9 August 2017
Transcript - #2017153, 2017

Interview with Ross Greenwood, 2GB

SUBJECTS: Turnbull Government delivering a better deal on energy prices for Australian families; AUSTRAC civil penalty proceedings against the Commonwealth Bank.

ROSS GREENWOOD:

Treasurer Scott Morrison is on the line right now. Many thanks for your time Treasurer.

TREASURER:

Thanks Ross, good to be with you and your listeners.

GREENWOOD:

Were there any solutions that you came up with today?

TREASURER:

There were five key things that came out of today’s meeting and they all principally relate to ensuring that the big energy companies are up front with their customers about when their offer is expiring that they tell them what that will mean and what their options are and how they can get themselves on the best possible deal. What all this is about at the end of the day, Ross, is ensuring that the power goes back to the customer in all this. Your introduction talking about how frustrated customers feel on this, they can’t control, that’s dead right. It’s the same often with banks, or telcos, or as you say, other companies who work in those bills, that you’ve got to pay. We need to get more power back to the customer so they can be more in control of what’s going to happen and today was about doing that - transferring that power back to the, whether it’s the pensioner, or whether it’s the family, or whether it’s the business, there is too much power being wielded simply by the fact of the complexity, there’s a lot of inertia, people don’t change, it can be hard to do that, and we’ve got to break all that down.

GREENWOOD:

If you’re an 80-year-old pensioner, you shouldn’t have to be shopping around for your energy bill. In the past, you were rewarded for your loyalty, right now you’re rewarded for your disloyalty because if you are quiet, if you don’t do anything, if you don’t act, you’re the one who get slugs, that seems completely opposite to the way in which I think it should occur. 

TREASURER:

Well it’s not looking after your customer in my view, and it’s taking your customer for granted. Now, the difference in New South Wales for example, between worst and best offers, can be about $1400 a year. Particularly what we’re talking about, there are these initial offers and then they revert to what’s called a standing offer, now you’ve got about a quarter of people now on those arrangements that go back to standing offers, and you can be paying, depending where you are, anywhere between $100 and $400 more a year because of the deal you end up on. Now, all this complexity, all this uncertainty, not knowing necessarily what you can do, what your options are, that can actually have more of an impact on your power bill than many other things that are driving electricity prices up. So, we’ve got to address what’s happening in the retail market. That’s why I commissioned the ACCC to do a very exhaustive inquiry on this and we’re not going to wait until that report because there are some things we can do now, and we’re doing that as we announced today.

GREENWOOD:

There is the other aspect of energy prices, and that is the lack of generation in Australia right now, as a result of very high prices of gas, so there’s no incentive for people to build new gas-fired power stations, there is also the closure of the Hazelwood power station, which is a coal-fired power station, there are more coal-fired power stations due to come off as soon as 2020. This is where ultimately there is a shortage of electricity for a growing population. Say for example, last night, here on the programme, I’ll give you one good example of this. We spoke to Mark Collette last night from Energy Australia. He’s head of energy at Energy Australia. Here is what he told us about this year, this summer coming.

“I think we’re on a knife edge at the moment, when we look at the market operator, AEMO, their published reports for the summer, and it’s going to be the tightest summer that we’ve seen in Victoria and New South Wales. We need all our power stations working well to get through the summer, and as long as it’s not too hot we should get through the summer ok. What I worry about is if we have further power stations, or we have unexpected stuff happen, and unexpected things do happen, and we don’t plan for them and build new power stations, or other ways to supply the load, that’s where we’re going to run into trouble. All the fat is out of our system, it’s time to plan for the future.”

GREENWOOD:

So Treasurer that is the boss of one of our biggest electricity generators and he is saying it’s on a knife edge. That must frighten the Government witless.

