Interview with Neil Mitchell, 3AW

 

NEIL MITCHELL:

Yesterday the Prime Minister announced that Australia’s big four banks will be asked annually to explain themselves before a parliamentary committee. Now this is in the face of calls for a royal commission. On the line from his Sydney office, the Prime Minister Malcolm Turnbull good morning.

PRIME MINISTER:

Good morning Neil.

NEIL MITCHELL:

Thank you for your time. If the banks don’t bend on their policies, would you consider legislating to force them to pass on interest rate cuts?

PRIME MINISTER:

No, Neil you can’t tell the banks how to run their business. If the Government were to direct the banks to run their business they would be effectively taking them over.

NEIL MITCHELL:

What’s the point in the annual appearance then?

PRIME MINISTER:

Well it will be at least annual. Let me explain what we are seeking to achieve here. This is a very important permanent change to the financial calendar. It is important for Australians to have confidence in the banks and the banks need to earn that confidence. They earn that through being accountable and being transparent and explaining their actions.

NEIL MITCHELL:

And being successful -

PRIME MINISTER:

Well of course they have to be successful and they are successful banks. People who complain about banks being profitable should remember that having unprofitable banks is a much worse state of affairs as many other countries have seen.

NEIL MITCHELL:

But are they being greedy?

PRIME MINISTER:

That is a fair question and that is why what we need to do is encourage a stronger culture of accountability and transparency so what –

NEIL MITCHELL:

But how can you make them accountable when you haven’t got any power over them really?

PRIME MINISTER:

Let me explain. You do make them accountable. We make them accountable by requiring them to attend at least once a year. I think this will evolve into more regular appearances than that – obviously that’ll be a matter for the committee but what they will be doing, is just like the Reserve Bank and APRA, the credential regulator, they’ll be coming before the House of Representatives Economics Committee and they will be giving their views and insights on the economy, the international economy, the housing market but also explaining how they are treating their customers – members of the committee will be able to raise issues, they might be issues that have arisen at the time or longer term issues and of course this accountability means that when banks decide not to pass on the full extent of an interest rate cut from the Reserve Bank – they will know that they are going to have to explain themselves in the full glare of a public parliamentary committee room in Canberra. I think that will be very salutary.

NEIL MITCHELL:

Is it a matter of trying to embarrass them into what you’d see as a fairer policy?

PRIME MINISTER:

I wouldn’t use the term embarrass. But I think the way to avoid being embarrassed if you are called upon to publicly account for yourself is to do so honestly, persuasively and to set out the facts in a manner that people will say, ‘well yes that’s fair enough I accept your point of view.’ But the onus will be on them and it is a big change to their culture.

NEIL MITCHELL:

So if it is not embarrassment – is it pressure? If you’re not trying to embarrass them, you’re trying to pressure them? Because you’ve said well you haven’t really got any power to do anything so what are you trying to do through this committee? Pressure them?

PRIME MINISTER:

Well Neil I wouldn’t use that word.

NEIL MITCHELL:

Well what word would you use?

PRIME MINISTER:

The word I would use is that they will be fully accountable for their actions and that will give them cause for reflection as to, for example, whether they would pass on a full extent of an interest rate cut. They’ll clearly feel under greater pressure to do so, I think that’s –

NEIL MITCHELL:

But Prime Minister this week they’ve had you and the Treasurer, you can’t go much higher up the tree, telling them exactly that publicly and it hasn’t had any impact?

PRIME MINISTER:

It will be, believe me Neil – look I do understand this financial services sector reasonably well.

NEIL MITCHELL:

We should remember you’re a former banker.

PRIME MINISTER:

Yes, not a commercial banker to be fair.

NEIL MITCHELL:

True.

PRIME MINISTER:

I’ve never run a big trading bank or commercial bank like Westpac or CBA but I understand the cultural problems. Here’s the fundamentals –

NEIL MITCHELL:

What is the cultural problem?

