they put their term deposits up as well so self-funded retirees would have been happy about that. So, look, that is how it is I think, Ray, and I will just try and be as upfront with people as I can about it.

HADLEY:

The Australian has got a copy of the official Cabinet ranking. I think it is fascinating – it's like the old Top 40 in the old days when 2SM and 2UE and 2GB…

TREASURER:

It's tabled in Parliament by the way so I am not quite sure how this is some sacred list. It is the order of precedence, it's a public document.

HADLEY:

One of the things I know, I mean I am happy about this having you on seeing you have dropped down below Barnaby but one of the things that one of my listeners said, the restoration of the Nats Deputy Leader to number five is a symbolic gesture by Mr Turnbull. In the Howard Government Tim Fischer and John Anderson were actually two and four. Likewise Mr Anderson, Mark Vaile – Vaile became two and then Mr Truss number four behind Downer.

TREASURER:

It's returning to those Coalition arrangements.

HADLEY:

  Well, actually, actually he's entitled to be dirty, Barnaby, because he should be in front of George. George should be five and Barnaby should be four. So, for anyone who hasn't read it, or got freedom of information from federal parliament. Mr Turnbull, strange enough, is number one. Number two is Warren Truss, of course, the Coalition Leader, the Nationals Leader. Julie Bishop number three, George is number four, Barnaby is number five and number six with the rocket…

TREASURER:

There you go.

HADLEY:

Is Scott Morrison and Barnaby shouldn't be happy about being number five because the precedent has been set, normally the Deputy Leader of the Nationals is number four.

TREASURER:

Well, we're all just happy to be working together, Ray. That is the main thing and look, Barnaby is the Deputy Leader of the National Party, George is the Leader of the Government in the Senate. These things are lists of the order the Governor General reads your name out, I think, or something like that. It doesn't change how we do the business every day and we are getting on with it and working closely together.

HADLEY:

Gee, there is a lot of discussion today about who is going to replace Joe Hockey for the seat of North Sydney. They are having a meeting tonight.

TREASURER:

  Yes, there is a selection meeting tonight, I understand.

HADLEY:

And it is a narrow field which has been called very, very quickly to suit the needs, they say, of a couple of people who look like they will be taking the job.

TREASURER:

Look, I don't know, that is a decision that the NSW division makes. John Hart and Trent Zimmerman are the candidates I am aware of. I am not on the panel so I don't…

HADLEY:

Well, I think CrownBet have Mr Zimmerman at 'fours-on'– very short price but stranger things have happened.

TREASURER:

Well, they will have a meeting tonight, they will pick their candidate and I know the Labor Party has decided to vacate the field, they won't be running. Bill Shorten has run off overseas this week. Not, really much to be found where he is at the moment…

HADLEY:

Well, you wouldn't expect them, they're on a hiding to nothing. First of all it would cost a little bit of money to run a candidate, secondly, normally with by-elections…

TREASURER:

They were happy to run in Canning by the way though I noticed.

HADLEY:

But they did that before there was a change of leaders.

TREASURER:

They were happy to run then.

HADLEY:

Yeah, but it didn't work out for them there but the thing about it is if they were to run a candidate, just say, there's a swing to the Government wouldn't that be embarrassing for Bill. Because there is never a swing to the Government in by-elections – there wasn't in Canning.

TREASURER:

The Government is usually on the back-foot in by-elections, regardless of who is in government.

HADLEY:

I mean it is one of the smartest decisions he has ever made not running a candidate because if he got a move against him.

TREASURER:

Well, he has vacated the field, basically, Bill Shorten, and that is the first decision he has made after the change well he can explain that to people.

HADLEY:

Alright then. Ok, we'll leave it there, your time is valuable and I appreciate you coming in on a Monday and having a yarn.

TREASURER:

Thanks Ray. Congratulations to Cheika and everyone over there with the Wallabies. We are all a bit bleary eyed today but it was a great win and those rugby league defensive coaches, as we were discussing, are doing a great service for Australian rugby.

HADLEY:

Well, they certainly have stiffened the defence of many rugby union teams across the world but I am not getting too excited at this moment because the All Blacks will be a much different opposition…

TREASURER:

That's true.

HADLEY:

To anyone we have met so far.

TREASURER:

It will be a great spectacle – the first time the two have ever met in a World Cup final.

HADLEY:

It is remarkable to think it has never happened before.

TREASURER:

It will be great – it will be a great spectacle.

HADLEY:

Alright, thank you Treasurer and we'll talk again next week.

TREASURER:

Cheers, Ray.

HADLEY:

That's our federal Treasurer Scott Morrison in the studio.