NEIL MITCHELL: While Kevin Rudd is touring the world, in the studio is the acting Prime Minister Julia Gillard, good morning.
JULIA GILLARD: Good morning Neil
NEIL MITCHELL: If you'd like to speak to the acting Prime Minister 9690 0693 or outside Melbourne 13 13 32. Is there any hope that this Government turning the banks into good Australians and getting them to stop this habit of increasing interest rates ahead of the Reserve Bank?
JULIA GILLARD: Well my colleague Wayne Swan is working hard on making sure that there is competitive pressures on the banks, we know that there's a problem and people get locked into their mortgage and then they face these increases. We want them to be able to shop around, we want them to be able to change banks, we want them to be able to say to their current bank: “unless I am being treated properly, I am off to another bank”.
Now we've got an interim arrangement with the banks to facilitate swapping. Wayne Swan is making sure that that's going to be a permanent, ongoing arrangement that will be available from November. But the interim arrangement is there now. And my message to Australians who hold mortgages - I am certainly an Australian with a mortgage - if you think you are getting a dud deal from your bank then shop around.
NEIL MITCHELL: Well Wayne Swan hasn't frightened them so far. The NAB has increased their rate ahead of it and others are looking at doing the same in the past few days.
JULIA GILLARD: Well the thing that really puts pressure on whether - its banks or any other big business in our society - is the threat of competitive pressure. Banks need customers. They need people who bank with them; they need people who borrow from them. And it's the borrowers who can send a message that they‘re not prepared to be treated in this fashion and they're going to shop around if they think they are getting a bad deal.
NEIL MITCHELL: So punish them?
JULIA GILLARD: Well I think we're all consumers in that sense and if we've got a mortgage and we that we're not being treated in that mortgage the way we should be then there's the ability to put pressure back on your bank.
NEIL MITCHELL: Well do you disagree a little with Governor of the Reserve Bank; he said that it's being unrealistic to expect the banks to do otherwise.
JULIA GILLARD: Well look, I've seen the comments of the Governor of the Reserve Bank and obviously the Governor of the Reserve Bank's independent - that's a good thing - and he can make comments as the independent Governor of the Reserve Bank.
What we're saying as a Government is we understand the pressures that interest rate rises have put on working families. We understand the pressure that comes when banks they lift their rates independently of the Reserve Bank interest rate movements. And one of the things we can do to help working families with that is make it easy to swap banks.
What's the long term solution? Well a long term solution is to get inflation under control and if we can get inflation under control we can put downwards pressure on interest rates.
NEIL MITCHELL: But is the Governor right (inaudible) banks reasonable to put their rates up ahead of his rate, ahead of the Reserve Bank. Is he right?
JULIA GILLARD: Well I think the Governor is making a point as he sees it about our banking system and the global economy. Obviously he is noting that there have been problems in global financial markets arising from the sub prime crisis in the states. He's saying our banking system needs to react to that; he has made a set of statements in that context.
What I'm saying, what Wayne Swan is saying and what the Government is saying is we understand we've got to look at the global economy is doing. One of the reasons the Prime Minister is overseas is to talk internationally about the global economy. Our economy here of course we've got to be dealing with inflation. And then at the level of working families faced with these pressures, government has got to deal with inflation to put downwards pressure on official interest rates. What's the way of dealing with other increases? Well, through competitive pressures.
NEIL MITCHELL: But in simple terms should the NAB have put up their rates ahead of the official rate or not?
JULIA GILLARD: Well we're saying to banks that we believe that the pressure on working families when rates go up has to be recognised and factored in when they make their decisions.
I am not going to lecture individual banks. I am going to say we understand when interest rates move when the official interest rate is moved. When it comes to other interest rate movements Wayne Swan's been very clear with the banks that he believes they need to be mindful of the pressure on working families. And he said to those families if you think you're not getting a good deal, then shop around.
NEIL MITCHELL: The Governor of the Reserve Bank also says there is no real mortgage stress out there. 99.6 percent of people are up to date with their mortgages. Do you accept that this mortgage stress in an invention?
