Malcolm Turnbull (Wentworth, Liberal Party, Leader of the Opposition) Share this | Link to this | Hansard source

My question is addressed to the Prime Minister. Has the Governor of the Reserve Bank recommended that the government’s unlimited deposit guarantee—barely a week old—be changed so that it has a specific dollar cap?

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

As the Treasurer said when he introduced the relevant legislation in parliament last Wednesday:

The government is consulting on the interaction between this guarantee—

that is, that on deposits—

on eligible wholesale borrowing and the guarantee on deposits.

If desirable, the government will proceed with measures to clarify the intersection of these guarantees and facilitate their operation.

Joe Hockey (North Sydney, Liberal Party, Manager of Opposition Business in the House) Share this | Link to this | Hansard source

No, that’s not the question!

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

I am coming to what the honourable gentleman has asked. This was clearly outlined by the Treasurer in his introduction of the legislation last Wednesday. Therefore, from the government’s point of view, the guarantee in terms of deposits remains absolute. The question at issue is whether deposits above $1 million and beyond should have an insurance premium attached to them consistent with the insurance premiums which are relevant to term wholesale deposits, which applied to the term wholesale lending arrangements of the major commercial banks. That is entirely consistent with what the government said, through the Treasurer, in his statement to parliament last Wednesday.

I would say this to the honourable gentleman: the guarantee, as it applies to all deposits, is absolute.

Christopher Pyne (Sturt, Liberal Party, Shadow Minister for Education, Apprenticeships and Training) Share this | Link to this | Hansard source

Who’s on both sides of the street now?

Harry Jenkins (Speaker) Share this | Link to this | Hansard source

Order! I will walk one side of the street and take decisive action against the member for Sturt!

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

The question at issue is when, as the Treasurer foreshadowed last Wednesday, at the intersection of these two regimes, you have competitive neutrality between those two regimes for the most significant depositors—that is, north of $1 million, beyond $1 million. If you are holding a deposit in a bank of less than $1 million, which most people in this country do, that is at 99.5 per cent of depositors.

And I say to the honourable gentleman: the government’s guarantee for depositors remains absolute. What we are talking about, as the Treasurer foreshadowed last Wednesday, is the intersection of the two regimes at the most upper end, and that is the subject of the discussion occurring between the regulators and the banks as we speak. Despite multiple questions from those opposite over the course of recent days, for the government in parliament to go to the detail of those commercial negotiations is not the responsible course of action until they are resolved. Once they are resolved, that will be put fully and formally and finally into the public domain. That is the right and responsible course of action.

What is the alternative course of action for those opposite, who advocated a $100,000 limit? For the benefit of the honourable member, who has not bothered to tell the public this, if Liberal Party policy was implemented, 40 per cent of this nation’s total deposits would not be covered. That is Liberal Party policy. This government took a different view that all deposits of all APRA-regulated institutions in banks, building societies and credit unions should be covered. The question at issue for those who have deposits at the extreme upper end of the spectrum—north of $1 million—is whether an insurance premium should be attached to it. That is what is at issue here. But 99.5 per cent of deposits are less than $1 million. What those opposite were saying, with their $100,000 guarantee, is that 40 per cent of this nation’s deposits would get zero guarantees. That is Liberal policy; that is what they wanted to do.

We have a completely different approach. Our approach was not only advised to us by the Secretary to the Treasury but also advised to us by the Secretary to the Treasury based on the consultation and advice that he had in turn received from the economic regulators. This is a clear-cut course of action for the future. Those opposite simply want to make cheap, short-term political points.

I would say to the member for Wentworth, who regards this as an entire hype, to use his own terms, that the interests of working families, the interests of households, lie in responsible action by a government responding to the advice provided to it by the regulators to act appropriately to maintain the stability of our financial system to make it possible for our banks to open up lending again to the small businesses of Australia and to provide our banks with the greatest opportunity to provide maximum pass-through for the interest rate burden being faced by those struggling households out there—an interest rate burden compounded by the 10 interest rate rises in a row brought about under their regime when they were in office and, I have got to say, an interest rate regime which the honourable gentleman opposite regarded as a mere trifling matter when he derided a 25 basis point increase.

This demonstrates more broadly how out of touch the member for Wentworth has become: regarding the global financial crisis as hype and regarding all these matters of the stability of the financial system as hype, and regarding the security of depositors—not just 60 per cent of deposits but the entire scheme—as necessary to the future. That is not hype either. We have acted responsibly and we stand behind the actions we have taken.