JON FAINE: Now, from the Labor Party, Lindsay Tanner is the Federal Minister for Finance in the Kevin Rudd Government. Mr Tanner, good morning.
LINDSAY TANNER: Good morning, Jon.
JON FAINE: Are you expecting and telling people to prepare for more interest rate hikes this year?
LINDSAY TANNER: We don't make predictions about where interest rates are heading, but it's pretty clear from the statements of the Reserve Bank Governor over the last month or two that the levels that we have had in recent months, and continue to have, are very unusual and shouldn't be expected to continue indefinitely Jon. They dropped interest rates dramatically by over four per cent in the face of the global recession and now, of course, as things are improving, they're starting to claw back a small proportion of that.
JON FAINE: We have, if not the highest, some of the highest interest rates, retail interest rates in the world. Why?
LINDSAY TANNER: Look I don't think that's necessarily accurate. We certainly have high interest rates relative to some comparable developed countries. A lot of that's to do with our current account deficit of the fact that we have very substantial capital inflows. It's all part of a much wider picture, but that's been the case in relative terms for many, many years that our interest rates have typically been higher than say European countries for example…
JON FAINE: …or America or Japan, and so on and so on, and all of our trading partners in fact…
LINDSAY TANNER: Well that's right, but one of the reasons at the moment of course is that our economy is in much better shape, typically a higher level of interest rates is a sign that the economy is ticking over pretty well, and of course what happens is that when the economy's in recession or going backwards, that's when interest rates get dropped. So, one of the reasons there is a significant difference at the moment of course is that Britain, for example, has just had its sixth quarter of economic growth going backwards, whereas Australia has actually got growth going significantly positive, so there's peculiar circumstances right here and now that won't necessarily last forever too.
JON FAINE: Are you happy with the Australian dollar being where it's at because of interest rates?
LINDSAY TANNER: Oh look, I'm neither happy or sad about any level of the Australian dollar Jon, because that's now something that, with the floating currency for over 25 years, no government exercises direct control over and…
JON FAINE: No but you can influence it.
LINDSAY TANNER: Well to a degree, but there are pluses and minuses. For example, if the dollar hadn't have increased in value, as it has, then petrol prices would be significantly higher than they currently are. There's always pluses and minuses wherever the dollar is and of course the fact that is has gone up back around into the US 90 cent level doesn't necessarily mean it's going to stay there. We can't predict these things.
JON FAINE: What's the political cost then of interest rates going up, and I'll accept your prediction continuing to go up, when you've got homebuyers, particularly first homebuyers, influenced in their decision making by a grant and incentives and even state government stamp duty holidays and the like and they get into the market with historically low interest rates and haven't factored in the fact that rates are going to be going up? You're going to cop the political heat from that aren't you?
LINDSAY TANNER: Well first, I haven't any prediction about where interest rates are heading. I've simply reiterated observations that have been made by the Reserve Bank Governor. On the question you've raised about political risk, there are always political risks with economic circumstances and the settings of budgets, interest rates, all of those things. And it's worth noting that the first home-owner's boost does of course scale down very significantly. It's already scaling down. It'll scale down further by the end of this year. There are always going to be small minority of people who will overcommit themselves no matter what the circumstances. Whether that's going to be any different in the circumstances that we've had recently, I think's [indistinct]. I don't think there's any evidence that the proportion of people who make foolish decisions, foolish choices spend too much beyond their means, is going to be any greater. I don't think there's necessarily any evidence of that, but it's all going to be a problem for a small minority.
JON FAINE: Don't you need to warn people that they shouldn't expect the current settings to last into perpetuity, and they have to factor in that there'll be a change?
LINDSAY TANNER: Look, I think it's always very dangerous for governments of any persuasion to get into the business of starting to provide detailed financial advice to people to make predictions about these things. There are plenty of experts out in the market place who provide this kind of advice. All that we would say, and we do say is if you're contemplating big decisions involving money, whether it's retirement incomes or whether it's purchasing a house, get genuine expert advice. I don't think it's appropriate for the Government to be dishing out that kind of advice.
JON FAINE: I'll ask you about banks in a moment, but early this morning, Joe Hockey told us you've refused to react to the changes in the marketplace and you've still got a stimulus package in place for an emergency that now has by and large passed us over.
LINDSAY TANNER: Well I disagree with Joe Hockey fundamentally Jon and he's making some very foolish mistakes. For example, he put out a press release saying there is $4 billion of spending, extra spending here that hasn't been covered by spending cuts on some other part of the ledger. What he was actually looking at was there's been a bit of a recovery in tax receipts and part of that recovery has been an additional $4 billion worth of GST receipts over four years more than was anticipated in May. That money, of course, goes straight through to the states and it’s recorded in our accounts as both tax in and spending out. So of course it's entirely different from the Federal Government spending money on pensions or hospitals or whatever. So he clearly is too lazy, too sloppy to actually study these issues properly. He can't be treated seriously.
JON FAINE: And all morning ever since chatting to him, while he was on air, I think you were on a plane at the time, he told us that he had a letter in front of him from a constituent complaining about a bank that he named. He said it was the ANZ, unilaterally increasing its overdraft fees, not the interest rates, just the fees on an overdraft, from $1,500 a year to six and a half thousand dollars a year and our phones have been ringing non stop with other stories of people with secured and unsecured overdrafts for, usually small business purposes, even up to some millions of dollars with unilateral changes in bank fees often a quadrupling of the annual account fee. Lindsay Tanner, just notification in the last day or two.
LINDSAY TANNER: Well typically, the arrangements between banks and customers given them the capacity to change these fees and the - that's part of the contract and of course what we don't know is the rest of the circumstances there because the deal that individual banks do with small business borrowers vary considerably according to the level of risk, the performance of the business, change in circumstances because the banks have different deals for different kind of customers. So…
JON FAINE: Well I can tell you from the half a dozen complaints we've had on air already this morning, that there is clearly a unilateral decision taken by at the least the NAB and the ANZ sending letters to longstanding customers. We've had people on air who have been customers for 20 years of banks out of the blue, no consultation, finding their fee, not the interest rates, the fee has quadrupled just by a letter from the bank saying from now on, here is your new fee. Take it or leave it.
LINDSAY TANNER: Well Jon, it's difficult for me to comment on that without knowing more detail, and for example whether this is an across the board thing or whether it applies only to specific customers in certain circumstances.
JON FAINE: Commercial overdrafts.
LINDSAY TANNER: Jon, there are all kinds of different circumstances with banks, and the first question you have to ask, which I don't know the answer to is, is this being applied to everybody that's got a commercial overdraft, or is it only to people whose business performances have deteriorated and they are becoming riskier investments for the bank. Without knowing these kinds of things, it's very difficult to make a comment on it I'm afraid.
JON FAINE: Okay, well I think you might find it's an increasing issue because I still have a full board of calls and any number of people wanting to tell the same story, clearly something has happened over the long weekend, well for Melbourne. And for the rest of the country it was business as usual, but they've done something that has enraged people and we're hearing about it left, right and centre.
LINDSAY TANNER: Well we'll certainly seek to find out what's going on, but I just don't believe in casting judgement before I know all the facts.
JON FAINE: So disappointing. I'm trying so hard to get a headline out of you.
LINDSAY TANNER: [Laughs].
JON FAINE: Thank you.
LINDSAY TANNER: Thanks very much, Jon.
JON FAINE: Lindsay Tanner, the Federal Finance Minister, undertaking to have a look at, but not at this stage passing judgement on what we've been talking about pretty much right through the morning.
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