EMMA ALBERICI: The Government seems to be backing away from its calls for the States to join them in relaxing the corporations law as it applies to directors' duties and the extent of their personal liability. Small business minister Craig Emerson told the State s that directors' liabilities were making boards overly cautious and deterring quality candidates from serving on them. But the rhetoric is more about regulation more generally rather than limiting that very law that was set up to stop repeats of high profile collapses like HIH. I was joined earlier from Melbourne by the Finance Minister Lindsay Tanner. Thanks for being there.
LINDSAY TANNER, FINANCE MINISTER: Good to be with you Emma.
EMMA ALBERICI: You've been speaking to State officials about looking at ways to reduce directors' liabilities, is it a wise thing to do at the moment when we're currently seeing a wave of company collapses?
LINDSAY TANNER: We don't want to reduce the liabilities that matter, but we do want to streamline the obligations that apply to directors in companies Emma, because many directors do complain to us that there are so many obligations, so many different reporting regimes and, of course, you've got State and Federal laws. But it makes it very difficult to focus on the business of making money, employing people, getting results for the company. So we're approaching this with an open mind but it is part of a wider process of getting better regulation, getting harmonisation across all the different State and Territory jurisdictions and relieving the burden on business generally. We need to make sure businesses can do their jobs can actually make money, employ people, deliver better outcomes for our economy.
EMMA ALBERICI: With all due respect when you survey company directors about regulation you certainly weren't going to get them saying there was certainly not enough of it, have you identified any in particular that you see as hampering their efforts?
LINDSAY TANNER: We've only just started this process. It's just an initial consultation with the States and we had an early discussion about this a couple of days ago, but it's one of a fairly substantial list of initiatives that we're keen to pursue. We want to make sure that we can get the States and Territories together and particularly where there are different rules in different States which, of course, drive major companies mad because they have to comply with different arrangements in different jurisdictions, that we can get some harmony, uniform national arrangements or at least arrangements that don't conflict with each other and this is one of the areas we're interested in pursuing.
EMMA ALBERICI: It's often said that Australia's corporations law is, if anything, much more relaxed as it stands than, say, that in the US where they bought in the Sarbanes-Oxley legislation far more prescriptive, as it is?
LINDSAY TANNER: That's true. In fact, there are many people in the US would argue that the Sarbanes-Oxley legislation has actually been too prescriptive. It was, of course, introduced in response to things like Enron and other appalling scandals. World com and the things that understandably made people in the political process very worried about the state of regulation there. But interestingly enough the Americans are looking, amongst other things at the Australian regulatory regime as a potential model for future reform. The split between ASIC and APRA, you've got the corporate regulator and financial or prudential regulator. So I think there's certainly no case for heading in the Sarbanes-Oxley direction in Australia. We'll never get it perfectly right. There's always a case for reconsidering the balance and looking at regulator approaches to make sure that we are up to date with developments in the economy, but I don't believe that trying to go down the Sarbanes-Oxley path would be a good thing for Australia.
EMMA ALBERICI: So as far as the regulation goes a tick for the previous government?
LINDSAY TANNER: We've had pretty much bipartisanship on the broad regulatory framework in this country for quite some time, and I think both sides of politics have supported the broad framework that we've got. Although there's room for improvement and specific issues emerge when you have particular problems and we're seeing that, for example, with the question of disclosure on shorting, particularly kinds of shorting, that's something the Government is going to act to amend the law on. We've seen a deficiency in the law exposed. But the broad architecture put in place and has been there for some time we believe is appropriate, and I think it has support from both sides of politics and I think it broadly has support in the business community as well.
EMMA ALBERICI: What are the measures you're looking at to stop shorting?
LINDSAY TANNER: We are looking at amending the legislation to require that both naked and covered shorts will actually be required to be disclosed. This has been an issue that's been exposed by some of the problems in recent times. There have been, of course, a number of problems in particular companies that you and the viewers would be very aware of. But we need to be cautious not to overreact. We've been at the, a stage of a very prolonged boom with a lot of money flowing into the markets, very big increases in stock prices over the last couple of years. And then, of course, you get a substantial correction and that tends to expose things that have inevitably been going a little bit wrong. But you need to be very careful in these circumstances not to overreact and engage in knee jerk interventions. You need to think and consult widely and that's what we're doing.
EMMA ALBERICI: Sticking with the regulatory theme and Operation Wickenby has been in the headlines today with the release of Glenn Wheatley from jail. Now that's the Tax office and crime commission investigation. Have you been able to gauge how successful they've been four years in?
