Jason Falinski (Mackellar, Liberal Party) Share this | Hansard source

I move:

That this House:

(1) notes that:

(a) the final report of the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry highlighted widespread misconduct across the financial sector;

(b) the Commissioner, the Honourable Kenneth Madison Hayne AC QC, made clear that primary responsibility for misconduct in the financial sector lies with the institutions concerned and their boards and senior management;

(c) the final report made specific note that the transparency and internal governance processes of a number of financial institutions did not meet community standards;

(d) after a request from the Treasurer on 1 August 2019, the House of Representatives Standing Committee on Economics has run an inquiry into the review of the four major banks and other financial institutions which seeks to review the financial sector's implementation of

recommendations from the Royal Commission; and

(e) IFM Investors is an Australian investment management company which is wholly owned by 27 Australian superannuation funds and which manages $148 billion as of September 2020;

(2) is disappointed that IFM Investors has refused to provide information to the House of Representatives Standing Committee on Economics, including the:

(a) reported $36 million bonus to a single fund manager;

(b) severance payment and terms for staff alleged to have engaged in sexual harassment;

(c) details and terms of bonuses paid by IFM Investors to their executives and fund managers, paid from Australian's compulsory superannuation; and

(d) deliberate attempt to launder transparency and accountability of the use and misuse of Australian's compulsory superannuation by keeping information confidential from the Parliament of Australia; and

(3) calls upon the House of Representatives Standing Committee on Economics to use its power to compel evidence and documents from IFM Investors to ensure transparency and accountability and to ensure that IFM Investors is acting in the best interests of ordinary Australians, not fund managers.

The banking royal commission was called by this government some 24 months ago. I must confess that, while some people love Beethoven and others a good ballet, I've always loved finance. My first job was lifting reinforced metal for Smorgon, now ARC, but my second job was at the Credit Union Services Corporation. I always from that point forward remember marvelling at the extraordinary contribution that finance has made to our modern society. The payment system and credit creation alone create 90 per cent of our financial sector in our economy.

The financial services sector remains one of humanities great achievements. It has driven more growth, more innovation and more prosperity than any other invention that we have managed thus far to come up with. So many of our achievements can be traced back to finance. Often we find that inventions—for example, the telephone—were invented hundreds of years before they became commercialised. The difference was not that the invention was better 100 years later but rather that the inventor had access to capital. The steam engine has a similar story.

When Pitt the Younger was asked how it was that Great Britain prevailed over Napoleon in the Napoleonic Wars, the parliament expected him to reply, 'It was Nelson.' Instead he replied, 'It was the government bond market.' Literally, the bond market allowed the United Kingdom to outspend Napoleon and the French.

In The Wisdom of Finance, Mihir Desai is able to demonstrate better than I ever could that the modern world in which we live would not be possible without modern finance—everything from insurance to hedges, forwards and leverage. All these things make our lives inextricably better and possible. We would not be able to drive a car without insurance, because without insurance we would be in the prospect of being responsible for the financial outcome of an accident or a crash every time we had one. Insurance allows us to derisk our lives.

Most of the protections that existed for customers in engaging with their banks have been systematically undermined, however, by modern society over the years. Common law rights that existed for customers are now encoded in law. Even ASIC, which quite frankly is very much part of the problem that consumers now face in the financial sector, admits that the consumer law reforms of the late 1990s under the Howard government were counterproductive. Who would have guessed that laws such as CLERP 8 and CLERP 9 that force financial sector providers to produce hundreds of pages of PDSs would not be read by consumers and would be taken by them as signs of important examples that the product that they were using or that they were about to purchase must be credible because the paper on which it came was glossy and thick enough.

We know now that the laws that we introduce to protect consumers have actually done the opposite. So, when some in this place insisted that the answer to the problems in banking was more lawyers, I was slightly sceptical. What is another few hundred million dollars thrown at a royal commission to see if lawyers that created this problem could somehow undo it? After all, those Portsea mansions don't pay for themselves.

What was uncovered at the Hayne royal commission was disturbing. We saw a culture that had developed under the very laws that we had sought to use to protect consumers that allowed bankers and the financial sector to instead rip consumers off. They were no longer working in the interests of their customers but were working in the interests of themselves and their bonuses. But what was not uncovered was even more disturbing.

The House committee has been reviewing the financial services sector and post-Hayne implementation. What we have discovered is a cesspool of self-interest and consumers being denied their basic rights. If I did not believe that lawyers and regulators had created these problems in the first place, I would be demanding a royal commission now into those parts of the financial sector that the Hayne royal commission, for whatever reason, decided to ignore. Indeed, Counsel Assisting Rowena Orr's lack of curiosity in this regard was striking. She kept Catherine Brenner in the stand for three days to go through emails sent to and received from ASIC, yet, when superannuation funds presented themselves at the Hayne royal commission and freely admitted to spending tens of millions of dollars on corporate hospitality to benefit no-one but themselves, counsel assisting simply moved on. She did not feel that it was worth investigating any further.

What we have found is a superannuation system that Australians are forced to contribute their money to, without being asked if they would like to do so. The system spends $400 million on advertising, promoting itself, even though it doesn't have a problem actually getting people to buy its product, because we have legislated that people are forced to buy it. We have been told that, if this parliament dares to exercise its sovereign right to change and make laws, the superannuation system will unleash hell upon this parliament. We have found corporate marketing, as disclosed at the Hayne royal commission, to the tune of tens of millions of dollars, and other superannuation funds that feel that they are above the law and therefore do not have to answer those questions. As we stand here today, we have no idea how much money the superannuation sector spends on corporate marketing to the benefit of themselves and their mates and to the disbenefit of their members—they simply refuse to disclose to this parliament how much that is.

We had the unedifying example of a Queensland superannuation fund donating money to a political party. When the regulator, Helen Rowell from APRA, was asked how this was in the best interests of members and therefore not in violation of the law, she answered it was not a material amount of money. So we now have regulators in this space—perhaps some of them have been beneficiaries of the tens of millions of dollars that we have thus far discovered being spent on corporate marketing—who are determining what parts of the law they will and will not actually regulate. They have taken it upon themselves to decide what this parliament meant and what laws from this parliament they will impose on superannuation funds. So the members no longer have the protection of the law, and nor do they have protection of the regulators. One has to ask why. Why would a royal commission not find this slightly curious and worthy of investigation?

We had the unedifying example of the head of Industry Super Holdings, an industry super association, telling us that they don't make political donations. The only problem was that the party that had received those political donations had declared them to the Australian Electoral Commission, so they were caught out. In their answer back to the committee they told us that they don't make political donations, that they didn't think the moneys they had given over to a political party had been disclosed and so therefore their answer stood. That is the attitude of superannuation funds and associations in Australia today. They think they can break the law as long as they don't get caught. And then we have regulators who decide that superannuation funds haven't broken the law enough for them to impose the law on them.

Then we have the situation of Industry Super Holdings. Technically, they are outside the law. They don't have to comply with the best-interests test, which this parliament has imposed on superannuation funds but APRA has decided not to actually enforce, for reasons that they can never properly explain, other than the fact that they feel it's not material. We have ASIC determining that they will persecute—and I use that world advisedly—real estate agents while ignoring the head of Industry Super giving financial advice across Channel 9, Channel 7 and other news. We have IFM refusing to come to a committee of this parliament and disclose how much it paid out an employee for sexual harassment charges.

We have situations where super funds are paying The New Daily and paying the ABC, but they won't disclose how much they pay the national broadcaster and its economics editor. This is— (Time expired)

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