PRIME MINISTER:

Okay well let me explain. The fundamental cultural problem with banks is this – like any business they seek to make a profit. Like any business employees are rewarded on the basis of how much they contribute to the profit. But banks are different to many other businesses in the sense that they are built on a foundation of trust. And they advise their clients and they must put their clients interest, their customers interests first. And that is why banking, the culture of a good bank is one where employees understand that they cannot put the pursuit of profit ahead of the interests of the customers. They’ve got to put the customers’ interest first. Now there is some tension there. That is why the banks under demands from, you could say pressure from me and the Government have made changes to their own practices and what this permanent change to the financial calendar that we’re setting out, the Treasurer and I have set out – this will mean that they will be regularly appearing before Parliament to explain what progress they are making, what changes they have made, what impact it is having and of course you’ve got to remember members of Parliament have constituents and they will, the constituents will be saying ‘I’ve had this done to me, I’ve had that done to me, the bank let me down here’ and they’ll be raising that directly with the banks. The good thing about that and this is where it is very different to having an inquiry like a royal commission as Mr Shorten’s talked about is that what this will be is permanent so banks will be turning up to this committee in 20 years’ time.

NEIL MITCHELL:

Okay. Can you require them to attend? The banks have all said they will, but you can force them to if necessary?

PRIME MINISTER:

Yes you can. Well Parliament would but there would be no need to. The reputational damage to a bank of not turning up to a parliamentary inquiry would be gigantic – they’ll all attend.

NEIL MITCHELL:

The head of the NAB, Mr Thorburn has said that the system could become unstable and struggle for economic growth if they lost control of their power to set mortgage rates. Now is there a possibility that going through this exercise undermines the banks, creates instability?

PRIME MINISTER:

No, I believe it will strengthen the banks. It depends on the quality of their leaders because what their leaders will have to be, their chief executives and chairmen and so forth – they will have to be able to explain themselves clearly, they will have to demonstrate that which they claim to be the case, in other words they will have to prove what they claim to do which is putting the customer first. There is no bank, there is no bank out there Neil that says ‘we put profits before the customers.’ Right?

NEIL MITCHELL:

Oh they try to balance the customers and the shareholder aren’t they and that affects a lot of us because a lot of superfunds are shareholders.

PRIME MINISTER:

That’s right. Well many, most Australians who have interests in Aussie superfunds have interests in the banks. But the important thing is that the banks operate with an enormous social license. It is built on trust. Let me put it this way - if the banker has got the choice between saying to a client, ‘buy this product or buy that product,’ they must advise the client to buy the product which is best for the client, not the one which delivers the highest profit to the bank and they’ve got to demonstrate that that’s what they do.

NEIL MITCHELL:

That’s right. Effectively they’re guaranteed, still guaranteed by Government aren’t they?

PRIME MINISTER:

Well there is an implicit – well, an express deposit guarantee of course but the fact is they are too big to fail. So they operate under a social license and that of course is why they’re highly regulated. That is why APRA the prudential regulator requires them to hold capital –

NEIL MITCHELL:

Well they’re an essentially they’re an essential service aren’t they?

PRIME MINISTER:

There’s no question about that and the health of the banks, all of us have a vital vested interest in the health of the banks.

NEIL MITCHELL:

Alright. But are they duding us, that’s the bottom line. The public perception is they’re duding us with fees that are over the top, they’re duding by closing branches and making us go to machines and they’re duding us with interest rates and making huge profits and paying their bosses multi millions which looks greedy. Are they duding us given that we’ve given them, given that the public, the taxpayer has given them an effective guarantee, are they duding us?

PRIME MINISTER:

Well the banks have got to defend themselves. It’s not for me to cast judgement on their level of profitability. What they have to do and what this mechanism will do, is ensure they are regularly brought before the representatives of the Australian people in the same way the Reserve Bank is. This is, frankly Neil, as I reflect on this it’s curious that it hasn’t been institutionalised a long time before. But that’s often the case –

NEIL MITCHELL:

And you are confident this will change the way the banks operate?

