Kevin Rudd (Griffith, Australian Labor Party, Prime Minister) Share this | Hansard source

I assume, therefore, that the alternative Prime Minister is now announcing new policy on the run as well. We know what one policy is at present, which is to have a depositors guarantee that excludes 40 per cent of all deposits around the country. That is where their $100,000 policy goes. If anyone thinks that that is not their policy, Senator Brandis, a member of the shadow cabinet, reconfirmed on national radio today that that is their policy. Those opposite, in answering questions from their constituents, need to answer this question: what of the 40 per cent of depositors which are not covered by their $100,000 cap? That is something which they need to answer—not just to those depositors but also to the roll-on implications for the stability of the entire system.

There is a further set of consequences which have flowed of course from the government’s decisive action a week or so ago, and that is that over the past days we have seen spreads narrow, especially in Australia, and the cost of borrowing for banks fall. The key measure of liquidity in the Australian dollar interbank market, the spread between the 90-day bank bill and the three-month overnight index swap, the OIS, has fallen from 93 basis points at the close of business on 10 October to 63 basis points at COB on 21 October. We have a long way to go in order to maintain continued stability in the Australian financial system but, because of the action that the government took the weekend before last, we have seen movements in interest rates by banks head in the right direction from the point of view of the general economy. We have also seen spreads narrow in terms of the interbank lending rate. This is good news for the general economy and for those who draw upon these financial institutions for loans which they need to get on with the business of expanding their activities out there in the economy, maintaining their business operations or lending for mortgage purposes.

One of the key motivating factors this government had in mind in providing this unprecedented guarantee for wholesale term funding for the APRA regulated banking institutions was this: to ensure that in the future we have our banks in a position to provide loans for businesses and small businesses across Australia. You could have sat there, as those opposite presumably are arguing, twiddled your thumbs and done nothing or you could have acted decisively. This government, acting on the interests of small business across the country, in rural areas and in non-rural areas, took the necessary decisive action. What has flowed in terms of recent moves in spreads and in interest rate actions by the banks is now on the documentary record. That is real action and real results as opposed to short-term politics, in which the alternative Prime Minister of Australia has now become a first-class honours degree holder.

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