Ross Greenwood speaks to Assistant Finance Minister, David Coleman, about ways the government is attempting to save taxpayers $200 million.
Introduction: What is Operation Tetris?
Ross Greenwood: Right now David Coleman, the federal member for banks, the assistant finance minister, and formerly the chair of the House of Representatives Standing Committee on economics. He’s online right now. Many thanks for your time, David.
Interview with: David Coleman, Assistant Finance Minister
David Coleman: No worries, good to be with you, Ross.
Ross Greenwood: A few bits and pieces, in your role at the House of Representatives Standing Committee on economics, you’ve seen a number of issues in regards to banks coming before you. You have grilled the banks and the chief executives themselves. The Royal Commission now with the revelations coming out, is that role of the commission ultimately been necessary for Australia?
David Coleman: Look, obviously, the Royal Commission focused on some important issues and the allegations that we’ve seen this week are disturbing as were the admissions of IMP some weeks ago. When we held our inquiry, we did focus quite a bit, Ross, on this issue with what’s called non-monetary default. That’s basically when banks were finding people to be in default on their loans even though they were up to date with all their payments. There were scenarios where that happened into some farmers and farming communities. A number of changes are being made now so that those non-monetary defaults aren’t being pursued for loans of less than $3 million which is the vast majority of people.
Ross Greenwood: Thank you. The start of that question was the Royal Commission actually necessary in hindsight. I didn’t believe it was necessary, I now believe it was absolutely necessary.
David Coleman: Look, we’ve obviously acknowledged that setting up the Royal Commission was the correct thing to do. Certainly some of the evidence that’s come before the commission has been very concerning. We look forward to the interim report of the commissioner which is due in September and we’ll certainly be looking very carefully at any recommendations he makes. As you know, there’s been a lot going on in this space in terms of changes that came out of our community, and the Banking Executive Accountability Regime, the Australian Financial Complaints Authority, the new lands [crosstalk].
Ross Greenwood: The Productivity Commission Inquiry, all of that [crosstalk].
David Coleman: Right and also, don’t forget the new financial services unit in the ICCC because prior to that community that we put together, no regulator was clearly focused on competition in the financial services sector. A lot of these issues do come back I think, Ross, to a lack of competition and an arrogance in which the banks have treated their customers, so competition’s absolutely critical and the ICCC is looking very carefully at that issue at the moment.
Ross Greenwood: Just one final one on before we move on to other subjects. Is there a danger out of the Royal Commission, out of all these inquiries that have taken place? What we get is a whole bunch of new rules that come out, one of the real problems that I sense and that goes back to even where the banks have been with their dealing with some of the farmers that we’ve heard in the past few days is that the common sense result did not occur, the legalistic result occurred. Now if you end up putting even more laws and more rules in, that ultimately you’re going to end up with even more legalistic conclusions as distinct from the right conclusion if you get my drift.
The common sense approach to say to a farmer, “Listen, you need to sell those stocks, sell them now” as distinct from “Hang on to those stocks because hanging on to stock because you might be selling below market value.” The real thing for a farmer is not get rid of the stock right now because we need to get the money, the cash in the bank right now. As I said, they can be a disconnect between common sense and the legalistic or the banking thing to do.
David Coleman: Yes, and you’ve got to get the balance right and the regulation. We need to feel gaps in a system where they’re identified, but, equally, you don’t want to have such a system that nobody is able to get a loan or that the whole system really slows down dramatically. That would not be good for the economy and it wouldn’t be good for people that are seeking to obtain finance, so it’s about a balance, Ross. Where the wrong thing has been done, where there has been a gap in the regulatory system, we need to fill that, but we also need to have regard to those practical issues that you rise.
Ross Greenwood: One of the reasons I wanted to talk to you was a lot of people will not understand that the Australian Federal Government is one of the largest renters of properties in this country. It’s suggested that Australia effectively spends $2 billion a year on commercial office accommodation for 94 departments and instrumentalities is now in the space and you’re responsible for this to try and save around $200 million over the next four years, and then that would be obviously going forward into the future. A lot of people would be surprised that the Commonwealth government is the largest tenant in the Australian office market.
David Coleman: Yes, we know we are, Ross. We’ve got 159,000 work points that we lease around the country and close to three million square meters, so huge leasing in the market. You’re right, the Commonwealth spends about $2 billion a year. Since we’ve come to government, we’ve made a number of changes. When we came in, effectively all the departments largely did their own thing, there wasn’t a lot of coordination, we changed that. We’ve identified $300 million in savings already through Operation Tetris which is about bringing together departments where it’s sensible to do so. In the most recent budget, we just saved another $105 million through basically a smarter approach to leasing.
What I’m looking at now Ross is further opportunities to make savings. Within that $2 billion, the Commonwealth spends on average about $400 million a year simply on office fit-out, so huge amount of money on office fit-out. What I’m looking at is can we do that in a smarter way? Can we make savings? Obviously, if you can save a decent percentage of $400 million a year, that’s a lot of money.
Ross Greenwood: Can I just pick up on one thing before I say, did you seriously call this Operation Tetris after that game where you got to feed all the little bits of the puzzle to make it keep on going?
David Coleman: Yes, I think that was the theory, Ross, because when we came into government, there was some buildings where there were literally whole empty floors. What we said was, well, are there opportunities where we can consolidate government departments so that we don’t have that wasted space, and, yes, that’s why it’s called Tetris, but $300 million over 10 years just through that sensible consolidation.
Ross Greenwood: We’re going to say, it was probably better calling it Operation Titus which could have actually led to a giant black hole for the government which wouldn’t have been necessarily as true I can understand that, but Tetris, I thought that was pretty clever. The other point also is that if you can try and consolidate government departments, it doesn’t necessarily mean the building of new giant buildings or trying to, it’s about trying to lease the space better to make sure the space is occupied and used efficiently. Does this mean in some cases actually bringing government departments together?
David Coleman: Yes, it can mean that. Basically, it’s saying we’re the biggest lessee in the office market in Australia and we should be the most sophisticated. We’ve done a lot of good work on this already, but I’m looking at it and saying, “What more can we do on office feed-out. What more can we do on subleasing? What other opportunities are there?” It’s such a large amount of money that it’s critical that we do absolutely everything we can and that’s what I’m focused on.
Just next week, actually, Ross, we’re kicking off a process with the property sector talking about the office feed-out processes that we follow now and getting the views of the sector on how that can be improved, how it can be made more efficient to make savings feel right for taxpayers. I would expect that later in the year we’ll have more to say on that.
Ross Greenwood: It would be interesting to see exactly what some of those landlords actually have to say about it as well. From a parliament held studios, the Assistant Finance Minister David Coleman. One thing, David, also, I think it’s this Friday that we’ll see the latest of the department of finance monthly accounts. That generally comes at last Friday of the month, I understand. That should show us a little last minute pictures the budget is tracking and whether it continues to be in surplus. That’s a pretty big day for you as well.
David Coleman: Yes and we’re seeing good results there, Ross. We’re seeing the benefits of a strong economy with tax receipts particularly from corporations higher than anticipated. In fact, the company tax receipts are around $9 billion higher than were expected back in the 2016, ’17 my info. We’re also seeing the benefit of a prudent cost management. Under the previous government, costs went up in real terms by about 4% every year. Under us, it’s 1.9% and that’s across a $400 billion-plus budget, Ross. That 2% difference is immense.
Ross Greenwood: I was going to say I was going to keep an eye for that very, very closely. David Coleman is assistant finance minister for the parliament held studios. David, I appreciate your time.
David Coleman: Thanks, Ross.
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