Sky News Karvelas - Royal Commission

10 April 2016


SUBJECT/S: Royal Commission into Financial Services; Budget; Arrium

PATRICIA KARVELAS: My first guest tonight is Jim Chalmers. Welcome, Jim.


KARVELAS: Excellent. Let's get into it. Lenders say the Royal Commission into banks could rattle international investors that are vital to the financial system. That's a huge risk you're taking with this, isn't it?

CHALMERS: Look, this is actually all about strengthening confidence in the banks, restoring confidence, making sure that we sweep away all the doubt, that we properly get to the bottom of the issues that have come to light in the last couple of years, that we deal with them properly. Because we do have very strong and very profitable banks but they have let people down over the last little while, and we want to make sure that's in the past and not in the future. We want to have successful banks that succeed because they have good products and good returns and good benefits for people and they make good decisions, not because they cut corners or prey on vulnerable people.

KARVELAS: I think everyone would agree with the sentiments there, but can you guarantee that international investors won't be put off by this Royal Commission that could take two years and many people have warned will put them off, effectively? Can you guarantee that that won't happen?

CHALMERS: I'm highly skeptical about that argument. I also think that it will, as I said, bolster confidence over the medium and long-term in our banks. Our banks have already got a good reputation internationally. There's no serious commentary that says that will be jeopardised by the Royal Commission. But it will give the opportunity to improve the customer experience and make sure that more Australians get a fair go. The natural conclusion of that argument that Scott Morrison and others have put and you just put is that the only way for Australian banks to be profitable and be successful in the international markets is if they cut corners or do the wrong thing. And I just don't think that's the right way to look at it.

KARVELAS: You say internationally our banks have a strong reputation, they're known as rigorous, strong, good banks. In that context, a Royal Commission is quite an extreme move, isn't it? You can't say on one side that they're fantastic institutions but that they deserve a Royal Commission.

CHALMERS: It's all about the customer experience, and I don't think anyone who has paid attention in the last little while could conclude anything other than some of our financial institutions have let people down. Whether it be in insurance, whether it be the allegations of manipulating the swap rate -- all of these sorts of things, they do need to be properly looked at. We do have regulators who are doing a fine job, but it's not sufficient. What they've done so far is clearly not sufficient, so after a long time of deliberation -- lots of deliberation and discussion -- we've not taken a decision lightly, but we think that a Royal Commission is the best way to go. We think that it's good value for money for the Australian people who do deserve to know that they're being treated fairly by the banks and being treated ethically in the financial system.

KARVELAS: Wouldn't it be a more efficient way to actually beef up, perhaps, as another scenario, the existing regulators? Give them more funding to do more investigations, rather than actually effectively delay the outcomes. I mean, a two year Royal Commission, which it could take, and then, of course, it makes recommendations. By the time that's all implemented, it seems to me to be a very long-winded way to achieve something when you've got the institutions there, why not beef those up?

CHALMERS: Well nothing about the Royal Commission will delay or prevent any conclusions by the regulators. That's a very, very important point that people need to understand. The second points is yes, the Abbott and Turnbull Governments have cut $120 million from ASIC which is the main regulator in this context and that has had very severe consequences for regulation in this country. And the third point I'd make is that one of the specific things that we will be tasking the Royal Commission to look at is whether or not our regulators do have adequate powers and adequate resources to do their job properly.

KARVELAS: Last year, there were just as many issues going on with the banks and you voted against a Royal Commission. It seems passing strange to me that now, a year later, on the eve of an election, you think it's a good idea suddenly.

CHALMERS: Well, as I said before, we didn't rush to this decision. We've been discussing it for some time and deliberating over it very carefully because it is a consequential thing, it is an important announcement that we made on Friday with Bill Shorten and Chris Bowen and Mark Dreyfus. And so we didn't want to rush to that conclusion. And also, don't forget Patricia -- as too many people have in the last couple of days as this decision has been analysed -- don't forget that the allegations around CommInsure, for example, the allegations around the manipulation of the bank swap rate, all of these sorts of things, they've come to light in the last six months or so. So we have had the compounding effect of one issue after another and we have come to the conclusion, as Bill said, that enough is enough. The financial institutions have let people down and now's the time to contemplate a Royal Commission. We'd like to work with the Government on it. We don't actually see it in the context, in that political context that you described, we think it's about something more fundamental than that. It's about people having confidence in their financial institutions, it's about financial institutions supporting people's aspirations, not cruelling and curtailing them.

KARVELAS: Jim Chalmers, can you put your hand on your heart and honestly tell me that there is no political prism to this decision? It's a very popular decision, I've got to say. People are very angry at banks. You're right at identifying that. Are you saying really that there's absolutely no politics to this?

