STEVE PRICE: The big issue for the Government right now is the $25 billion odd dollars locked away in mortgage funds with people unable to access their capital. Finance Minister Lindsay Tanner, thanks for your time again.
LINDSAY TANNER: Good morning Steve
STEVE PRICE: I understand talks are continuing on this issue of money locked away, is there any room for you to move there?
LINDSAY TANNER: We are conducting serious discussions with both Treasury and ASIC, the corporate regulator to look at possibilities. This of course is an issue that affects different people in different ways. There are some who have serious problems as a result of money being locked up because they were about to withdraw it, for example to be part of a transaction on a house, or so on. But definitely for the bulk of people, these are longer term investment, and while the money remains secure, and while they’re getting an income stream, then everything is ok, they don’t actually need to withdraw it immediately. So there are a lot of different circumstances here and we’re seeking to work through all the possibilities with the regulators to see if there is a way to give relief to those who are actually suffering as a result of these problems.
STEVE PRICE: I guess that is ok, although I read in the Financial Review this morning an example of a bloke, 68 year old pensioner Jim Lamb, who has got money in the Challenger Howard Mortgage Fund, he’s still being paid as you say, his pension from that fund, but he wakes up in the night wondering if he’s ever going to be able to actually access his money?
LINDSAY TANNER: Those concerns are understandably Steve, and we are in the middle of an unprecedented international financial crisis which of course is scaring a lot of people, very understandably. But I think in a general sense, these major funds like Challenger, like Colonial, AXA and Perpetual, they’re perfectly well-managed and proper outfits that people shouldn’t have concerns about in a specific sense. It’s understandable that when they freeze these redemptions, that people are going to be worried, but the reason for that is that when you get a sudden flow of redemptions, because their investments are in things that aren’t easy to just sell overnight, particularly property, it’s very difficult for them if a whole lot of people want to withdraw their money all at once so they do have to but a break on it. We’re confident that this problem will be resolved over time, and that people like the pensioner that you named don’t need to worry about the longer term.
STEVE PRICE: This is unlike the funds that are not even now still paying out their interest payments, funds like City Pacific, which really went into a lock down before the global financial crisis even hit.
LINDSAY TANNER: That’s correct, in fact, it’s a very complex picture, because there is a significant number of funds even ones that had big problems and actually went into effectively bankruptcy months ago that are all part of this spectrum of mortgage related funds that are outside….
STEVE PRICE: Are you concerned that some of them are using the global collapse as an excuse?
LINDSAY TANNER: Steve, I couldn’t really comment on what they are saying publicly and inevitably when these do collapses occur, the liquidators and regulators end up getting to the bottom of what’s happened and sometimes people get charged for breaking the law, as we’ve seen. So there has been a whole variety of things here, something like half of the mortgage funds that have put freezes on redemptions did so before the government’s guarantee on bank deposits was announced. So, in effect you’re dealing with a problem that’s got various factors in it. We’re looking to work with the regulators to try and relieve the pressure on people who are suffering specifically as a result of it. But it does reflect the wider international problems that are really playing havoc with the international economy and having a significant negative effect on Australia’s economy.
STEVE PRICE: A question from Ken, who says as long as I get my living payments I’m glad the mortgage funds have locked up the money because I know that when it’s all over my money will still be sitting there. My question is, if this is a world crisis, why is the Aussie dollar the only one that’s dropping?
LINDSAY TANNER: It’s actually not the only currency that is dropping, but the reason why there is a specific fall in the value of the dollar, is that we are very much connected to commodity prices, so the world sees our dollar as something of an indicator of the prices of minerals and we’ve seen of course, those prices at record levels in recent times and the Australian dollar was at near record levels too. Now because world growth is slowing, the demands for those commodities have dropped and therefore the prices are dropping and our dollar is dropping with it. But on balance that’s a good thing. Because you’ve seen a lot of people of export industries, in import exposed industries who have been really squeezed by the high dollar, they’re getting some welcome relief now and that will contribute to greater economic activity in the economy. So it has some downsides there’s no question about that, but in the current circumstances it’s an important stabiliser that helps keep growth and employment ticking over.
STEVE PRICE: You led by examples of the slow down, are you getting similar feedback that the economy is slowing?
