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

My question is to the Prime Minister. Did the Reserve Bank recommend to the government that the deposit guarantee be unlimited?

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

The Leader of the Opposition has been out there today hyperventilating like a kid on red cordial. I say to the Leader of the Opposition in very clear cut terms: the government, in taking the decision that it announced on Sunday a week ago, did so on the advice of the Secretary of the Treasury that this was the position of the regulators, including the Reserve Bank. That is why the government acted. The government stands by its position and the decision taken. I would draw the honourable gentleman’s attention to this statement, which was made by the Reserve Bank governor today, in which he said that the announcements by the government Sunday a week ago were ‘sensible and the RBA supported them’. The Reserve Bank governor has blown the credibility of the Leader of the Opposition right out of the water.

Jodie Campbell (Bass, Australian Labor Party) Share this | Link to this | Hansard source

My question is to the Treasurer. Will the Treasurer update the House on the implementation of the deposits guarantee?

Wayne Swan (Lilley, Australian Labor Party, Treasurer) Share this | Link to this | Hansard source

I thank the member for her question. The government is committed to protecting depositors in these uncertain times. The announcement by the Prime Minister the Sunday before last was a very important announcement in terms of not just confidence in banking but also confidence in the wider financial system. That is why we announced a comprehensive guarantee, because you have to move with speed and comprehensively. This was supported by the Treasury and by the RBA, and it was fully supported by APRA. It was fully supported by all of our regulators. At the time of the announcement, we indicated that we would be consulting with industry as well as with our international counterparts on the details of the guarantee. We have been doing that.

I would just like to quote from a speech that I gave in the House last Wednesday. It was the second reading speech that I gave on the bill that was introduced. These comments seem to have been missed by the opposition in the debate and discussion that has been going on since then. This is what I said in the second reading speech:

The government is consulting on the interaction between this guarantee 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.

…            …            …

The government will ensure that the short-term money market remains viable and that the deposit guarantee does not provide disincentives for market participants from operating in this market.

That is what I said to the House last Wednesday. The regulators are consulting with industry, as they should, to ensure that the guarantee of deposits and wholesale borrowings does not adversely affect the efficient operation of the short-term money market.

As members will be aware, the deposit guarantee and the term funding guarantee applies to Australian owned banks, Australian ADI subsidiaries of foreign banks, credit unions and building societies. The deposit guarantee applies to deposits in any currency and will extend to an Australian ADI’s branch operations in another jurisdiction. We are working with our international counterparts to ensure that appropriate arrangements are in place for foreign bank branches operating in Australia.

None of these are new issues, but they are ones that the government has been well aware of and has been addressing in consultation both domestically and abroad. They are important issues, so it is very important to get them right. Treasury expects to have concluded consultations shortly and to have finalised the details of the package shortly.

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

My question is again addressed to the Prime Minister. Did the Prime Minister speak directly to the Reserve Bank governor concerning the deposit guarantee prior to his announcement on 12 October?

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

In the midst of a cabinet meeting, which was a meeting of the strategic planning and budget committee of the cabinet, and with members of that committee present or online, at the conclusion of a discussion of a range of options before the government, I explicitly put this question to the Secretary of the Treasury: ‘Is the position being recommended here that of the regulators?’ He answered, ‘It was, and that includes the Reserve Bank.’

Stuart Robert (Fadden, Liberal Party) Share this | Link to this | Hansard source

Where does the buck stop?

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

The buck will stop for the member for Fadden outside. He is warned.