CHALMERS: Well if there were politics involved in this, we wouldn't be seeking to get the Turnbull Government's agreement to it. Our ideal situation would be to sit down very soon with the Turnbull Government and to agree a way forward on a Royal Commission, agree Terms of Reference and get the ball rolling. If we wanted to play politics with that, we wouldn't be trying desperately to have a bipartisan approach. I think the country would be best served if the big parties came together in this case and agreed the best way to do it so that people could have confidence in their financial institutions and, frankly, confidence in the Parliament that it's responding in a bipartisan way to those concerns that you identified.

KARVELAS: Let's get to the Budget now. The Prime Minister has said there won't be a fistful of dollars in the Budget, which is unsurprising given the sort of situation that the Budget is in. On the Budget, do you agree that we must "live within our own means"? Is that a statement that you agree with?

CHALMERS: I do, fundamentally, Patricia, and that's why we've got more than a hundred billion dollars of improvements to the bottom line, which is very unusual for an Opposition to have such big savings on the table well in advance of an election. It's a very unusual situation in this country. We're eighty-three days now from a likely election and the Opposition is the only one with a detailed plan to improve the bottom line on the table. So they can have all the spin and all the slogans about living within our means, but we're the only party in the Parliament who is actually demonstrating a willingness and a capacity to come up with those decisions to improve the bottom line in a fair way.

KARVELAS: So given those optics and the fact that you say you also believe in living within your means, if there are sensible savings in this Budget, will you take the politics out of it and back those savings that the Government identifies? Savings that are perhaps not the ones you have already found but go further.

CHALMERS: Of course and we've done that before. I mean it doesn't receive all the attention of the other things that we have legitimate concerns with. But over the last couple of Budgets there have been savings identified by the Government that we have supported through the Parliament. We do have a genuinely open mind. But we won't cop the sort of re-run of the 2014 Budget which Scott Morrison seems to be flagging. We won't cop a situation where we've got a Prime Minister who's more prepared to stand up for multinational corporations than Medicare, or a Prime Minister who goes soft on people who evade their tax and goes hard on families. Our cards are on the table. People know what they're getting with Labor. They know our approach to the Budget. If there are savings identified that we haven't thought of that we think are a good idea, we'll vote for them. But you've got to say that the track record of the Government -- that horror Budget of 2014 which they still want to try and pass through the Parliament -- there's lots in that which we won't support because we owe it to the people that we represent.

KARVELAS: So Jim Chalmers, you've got a number of savings that you've identified and they're well-known and they've certainly been canvassed here on Sky News a number of times. Can we expect that more savings are on the agenda that the Labor Party will announce, more significant savings on the table that we'll hear more about in the next month or so?

CHALMERS: I think, in general, it's fair to say that the task of improving the Budget bottom line is never finished. But at the same time, more than a hundred billion dollars on the table from an Opposition is a pretty extraordinary effort. I do think that the team -- Tony Burke and Chris Bowen and Bill Shorten and the Shadow ERC -- they do deserve credit for doing that so far in advance, so the Australian people can evaluate the savings that are already on the table and they can decide whether they think that they're fair or not. And they can compare them to whatever the Government comes up with in this shambolic Budget that they seem to be sticky-taping together in a hurry.

KARVELAS: Just a final question on the collapse of Arrium and those nearly 8,000 jobs that are on the line now. This week on RN Drive, the program I present during the week, I spoke with Kim Carr, your Shadow Minister in this area, and he said that steel from China that's contributed to building infrastructure here in Australia means we're basically in store for a national disaster imminently. Do you agree with that statement?

CHALMERS: Well first of all, I think it's heartbreaking what's happening to the workers and their families in the steel industry. It's a very strategically significant industry, as you know, and we do need a national plan. I think the point that Kim was making, certainly the point that I'm prepared to make, is that we want to maximise the use of Australian steel and particularly Australian-standard steel in projects that are --

KARVELAS: Sure, but do you think we're about to have a disaster?

CHALMERS: Well I'm not an expert on those sorts of things. You'd have to ask Kim about that comment. But I think his point is well-known and well-made which is that we want to maximise Australian steel and Australian standard steel in the projects that state and federal Governments fund. I don't think that's too much to ask. It's not too much to ask to tighten the anti-dumping provisions -- all of these sorts of things that should comprise a national plan for steel. The Government has gone missing again on this and we're again filling the vacuum when it comes to forward-thinking policy.

KARVELAS: Jim Chalmers, thanks for your time tonight.

CHALMERS: Thanks Patricia.