PRIME MINISTER:

It will I believe, together with the other changes that have been announced – the increased resources we’ve given to ASIC and so forth that this will make the banks, look you think about it, let me put this to you, imagine you’re a bank chief executive and you’re making a decision as to how much an interest rate cut you’re going to pass on and there will be somebody in the room, might just be a little thought in your own mind, it’ll be saying, ‘you know, you better get this right because you’re going to have to explain that to a committee of very grumpy Members of Parliament. There will be a lot of television cameras there and a lot of attention so you better get it right.’

NEIL MITCHELL:

So you’re ruling out a royal commission completely?

PRIME MINISTER:

The answer is yes, but the real question is for Mr Shorten who advocates one, he can’t even say what the terms of reference would be. What is the royal commission going to enquire in to?

NEIL MITCHELL:

Two of the groups you’re clearly going to negotiate with, Pauline Hanson and Nick Xenophon’s lot, both want royal commissions. And you’re saying you might have to negotiate one with them.

PRIME MINISTER:

It’s all very well to say I want a royal commission, but a royal commission in to what? What exactly is it going to enquire in to? If you have a royal commission, saying you’re going to have a royal commission is meaningless unless you identify what it is exactly going to enquire in to and you remember when you had Mr Shorten on your programme and you asked him that very sensible question, what are the terms of reference going to be and he said he had a little list that he’d been filling out in the back of the cab I think he said. So, you know, this is ridiculous frankly.

Royal commissions are inquiries. They are good if they are well run at investigating a particular incident, a particular issue. But you’ve got to remember Neil, you have a royal commission, it runs for a few years, you spend hundreds of millions of dollars, it writes a report and then it’s gone. What the Treasurer and I have set out will be a permanent change to the financial landscape which will increase the accountability and the transparency of the banks and if they use that opportunity well, they will build confidence in their institutions with the public.

NEIL MITCHELL:

Okay can I ask you too, speaking about Pauline Hanson, why do you think she’s had such success? Four seats in the Senate.

PRIME MINISTER:

Well because across the country over half a million people voted for her.

NEIL MITCHELL:

And why has she got that support?

PRIME MINISTER:

Look, I’m a politician, I’m not a political analyst or a pollster. She is, you know, expressed a message, she has attracted the attention through her profile and some of her policies and speeches for, you know, over half a million people and that’s why she’s in the Senate. I might say, with the Senate, with the new Senate and we now know what it is - this is a Senate where everyone who is there is there because a large number of Australians voted for them, either on first or a preference they allocated, not because of backroom deals.

NEIL MITCHELL:

Despite the makeup of the Senate, you’d say your Senate reform worked?

PRIME MINISTER:

Well the Senate reform absolutely worked because what we had before, as you know, was preferences being allocated behind closed doors on these very complex group voting tickets that nobody knew. So what we’ve got is a much more democratic Senate – a democratically elected Senate. And again, getting back to what we were saying about the banks, it has been transparently elected, you can absolutely see why people got there.

NEIL MITCHELL:

It’s not going to help you govern is it? I mean, Pauline Hanson for example, wants a freeze on Muslim migration and will tell you that. Will you ever bow to that?

PRIME MINISTER:

There is not going to be a freeze on Muslim migration, obviously. But the fact is that she is elected, I respect her, I respect her election, half a million Australians voted for her, she understands and I’ve had a very constructive meeting with her and I will meet with and meet with constructively and respectively with every member of the Senate and every member of the House of Representatives because we want to make the Parliament work.

NEIL MITCHELL:

A big part of what Pauline Hanson’s campaigned on has been the issue of nervousness about Muslim migration, about matters of Islam about Terrorism. Do you think she’s got the public ear on that, has she got the public mood right on a sense of fear about Muslims in the community?

PRIME MINISTER:

Neil, let me make this point. I had a meeting with Pauline Hanson recently, which she spoke warmly about subsequently. And the vast bulk of the subjects we discussed had nothing to do with migration. So, she is – I think it would be fair to say that she has a wide range of policy interests, which she will pursue. She does have views on migration which I don’t share and the Government doesn’t share. But, she’s got many other views and the fact is, in a Parliament whether you’re talking about, particularly with the Senate, you have to work with every member, every single member of the Senate regardless of what their views are has been elected by the Australian people and that is why their views must be listened to, respected and we must negotiate with them.

