Stephen Jones (Throsby, Australian Labor Party) Share this | Hansard source

It is a great pleasure to be speaking on the Commonwealth Government Securities Legislation Amendment (Retail Trading) Bill 2012, otherwise known as the retail trading bill. Of course, Deputy Speaker, as you know, this was an important part of the government's banking and financial reform package.

It is an even greater pleasure that I follow what might be described as the bookends of the coalition's economic management team—sometimes described, perhaps, as the bookends, sometimes as competitors for the mantle of the principal economic spokesperson. We saw earlier the member for North Sydney huff and puff. He comes in here and makes a hell of a lot of sound and noise and fury, rarely very much sense. Sometimes he speaks on the subject before the House but rarely does. So you have the noisy end of the coalition's financial spokesperson team, and then you have the member for Goldstein, who on some days, like today, could pass as a rather fancy substitute for Horlicks on a cold winter night—not the sound and fury or the noise and rarely the same content either.

But there are serious matters before the House, and this bill is one of them. I will address the matters in the bill and then I will go to some of the matters that have been raised by the member for Goldstein and the member for North Sydney, because they really do need to be debunked. The bill amends the Commonwealth Inscribed Stock Act 1911 to enable the Australian Office of Financial Management to make payments in relation to depository interests in Commonwealth government securities. It is intended that these depository interests will be quoted on financial markets, thereby making them available to retail investors. The bill also contains amendments to the Corporations Act 2001 to ensure that depository interests in Commonwealth government securities are subject to the investor protection and market integrity provisions within the legislation.

One of the key objectives of the federal government's banking package, which was announced in 2010, was to secure the long-term safety and sustainability of the Australian financial system, some domestic sustainability, by reducing reliance on offshore wholesale funding markets but also to ensure that domestic borrowers were not subject to the significant swings in the costs—at that point in time, a significant increase in the costs—in borrowing from offshore wholesale markets. One of the ways that we decided to achieve this was to foster a deeper and more liquid corporate bond market and thereby trading of Commonwealth government securities on financial markets, making it accessible to retail investors. This is a crucial element of this proposal because it provides retail investors with a visible pricing benchmark for investments they may wish to make in corporate bonds. Establishing a strong liquid retail market in the premium debt security—that is, Commonwealth government securities—is a critical step in the formation of a wider retail debt market, including corporate debt.

Following consultation with stakeholders, it has been decided to adopt an indirect or beneficial ownership type of trading model whereby retail investors will be able to buy and sell a derivative known as a depository interest in the Commonwealth government securities. It is a widely used model. There are already about 80 types of depository interests which are traded on the Australian Stock Exchange, and more are expected. Based on this model, retail investors will be able to buy and sell depository interests in Commonwealth government securities in the same manner as any other listed share.

Owners of Commonwealth government security depository interests will have the same claim to payments of principal and interest as if they owned the underlying security itself. As the current legislation does not contemplate beneficial interests in Commonwealth government securities, the amendments in the bill are required to ensure that the necessary payments of principal and interest, as well as costs and expenses, can be made in connection with the issue, sale and management of depository interests in the security.

In order to enable the retail trading of the security to commence, proposals and tenders have been requested from industry stakeholders for the provision of commercial services necessary to implement this policy. The government anticipates that trading will be able to commence on at least one such market in the very near future.

The bill will also ensure that the investor protection and market integrity provisions apply to the security depository interests. These measures will ensure that financial services providers will have to comply with a range of licensing, conduct and disclosure requirements when they provide their services in relation to the CGS depository interests. The amendments in the bill will also require information statements to be provided to retail clients when they are given personal advice about CGS depository interests.

The government considers that the tailor-made disclosure documents prepared by the AOFM are appropriate for CGS depository interests because they are a particular type of safe and simple investment. The government will ensure that these information statements will be made available to the public on a dedicated website, together with other information related to CGS. Financial advisers will be able to download and print out the information statements from this website before talking to their clients.

As I said at the outset, these measures deliver part of the banking package commitments which the government announced in December 2010. The banking package was announced in the wake of the global financial crisis, as the government sought to steer our economy and our financial system through an unprecedented set of global circumstances. The government has been acutely aware of the impacts of the global financial crisis on our competitive outlook for our banking sector. I have to say that the performance of the Australian banking system, and indeed the Australian economy as a whole, as we wove our way through the global financial crisis means that Australia is the standout economy of all comparable economies throughout the world. In Europe, countries are really struggling under burdens of debt that would be unimaginable in this country and under record levels of unemployment. I recently visited one such country, for example, which had unemployment rates in excess of 20 per cent. They would be envious of the sorts of issues that we struggle with in this country.

Of course, we get little recognition from those opposite for the way we managed the economy through this crisis, but we get plenty of recognition when representatives of the Australian government or Australian businesses travel abroad. It is widely recognised that due to the actions of the Australian government we are now the beneficiaries of nothing more and nothing less than the Australian miracle.

It did not have to go that way. If we had listened to the advice of the coalition, particularly the member for North Sydney and the member for Goldstein, we would have been struggling under record levels of unemployment. Some people suggest that had we not acted quickly to stimulate the economy we would have been seeing in excess of a half a million people unemployed instead of having unemployment levels below five per cent and having our economy dip out of growth for only one quarter throughout that entire period. We have seen our economy grow on trend on average for each of the years we have been in government. We have an unemployment level that is the envy of the world. Many state governments are trying to attack that by laying off public sector workers in levels not seen since the Howard government was in office, in 1996 and 1997. But, by and large, through the sound financial management of this government we have low unemployment, and that will continue to be our driving objective, because nothing is more important to a Labor government than ensuring people have jobs—decent jobs, good-paying jobs and secure jobs.

I heard the contributions from the member for Goldstein and the member for North Sydney, who tried to puff up their economic credentials, particularly the member for North Sydney. I had to laugh because this is the same man who was having thought bubble after thought bubble two years ago when it came to policies around banking sector reform. This is a guy who quite seriously tried to politicise the Australian government's longstanding membership of the International Monetary Fund and bipartisan approach to our membership of it. He tried to get some political leverage out of us renewing and improving our quota arrangements and security arrangements with the International Monetary Fund.

Talking about structural deficits, the structural deficit we inherited from those opposite was something we spent our first year and a half in office addressing, whether it was the extreme growth in middle-class welfare or the handouts and the boondoggles to the National Party members and the National Party seats.

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