LINDSAY TANNER: Look I think the honest answer Steve, is that it is mixed. There are always stories of that kind. Even at the height of the boom, you’ll hear people are doing it tough and that’s just the nature of a big, modern economy in a country like Australia. But we have to be careful not to overstate the individual stories, until you actually get wider data. But yeah, I’m picking up things of that kind around the place, but equally I also speak to people who say no, things are still going pretty well. So the true answer is that it is mixed and we’ve got to very careful not to talk ourselves down. Confidence is critical in this current situation and Australia still has still got the best set of fundamentals in the world and we want to make sure we don’t scare ourselves into our shells, that we don’t…
STEVE PRICE: I just get a sense that people are going into their shells, whether we talk confidently or not.
LINDSAY TANNER: I think there is probably some truth in that in some areas, and certainly in parts of Sydney where you broadcast to, there is no question that people have been doing it tough for awhile now more so that many other parts of Australia, particularly those mining boom states. So there are certainly parts of Australia where that’s true, but equally there are other parts where things are still going along pretty nicely. We’re starting to feel those negative pressures, I think that’s true, but equally you’ve got tax cuts that are now flowing, you’ve got the fall in the Australian dollar is relieving pressure on companies that otherwise would be really struggling.
STEVE PRICE: I wanted to ask you about that – your $10.4 billion rescue package, (inaudible) pensioners and parents of children who earn less that $100,000 will start to get that in the first week of December. Are you convinced that the trickle down effect as you’ve described it will help or are you concerned that you haven’t targeted that money and you may simply be putting money in the pockets of people who will go out and buy iPods and plasma TVs and bikes for Christmas?
LINDSAY TANNER: There is no doubt it will help and the key thing about this package is to get money moving, because what happens when you get these big downward pressures is that people stop spending, business lose turnover, and they lose profits, they put people off and then those people can’t spend because they’ve no longer got jobs and so the cycle continues. What we’ve got to do is push back against that really hard and although there are other factors such as interests rates coming down, value of the dollar falling that also do push back, we made the judgement that we’ve got to inject some money into the economy.
STEVE PRICE: Regardless of where it’s spent? Well, you can’t tell people where to spend their money.
LINDSAY TANNER: Exactly, and the truth is, that some of it will be saved, and some of it will be spent on things that you or I may not approve of.. some of…
STEVE PRICE: What you and I think about that problem probably doesn’t matter does it?
LINDSAY TANNER: No no, that’s right, that’s right. But the key thing is to keep spending ticking over, because having lived through a significant downturn, 15 or 16 years ago as you have, what we know happens is that once the cycle takes hold and people are spending less and business are turning over less. It’s very hard to break, so if we don’t act now, we’d end up having to a lot more a little way down the track.
STEVE PRICE: Malcolm Turnbull says the package is a serious blunder. But have you worked out yet what he says he would have done?
LINDSAY TANNER: No I haven’t. In fact, Malcolm Turnbull has a different position on all these issues everyday of the week. He’s slick and tricky and taking every conceivable position and playing sneaky little politics and sniping. One minute he’s saying I’m bipartisan – I stand shoulder to shoulder with the Government, support its package, support the bank guarantee. And then the following minute he’s attacking it, criticising it. So, it’s about time that he actually stood up and said precisely what he stands for and what should be occurring, because he’s got every position under the sun, sometimes contradicting himself within hours.
STEVE PRICE: Well news poll today says 65 per cent of Australians are satisfied with the way Kevin Rudd has dealt with the crisis. That must be satisfying for you?
LINDSAY TANNER: Steve, to be honest, most of the time we don’t take a huge amount of notice of polls, we take some notice.
STEVE PRICE: Lindsay, really?
LINDSAY TANNER: No no, we take some notice, but it’s amazing how the public mood can shift and in the current circumstances it is such an unusual situation, that we’re very focused on trying to deal with what is an unprecedented situation.
STEVE PRICE: Have we seen the worst of this world crisis yet?
LINDSAY TANNER: Look I hope so, and I’m optimistic that we have. But as you would have observed over the past twelve months it’s come in waves. Each wave has been bigger and uglier than the previous one. So there was a bit of a burst in August/September last year, and then it got into the new year and around March/April there was a very serious period and then it receded and so on. So I’m optimistic, I think that things are showing signs of settling down and that the big interventions by the foreign governments and regulators we’ve seen over the last month or two are starting to work, but nobody can be certain.
STEVE PRICE: Appreciate your time, thanks a lot.
LINDSAY TANNER: Good to talk to you, thanks Steve.
-ends-
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