NEIL MITCHELL:

Kevin Rudd and his interesting job at the UN. Did you and Julie Bishop disagree over that? Were you split over that?

PRIME MINISTER:

I’m not going to comment on discussions between Cabinet Ministers, the decision about Mr Rudd has been made, it was the right decision -

NEIL MITCHELL:

He’s accused you of a breach of trust, of dishonourable action.

PRIME MINISTER:

Well – at all times, at all relevant times, he knew that this was a matter for the Cabinet, he knew that there was no guarantee that he would be nominated, if and when he asked for such a nomination and he was certainly told, and he doesn’t deny this – he was certainly told, in absolutely unequivocal terms in May that my estimation that if it went to the Cabinet he would not be supported and I told him why.

NEIL MITCHELL:

Well he then says Julie Bishop after that told him otherwise.

PRIME MINISTER:

Neil…

NEIL MITCHELL:

Is that wrong?

PRIME MINISTER:

Neil, well, Neil, I am not going to get in to a debate about Kevin Rudd…

NEIL MITCHELL:

Okay. Fair enough.

PRIME MINISTER:

… and his various assertions. The facts are pretty clear and the decision was the correct one.

NEIL MITCHELL:

Alright, now he’s gone after you, will you tell us why you thought he was unfit?

PRIME MINISTER:

Well, he has said in the paper today that I told him that he had poor interpersonal skills and – what he said is that - he said that I said to him that the reason he was unsuitable for the job was his interpersonal skills and temperament. Well I wouldn’t dispute that.

NEIL MITCHELL:

He’s been described as a control freak and a narcissistic psychopath for heaven’s sake.

PRIME MINISTER:

Well, again I have noted that, yes that’s..

NEIL MITCHELL:

Have you disagreed with that?

PRIME MINISTER:

Again, I’m not going to get in to a commentary on Mr Rudd.

NEIL MITCHELL:

Okay, fair enough.

PRIME MINISTER:

I was very frank with him In May. I was very frank with him just the other day. He’s chosen to characterise what my remarks were. I mean look, I think we all know – we all know the reason why the Government didn’t nominate him and we should all move on.

NEIL MITCHELL:

Okay, I think the important thing is not as much as you’d hate to hear this, it’s not Kevin Rudd, it’s Julie Bishop. Because there is a perception that you were divided with her and now Cabinet has leaked. You must be concerned about Cabinet leaking on this?

PRIME MINISTER:

Well again, I wouldn’t concede that just because the people write accounts of what happened in Cabinet doesn’t mean that they are true. I stick resolutely to the proposition that we don’t talk about what happens in Cabinet. Just because you read a version of what happened in Cabinet, doesn’t – you shouldn’t assume that is a leak or indeed that it is accurate.

NEIL MITCHELL:

The Olympics, are you concerned or nervous about the safety of Australian Olympians? It’s been a pretty dodgy start over there.

PRIME MINISTER:

Well, it is – the safety of Australians everywhere in the world is a matter of concern and obviously a great deal of attention is being given to the Olympics. As you know, we saw overnight two Australians injured in that knife attack in London and you know, that again – our consular officials in London have been paying very close attention to that. I can say that both the Australians that were injured have now been discharged from hospital which are very pleased. There was a third Australian who was at the scene who was naturally very shaken by the events but was not physically injured.

NEIL MITCHELL:

I thank you very much for – are you going to do your census online or on paper?

PRIME MINISTER:

I’ll do mine online.

NEIL MITCHELL:

Are you sure you’ve got the right operating system?

PRIME MINISTER:

I’m sure I’ll be able to handle it Neil.

NEIL MITCHELL:

You reckon it will work?

PRIME MINISTER:

Yes. Well I’m – we’re certainly advised so by the census. I thought Mr Kalisch gave a good explanation for it and defended his decision and the approach well. It is important that we move to – we use electronic platforms more for Government work. The reality is that most of us do much of our – much if not most of our commercial transactions online nowadays. So it is a digital world.

NEIL MITCHELL:

Thank you so much for your time. Look forward to talking soon.

PRIME MINISTER:

Thanks very much Neil.