TREASURER:

That’s why you’ve got to work across so many fronts on this. I’ve already talked about what we’re trying to do on the retail end of this, but we’ve got to act on the gas price as well, the gas price at a wholesale level is really what is setting a lot of the prices. Now we actually have seen that wholesale price for gas come down a little lately. There’s very strong evidence that suggests that came from the Government taking strong action on the gas going offshore, and putting a very strong message to the gas producers that we needed to keep the gas here in Australia for domestic use and we’ve got those measures now in place and I think they’re having an impact, but what you’re talking about, is the generation. Now, I’m a big fan, a big supporter of ensuring that we sweat our coal-fired power stations for as long as possible, to ensure that we keep that base load stability in the system. But, it’s also why the Prime Minister announced that we’re investing in the pumped-hydro at Snowy 2.0. That will be one of the single largest, if not the single largest increase to storage and capacity in our system that we’ve seen for some time.

GREENWOOD:

Even though the Productivity Commission today said that it thinks that the whole Snowy Scheme, it could be actually a white elephant, it could be a waste of money for the Government.

TREASURER:

I don’t share that view at all, but we’re doing the due diligence on that, and others like Paul Broad, as you know has been around this show for a long time, worked for a lot of the different providers and he’s working closely with us on that. Obviously we’re going to be careful about this, but what you’ve got to do is increase the capacity and the supply that’s coming in. Now, these things have long lead times, you can’t just turn around one of these things overnight. It’s 5 to 10 years from initial planning all the way through to delivery on the ground. That requires some certainty for investors to go and put that money in and make those investments. The message we also get back from those retailers today, some of them are also generators, they’re saying they need the certainty around the regulations about what is happening with how out energy markets, and particularly how all the various different sources of energy are treated under our regulations. So, the more uncertainty we have, the less people are going to invest.

GREENWOOD:

Just a little one for you, because I know the next big power station set to close is the Liddell power station in the Hunter Valley. That’s expected to be 2022. Now, would you be encouraging, while there is this gap in our energy markets, now it may not be 2022, it might be all sorted by then, but would you be encouraging that power station to stay open to keep that base load of power, that goes day and night, available to the grid until the pressure is taken off?

TREASURER:

Yes, in short. I think there are those out there who would have an interest in investing in that. Whether that’s the existing owner or not, that’s a matter for AGL I think. When I talk about sweating those existing coal assets for longer – coal-fired power stations for longer – I think that’s a critical part of the mix. We’re quite agnostic about how we get more power into the system and you’ve got to work across all of them, but when you’re working across all of them, you don’t rule one of them out – like coal. And particularly, in this immediate period where you’ve got these existing assets that are there, that are producing energy at a much lower cost than, frankly, a new coal-fired power station would. There’s no such thing as new, cheap energy with a coal-fired power station. It costs a lot more and you’re looking at two to three times the cost of the energy being produced then you’re getting out of the existing coal-fired power station. It can even be higher than that price.

GREENWOOD:

Yes, I understand that. Ok, just one final one for you. Do you think within the next year or so, a person’s electricity bill might be expected to be back down in the very low single digits in regards to price increases as compared with where it’s been over the past few years?

TREASURER:

I certainly hope so and you’ve got to work on all the fronts. We need to give the customers better information, more options to try and get their power bills down, simply by the choices that they have available to them. Now, that can also mean, Ross, changing how you use energy yourself. Many people have already done that, but there’s alarming statistics about what proportion of households aren’t changing their energy usage and modifying how they might do it or use it more smartly, and that means we’ve got to help them with that information to be able to take control of their energy bills more. I think that’s important but right across the board, we obviously want to see downward pressure on rising electricity prices – whether it’s for businesses or for households – because at the end of the day, they’re the bills you can’t avoid and they’re the bills that need to be paid and we want to make that as affordable as possible.

GREENWOOD:

Can I change subjects now and go to the Commonwealth Bank and as I said, I spoke to Ian Narev, the Chief Executive of the Commonwealth Bank, after a [inaudible] at $9.88 billion profit today. There is the issue with Austrac, it is about reputation and quite clearly, the potential fines if all of those accounts were proven, the Commonwealth Bank says there’s just one, Austrac says there’s potentially more than 53,000 accounts each with a maximum penalty of some $18 million. It’s in nobody’s interest – say for example, for the reputation of Australia’s largest company and Australia’s largest bank to be dragged through the gutter. But then, if it’s done the wrong thing, quite clearly an example has to be made. Where is the balance here?