JULIA GILLARD: No, I see families all the time under mortgage stress. As you know Neil, my electorate is in Melbourne's west. It's home to a lot of new housing suburbs. People are very highly geared for debt....
NEIL MITCHELL: How could he get that wrong? How could he get that wrong and say there is no mortgage stress when we keep getting this message that people are really suffering?
JULIA GILLARD: Well I think we are probably talking a little about two different things here. The Governor is reflecting the fact that people are overwhelmingly paying their mortgage payments on time - that isn't telling us how difficult it is for them to make sure that those payments get there on time and what else they've had to cut and how the family is absorbing that pressure. I see that every day in Australia. I see it reflected in my own electorate where people have cut back to the bone on other family expenditure in order to keep the dollars going into the mortgage because they want to keep the house. It's the great Aussie dream and they want to keep the house.
NEIL MITCHELL: So the indication to you of mortgage stress is not people having to give up mortgages or failing to pay them, but it is people who are suffering to pay them?
JULIA GILLARD: It's both. We know that there have been problems with increasing arrears rates...
NEIL MITCHELL: But he's saying there's not.
JULIA GILLARD: Well when we do the sort of spatial analysis we know that there have been problems in some parts of Australia with increasing arrears rates. We've had some data come out about that. So that's one indication of mortgage stress - people who do everything they can to pay the mortgage and ultimately fail. Another indication of mortgage stress is what else gets cut back in people's lives in order to keep those mortgage payments going in.
NEIL MITCHELL: Do you think that mortgage stress is the fault of the banks of the banks too? Have they lent money - too much of it too easily - to people who couldn't afford it?
JULIA GILLARD: I think there's a whole series of things that have gone into where we are now. Obviously house prices have gone up unbelievably. I mean, we survey across Melbourne, we know that house prices have gone up. Consequently the burden for people getting into the housing market, the actual volume of the debt is much higher than it use to be. And so the percentage of your income that goes to servicing the mortgage is higher that it use to be. And there's not much fat there, so interest rates go up and people really experience those pressures.
NEIL MITCHELL: And there is a report today that housing prices could jump 40 per cent in the next five years. Is that accurate do you think?
JULIA GILLARD: Well I am not a predictor of the housing market. Obviously, we have seen housing prices go up a lot. The Government has recognised there is a big problem with housing affordability. We are obviously doing what we can to deal with inflation to put downward pressure on interest rates.
We've got some particular policies too - and you know, they're modest plans, but they're our attempt to make a difference in this area. Special saving accounts that have special treatment to help people get that all important first home buyers deposit together or to try and get into the housing market because it's just so difficult now. Some new arrangements to try and facilitate the development of affordable housing. Obviously we've got a focus on homelessness because people for who drop off the edge whether it's out of a mortgage situation or out of a rental situation, there are too many families that are at that brink of homelessness and we want to address that.
NEIL MITCHELL: Would you like to see the states cutting back their stamp duty?
JULIA GILLARD: We've said to the states - and one of the policies we announced during the election was trying to lift the burden of developer charges in new estates. Obviously in new housing estates - in my area of Melbourne and cross the board - there's a substantial weight that goes on developer charges when you buy a new home. We've got a policy to try and address that to lift some of that burden.
NEIL MITCHELL: Is there fear within the Government that the predictions are right that Australia could be facing recession at the end of this year?
JULIA GILLARD: Well what we've said about the Australian economy - the Prime Minister was saying it yesterday and he is going to say it overseas as he has these discussions with global leaders - is there as concerning signs in the global economy flowing from sub prime mortgage crisis. Obviously that means further credential regulation. The strength of global financial markets is important.
But against that backdrop Australia has a good story to tell. Our economy generally, whilst we've got to deal with the problem of inflation, our economy generally continues, we've got good employment rates - all of those things are continuing in this country. It's a great place to invest, the resources boom is continuing. So the Australian story the Prime Minister is taking to the world is one where our economy is continuing, it's continuing to grow. We've got to deal with inflation pressures, we've got to deal with our infrastructure problems, we've got to deal with our skills problems.
