Transcript: Interview with Philip Clark, ABC 702 – 7 December 2011

TRANSCRIPT: INTERVIEW WITH PHILIP CLARK, ABC 702

TRANSCRIPTION: PROOF COPY E & OE

DATE: 7 DECEMBER 2011

TOPICS: Mortgage stress in Western Sydney, interest rate cut.

PHILIP CLARK: Look, it’s fair to say that the banks this morning are under some pressure from consumers in particular, let alone politicians, the Treasurer included, to cut interest rates.

A cut in the interest rates of course would be of great benefit obviously to people, at least $49 a month, at least $50 a month to those on average mortgages.

There are plenty in Western Sydney as part of Australia who are facing significant stress. The Member for Blaxland Jason Clare joins me on the line this morning.

Mr Clare, good morning.

JASON CLARE: Good morning Philip.

PHILIP CLARK: Plenty of your constituents would be saying well come on, cough up, give us the rate cut now wouldn’t they?

JASON CLARE: You bet. And anyone that’s got a mortgage will be asking the big four banks to pass it on today. An extra $50 especially at Christmas time will really help.

PHILIP CLARK: Yeah. That’s the thing. If you’re in Sydney of course you suffer rate stress like – or mortgage stress like nobody else in the country given the cost of housing here, do you think that banks understand that?

JASON CLARE: Well I guess we’ll find out today. Banks are making big profits. ANZ made a big profit that they announced I think just last month, $5.6 billion. Westpac’s even bigger at $7 billion. When you’re making those sorts of profits I find it difficult to find an excuse not to pass the rate reduction on.

That’s the reason the Reserve Bank made that decision yesterday and I, like everybody else listening today, would expect the big banks to pass that – pass that rate reduction on.

PHILIP CLARK: What would you say to banks who don’t; who don’t pass it on in full or at all?

JASON CLARE: Well I would say you’re defeating the purpose of the Reserve Bank’s decision.

The Reserve Bank has made the decision that we need to reduce rates. It puts more money into the economy.

If you don’t pass the rate reduction on then not only are you hurting your customers but you’re not doing the right thing by the economy. So have a good look at what the Reserve Bank has said and do the right thing.

PHILIP CLARK: Your – I mean your constituents, as I say, would be in a part of Sydney and a part of Australia where this is of huge significance to them. A cut of $50 a month is a real saving for people who are in significant difficulties isn’t it?

JASON CLARE: Yeah Philip, you’ll know a couple of years ago we – I described this as the mortgage stress capital of Australia.

PHILIP CLARK: Yeah.

JASON CLARE: We had 60 families a month having their homes repossessed. The big cuts in interest rates over the course of the last few years mean that that’s a lot lower.

In October we still had eight families that had their homes repossessed in the Bankstown area.

So there are still people doing it tough. A lot people – a lot of people have been able to get ahead in their mortgage, but another cut, another 50 bucks a month or so, that equates to $600 extra in their purse or their wallet every year will make things a lot easier.

PHILIP CLARK: Hmm. I mean your constituents probably look at the banks and think well look, you know, at the time of the GFC my jobs were disappearing; no one was protecting my job. The government issued a protection to the banks said, you know, the banks are basically – we’ll stand behind you.

And they seem some – they probably see some, you know, some gap don’t they in the way that the banks are now acting in their own situations?

JASON CLARE: Well at that time when the global financial crisis hit, people expected us to make sure that we guaranteed and protected their money. That was a decision, a good decision, made about protecting people’s deposits rather than the banks themselves just [indistinct] they keep their money in the bank.

But, you’re right. We made the right decision during the global financial crisis to stimulate the economy and to protect bank deposits and the right decision by the banks now would be to say okay, if the Reserve Bank thinks that the cash rate should be cut then that should be passed on because that will be good for the economy and good for the people that borrow money from them.

PHILIP CLARK: Nine to nine. My guest is Jason Clare, Member for the – Member for Blaxland in Western Sydney. Is the government putting enough pressure on the banks? Ought the government be seeking some bigger stick? I spoke to Mr Abbott earlier; he says when he was part of the previous government they always passed on the rate cuts.

JASON CLARE: Yeah. Well I heard what Mr Abbott said. There’s a difference between talking and doing.

One of the things the government’s done in the last 12 months is abolish exit fees so if you do make the decision to switch from one bank to the other you don’t pay a whopping big multi-thousand dollar fine for moving from one bank to the other.

And when we put those laws into the Parliament, not surprisingly, Tony Abbott voted against them.

He’s voted no on most things we’ve put into the Parliament. If he really cared about people’s mortgages and wanting the banks to pass on this rate reduction then he would’ve supported getting rid of exit fees. I think – pretty simple question.

PHILIP CLARK: Okay. But would you like to see Mr Swan – would you like to see him, on behalf of your constituents, proposing a bigger stick than the current please pass on the rate cuts banks?

JASON CLARE: Well go back 20 years, we deregulated the banks.

I don’t think anyone wants us to go back and nationalise the banks or be able to control the way in which they make decisions.

But what we do need to do is put incentives into the markets so that if people aren’t getting a good deal they can go down the street and get another deal.

That’s one of the things we’ve done. Getting rid of exit fees – that’s thousands of dollars that people no longer have to pay. So that makes it a lot easier to switch from one bank to another.

But the other thing the government has done, and I think not a lot of people know about this, but put a lot of money to underwrite or support the lending of these smaller non-bank lenders.

We had around about four years ago, about 20 per cent of the market were those smaller non-banks lending for mortgages, the GFC destroyed most of them and the government’s put a lot of money to support them and get them back into the market – the Aussie Home Loan type lenders.

And if you’ve got more of them back in the market it creates more competition so it puts more pressure on the banks to pass on the rate reduction today.

PHILIP CLARK: Okay. Alright, Mr Clare we’ll leave it there.

Thank you. Jason Clare, who’s the Member for Blaxland in Western Sydney. One of those – well one area in Australia suffering very very significant mortgage stress.