House debates

Wednesday, 26 May 2021


Financial Regulator Assessment Authority Bill 2021, Financial Regulator Assessment Authority (Consequential Amendments and Transitional Provisions) Bill 2021; Second Reading

12:04 pm

Photo of Daniel MulinoDaniel Mulino (Fraser, Australian Labor Party) Share this | Hansard source

As earlier speakers on this side of the chamber have indicated, we will support the Financial Regulator Assessment Authority Bill 2021. But I think it's important to indicate the context in which we will support the bill. This is—I think everybody would agree—a minimalist response to a couple of recommendations arising from the Hayne royal commission. But we shouldn't forget that this is a drip-feed approach that we're getting from the government in response to that royal commission, a royal commission that they never wanted—which is reflected in the way that they're responding to it. Some years down the track, we've seen barely more than a third of the recommendations of that royal commission acted upon. We see dribs and drabs come into this chamber, when in fact, as earlier speakers on this side have indicated, some of the systemic issues that were highlighted by that royal commission remain unattended to. This is a sector that is absolutely critical to not just Australia's economic wellbeing but the wellbeing of so many vulnerable people. So we need to see much more urgency from those opposite when it comes to dealing with some of the substantive issues relating to that royal commission.

As earlier speakers on this side indicated, when we look at the specific issue being addressed here, the regulatory culture in relation to ASIC and APRA, the government had problems in that culture raised many years before the royal commission, by the Financial System Inquiry, and they sat on their hands for year after year. Then, when it was clear that there were issues in relation to regulatory culture but also in relation to abuses of many vulnerable people, it took many years to drag this government finally to implement a royal commission. The government voted over 25 times against a royal commission being held. They never wanted the royal commission. As I indicated earlier, we are seeing that reflected in the fact that, having had the royal commission recommendations handed to it, this government now is dragging its feet in responding to the royal commission recommendations.

The royal commission, when it was finally called—despite the government's hesitation and despite the government having voted against it over 25 times—received thousands and thousands of submissions from people who had been abused in so many ways by major actors in the financial services sector. We saw people who were receiving fees for no service. We saw conflicts of interest. We saw charges to dead people. As speakers in this debate have indicated, we saw many instances of inappropriate behaviour.

What we're seeing in this bill is that, having had all of that brought to light, there is too little urgency in fixing the system. This bill relates to recommendations 6.13 and 6.14. We're happy to support a mechanism that responds to those. Those recommendations related to the fact that APRA and ASIC should be subject to quadrennial capability reviews and that a new authority should be established to assess the effectiveness and capability of financial sector regulators. What we're seeing here is the establishment of the Financial Regulator Assessment Authority. It is a minimalist model that will create a statutory body consisting of three appointed part-time members and the Secretary of Treasury, as an ex officio member. It will be responsible for providing a biennial assessment to the minister on the effectiveness and capability of ASIC and APRA, and it will be supported by a secretariat of Treasury staff. Even though we might not have implemented it in precisely the way that it is being implemented, we do support an implementation rather than nothing. But I do want to stress, in providing context to these remarks, that this is yet another bill in this area which is belated and yet another bill which is too narrow in scope.

In supporting the establishment of the Financial Regulator Assessment Authority, it is also important to acknowledge that there are a number of existing oversight mechanisms, as earlier speakers have indicated. There are two prominent committees in the Australian parliament. There is ministerial oversight. There is oversight by the Australian National Audit Office. There are public governance frameworks. And there is oversight by the IMF Financial Sector Assessment Program. So it is going to be critical that the work of this new authority dovetails with and complements the work of existing oversight mechanisms.

This debate has prompted an assessment by a number of contributors to this debate as to the effectiveness of some of the parliamentary oversight of ASIC and APRA. I want to make a few observations on that as a member of the House Economics Committee. The chair of that committee spoke earlier, and it was a fascinating insight into his assessment of or his views on how that committee should operate. He stressed at the beginning of his comments that he defends the right of all members of the committee to ask whatever questions they wish. I would also defend the rights of committee members to ask whatever questions they wish. But I also say that committee members should be held to account for the questions they ask, for the emphasis they take and for, where it can be shown, the bias that they might show.

One could argue—and I would certainly say—that the chair's speech at times developed into a bit of a rant against the industry funds. He said early in his speech, 'I'm not biased.' But if one were to then read the following 10 minutes of the transcript, it would show his speech was on his allegation of crime after crime after crime by industry funds. One would be left after reading that speech thinking that the problems in the financial services sector were all about industry superannuation funds. It was a rather bizarre confluence: 'I'm not biased,' and then 10 minutes of focus on one single part of the financial services sector. Again, it's rather strange that that was the entire focus of his rant, given that the Hayne royal commission largely gave that sector a clean bill of health.