NEIL MITCHELL: As you've said, or the party has said right through the election campaign: much of Australia's economic health is based on the resources boom. Is this over simplifying it? The United States goes into recession, China cant afford to, well they cant afford to buy stuff from China therefore China doesn't need to buy materials from us to make what they were selling to the United States and we are all in trouble. What's wrong with that theory?
JULIA GILLARD: I think that's a little too simple Neil.
NEIL MITCHELL: That's the danger isn't it?
JULIA GILLARD: Well look Chinese growth rates are very strong. We know that. The Chinese economy is going ahead in leaps and bounds. This is a nation that is developing that is moving to super power statues, its economy is strong, it is a voracious consumer of the things that's we've got to sell. I talk to the resources industry regularly....
NEIL MITCHELL: It's more of voracious producer. I don't know if it's a voracious consumer, it's a voracious producer.
JULIA GILLARD: Its buys our raw materials, its buys our resources....
NEIL MITCHELL: Nobody buys what it produces without raw materials they don't want our raw materials.
JULIA GILLARD: Its own domestic economy is of course growing in leaps and bounds, so Chinese demand is ever growing as its economy grows. Obviously China sells around the world and its global trade is also strong. And its demand for our resources is strong and that demand is continuing.
NEIL MITCHELL: So is the Government concerned about the danger of recession later in the year?
JULIA GILLARD: We're concerned to keep our economy strong and we are identifying as the things the government has to deal with. The challenges, dealing with inflation - that's very important and the Prime Minister and the Treasurer have been consistently been talking about dealing with inflation.
We've got to deal with our skills challenge. Our labour market is tight, we've underinvested in training. That means that there are real skills shortages out there now we've got to do something about that. We've got problems with infrastructure and infrastructure creates bottlenecks in the economy and we've got to deal with that.
NEIL MITCHELL: We'll take a break. Calls for the acting Prime Minister Julia Gillard in a moment. And in a moment is the Rudd razor gang (inaudible)
JULIA GILLARD: Thanks for that Neil.
NEIL MITCHELL: There is a number of issues I want to get to so we'll be quick as we move along. Peter - go ahead please Peter
CALLER:Yes, good morning Ms Gillard.
JULIA GILLARD: Good morning Peter.
CALLER: Hello, how are you?
JULIA GILLARD: I'm good thank you.
CALLER: That's good. With the banks, I've seen this cycle before in the late 80s, where the banks just throw money at people that can't afford to buy a house which is a dream for everybody of course...
NEIL MITCHELL: Question Peter?
CALLER: Yes, my question is why can't we re-regulate the banks?
JULIA GILLARD: Well Peter I can understand your concerns about people getting into trouble with their mortgages but we need a competitive banking system. We need a banking system that's meeting modern needs and when we look at our banking system we don't have big sub prime problem here. The sub prime problem has been in the US and that's what's feed into global financial markets, so...
NEIL MITCHELL: There's no intention to re-regulate banks?
JULIA GILLARD: I mean there is banking regulations in this country; lets not pretend there isn't any. There is banking regulations in this country. But beyond banking regulation, I think the thing that is important is people using their power as consumers and shopping around. And I was just saying to Peter whilst I understand his concern, and some people do get into trouble, there's no evidence of big problems in terms of who is being linked to in there way that there was in the United States which started off the sub prime mortgage problem.
NEIL MITCHELL: There is a report in the papers today that there's a proposal before the Government to quite simply guarantee $20,000 in accounts. Anybody's account guaranteed in case banks go under. And people hear ‘banks go under' and they just shudder. Is that proposal before government? Will the government do it?
JULIA GILLARD: This has been around for a long, long time Neil. As I understand it, it was first floated in 1997 around the time of the Wallace Inquiry and it's been looked at again by a government agency. So its one of those policy proposals and ideas that's been floating around government for a long period of time.
NEIL MITCHELL: But is mood now that we take it more seriously to guarantee the first $20,000 of a person's bank account?
