Bank guarantees to be withdrawn: Swan

The federal government has decided Australia's banks can survive on their own
without taxpayer-funded guarantees.
Deposits of more than $1 million will no longer be guaranteed from the end of March,
although bank accounts with less than $1 million will continue to be underwritten
until late 2011.
The government is also phasing out its wholesale guarantee of bank borrowing on
global money markets from the end of next month.
Canberra's underwriting of state and territory government borrowing will be turned
off from the end of December.
In October 2008, $600 billion to $700 billion of measures were unveiled as global
turmoil jeopardised the stability of Australia's financial system and the ability of
banks to lend.
But now, the Council of Financial Regulators - which includes the Reserve Bank and
Treasury - says banks can fund themselves without a taxpayer-funded guarantee.
Treasurer Wayne Swan said bank borrowing costs had returned to where they were
before the onset of the global financial crisis in 2008.
"Critically, our regulators explicitly advised that removing the guarantee would not
materially affect banking sector funding costs," he told reporters in Canberra,
adding the announcement was made on Sunday because it was "market sensitive".
Banks would have "absolutely no justification" to use the news as an excuse to raise
interest rates beyond any move by the Reserve Bank of Australia (RBA).
"They would incur the wrath not just of the Australian people but of the Australian
government," he said.
The government, however, has resisted opposition calls for the stimulus to be wound
back.
Mr Swan said most of the stimulus money had been committed, and "ripping it out"
would disrupt a whole pipeline of activity and damage the recovery.
Finance Minister Lindsay Tanner revealed that a little over half of the government's
$42 billion stimulus money had been spent but argued the Australian economy is still
"very fragile".
Opposition treasury spokesman Joe Hockey said the withdrawal of the bank guarantee
measures showed the stimulus was no longer needed.
"We have the Rudd government spending billions in 2010 dealing with a downturn in
2008," he told AAP.
The government said the bank guarantee had allowed smaller banks to raise more than
$32 billion from global credit markets.
Mr Hockey and Australian Greens leader Bob Brown criticised Mr Swan for not
revealing how much the major banks had raised.
The big banks should have been pressure to reduce lending rates in exchange for the
guarantee, Mr Hockey said.
The chairman of the Bendigo and Adelaide Bank, Rob Johanson, told ABC Television on
Sunday there was still "lot of nervousness" in various parts of the banking sector.
Economists are expecting official home loans data for December, due out on
Wednesday, to show a drop in lending activity as borrowers react to the scaling back
of first home buyer grants.
The experts are expecting labour force data, due out on Thursday, to show the
creation of 15,000 jobs, albeit with a slight tick up in the unemployment rate to
5.6 per cent.