Matt Keogh (Burt, Australian Labor Party, Shadow Minister for Defence Industry) Share this | Hansard source

It's often said by observers of federal politics in Australia for some reason—reasons that I clearly can't understand—that the government parties here are the parties of good economic management, that somehow they have a better approach, a sounder approach, to economic management. This bill, the National Consumer Credit Protection Amendment (Supporting Economic Recovery) Bill 2020, demonstrates everything that is wrong about this government's approach to economic management and in particular that intersection of economic management and consumer protection, because, if there is one topic that has been discussed time and time again in this place since I was elected in 2016, it would have to be the need for a banking royal commission—a banking royal commission that was called for for years and years, a banking royal commission that the Labor side of the parliament voted for time and time again, a banking royal commission that the government voted against time and time again. But eventually they were dragged kicking and screaming by Labor and the baying masses of the Australian people saying: 'It is time. We need this royal commission.' And the royal commission was finally held. Then, of course, it was all too hard for the government to bring about the legislation to implement the recommendations of that royal commission before the 2019 election, despite offers of cooperation from our side of the House to make that happen.

One of the key recommendations out of that royal commission is about making sure that we have appropriate consumer protection and responsible lending obligations on our banks. It's a key recommendation, right up there: 1.1, right at the top. Here today, we have legislation before this parliament. It's not implementing the recommendations, no; it's doing the precise opposite. Two years after we got this recommendation from the royal commission, the government is now legislating the opposite thing to what that royal commission recommended. The government likes to fall back and say, 'Oh, well, there are protections that will be applied through APRA regulation,' but that fundamentally misses the point, because there's something else government likes to talk about, and the banks mentioned this too. They said: 'Well, we're not going to lend money irresponsibly. We're not going to give money to people who can't repay it and in a way that may cause them financial detriment, because, of course, it's our money that we're lending them. We don't want to do that. That would be against our own interests.' Of course, in making that statement the government and the banks seem to completely overlook all of the behaviour that had occurred for the decades leading up to the royal commission and why we held the royal commission in the first place. Amazingly, it would appear the government now thinks that the banks will not do the same thing that they did before when these requirements are removed.

There is a critical and important distinction—I know it's somewhat difficult for the government to understand this distinction, but it is a distinction nonetheless—between APRA regulation and ASIC regulation of responsible lending laws. The distinction is this: the purpose of the responsible lending regulations in the APRA regulation is to make sure that the bank doesn't lend money in such a way that the bank can't get back its own money. Notice I didn't mention 'consumer' or 'borrower' in that statement. That's because it's got nothing to do with the consumer or the borrower. This means that, if the bank is confident that if the borrower does default and can't repay then the bank will get the money back by selling that person's house, that meets the APRA requirement. That's fine, because the bank got its money back. It's about prudential regulation. It's about the stability of the financial system and the bank. The ASIC consumer protection element of responsible lending is about making sure that the borrower is not put under such financial stress by taking out the loan that they would not only be unable to repay it but also be unable to properly live whilst repaying that loan. It's to make sure that the borrower is not put in an extortionate position of not being able to put food on their and their children's tables because of having to repay that loan, and that they don't end up losing their house, which is the house that their family is living in. That is what the government is trying to unwind in the name of economic recovery. Well, just explain to me this, government: how much of an economic recovery are you going to get when people start losing their houses? That is not an economic recovery; that is literally undermining the foundation of the Australian economy. It's hard enough as it is. Why would you go about making it worse?

The government also says that this is going to help credit supply to business. This is curious for a number of reasons. One of these reasons is that, as part of the government's economic support package in response to the coronavirus pandemic, it is now—and has been in some other guises—offering low-interest or deferred-interest loans to business. But what business tells us—and, in fact, what business was telling us back at the time of the bushfires when a similar scheme was introduced—is that business isn't interested in taking on yet more debt in an economically uncertain time. All the government is actually doing through this legislation is creating even more uncertainty in the area of credit supply to the nation. It's creating more uncertainty. It's already got the uncertainty that is the coronavirus pandemic, and now it's making it worse at a time when business isn't saying, 'We want to borrow money.' Businesses are finding it hard enough as it is. The last thing they want is more debt. Where they do want to borrow and get access to credit, the government has now put in place many different schemes to do so. It announced a new scheme just recently. Why does it now want to put the owners of those small businesses, their families and their homes at risk by enabling them to borrow money when it would be inappropriate to do so? I just want the government to think about that for a minute. I want all Australians to think about that.

