Tuesday, 12 February 2019
Economics Committee; Report
by leave—This is the fourth report of the House of Representatives Standing Committee on Economics into hearings with the bank CEOs, and the Labor members of this committee made two additional recommendations in our additional report. Firstly, we recommended a mechanism to give bank victims who had not been called before the royal commission the opportunity to tell their stories to that commission. We asked that those hearings take place in both city and regional areas. Unfortunately, of course, the commission has now passed, and the government didn't take up this recommendation. It's a great shame, because I and members of the Labor economic team spent months meeting with many of the bank victims, and many of their stories are absolutely harrowing, particularly those—they may have been running small businesses or may have been farmers—who had met all of their obligations under their loans when they took out loans with banks as mortgages. They never missed a payment but, because the banks decided to revalue assets associated with those loans and impair those loans, they found themselves in dire circumstances. We believed that these people should be given the opportunity to tell their story before the royal commission. It's unfortunate that the government didn't take up that recommendation.
The second recommendation that we made is related to the banking accountability regime proposed by the government—the BEAR, as it is more widely known. We recommended increased accountability obligations for bank executives be extended to cover matters that affect consumer outcomes. It's pleasing to see the royal commission allude to this in recommendation 6.8, which states that the BEAR should be extended to APRA regulated financial service institutions. That's something Labor looks at positively in terms of the recommendations that were made by the royal commission.
On the royal commission more broadly, it should never be forgotten that the Prime Minister and those opposite voted 26 times against a royal commission. This is the report that they did not want to see. These are the scandals, the rip-offs and the undermining of businesses in the Australian banking and financial system that they did not want to be exposed. Labor had been calling for two years for the government to hold a royal commission into banking and financial services because we had seen what had gone on in that industry and, as I mentioned earlier, we had sat down with some of the victims against whom these rip-offs have been perpetrated.
It also should be noted that many of the activities, cases and instances that have been uncovered in the royal commission as breaches of law and illegal—and for which some are facing the prospect of prosecution—would never have been illegal if this government had had its way when it was originally elected. That is because many of the cases presented at the royal commission are breaches of the FOFA legislation. They're breaches of the duty of financial advisers to act in the best interests of their clients. They're breaches about disclosure obligations, particularly when it comes to grandfathered commissions and people paying fees for services that they are not actually getting, let alone people who had passed away and were paying fees on accounts that obviously they were getting no more services for.
Many of the situations would not be illegal if this government had had its way. Labor introduced the Future of Financial Advice reforms when we were last in government. Guess what the then opposition, led by the member for Warringah, did? They opposed the introduction of FOFA. They had an inquiry set up to oppose FOFA. Believe it or not, they relied on the advice of AMP. They said that in this instance the advice of AMP should be relied upon when they say that we shouldn't introduce FOFA regulations into Australia. Yes, that's right. They accepted the advice of AMP, who said that the world would end if Labor introduced FOFA regulations and if we introduced the best-interest duty for looking at what was going on in this industry. They actually suggested that there would be a loss of tens of thousands of jobs in Australia if Labor introduced its FOFA legislation.
We now know why AMP weren't so keen on Labor's FOFA regulations when they were introduced—because it uncovered the acts and the rip-offs that were going on in this industry that we've seen in the royal commission. We should never forget that in the Australian banking and financial services sector this government never wanted the royal commissioner's recommendations to be uncovered. They never wanted to see these sorts of recommendations being made for consumers of financial products in this country. For that they should eternally stand condemned. This is the government that did not want to see new recommendations made about how we fix our banking and financial services industry.
Some of these recommendations require urgent attention. They require detailed analysis and urgent attention of this parliament. We all know that there are only three sitting weeks left for the House of Representatives and only one for the Senate. Urgent attention is required from this parliament to look at issues like grandfathered commissions, where people are still being ripped off. That is why Labor is suggesting that we meet for an additional two weeks to get on with the business of looking at implementing the recommendations of the royal commissioner. This will be a test for the Morrison government. Do they agree that the rip-offs and scandals that have occurred in this industry are unacceptable, that the recommendations of the royal commission should be adopted immediately and that we should get on with the business of legislating for them, so that people can get the protection they deserve and we can restore trust and confidence to Australia's banking and financial services sector?