Here we are, as I indicated earlier, in a very belated way responding to recommendations arising from the Hayne royal commission. Here we are, years after that royal commission was handed down, with a government that's barely responded to a third of the recommendations of that royal commission. Here we have the chair of the economics committee, in response to an assertion that we as a committee aren't paying enough attention to the Hayne royal commission, spending 10 minutes of his speech in a rant about a part of the sector that got a clean bill of health. This is exactly what the deputy chair and I and other members of this committee have pointed out on occasions. We don't deny the member for Goldstein the right to ask whatever questions he wants. We don't deny that, where there are instances of bad behaviour in that sector, light should be shone on them. But it's a question of proportionality. It's a question of bias. It's a question of asking: 'Are we using our time and our resources to the best effect?' The entire focus of some members of the committee seems to be on one part of the financial services sector, almost to the exclusion of all others, and on pushing a particular highly misguided policy option.

As members on this side have pointed out, the committee is also being used at the moment as some kind of vehicle for what is sometimes described as 'housing first, super second', which is a nice bumper sticker. But it is really a demand-side policy flop, which I don't think any serious macroeconomist or housing expert has publicly come out to support. Here we have a committee where we have a royal commission with many recommendations yet to be implemented for the largest and most complex sector of our economy, and our committee seems to be focusing on a sector that got a clean bill of health from that royal commission. We seem to spend an inordinate amount of our time trying to support some policy with not a single economic expert backing it up. I might say, not only is not a single economic expert backing it up but not a single member of the frontbench of this government, not a single economic minister of this government, is backing it up. We have a chair desperately wanting us to hold an inquiry into something he's written a book about, but fortunately the government is not having a bar of it.

Let's look at some of the things that this committee—or, rather, government members of this committee—has spent barely any time on. Have they looked at the super guarantee increase in a way that balances the pros and cons? It's fortunate that the government has backed down on its threat of not following through on its election commitment to increase the superannuation guarantee, but I didn't see many members of the government on this committee holding the government to account on that side of things.

Let's look at the threat in terms of legislation, which we are going to discuss later today in this House, to exclude the consideration of administration fees from evaluating fund performance. Is that something government members looked at in detail? Is that something government members focused on? There was barely a word. The government members were focusing on the ills of industry super funds, but a deeply flawed bill which was going to exclude the consideration of admin fees—which would have had an extremely deleterious effect over the long run on members' final balances, particularly those on low incomes—got barely a mention by members of the government on the committee. Again, fortunately the government has backed down on that. There are other objectionable parts of that bill which we still need to see them back down on. Fortunately, they've backed down on it, but no thanks to the government members of that committee.

What about early release? Consideration of early release of super, which is a fundamental undermining of people preserving assets in super for their retirement, has barely been examined in detail by members of the government. To the extent that we've looked at early release, it has tended to be an attempt to back up vanity projects and policy thought bubbles, like removing massive amounts of funds for housing in a way that would do nothing other than drive up prices and have extremely damaging long-term consequences for people's retirement balances.

Let's look at the hearings themselves—and this is a point that has been made publicly by the deputy chair and backed up by other opposition members of the committee. The emphasis in hearings, in terms of the amount of time allocated to different parts of the financial services sector, has indicated a lack of appropriate priority to royal commission hotspots, to concerns raised by the royal commission, and to areas of concern in the financial sector that have arisen since the royal commission. We have seen a number of entities drawn into multiple lengthy hearings with very little connection to anything raised by the royal commission. For example, we've seen fund managers called in to give evidence if they have a relationship with industry funds, but no fund managers, no other actors in that part of the financial sector supply chain, in other parts of the sector. It's clearly an uneven and biased way in which to examine the sector.

Then there's the weight—the amount of time that is allocated. We've had lengthy hearings for multiple industry funds, who have been given a clear bill of health and who have very healthy returns, whereas one can only question the amount of time that has been allocated to funds who've had serious questions raised about their returns or other governance issues. When it comes to the big-picture issues, like ensuring that people get high returns over the long run and that they pay low fees relative to those returns, I would argue that there has not been an appropriate focus by the committee over the course of this term of parliament.

As the chair did, I defend everybody on the committee's right to ask whatever questions they want of members who come to public hearings and to ask whatever questions they want on notice. But I would say this: this bill raises a question about the effectiveness of parliamentary oversight. I think there is a real question mark as to whether or not our committees—the House Economics Committee, as an example—have been focusing on the issues that matter most for the welfare and financial security in retirement of ordinary Australians.


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