LINDSAY TANNER: I'm of course not responsible for the Tax Office, that's the Treasurer's responsibility Emma, so I don't have a direct line of communication in detail with the Tax Office, but I would point out that we have significantly increased the resources for compliance generally with the Tax Office. There's been recent work done a year or two ago suggesting that there are billions and billions of tax liabilities out there not being collected. So people not paying their way when ordinary working people on PAYE are actually effectively caught in the net, that there's other people out there who are evading or avoiding tax and that more compliance resources will actually deliver a big dividend. So one of the lesser known initiatives in this Budget has been to significantly improve the compliance resources for the Tax Office to ensure that we get fairness across the system.
EMMA ALBERICI: This latest Budget made quite a big deal of efficiency gains to be had across the lick sector and if we just look at Operation Wickenby it's said to have cost the Government so far something in the order of $300 million but in its four years it's only reaped back in tax take about $40 million in extra Government revenue. Are you going to be looking at that and exactly how that money's being spent and what bang you're getting from that buck?
LINDSAY TANNER: I can't confirm the numbers you've just cited. I've got no way of responding to the specific content of the question, Emma. But we are in the process of setting in place a second stage of the razor gang, which is looking at a very wide range of things across the entire public sector, looking for greater efficiencies. It's important to note, though, in the case of things of this kind that in some instances there's a major deterrent effect as well. So although there may be debate about the exact amount of money that's been recouped by that particular operation, bear in mind that had it not occurred there's a very strong likelihood there would have been a lot of other dubious things occurring that have been deterred as a result of that effort. So it's difficult to quantify benefits of things like this. It's important to remember that without that very strong enforcement approach, then you'll end up with a lot more bad things happening.
EMMA ALBERICI: Now if we can just turn our attention to the Budget, this was sold as an inflation fighting Budget but now everyone's had time to crunch the numbers, economists are saying that was more marketing spin than reality?
LINDSAY TANNER: I think that's not correct. You're seeing a diversity of opinion. In fact only a day or two ago a senior analyst from the investment bank Goldman Sachs was quoted as saying had it been any stricter it would have posed a significant risk to the economy and to the rate of growth. So as always, there's a diversity of opinion about these things. The important thing, though Emma, is we have done what we said we'd do. We've implemented election commitments in full and we have done what the Prime Minister said in his speech on 21 January in Perth said we'd do on fiscal policy, namely, a surplus of 1.5 per cent of GDP at least and not relying on any revenue windfall that's what happened. And at least $3 billion to $4 billion of savings. That's what's happened. We've actually had over $7 billion of savings, some announced before the election, some of them revenue but they're still not far short of $4 billion of spending cuts post the election commitments on savings. So we've basically done what we said we would do. The question of the extent to which this Budget will have a downward effect on inflation and interest rates, which is what it's designed to do, is always going to be a matter of debate amongst commentators.
EMMA ALBERICI: Just to pick you up on that, you say you've done what you said you'd do, you specifically said this Budget would fight inflation. Real growth in spending is forecast to be 1.1 per cent in this financial year. Given the criticism you hurled at the Coalition for what you saw in Opposition as profligate spending, are you surprised that when you got down to the business of it you couldn't find more cuts in spending?
LINDSAY TANNER: It's always tough; it's not a lot of fun being around the expenditure review committee table and being the bad guy. That's my job. It's always tough finding savings but we have made a major difference. Spending was running at turns out at over five per cent in real terms. In the financial year about to end the Government spending was increasing by five per cent. We've got that down to just under one per cent. That is a significant impact on inflation and on the effect that Government spending will have on demand in the economy. Some argue we should have gone further, some would suggest the contrary. Ultimately time will tell but we believe we've got the settings right. We are concerned about the international circumstances, the American situation has improved a bit in recent times, but that's happened before. It's gone up and down, it's come in waves. So we are still concerned about the wider international circumstances and we're very concerned to ensure that we don't go overboard, we don't put the brakes on too hard. We've had a modest tightening. We believe it's the right setting.
EMMA ALBERICI: You call this a major difference but the point is you'll increase spending, not cut it?
LINDSAY TANNER: The economy increases as a whole every year, all the time Emma cause you've got nominal GDP forecast to grow at something like nine per cent because of the effect of the mining boom. So, in fact, spending as a proportion of the total economy is actually going to shrink quite significantly by about one per cent of GDP and it's going to be the lowest that it has been for nearly 20 years, since the 89, 90 Budget and tax will shrink as a proportion of the general economy. It depends on which way you look at these things, but I think the fair assessment is we have significantly tightened fiscal policy but we haven't gone overboard. We haven't gone too far because there are conflicting risks out in the wider economic world there that we have to be focusing on. We believe we've got the settings right.
EMMA ALBERICI: Lindsay Tanner, thank you for taking the time to talk to us.
LINDSAY TANNER: Thank you very much Emma.| Media Contact: | Website: |
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| Nardia Dazkiw - 0418 144 690 | www.financeminister.gov.au |
