ID :
25825
Tue, 10/21/2008 - 18:53
Auther :
Shortlink :
https://oananews.org//node/25825
The shortlink copeid
RBA backs bank guarantee
The central bank chief has publicly backed the federal government's unlimited guarantee for bank deposits amid accusations it ignored his advice against the move. The opposition says the guarantee is distorting financial markets as investors take money out of unprotected funds and put them into banks.
Prime Minister Kevin Rudd on Tuesday revealed he had not personally consulted Reserve Bank of Australia governor Glenn Stevens before announcing the decision at the height of the global financial storm.
In a speech on Tuesday, Mr Stevens said the October 12 decision had allayed any public anxiety over the security of their savings. "Steps in these directions, in the context of what other countries were doing, were sensible and the RBA supported them," he told the Trans-Tasman Business Circle.
A report in The Australian newspaper said the government had ignored RBA concerns
about the impact of the guarantee.
The prime minister said while he had not spoken about it with Mr Stevens, the
governor's support had been communicated by federal Treasury Secretary Ken Henry
during a cabinet committee meeting.
"At the conclusion of the discussion of a range of options before the government, I
explicitly put the question to the secretary of the treasury - is the position being
recommended here that of the regulators?" Mr Rudd told parliament.
"He answered it was. And that included the Reserve Bank."
Federal Opposition Leader Malcolm Turnbull said the government had used Dr Henry as
"a human shield".
"This could involve the commonwealth taking on hundreds of billions of dollars of
contingent liability," Mr Turnbull told parliament.
"Taxpayers are on the hook."
The prime minister accused Mr Turnbull of over-reacting to the report about RBA advice.
"The leader of the opposition has been out there today hyperventilating like a kid
on red cordial," Mr Rudd said.
Opposition finance spokesman Joe Hockey said investors had taken money out of a
range of funds and put them into banks because of the guarantee.
"What we've seen over the last few days is a massive movement of money from
superannuation funds and other investments into bank deposits," Mr Hockey told Sky
News.
"The net result is it's distorted the markets, dislocated the markets."
Mr Hockey said Mr Rudd should have taken the effort to personally speak to Mr
Stevens and the heads of the other financial regulators, APRA and ASIC.
"The prime minister had enough time on that weekend to have the cameras come in to
the meeting to take fancy pictures ... but he didn't have time to pick up the phone
to talk to the governor of the Reserve Bank and say - is this your recommendation to
have an unlimited guarantee?"
Federal Treasurer Wayne Swan said the government would consider any necessary
refinements to the guarantee, including a fee for deposits above $1 million.
"That threshold is not a cap, it is simply a fee for deposits above a threshold. It
is very important to understand that," Mr Swan said.
"These are issues that the Treasury and the Reserve Bank have been discussing and
are consulting industry about."
Prime Minister Kevin Rudd on Tuesday revealed he had not personally consulted Reserve Bank of Australia governor Glenn Stevens before announcing the decision at the height of the global financial storm.
In a speech on Tuesday, Mr Stevens said the October 12 decision had allayed any public anxiety over the security of their savings. "Steps in these directions, in the context of what other countries were doing, were sensible and the RBA supported them," he told the Trans-Tasman Business Circle.
A report in The Australian newspaper said the government had ignored RBA concerns
about the impact of the guarantee.
The prime minister said while he had not spoken about it with Mr Stevens, the
governor's support had been communicated by federal Treasury Secretary Ken Henry
during a cabinet committee meeting.
"At the conclusion of the discussion of a range of options before the government, I
explicitly put the question to the secretary of the treasury - is the position being
recommended here that of the regulators?" Mr Rudd told parliament.
"He answered it was. And that included the Reserve Bank."
Federal Opposition Leader Malcolm Turnbull said the government had used Dr Henry as
"a human shield".
"This could involve the commonwealth taking on hundreds of billions of dollars of
contingent liability," Mr Turnbull told parliament.
"Taxpayers are on the hook."
The prime minister accused Mr Turnbull of over-reacting to the report about RBA advice.
"The leader of the opposition has been out there today hyperventilating like a kid
on red cordial," Mr Rudd said.
Opposition finance spokesman Joe Hockey said investors had taken money out of a
range of funds and put them into banks because of the guarantee.
"What we've seen over the last few days is a massive movement of money from
superannuation funds and other investments into bank deposits," Mr Hockey told Sky
News.
"The net result is it's distorted the markets, dislocated the markets."
Mr Hockey said Mr Rudd should have taken the effort to personally speak to Mr
Stevens and the heads of the other financial regulators, APRA and ASIC.
"The prime minister had enough time on that weekend to have the cameras come in to
the meeting to take fancy pictures ... but he didn't have time to pick up the phone
to talk to the governor of the Reserve Bank and say - is this your recommendation to
have an unlimited guarantee?"
Federal Treasurer Wayne Swan said the government would consider any necessary
refinements to the guarantee, including a fee for deposits above $1 million.
"That threshold is not a cap, it is simply a fee for deposits above a threshold. It
is very important to understand that," Mr Swan said.
"These are issues that the Treasury and the Reserve Bank have been discussing and
are consulting industry about."
