11 March 2014
Transcript - #2014006, 2014

Interview with Rishaad Salamat, On The Move, Bloomberg Television

SUBJECTS: Internationalisation of the renminbi; property prices; the financial system inquiry; the Australian Dollar

RISHAAD SALAMAT:

…has hopes of being an Asia Pacific financial hub. Joining us now is Assistant Treasurer Arthur Sinodinos. Arthur, thank you very much indeed for joining us. Well, how do you plan to achieve that aim?

ARTHUR SINODINOS:

Thanks again for having me on the programme. I think first and foremost by continuing to build a pretty strong economy here and I think continuing to improve the operation of our own financial system, which is well regulated. Thirty years of deregulation has given us a fantastic base to build from. We've got one of the biggest superannuation pools in the world now. We have a lot of financial expertise. We're doing a lot of economic diplomacy in the region, promoting the internationalisation of the renminbi. We're also involved in the Asian region funds passport to make it easier for funds managers to operate within the region and move funds around. So, we're really keen not so much to overtake Singapore or Hong Kong or Shanghai or whatever, but really to complement them by bringing to bear our expertise and also of course the great lifestyle and other opportunities that Australia has to offer.

RISHAAD SALAMAT:

Well, all that sounds good. What about the nuts and bolts of this? I mean when do you start getting involved with let's say the greater use of the RMB as an international currency, indeed for settlements here as well, where are you with that? These things are going to be important aren't they?

ARTHUR SINODINOS:

Look, over the last few weeks I've been involved with China Construction Bank and Bank of China in terms of initiatives they're taking out here to promote the use of the renminbi. I attended and presided at a function with the Australian Stock Exchange where it was agreed with the Bank of China that the financial infrastructure of the stock exchange would be used to help with real time clearance of renminbi, and also Hancock Prospecting I was involved in overseeing a memorandum of understanding being signed between them and the Bank of China to promote the internationalisation of the renminbi. And I'm keen to do more of that because I think everything we can do to liberalise China's capital account and financial markets is going to be very important in terms of their development and of course their greater engagement with the world economy.

RISHAAD SALAMAT:

A lot of concerns are out there Arthur when it comes to property prices, particularly where you are at the moment. I think it's your hometown as well – we're talking in Sydney and property prices are absolutely soaring there still at the moment. I mean, are you concerned about this threatening financial stability?

ARTHUR SINODINOS:

Property prices in Australia have gone up. I think in Sydney they have gone up about 14 per cent in the last year. The Reserve Bank is of course keeping an eye on all of this, but in a sense what we're seeing is a classic price response which should induce a supply response. We're already seeing dwelling investment going up. So obviously we would be hoping that the market corrects itself and certainly the Reserve Bank is keeping an eye on all of this and the fact that they haven't again moved interest rates recently indicates that they're satisfied with the growth path of the economy. But they will keep an eye on asset prices including importantly, property prices.

RISHAAD SALAMAT:

You at the moment are conducting an inquiry into mortgage providers in the financial system here. Now, after the global financial crisis it left it a bit more concentrated there in terms of the number of mortgage providers. Are you likely to open up more to foreign lenders to play a part here as well?

ARTHUR SINODINOS:

We're very keen to get as much competition in the system and our financial system inquiry will particularly look at issues like the balance between big and small banks in the Australian economy – whether prudential safeguards discriminate against one group or the other. We're very keen where there's foreign competition that come in that it happen. Traditionally in Australia the foreign competition has come into the corporate and institutional space. Not as big in the home lending space where traditionally it's been asset securitisation which residential mortgage securities which has been the way in which non-bank players have competed with the bank and of course the securitisation market has gone through a difficult period since the GFC. But certainly through the financial system inquiry we're keen to make sure we're doing everything we can to have an open and competitive financial system.

RISHAAD SALAMAT:

Are you happy with the Aussie dollar trading at about 90 where it is at the moment or would you like to see further weakness?

ARTHUR SINODINOS:

Look obviously from the point of view of our exporters it's always good if the dollar goes down as opposed to up. We're doing what we can to support the current monetary policy settings and in-turn hopefully put downward pressure on the dollar through consolidating our budget, having one eye of course to the state of growth in the economy as we do that. But it is important that the Government plays its role in consolidating its budget and providing room for the dollar to fall and for low interest rates settings to be consolidated.

RISHAAD SALAMAT:

Arthur thank you very much indeed.