ABC TV - News Breakfast

Senator the Hon Mathias Cormann
Minister for Finance


Date: Wednesday, 21 October 2015

Financial Systems Inquiry, Joe Hockey

MICHAEL ROWLAND: Mr Hockey entered Parliament back in 1996 and went on to hand down two Federal Budgets, which failed to gain any traction for the Government, under then Prime Minister Tony Abbott. There will now be a by-election for Mr Hockey’s safe Liberal seat of North Sydney. And the man himself is widely tipped to become the next Australian Ambassador to Washington. To talk about this and also the Government’s response to the Murray review, we’re joined now from Canberra by the Finance Minister Senator Mathias Cormann. Senator good morning to you.

MATHIAS CORMANN: Good morning. Good to be here. 

MICHAEL ROWLAND: Are you sorry to see Joe Hockey leave?

MATHIAS CORMANN: I will miss him. Joe is a very good friend. I have very much enjoyed working with him. I wish him all the very best for his future. 

MICHAEL ROWLAND: How will history judge him as a Treasurer?

MATHIAS CORMANN: I think it is too early to assess how history will judge Joe. As I said, I worked very closely with him. I know that he has put his heart and soul into making Australia a better place. Over the last two years in particular, he has put his heart and soul into putting Australia on a stronger foundation, a stronger economic and fiscal foundation, for the future. All of us in this business we do the best we can. We leave it to others to make judgments along the way and down the track.

MICHAEL ROWLAND: Did he get a bad rap do you think, in the end?

MATHIAS CORMANN: Again, I am not a commentator. I was very much on the field with Joe Hockey. I was working with him as part of the economic team. So I am probably not the best to provide a running commentary on other people/s perceptions.

MICHAEL ROWLAND: Conservative commentator Janet Albrechtsen in 'The Australian' this morning writes a scathing article about Joe Hockey. She says he simply does not deserve to become Australia's next Ambassador to Washington. Do you disagree with that?

MATHIAS CORMANN: Again, as I say, what the future holds for Joe Hockey that is a matter for him and others to tell us in the days and weeks to come. That is not for me to go into. Joe Hockey is a very good person. He is a very good man. He is somebody who has provided distinguished service to Australia in the Australian Parliament for nearly 20 years. 17 years on the frontbench in a senior role in the Coalition. I think he has served Australia extremely well. From my point of view and I am sure that most Australians would share that view, I wish him very well for the future. I wish him and his family all the very best for the future. He will have more contributions to make down the track. He has an exceptional level of experience and background that he can continue to contribute to the public benefit of Australians. 

MICHAEL ROWLAND: Okay, we will hear from Mr Hockey himself when he gives his valedictory speech to Parliament later this morning. Let's move to the reaction to the Government's reaction to the Murray report and in agreeing to the recommendation to impose bigger capital buffers, bigger capital requirements on the major banks. Are you giving the other banks the green light to follow Westpac's lead and raise their interest rates as well?

MATHIAS CORMANN: No, that is not right. Firstly, what Westpac did was a commercial decision by them. All of the advice that we have is that the decision they made in terms of their interest rates wasn't required in order to deal with the additional capital requirements that follow from various APRA decisions. They went well beyond what was required on that front. That is a matter for them. In the end it is a competitive market. What we would say to Westpac customers is to consider whether there are other banks that might offer them a better deal in the circumstances. What we have sought to do in our response to the Murray Inquiry is to ensure that we continue to have a financial system which is efficient and competitive, but which is also resilient and safe. It is a matter of making sure that we have the right balance. We do have a very good banking system. We do have a very good financial system. But it is very important to ensure that we continue to be in the best possible position to deal with future headwinds coming our way and to be in the best position to take advantage of opportunities. In the end, the financial system is a key facilitator in the economy. It is a key contributor to productivity and growth. It is very important that we have the policy settings right.

MICHAEL ROWLAND: Why won't the Government agree to banning self-managed superannuation funds from borrowing to invest in property?

MATHIAS CORMANN: Because we don't believe that there is sufficient evidence there is actually a problem. We agree that we shouldn't allow self-managed super funds to have access to unfettered borrowings, but that is not actually the case. There is an opportunity for self-managed super funds to enter into non-recourse loans in the context of property investments. We understand that there is anecdotal evidence put to us from time to time as part of people pursuing a particular agenda. We actually don't think that there is data to suggest that there is a systemic risk as we speak. We will continue to monitor that situation but from where we sit at the moment we believe the system is actually working as intended.

MICHAEL ROWLAND: In agreeing to break what the Government calls the closed shop regarding industry super funds getting the lion’s share of default superannuation accounts, won't you at the same time, Mathias Cormann, further grow the power of the major banks and the super funds they operate?

MATHIAS CORMANN: No, that is not right. What Labor did in Government in this space is quite outrageous. In coming to Government in 2007 and in the period subsequent to that, they essentially provided a closed shop, anti- competitive arrangement that favoured union dominated industry super funds by essentially giving Fair Work Australia a role that they're ill equipped to perform. The truth is that the previous Government legislated all of the consumer protections and all of the checks and balances required for those Australians who don't make active choices in terms of their own superannuation, which is what we are talking about here. We are talking about default super. We are talking about those superannuation arrangements that apply to people who don't make an active choice for their own super fund. Under Labor's arrangements the system was geared to channel nearly all those Australians into industry funds. We believe that it is important to have appropriate competitive tensions in the system because we want to continue to have downward pressure on fees so that the net returns for people saving for their retirement are maximised. That is something we said in the lead-up to the last election we would pursue. We are doing it carefully and we are doing it in a considered fashion. What we have done in the context of our response to the Murray Inquiry is we said that we would ask the Productivity Commission to give us the model that would best achieve appropriate levels of competition in the default fund market.

MICHAEL ROWLAND: Okay Mathias Cormann, we’ll leave it there. Thank you very much for your time.

MATHIAS CORMANN: Always good to talk to you.