WAYNE SWAN MP
MEMBER FOR LILLEY
FRIDAY, 20 APRIL 2018
SUBJECTS: Banking Royal Commission; Global Financial Crisis; Executive Pay; Appointment to ICRICT; CFMEU; Change the Rules; May Budget.
SAMANTHA MAIDEN: We’re going to go live now though to Brisbane, where the Former Treasurer Wayne Swan has kindly agreed to come in and talk to us about all of the shocking evidence that has been emerging from the Banking Royal Commission. Good morning Wayne.
WAYNE SWAN, MEMBER FOR LILLEY: Good morning Sam.
MAIDEN: Look, you were Treasurer for a long time, and you no doubt from time to time heard of concerns about what was going on in the banks and the financial services sector. But are you surprised by the evidence that we’ve been hearing?
SWAN: Look I'm surprised and appalled, but on many occasions as Treasurer, I tried to put forward very substantial reform packages to deal with some of the challenges in the banking sector. And on every occasion I was opposed by the banks and the Liberal Party. I’ll just give you one, for example, executive pay across the board, but particularly in the banking sector. Every time there’s been a discussion about how the banks have not been behaving ethically, they have fundamentally repudiated that and turned their backs on those criticisms. So I’m not surprised, but I'm certainly appalled by the extent of what we've now learned in this Royal Commission.
MAIDEN: There’s long been an argument that during the Global Financial Crisis, that it was the stability of the banks that helped protect Australia and Australian investors. And that this has been in some ways used against an argument in the past for cracking down or going further with the reforms of the banking sector. Now obviously you as Treasurer stepped in during that period to protect the banks in Australia. What are your recollections of that period?
SWAN: Well we provided a government guarantee which provided stability to the banking sector. Not just to the big banks, but to the financial sector more broadly. But following that, following the GFC abating and us moving into a period of growth, I put forward a number of substantial reforms to the sector to make it more competitive. Abolishing exit fees in terms of people who had outrageous loans with banks was one. The other one was the one I mentioned before, doing something about executive pay. I think what we’re really seeing here is the culmination of a long process. And if I could put it this way: a fish rots from the head. And what we’re seeing here is weak board supervision. And what we’re also seeing here is the ultimate impact of obscene pay packages for banking executives. Because you see they are the ultimate beneficiaries of the behaviour that is now on show before the Royal Commission. So two areas of fundamental reform must be board selection – we must empower shareholders to have a greater say in board selection. Because what you can see very clearly in corporate Australia, but also in the banking sector is that board selection is simply a game of mates. And mates select mates. So the boards are drawn from a very narrow sector of Australian society. And then you come to executive pay. There are outrageous payments being made to executives and it is simply a disgrace that those that have benefited so much from this outrageous behaviour further down are not facing punitive sanctions in terms of their packages. And I think this is where the debate’s going to go. What do we do to reform – to further reform – executive pay across the board, particularly in the banking sector, and what do we do to reform the way in which boards are selected.
MAIDEN: Well the Treasurer has suggested that he’s already announced some reforms in that space, of executive pay. Obviously I’m going to assume that you’re going to tell me that it hasn’t gone far enough.
SWAN: Well I don’t think it has gone far enough. For example, many executives get golden parachutes and why wouldn’t we actually change the taxation arrangements for golden parachutes? Make it prohibitive; make [the marginal tax rate] 75 per cent, for example? There’s a lot more we can do to remove the incentives in the system to rip people off.
MAIDEN: You’ve recently announced that you’ll be joining an international corporate tax commission. Can you tell us about what you are going to do in that new role, what ideas and issues that you want to prosecute?
SWAN: Well I think we need a better system internationally to combat rampant multinational tax evasion and tax avoidance, which is one of the principal drivers of the rampant inequality we are seeing around the world. Now there is already a governmental process in place called the BEPS [Base Erosion and Profit Shifting] process, which I was part of kicking off as a finance minister in 2013. I don’t believe that has gone far enough, and nor do many other knowledgeable people in the system. So this Commission has been set up by the non-government sector to talk to the community worldwide about the importance of getting rid of and eliminating tax evasion and avoidance by multinational companies. Because you see, that avoidance basically will, if you like, demolish the achievement of the Sustainable Development Goals which were adopted by the UN in 2015. So what we have to do is to make sure that countries around the world have sufficient tax revenue to invest in the drivers of economic growth and in the health and education of their people. And if we keep seeing this race in corporate taxation to the bottom, we’re going to have lower growth and we're going to have further polarisation and inequity in our global economy.
MAIDEN: You have previously tried to prosecute some ideas in terms of higher taxes for corporates that have not been embraced by Chris Bowen. There was a bit of argy-bargy about that coming up to the next ALP Conference. Do you think that this evidence that has been heard in relation to the activities of these banking and financial services providers might actually shift that debate and you might have a better chance of winning that argument in the next couple of months?
