Michael Keenan (Stirling, Liberal Party, Shadow Assistant Treasurer) Share this | Hansard source

The opposition supports the Financial Sector Legislation Amendment (Review of Prudential Decisions) Bill 2008, and we do so for reasons similar to those that we supported the previous bill—because it was a bill introduced by the former government. This bill has not been changed in any substantial way. It has only been changed to take into account some other transitional issues in relation to legislation that has already passed through the House. It is an important piece of legislation. Recent events in the United States and the United Kingdom emphasise the crucial importance of an effective prudential regime to provide efficient stability as well as efficiency in the financial system.

This bill has its origins in the work undertaken by the coalition government with the aim of reducing the regulatory burden on business. We hear a lot from the government at the moment about reducing regulation. We find that, like a lot of things about the new government, it seems to be more about striking a pose than doing anything effective. I am sure the minister, as an economist, would support measures to reduce regulation, but what I say to him is, if he is a fan of Elvis: ‘a little less conversation, a little more action’. If the government do come up with sensible measures to reduce regulation then they will certainly get the support of the opposition. What he will find is that it is easier to talk about than actually do.

The hallmark of that work has been the effectiveness and thoroughness of consultation with the peak industry bodies. There is some speculation on this side of the House about the ability, or the inclination, on the part of those opposite to genuinely engage with stakeholders. But, again, I am very happy to reserve my judgement. There have certainly been some criticisms about the make-up of the first home saver account, so it will be interesting to see whether the government is prepared to take these criticisms on board and maybe amend some of the design features of that proposed account.

The coalition encourages and welcomes an open and two-way interaction with industry and other representative bodies, as we did when we were in government. In 2005 a task force was established to assess the nature of the compliance burden. The task force’s report Rethinking regulation identified a number of areas where changes could lead to efficiency gains. The coalition accepted all of the task force’s recommendations in relation to prudential regulation affecting authorised deposit-taking institutions, superannuation funds, and life and general insurers. These industries provided more specific input through their responses to the coalition government’s December 2006 discussion paper in Streamlining prudential regulation. That input then informed a follow-up discussion paper in May 2007 which marked a high point in prudential policy and regulation.

The opposition supports this bill and welcomes the introduction of its main features. They are as follows. A power is given to the Federal Court to disqualify responsible officers working in entities governed by the Banking Act, the Insurance Act, the Life Insurance Act, the Retirement Savings Account Act and the Superannuation Industry (Supervision) Act. In broad terms this power is modelled on a similar power contained in the Corporations Act. It will allow APRA to apply to the Federal Court for a person to be disqualified from acting as a ‘responsible person’. The measure, which introduces flexibility into APRA’s enforcement tools, has the support of key stakeholders.

This bill also harmonises the directions powers of APRA. The measure replaces various specific powers for APRA to issue directions concerning entity level activities under the Banking Act, Insurance Act and Life Insurance Act. In addition, there will now be a materiality test included in the trigger for APRA or the ATO to issue a direction to freeze a superannuation entity’s assets under section 264 of the Superannuation Industry (Supervision) Act. While this measure reduces the complexity of APRA’s administering directions powers, which are presently spread throughout a number of different pieces of legislation, it also clarifies which of those directions is subject to merits review.

This bill also allows for expanded availability of merits review of specified decisions taken by APRA. Merits review is currently available for most decisions made by APRA or the ATO under prudential legislation affecting individuals. There is, however, inconsistent application of merits review for decisions which may impact substantially on entities. Further, there was also the possibility of a perception arising that such inconsistency may reduce the regulator’s accountability for administrative decisions. In determining which decisions are appropriate for merits review, the approach in this bill is to take into account the guidelines of the Administrative Review Council.

Finally, this bill provides for the removal of the requirement that the Treasurer agree to administrative decisions not involving wider policy issues to be taken by APRA or the ATO. This measure will mean that the Treasurer is no longer required to be involved in operational prudential decisions made by either APRA or the ATO. Such involvement could blur the lines of accountability for those administrative decisions. Removing the need for the Treasurer’s involvement should enhance the regulators’ operational independence and improve the timeliness of the process of supervision. In addition, it will ensure that accountabilities are clearly allocated to the responsible decision maker. It should remove any perception that the regulators are influenced by external interference in the exercise of their prudential powers. Finally, I note that, where a decision concerns licensing and authorisation, removal of a responsible person will be subject to merits review. This is a sensible piece of legislation and the opposition supports this bill.

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