Helen Coonan (NSW, Liberal Party, Shadow Minister for Human Services) Share this | Link to this | Hansard source

My question is to the Minister representing the Treasurer, Senator Conroy. What exposure do Australian banks have to the economic crisis in the United States?

Stephen Conroy (Victoria, Australian Labor Party, Deputy Leader of the Government in the Senate) Share this | Link to this | Hansard source

We are not immune from these global difficulties, as I have said before, but we are better placed than most countries to weather the storm. It remains the case that our banks are well capitalised and well regulated and do not face the same problems as are being experienced in the US. The government is in regular contact with our regulators. The government has been advised that Australian deposit-taking and insurance companies supervised by APRA are well capitalised, profitable and well regulated and are weathering the turmoil well. Australian depositors can be confident in the soundness of Australian financial institutions.

Our major banks have announced relatively modest exposures to Lehman Brothers, and the regulators have advised the government that these are manageable and in no way take away from the very strong state of our financial sector. It is also important to point out that the Commonwealth government has negligible exposures to Lehman Brothers through the Future Fund. I am sure the states will make any announcements on any exposures, should that be appropriate, as some already have done. The merger of BankWest’s parent, HBOS, in the UK with Lloyds, facilitated by UK authorities, has strengthened the BankWest parent company and the group as a whole. APRA is in regular contact with the UK authorities to ensure the interests of Australian depositors are looked after in the merger process.

On US measures to support AIG, the Australian government welcomes the actions by the Federal Reserve which have the full support of the US Treasury. This announcement will provide much-needed support to the AIG and the broader US market. The Australian government has only negligible exposures to AIG. We are confident that banks and state governments will announce any exposures, should that be appropriate.

It is important for me to reiterate that although we are not immune to international effects we are better placed than most to weather this storm. We have a very well-regulated financial sector and our banks remain strong. Our four largest banks all have AA credit ratings or above. Subprime mortgages account for only one per cent of the mortgage market in this country compared to 15 per cent in the US, and our default rates are nowhere near those being experienced in the US.

The Rudd government are now focusing on the things we can control. We are implementing the Financial Stability Forum recommendations in full and encouraging their implementation internationally. We have implemented the Basel II capital adequacy requirements in full. Through our regulators we have called on our financial institutions to make all appropriate disclosures. Treasury and ASIC are examining the role and regulation of credit-rating agencies with reference to the FSF’s recommendations. We have taken steps to support liquidity in the government bond market to ensure our broader financial markets operate more effectively. And we are strengthening protections for deposit holders through the introduction of a financial claims scheme. We have also moved in recent days to crack down on short selling. All of these measures are designed to protect—(Time expired)

Helen Coonan (NSW, Liberal Party, Shadow Minister for Human Services) Share this | Link to this | Hansard source

Mr President, I ask a supplementary question. The minister’s comments were reassuring. My supplementary question is this: if the Australian economic situation is light years away from that of the United States why then is the Prime Minister rushing there for urgent discussions rather than staying in Australia to deal with the financial problems our pensioners are facing right here and right now?

Stephen Conroy (Victoria, Australian Labor Party, Deputy Leader of the Government in the Senate) Share this | Link to this | Hansard source

It would be easier to take those opposite seriously when they cry crocodile tears over the state of pensioners in this country if at any stage during the 12 years that they were in government they actually did anything credible. For them now to try to suggest that they have, as I think one of my colleagues in the chamber suggested, suddenly discovered a social conscience is really hard to take seriously. The hypocrisy from those opposite goes not just to their attitude towards pensioners; it goes to their attitude to the Prime Minister on this trip. Mr Turnbull himself has only just recently returned from overseas where he insisted that it was important to get face-to-face time and contact with those in these positions overseas. When the Prime Minister of the country—(Time expired)