As I said, we spent years in this place trying to get a royal commission up. Going directly to this point, the royal commission came out with recommendation 1.1: make sure that we've got appropriate protections and make sure that we don't have unfair lending practices. We saw what happened in the decades leading up to this, in the government's response during the coronavirus pandemic and in the government's response when it was elected in 2013. How could it unwind all of Labor's reforms, which were designed to protect consumers and strengthen—and I say strengthen, not make harder—the regulation of the financial system in Australia? Our financial system is actually, overall, a pretty good one. We have the benefit of Labor's great superannuation policy, another policy the government is trying to dismantle before our very eyes. The government is undermining confidence in the superannuation system and trying to convince people that there shouldn't be increases in the amount of compulsory superannuation. It's all consistent. Since they were elected in 2013, those opposite have wound back the protections that Labor tried to put into the system.

That's only one part of this legislation. There are some other interesting protections in this legislation. They go to the issue of payday lending. This is a really important part of what we are discussing here today, not only because of the way in which payday lenders—for those who don't know—effectively use extortionate interest rates over a short period to capture people in desperate need of financial assistance. They get them locked into a cycle of financial reliance on one payday loan after the other and then ramp it up to pay the interest costs. It looks like a small cost because you're only going to borrow it for a month. But, lo and behold, when you can't repay it, wham, that interest is capitalised. Now you've got to borrow the principal plus the interest and pay it within one month. Another month goes by and, wham, the interest is capitalised again. Now you've got to repay that, along with the principal, and on it goes. Quite frankly, it's unconscionable. I say that because it is unconscionable! Under the existing protections for borrowing, if you were to go into a bank and say, 'I want a personal loan, as a consumer,' the bank would not be allowed to capitalise the interest. That's actually unconscionable under the ASIC legislation. They're not allowed to do that. But, with short-term or separate loans, they can get away with it. This legislation is designed to fix that, in part, just a little bit. It's not really a great job, but they're getting there. They're learning slowly. They're getting somewhere.

What's quite interesting is this: the government had actually already prepared legislation on this for the last parliament. They prepared it, sent it out for consultation and got feedback on it. Labor said: 'This is a great idea. We've been saying you should do this for quite a while.' Then it just got slipped into a pocket somewhere. It sort of disappeared. The Senate has looked at this legislation and—this may surprise some—Labor members of that Senate inquiry said: 'Look, this legislation is not great, but we're not going to let the perfect be the enemy of the good. We support this legislation. We think it's a good idea. We think you should go further, government, like your original legislation, but we'll support this.' On the other hand, the government members of that committee—remember, this is government legislation—said they didn't support it. They didn't support their own government's legislation, even though it had support from Labor. The executive proposed the legislation, the opposition said, 'We'll support you,' but the government's own senators didn't support it. That probably tells you everything you need to know about this government. So here we've got similar provisions dropped into this bill to provide some protections to consumers, some caps on the nature of this payday lending that can go on. I think there's a very strong argument to say that those protections are not strong enough; however, we will support them because we're not going to let the perfect be the enemy of the good. We welcome their inclusion in this legislation today.

I mentioned before some curious rhetoric coming from the government about how removing some of the regulatory responses to ensure appropriate consumer protection is going to free up capital for business and credit lending for business, and that the government's already got some other programs. I mentioned one of those programs, where they're going to allow for low-interest deferred repayment loans. They will, fortunately, unlike their policy response during the bushfires, allow these loans to be used to consolidate existing debt. That is a good thing for our small business community. But let's just put that in the full context. The full context of this announcement is that in just 13 days time the JobKeeper payment will cease under this government. On 28 March there will be no more JobKeeper under this government. Meanwhile, across Australia, thousands of businesses relying on JobKeeper and the 1.1 million employees that they employ will miss out. They will be left high and dry. We've had varying reports from Treasury that over 100,000 people—others estimate up to 250,000—will lose their job as a consequence of the removal of JobKeeper.

We're going to see a situation where businesses, with only 13 days to go until JobKeeper comes to an end and with no clarity from government—they've announced a loan scheme and they've announced a scheme to fly you to a handful of places you might not want to go to anyway or, in the case of Western Australia, are already full. That scheme supports aviation, and that's good, but it's not actually going to support any of the businesses in those areas. They've announced those schemes and they've sort of left it open that they might look at some other stuff. Well, with 13 days to go, those businesses relying on JobKeeper need to get some serious advice now. They're in a situation where they won't be able to provide sufficient notice to any employees that they may need to make redundant as a consequence of them not getting JobKeeper or any other support from this government come the end of March.

We need to look at that in this context because when those employees are made redundant—those employees who are also financial consumers—they're the ones who are going to need protection from the banks to make sure they also don't get in over their heads, that they don't those put up their house as collateral at risk of losing it. When we had proper protections in place, those protections would have made sure that that couldn't happen. But under this legislation that the government is bringing forward right now, when many Australians—over 100,000 of them—and business owners are going to find themselves at their most financially vulnerable, they're not going to have any protection when it comes to borrowing in Australia.

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