STEFANOVIC: Welcome home, Prime Minister.
PM: Thanks, Karl.
STEFANOVIC: Nice to see you again, now we went to the news this morning, our dollar has launched through parity and that's where it's standing right now, first of all your thoughts on that.
PM: This is a mixed thing Karl, it's good for some of our industries and bad for others, particularly for tourism. As a Government we're going to work with every part of Australia to look at their own regional development and economic plan, that's what Simon Crean is doing as our Minister for Regional Australia, so it's swings and roundabouts, good for some, bad for others.
STEFANOVIC: And really bad for exporters, really bad, they've had a tough run of it.
PM: They have had a tough run, it's obviously if you rely on imported components to do what you do then it makes a good difference for you, but if you're competing like tourism, international education another big one, it makes it really tough.
STEFANOVIC: Also this morning $600 billion the US is printing in cash and there is also talk of a rate war around the world, a currency rate war around the world. These are uncertain times.
PM: These are still uncertain times, the world has been in an uncertain economic phase since the global financial crisis and whilst our economy is emerging strong, and we should all take joint and shared pride in that, right around the world there's still a lot of fragility and a lot of risks. I will be going soon to the G20 meeting, where President Obama and other world leaders will be talking directly about these questions. We've had some successes, new financial rules, new rules for the IMF, the International Monetary Fund, but there are risks out there Karl and it takes careful work to manage it.
STEFANOVIC: Right, and risks, the thing that really stings Australians are that they're fully aware of these risks and then they see the Reserve Bank come out and raise interest rates, but then the Commonwealth Bank go even more than that, it really, really stings. We also hear this morning that the Greens, Andrew Wilkie, may back Joe Hockey's plan to try and get a little bit more accountability into the system, your thoughts on that?
PM: The Treasurer announced in early October that he would bring forward a plan to bring even more competition into the banking sector, we've already done some things, we've made it easier for people to vote with their feet and change their mortgages and I think there'd be a lot of Commonwealth Bank customers who are thinking about that right now. We are working on a comprehensive plan to bring more competition into the banking sector. Of course banks are vital to our economy so you've got to be careful, you've got to make sure the changes are right and that they're going to have lasting effect and that's what we're doing now.
STEFANOVIC: Will you legislate to regulate?
PM: We're looking at questions like giving the ACCC, our competition watchdog, greater powers. These are the things that the Treasurer has been working on in a very careful way since October and they build on our earlier competition reforms like making it easier to get out and change your mortgage.
STEFANOVIC: But none of those are really regulation, as you going to go as far as legislating to regulate?
PM: Look, you certainly, in a modern economy, can't regulate interest rates. Joe Hockey, of course floated this idea, but those of us who have lived long enough Karl, remember when interest rates were regulated in this country and what that meant was young couples, small businesses could not get finance, or if they did get it they got it in an expensive cocktail, with some coming from a bank, some coming from another sort of financial lender and they used to end up paying astronomical interest rates, so we're not going down that regulate the interest rate path, that's economics discarded for the last thirty years, but we are increasing competition, which puts pressure on banks to do the right thing.
STEFANOVIC: You see, you would understand and you would know that there is real anger, searing anger out there, particularly at the Commonwealth Bank and probably the rest of the banks will follow suit here because effectively what they have done is absolutely thumbed their nose at the Government, they don't care.
PM: Karl, I'm angry and I understand why Australians paying mortgages are angry and as the Reserve Bank has said there is really no justification for interest rate movements above and beyond what the Reserve Bank independently decides our economy needs. So, yes, angry with the banks, angry with the Commonwealth Bank for this move -
STEFANOVIC: But nothing you can do about it?
PM: Well we can increase competition and that's the package the Treasurer is working on now and individual customers can say 'I've had enough' and take their money and their business somewhere else.
STEFANOVIC: Is it naive for Australians to think that you and your Government can do something about interest rates, have they got it wrong?
PM: The Reserve Bank sets interest rates independently and we've got to have that system, you don't want me or the Treasurer waking up every morning and going 'gee, what should interest rates be today'. Once again that's the economics of thirty years ago, we moved to independent setting of interest rates deliberately for our modern economy. So the Reserve Bank does that. What then keeps the banks honest is the pressure of competition of customers just saying 'I'm not interested in your bank anymore, I'm going somewhere else'.
STEFANOVIC: Alright, the Greens have also suggested a move to fixed gap mortgages and also a ban on two dollar ATM fees, are they things that you would support?
PM: Well, once again, increasing competition is about making sure that people get a better deal and that's what the Treasurer is working on, but once again Karl I'd just say, you know, you'll hear a million ideas in this area and ideas are a good thing, but the health of our banking system, vital to our economy, one of the reasons we came out of the global financial crisis strong, is unlike other countries we didn't face the prospect of a bank collapsing, so when we're talking about changing settings for banking, patient, careful, methodical work, rather than snap shot ideas is what's called for.
STEFANOVIC: I think people, there are going to be people at home, and you know only too well there will be people at home this morning going 'I just want the Government and I want Julia, our Prime Minister, to do something about this' and you're not.
PM: Well, step one, we have done some things to increase competition and if you've had -
STEFANOVIC: It didn't work though, the Commonwealth Bank has almost doubled -
PM: Well, if you'd had it with your bank, used the power of your dollar, of your business to pressure for a better deal and go elsewhere, we've made it easier for people to do that. The Treasurer has already said, in October, that we will bring forward a package to put more pressure on and create more competition.
STEFANOVIC: Let's talk about Schapelle Corby, just briefly, now Schapelle Corby, you've said that you will support a clemency, her clemency, how far have negotiations got with Indonesia in terms of perhaps a prisoner exchange here, and the second part of the question is what if she doesn't want to come back?
PM: Well, two things Karl, I went into the meeting with the President of Indonesia, President Yudhoyono and indicated that I personally supported Schapelle Corby's bid for clemency and the President of Indonesia is considering that now, so that's the potential for a sentence reduction from the twenty years. But out of our discussions also emerged a discussion about a transfer of prisoner agreement, which would enable, for example, Schapelle to serve the balance of her sentence in Australia, where should could get things like mental health services and support. Now, I want to be really clear about this, there's a long way to go, I have to negotiate the agreement and the agreement has to go through the Indonesian Parliament, but the fact that the President talked to me about it in the meeting and came out of the meeting and publicly announced that Australia and Indonesia would be working on this is a good sign. For Schapelle, obviously if we got to that stage she would be able to make a choice, but here in Australia we do have the ability to provide health services and particularly mental health services and support, that it seems to me Schapelle is in need of and not able to access where she is now.
STEFANOVIC: Alright, busy times. Prime Minister, thanks for your time.
PM: Thanks Karl.