JULIA GILLARD: Look I certainly want to say our banking system is strong, it is regulated, it's well regulated, it's appropriately regulated. I don't agree with Peter's idea of about full re-regulation. It is appropriately regulated, it's very stable. This has been something that has sort of been floating around for a long period of time.
NEIL MITCHELL: So was it under consideration though?
JULIA GILLARD: Well look it's sort of there, it's been developed by a number of agencies - APRA, Treasury and ASIC - but it's something that's been there for a long period of time. There's no immediate plans to deal with that policy proposal. And as I say it's as old as 1997.
NEIL MITCHELL: And you see no need to deal with it urgently?
JULIA GILLARD: No I see no need to deal with it urgently. Our banking system is well regulated and strong.
NEIL MITCHELL: Now it's reported also today that a significant cut is planned to the CSIRO as part of the razor gang. Is that right?
JULIA GILLARD: I've seen those reports Neil and I actually sit on this razor gang - it's the expenditure review committee. We certainly don't refer to it as Gillard's garrotte or gelatine or any of those terms.
NEIL MITCHELL: Maybe we should.
JULIA GILLARD: (laugh) Well I don't think so. I'll have to come up with alliteration for Mitchell, but - Murderous Mitchell or something...
(laugh)
JULIA GILLARD: It's getting nasty now. But what does the ERC do? Well we sit with the government budget papers and we go through them line by line, and we look for waste, and we look for efficiencies - and that's call prudent government.
But when it comes to the CSIRO flagship program, can I make it very clear: innovation is at the heart of this government's policy agenda as recently as yesterday the Prime Minister in Melbourne was talking about the importance of innovation to productivity and this nation's future growth. The CSIRO flagship program is in the national interest. It's an important program.
And can I say I know that we are going to have budget speculation every day in between now and budget and one day people will wake up and read that we are trying to you know do a fire sale of the MCG to raise a few quick dollars - you know, budget speculation will come and go - but the CSIRO flagship program is an important program in the national interest.
NEIL MITCHELL: So is there a proposal to cut $414 million dollars out of it?
JULIA GILLARD: Well I think Neil when you've got a program that is in the national interest which is as important as the CSIRO flagship program, it's a program that enjoys Government support.
NEIL MITCHELL: So you are ruling it out?
JULIA GILLARD: That program has the governments support, full stop. There's no need to put any more in that sentence. It's got our support.
NEIL MITCHELL: OK. Wayne Carey. Wayne Carey had an interview with Andrew Denton, now this is - Andrew Denton said binge drinking is a big issue in the life of Wayne Carey which strikes me. It's important for the government because it's only two weeks ago Kevin today, Kevin Rudd meet with the AFL and other codes and talked about binge drinking. Are you concerned by the message coming out of the Wayne Carey situation?
JULIA GILLARD: Well I guess I like many Australians have watched what's happened with Wayne Carey and I find it overwhelmingly sad I suppose, is my reaction to it. I mean he is an incredibly talented man. He was a legendary football player. In the ordinary course you would expect him to go into the media and you'd see him at events and you'd see him on TV and he would be having a tremendously successful life.
And it is distressing to see all of these circumstances around Wayne Carey and I think there's a message there for football, there's a message there for the community. Alcohol has obviously played a big part in this. I think that's the theme of the Denton interview as it is reported in today's newspapers and we're obviously, as a government, concerned to be saying to young people: alcohol isn't a solution to life's problems. Binge drinking isn't a way of dealing with young adulthood. And as I think Wayne Carey's life story tends to show there is a heavy price that ends up being payed by alcohol misuse.
NEIL MITCHELL: Did you drink too much as a kid? I did.
JULIA GILLARD: Look, yes Neil to be frank you know, we, I drank the way a young Australians drink when I was young. Where there times when I drank too much? Sure there were times that I drank too much. Did I ever have a problem with alcohol? I don't think I ever had a problem alcohol. I had a youthful experimentation. You have the occasion where you drank too much and wake up the next day feeling dreadful and after a few of those cycles you learn that it's not that smart.
