ALI MOORE:
Are you shuddering every time you buy bread or milk or petrol? It was probably absolutely no comfort to get confirmation of the pressures that we're all feeling with yesterday's inflation numbers up 1.5 per cent in the June quarter, the CPI, that's up 4.5 per cent in the past year. And that means consumer prices are now growing at their fastest rate in 13 years, if you exclude the spike that we got when the GST was introduced.
But you already knew all of that, you feel it every day, and it's not just when you're shopping, it's when you go to the bank, it's when you pay your rent, it's pretty much everywhere.
Lindsay Tanner is the Federal Finance Minister, Lindsay Tanner, good morning.
LINDSAY TANNER:
Good morning, Ali.
ALI MOORE:
You say it's a problem that you inherited, but the rate of price increases has doubled since you took office. In the short term, what can you do about it?
LINDSAY TANNER:
The main thing that the Government can do about it is to put in place a tough budget with a big surplus, that puts downward pressure on inflation, Ali, that's what we've done.
This inflation figure reflects the April, May, June months, so of course the actual impact of the budget really doesn't come into play until after the end of June, so we've put in place a budget with a $22 billion surplus, very substantial spending cuts, that I was at the centre of identifying, and that will help to reduce the rate of Government spending, which of course has been running at much too rapid a rate, and therefore putting upward pressure on inflation.
There are other factors out there of course, but we are certainly doing everything we can to get this problem back under control.
ALI MOORE:
Lindsay Tanner, I should just say I know that you're at a breakfast function, and that's obviously why it's a little bit noisy behind you, you're not just down at the local café, having a coffee.
LINDSAY TANNER:
That's correct.
ALI MOORE:
But these spending constraints that you've put in place in the budget, I mean all these things take time to flow through, is it now just a fact of life, are people going to have to put up with higher inflation, and of course interest rates at substantially higher levels, for some time, because your spending constraints are not going to hit in the short term?
LINDSAY TANNER:
Well, we wouldn't make predictions about how long it will take to get this problem under control, but clearly it's absolutely essential that we do everything we can to do that.
You're right that it takes a while for inflation pressures to build, and then it takes a while for them to go, or to be got rid of, and of course, some of the factors involved, like oil prices, are beyond the direct control of any Government, and nobody can predict where oil prices will head. They've really gone up very seriously, and we're very conscious of the fact that people are hurting, that there are a lot of people out there who are really suffering under the pressure of these increased prices.
I wouldn't make a prediction about how quickly the inflation rate will come back within the Reserve Bank target zone, there's plenty of evidence around that some things are starting to slow down a bit, that the rates of growth in credit, and things like that, that have been part of this picture, are starting to slow down, but we're just going to keep working away, to make sure that we end up with inflation back in that two to three per cent zone, that the Reserve Bank targets.
ALI MOORE:
If you look at what made up this rise, there are a couple of specific areas that I'd like to put to you. One in particular is the almost 10 per cent increase in prices in financial services, that's all the bank fees and charges that we all know way too much about. Steven Fielding says the banks are being greedy, are the banks being greedy?
LINDSAY TANNER:
Look, I don't believe that there's evidence to suggest that the banks are any greedier than they are at any given point in time, Ali, we all tend to think the banks are greedy most of the time, so I don't think there's anything to suggest that they are behaving in an unusual way.
ALI MOORE:
But what can you do? Can you cap fees? Can you do something like that?
LINDSAY TANNER:
One of the things we're in the process of doing is making it easier for people to switch banks, so there is a greater degree of competition, there is greater pressure in the market on the banks...
ALI MOORE:
But Lindsay Tanner, they all charge the same fees, you know that, there's no point switching, you get the same deal.
LINDSAY TANNER:
Well, they don't actually, in fact if you look across what the flow-through of the impact of increased borrowing costs that they're suffering as a result of the crisis in the United States, there has been a degree of variety across the amounts that they charge.
Now it's only relatively small differences, but ultimately, they're all borrowing their money in the same market, they're all charging the same rates, or similar rates, because the source of money that they have is either overseas borrowing, which is pretty much going to be at a similar rate, or its deposits, and anybody who charges a significantly lower rate for deposits, is of course not going to get any deposits, so there are natural market pressures, that mean that their rates will always be pretty similar.
ALI MOORE:
Of course, Cabinet's been meeting in Arnhem Land, you weren't there?
LINDSAY TANNER:
I've actually been in rural Victoria, I'm now in Darwin, and there's a Cabinet meeting on this morning, but I was actually in Corangamite with Darren Cheeseman, in Colac, opening his electorate office there, with local businesses yesterday.
ALI MOORE:
Do you support constitutional recognition for Aboriginal people, and indeed if you do, do you have any sort of sense of what time frame we can expect?
LINDSAY TANNER:
Look, that's an issue that of course doesn't involve spending money necessarily, so it's not one that I'm directly involved with Ali, and...
ALI MOORE:
But do you support it as a personal issue?
LINDSAY TANNER:
When you're a Cabinet Minister, you don't have personal views, Ali, you have Government views, and so as far as I'm concerned, that's an issue that will progress in due course, with Jenny Macklin, the relevant Minister most directly involved.
ALI MOORE:
Mr Tanner, that sounds a little equivocal, you don't believe in constitutional recognition?
LINDSAY TANNER:
Look, Ali, I support full recognition of the indigenous people, including appropriate constitutional recognition, but that's not an issue that I have responsibility for, it's an issue that Jenny Macklin has responsibility for, and I'll be taking my lead on those issues from here, and what the Government does, in the same way that where there are other direct ministers involved in things, that that's their responsibility to pursue.
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