Credit cards, Telecards, interest rates, dollar/current account

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October 11, 2000
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Taxing Trusts Like Companies and Simplified Imputation Rules – Exposure Draft Legislation
October 11, 2000
Telecard,  Dollar,  Telstra
October 16, 2000

Credit cards, Telecards, interest rates, dollar/current account

Transcript No. 2000/98







Wednesday 11 October 2000

10.20 am

SUBJECTS: Credit cards, Telecards, interest rates, dollar/current account


Does that report yesterday mean that it’s time to break up the cartel the banks

effectively have over debit and credit cards?


Well, look I welcome the report. It’s a good piece of work. We’re now going

to get the banks’ response to that and Minister Hockey, I think, indicated yesterday

that he would write to the banks, let them put their views on the table. But from the

Government’s point of view we want to increase competition. Increased competition

means that you’ll be able to shave margins. And if you can get increased competition

in this particular area, like any other area, you’ll get a better deal for consumers.

Increased competition in relation to the housing market meant that margins on interest

rates were shaved and if you can get increased competition in the consumer market then

there’s every chance you’ll also get margins shaved.


So non-bank lenders, supermarkets, might be able to get into the area of credit cards,

that sort of idea?


Well, there are two issues that go on here, one is competition, the other is

you’ve got to ensure that you’ve got a stable, well-regulated payment system.

So, whatever changes are put in place will be ensuring that those that are issuing credit

are well-regulated and that the payment system is secure. So, I don’t want to go

further than that at this stage, but I can assure consumers that we’ll be encouraging

competition with the hope that that can shave margins.


Should Peter Reith have told the Prime Minister a bit earlier about this Telecard



Well, as I understand the situation, when he was alerted to the problem he asked for an

investigation from the Department of Finance. And it was that investigation, when he

became aware of the full facts that he alerted the Prime Minister to. So, he was, he did

the right thing by having that investigated and when it was investigated and when he

became aware of the results he alerted the Prime Minister.


But did he do the wrong thing in giving those details to his son?


Look, he said in the Parliament yesterday that he regrets giving the card to his son.

He said that himself. What is clear is that somehow it became available to third persons.

It is not alleged that his son made all of those calls. Somehow it became available to

third persons and they used it and that’s what the police are investigating and

it’s just too early to say whether any charges can be laid against those third



Would you support changes to the privacy laws, which would mean you’d get an

itemised account for your telephone card?


Well, can I make this point, it was under guidelines some time ago under the Labor

Party that the bills for these Telecards were put onto your office telephone, as I

understand it, your office telephone, and they are not separately itemised. So, what was

coming in to Mr Reith was a global figure for his office. And that didn’t disclose

that there had been this incredibly high use on the Telecard. Now, when he became alerted

to the fact that there was a problem he asked for an inquiry, it was because of the

inquiry that they became aware that there had been this abnormal use. It’s now in the

hands of the police. But, I didn’t put in place those guidelines, this Government

didn’t put in place these guidelines. Those guidelines were put in place a long time

ago, and so people might think, oh well he was getting a bill which was showing all of

these calls. He wasn’t. He was getting a global bill for his office which didn’t

disclose the amount on the Telecard at all.


Regardless of who set up those laws though. Would you support a change now?


To change the system. Well, look frankly it’s not my portfolio, you’d be

better to ask the relevant Ministers for their views on that.


The National Australia Bank is saying this morning it believes interest rate rises are

now over, that the Reserve Bank has done enough. Would you support that view?


Well, I never comment on the future movement of interest rates, and you understand why

I don’t because if I do that can be interpreted in such a way as to move markets.

But, look at the moment we’ve got an economy which is still growing strongly. We have

subdued inflation, we have strong productivity and, incidentally, historically low

interest rates. Not as low as they were, say, a year ago, but if you leave aside the last

year or so of the Coalition Government, you’d have to go back to 1973 to find a home

mortgage rate of this order, so, in historical terms low interest rates. Now you probably

heard me make some remarks in here, there are a lot of self-funded retirees that

don’t like low interest rates, but I think low interest rates are good for home

buyers, they’re good for business, they’re good for continued growth and

they’re good for jobs and that is the way the Government likes it.


Treasurer, confidence amongst businesses appears to have slipped a little partly due to

the weakening Australian dollar, but some economists say we should take this opportunity

of a low Australian dollar to halve Australia’s current account deficit. Should

businesses just accept that we are now at a, sort of, new lower range for the currency and

get on with it, get on with business?


Well, I make two points. One is, I think that the survey that came out yesterday, the

NAB survey on business confidence actually showed strong business confidence. I think that

conditions were different, but actually confidence was up, as I recall in the NAB survey

yesterday. In relation to the current account, Australia’s current account is

improving. That is, the deficit is declining. Now, we forecast it to decline, and the

evidence is that in this year 2000/2001 it is likely to be lower than it was in 1999/2000.

It’s a result of a number of factors. One of which is that the world economy is

strong, that’s giving us better export markets and Asia is recovered. So, I

don’t want to get complacent on the current account, we’re never going to get

complacent on the current account. But the fact of the matter is that the current account

deficit is improving in Australia.


Why is the dollar so low Treasurer?


Well, there’s been a lot of movement in international markets. And the principal

story in international currency markets has been the rise of the US dollar. That is the

principal story. The rise of the US dollar against the Euro in particular and other

currencies, including our own. There are a number of factors why people are bringing money

back into the United States. I think I described it once before as a love affair with all

things American. That’s going on at the moment. That is the principal feature of

international currency markets.


Treasurer, we’re now in a fairly unique position where we’ve got strong

growth and a narrowing current account, probably one of the first times in our history,

could that be used as a sort of, does that suggest the dollar is actually trading in a

more natural range, that’s suited to (inaudible)?


I wouldn’t draw any lessons from that onto the exchange rate, because as I said

before I think what’s happening on exchange rates is not much to do with Australia.

As the exchange rate has been moving, it hasn’t been moving in relation to Australian

conditions which are strong, as you pointed out strong growth and a narrowing current

account. We measure ourselves principally against the US dollar, and the story has been

the rise of the greenback, that has been the story in international markets. So, I

wouldn’t draw from Australian conditions, conclusions, but I would note as you have

said, that Australian conditions are strong. This is strong growth and a declining current

account. A little bit different, as you pointed out, to what we’ve had in the past.

Normally with strong growth we have an increase in our current account. This could be one

of those good occasions where we’re seeing a pay-off of an improvement. And I’d

better leave it there. Thanks very much.