TREASURER:

The first step is that this matter will be determined through the courts through Austrac and the Government doesn’t want to do anything that would any way delay or undermine or divert that process from following through. CommBank are going to have to face the courts on this and the charges that are being brought – or I should say, the case that is being brought – and that’s what’s most important right now. As you may know, yesterday I had Catherine Livingstone come down – the Chair of Commonwealth Bank – and meet with me and it was a ‘please explain’ really about what the board was doing about this. Ian Narev as managing director is responsible to the board, the board at the end of the day is responsible more broadly for the company and its overall reputation, and restoring confidence in what is happening there and that’s the first port of call. So we’ve had a very, I think, constructive, courteous conversation, but at the same time, a very frank one about where all that was at. But step one is they’ve got to face the music in the courts and that’s the next step.

GREENWOOD:

Do you think it would be sensible for Ian Narev to become the next Chairman of the Australian Bankers’ Association given that it is his turn given the current situation at the Commonwealth Bank?

TREASURER:

Well, far be it for me to comment on who should be running the Bankers’ Association.

GREENWOOD:

Well, that’s right, you haven’t had much of it in the last little while.

TREASURER:

[laughs] I’m not going to start now.

GREENWOOD:

[laughs] Well, you can if you like, feel free. I mean, I’ve got no problems about that, you can cast a few more barbs to Anna Bligh if you like.

TREASURER:

No, no, I haven’t and I’m not about to start.

GREENWOOD:

Alright.

TREASURER:

But the point you make, really these matters are for the ABA and they’re also matters for the board in terms of the managing director and any other executives in the organisation. But I’ll tell you what this episode has reinforced, in a few weeks’ time, I’m going to be introducing legislation here in Canberra to increase the accountability of executives in banks for things that they do. Now, not being able to shuffle people to the side and not report those – the Executives Accountability Regime is designed to address specifically when things like this happen and prevent them from happening by a greater sense of account beyond those executives…

GREENWOOD:

I was going to ask you, does a lack of criminal prosecution here – because as you know, Austrac has had to take civil proceedings here and not criminal proceedings here – do you believe that criminal proceedings here would beef up the law and maybe make banks and others more accountable in the very worst circumstances?

TREASURER:

I think these are all very reasonable questions, before we go to the next stage of our response to what’s happened at Commonwealth Bank – we just want to make sure the Austrac case is able to proceed and we don’t want to prejudice that – and obviously, that will be coming before the courts. Now, in terms of what other actions the Government may take here, you can rest assured that – and your listeners can rest assured that – I don’t provide them leave passes, haven’t in the past, not about to start doing it now.

GREENWOOD:

Ok, final one, Royal Commission. That’s been back on the agenda, you’ve obviously got Bill Shorten right now again screaming from the high heaven that there should be a Royal Commission into the banks, if not, even more specifically, the Commonwealth Bank. Is a Royal Commission now the measured response to try and find out what is taking place inside our banking industry?

TREASURER:

As usual, that’s the political response from Bill Shorten. I mean, he still doesn’t have terms of reference for what on earth that he wanted to inquire into and if you asked him four weeks ago if it should have included matters like this, he wouldn’t have understood what you were talking about. That’s what Bill’s doing – it’s just all politics. But what we need to do is focus on the action that needs to be taken right now. So, right now, what have we done? We’ve increased the powers and resources of ASIC to investigate malfeasance, prosecute, do all of those things and they’re getting on with that job. We have improved and changing the way you can make complaints about your bank and get an outcome on that – a binding outcome on the banks – and that process is coming through now with an Act taking that action and the Executive Accountability Regime, that is now about to be introduced into the Parliament. These are all the things that potentially a Royal Commission may have recommended three years from now – well, what good does that do to anyone? We’re doing it now, so our policy is take action now and forget Bill Shorten’s politics.

GREENWOOD:

There you go. Treasurer Scott Morrison, as always, we appreciate your time here on the program.

TREASURER:

Thanks a lot, Ross. Good to be with you.