NEIL MITCHELL: Now the deal on the Murray Darling Basin - a billion dollars for Victoria which got Victoria over the line. Is that new money? There are claims that is in fact less than was promised by the Howard Government
JULIA GILLARD: Oh no, the billion dollars is a specific commitment to Victoria. It's a...
NEIL MITCHELL: But is that new? Wasn't it there before?
JULIA GILLARD: Well we've got the ten billion dollar water package and it's a clear allocation of a billion dollars to Victoria. It's something that the Premier was obviously delighted about because it enables him to do a set of things which will make a difference for Victorian farmers and ultimately for all of us.
NEIL MITCHELL: But I guess my point is, is there really any money there, in that billion dollars, that wasn't going to be there under the Howard plan anyway?
JULIA GILLARD: That money, the money was - the ten billion dollars obviously is part of the Howard Government's water plan. It was a question of where the ten billion dollars was going to be allocated. There is no point having a figure that says ten billion in the budget papers and it never goes anywhere. Where's it going to go? Well a billion dollars is going to be allocated to Victoria for the purposes the Premier is been so keen to argue for.
NEIL MITCHELL: Is that more than you were going to get under the Howard plan? That's my point. I thought they were going to get that much anyway.
JULIA GILLARD: There was no clear allocation of resources like that prior to COAG this week.
NEIL MITCHELL: What are you doing for Earth Hour?
JULIA GILLARD: Well I guess I'll be looking to turn some lights off, wouldn't I? (laugh)
NEIL MITCHELL: It seems like a very strange idea to me.
JULIA GILLARD: Earth hour?
NEIL MITCHELL: The fashion industry is going to turn off the lights at 8 o'clock on Saturday night. What is the fashion industry doing at 8 o'clock on a Saturday night? Partying.
JULIA GILLARD: Possibility having a fashion parade Neil or hunched over a sewing machine generating a new garment. Hopefully they have to stop doing that for an hour if the lights are off.
NEIL MITCHELL: More Tibet protests today. Monks interrupting in Shanghai at a press conference with Chinese officials. Are we going to face this right up to the Olympics, do you think?
JULIA GILLARD: That is not a question I can necessarily answer. But it seems from recent events that Tibet is going to be an issue on peoples' minds and we are going to see protests from time to time. Obviously the Prime Minister is visiting China during the course of this period overseas. We've made it very clear - and certainly both the Prime Minister and our Foreign Minister Stephen Smith have made it very clear - that there's no tolerance for human rights abuses.
NEIL MITCHELL: You support maternity leave and Myer had the announcement yesterday and several others - but you are also arguing as strongly as the Prime Minister was yesterday for increased productivity. How does maternity leave, payed maternity leave, increase productivity?
JULIA GILLARD: I can answer that Neil. It increases productivity because it makes it more likely that skilled women workers are going to be able to balance work and family life, come back to work with the same employer. They're likely to feel a sort of debt and a bond to that employer. It's going to make them more likely to return to work with that employer. And in the current economic circumstances that employer needs their skills and ability.
It is not good for employers if they lose skilled women, who go on maternity leave, who don't come back and they are in a constant cycle of training and retraining new workers. That's bad for productivity.
NEIL MITCHELL: Thank you for coming in. How was Kirribilli?
JULIA GILLARD: I was only on the lawns outside for the press conference.
NEIL MITCHELL: You didn't get to stay the night?
JULIA GILLARD: No I was, last night I was at home in Altona, Neil
NEIL MITCHELL: OK. Oh, one other thing, very quickly: there is going to be a Jewish Summit now before the Summit Summit?
JULIA GILLARD: Well there's going to be a youth summit. Obviously there have been some issues about the inclusion of Jewish community members in the 2020 Summit because of the date of which it is being held. And I think obviously we want to make some efforts to make sure those voices can be heard.
NEIL MITCHELL: So that's sort of a pre-summit summit?
JULIA GILLARD: Well look, we are in trying to include as many voices as we can. I am certainly looking forward to attending the Youth Summit. I'm going to get to do that even when I'm nowhere near young. So that's good.
NEIL MITCHELL: Thank you very much.