SWAN: Well firstly I'm in complete agreement with Chris Bowen on all of the tax reforms that he’s putting forward now, because they will have a dramatic impact on tax avoidance and evasion in our system. But I do think that the revelations from the Royal Commission are a power of force which should drive substantial reforms in corporate governance. Substantial reforms to deal with obscene executive pay packages. And substantial reforms about how boards are selected. Because what we’re seeing is very unethical behaviour. And of course the private sector us roughly 75 per cent of our economy and because of that, we’re not going to have the sort of economy that we want, which grows in a healthy way and which is fair, unless we come to grips with fundamental reforms in corporate governance. And that's what I'm concentrating on.
MAIDEN: Now earlier this week I spoke to the CFMEU’s John Setka in relation to the history of the Gillard Government coming in and the reforms they announced in the industrial relations space. It’s interesting to hear now that a lot of unions are saying that those areas need reform, despite the fact that the architect was the Gillard-Rudd Government. Do you believe that you got it wrong then, that you were too concerned about being seen as pro-union back then, and you basically left workers disadvantaged?
SWAN: As Sally McManus has said, a lot of things have changed since that time. And the thing that has fundamentally changed is the aggressive corporate behaviour which is making collective bargaining so difficult for so many unions and for so many individuals. Basically we've got much more aggressive behaviour from large corporates, which is aimed at minimising their tax, suppressing the wages of their workers and casualising their workforce. And that will demand changes to the rules. Not just in industrial relations, but as I said before, changes in relation to corporate governance and much more. So we need to have a complete rethink of the whole system. And the Labor Party is doing that. In relation to some of the criticisms, there was no sector that was a bigger beneficiary of our response to the Global Financial Crisis than the construction industry, where jobs were created across the country in the face of massive unemployment in every other country.
MAIDEN: It’s interesting though, because my sense listening to the debate is that in the lead-up to Kevin Rudd being elected as Prime Minister, he was under the pump to show that he wasn’t going to be captive to the unions and he was very careful in that space to be very careful about how they were going to do things back then, and the ABCC and so on. This time around, it seems the Labor Party is pursuing a pretty major agenda of industrial relations reform and they really are very much in lockstep with the unions with these calls to have a greater right to strike, and so on. Do you think that a Shorten Government would have a more radical industrial relations prescriptions than the Rudd Government did?
SWAN: Well Sam I've always regarded myself as being in the labour wing of the Labor Party. And the two institutions in our society that have the power to deal with growing inequality in wealth and income are the union movement and the Labor Party. What we are seeing now is a radicalised right and a much more assertive corporate sector, which is seeking to change the distribution of wealth and income in our society. And that demands, from both the union movement and the Labor Party, new responses to this aggressive behaviour that we’re seeing from many corporates on an international scale. So I’m proud of our record in government, but there are different conditions now. The wage suppression that we are seeing in enterprise bargaining across the country, employers walking away from enterprise bargaining, some of their very aggressive behaviour we’re seeing from employers demands a new response, not just from the unions, but also from the Labor Party.
MAIDEN: Just finally, we’re not far away from the May Budget. We’re told that it’s locked and loaded this year; they’re not having the same public arguments that they did last time for example over whether they’re going to allow superannuation accounts to be used as first-home-owners’ savings accounts and so on. But you’ve done a lot of Budgets; you’ve seen a lot of Budgets play out. What do you think is going to happen in this Budget; what are we going to see? And I’m also interested in what your take is on this record of the Abbott-Turnbull government in actually reducing the deficit. They’ve talked a lot about debt and deficit, they introduced a deficit levy, but what headway have they made, really?
SWAN: We’ll they haven’t. They’ve blown out deficits and they’ve blown out debt. And that’s happened completely on their watch and those figures are there for everybody to see. So their fiscal fearmongering, that they try to use against the Labor Party, is exposed by the terrible outcomes they’ve had in terms of increasing deficits and increasing debt. You do hear reports that maybe the revenue is going to be a bit better this year. But I don’t see any indication that they’re going to come to grips with the fundamental problem in the Australian economy – insufficient demand, which is caused by a real squeeze on the incomes of low‑ and middle‑income earners in Australia. All they want to do in that circumstance is to give a tax cut to the rich and powerful and a tax increase to people on modest incomes. If they continue with that policy setting, we’re not going to see any dramatically different outcomes from what we’ve seen in the past.
MAIDEN: Wayne Swan, great to talk to you, thanks for your time today.
SWAN: Thank you.
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Authorised by Noah Carroll, ALP, Canberra