Thursday, 4 April 2019
Treasury Laws Amendment (Mutual Reforms) Bill 2019; Second Reading
I present the explanatory memorandum to this bill and move:
That this bill be now read a second time.
The Treasury Laws Amendment (Mutual Reforms) Bill 2019 amends the Corporations Act to enable mutual and cooperative firms—in particular, mutually owned financial institutions—to raise the capital they need to compete with investment owned banks, insurers and other competitors. Cooperatives, mutuals and member-owned firms have a proud history across the country of providing generations of Australians with customer and community focused alternatives to profit-driven business. The oldest member-owned firms even predate the Commonwealth, with some tracing histories that extend back to decades before Federation. Over 14 billion people, or nearly two in three Australians, were members of these organisations in 2017.
Yet despite their value to customers and the community, mutuals and cooperatives in Australia have long been under appreciated and ignored by our federal laws. They face a number of barriers preventing them from growing to their full potential, placing them at a disadvantage. Recognising that our federal laws were effectively forcing mutuals and cooperatives to compete with one arm tied behind them, in 2017 the then Treasurer—now Prime Minister—Scott Morrison commissioned Greg Hammond to advise the government on regulatory and legislative changes that could remove the barriers facing the sector. The government accepted all 11 of the Hammond report recommendations and we have been working with the mutuals, the legal community and regulators to develop the bill. The government has consulted with the Legislative and Governance Forum on Corporations in relation to the bill, which has approved them as required under the Corporations Agreement 2002. It is an immense credit to the Prime Minister, who, as Treasurer, pushed these reforms forward. Frankly, he deserves to be acknowledged as these reforms now come before the parliament.
This bill will introduce a definition of 'mutual entity' into the Corporations Act for the first time. It will remove the uncertainty around demutualised provisions in disclosure requirements that have prevented mutual authorised deposit taking institutions, otherwise known as mutual banks, from raising capital in the past. And it will create a new bespoke instrument called a 'mutual capital instrument', which allows mutuals to raise equity through a specialised capital instrument. The bill also provides a simple standardised process for mutuals to amend their constitutions to take advantage of the introduction of mutual capital instruments should they wish to do so.
With this legislation the government will finally ensure that cooperatives and mutuals are recognised in our federal laws. Our reforms will mean more opportunities for mutual organisations by allowing them to raise the funds they need to make long-term investments for the benefit of their members and to compete effectively with shareholder owned companies to the benefit of all Australians. Full details are contained in the explanatory memorandum.
Leave granted for second reading debate to continue immediately.
I rise to speak on the Treasury Laws Amendment (Mutual Reforms) Bill 2019. The idea of mutualism is vital to communities. Mutuals build trust and reciprocity. They are an essential part of an inclusive society helping to foster empathy for our fellow human beings. Cooperatives and mutuals, as member-owned enterprises, exist and operate in the same market as investor owned enterprises. They are voluntary associations of people, democratically run for their members, for the pursuit of a common social, cultural or economic goal. Eight out of 10 Australian adults are members of at least one cooperative or mutual. They account for some seven or eight per cent of GDP and 54,000 direct jobs. Mutuals such as HCF, Capricorn Society, ME Bank, Australian Unity, Sun Super and roadside organisations, including the NRMA, the RACQ and the RACV are cooperatives and mutuals that are essential to Australian society.
Mutualism is also well placed to play a role in the digital economy. Internationally we have driver owned apps competing with Uber and Lyft. Coopify is an app connecting a childcare cooperative with clients in New York. Stocksy sells stock photographs supplied by its members online. In my own electorate of Fenner I have seen firsthand the benefits of the cooperative sector, with the national health co-op now expanding from its original location in Charnwood to set up more than half a dozen locations across Canberra and rural New South Wales.
Labor supports this bill. And why wouldn't we? This is a Labor idea. This is a bill enacting Labor policy and we are delighted to see it finally coming to the House. The bill amends the Corporations Act in relation to mutual entities such as customer owned banks and credit unions and customer owned insurance service providers. They were originally announced as Labor policy in November 2016 in a speech I gave at Old Parliament House announcing Labor's 'Inclusive Ownership, Inclusive Growth' package. That was a policy that drew heavily from Labor senator Chris Ketter's Senate Economics Committee inquiry. I pay particular tribute to Senator Ketter for his work in shaping Labor's cooperatives and mutuals agenda. In 2016 the government launched the Hammond review and eventually agreed to its recommendations in 2017. It took the coalition a full 12 months to adopt Labor's reforms and then another 12 months to draft the required legislation. But we are here now and Labor is very pleased to have gotten to this point.
The bill introduces a definition of a mutual entity into the Corporations Act. It removes the uncertainty for transferring financial institutions and friendly societies in respect of the demutualisation provisions in part 5 of schedule 4 of the Corporations Act and it expressly permits mutual entities registered under the Corporations Act to issue equity capital without risking their mutual structure or status.
There are many stakeholders supporting the bill but one to whom I want to pay particular tribute is the Business Council of Cooperatives and Mutuals CEO Melina Morrison. She has been a driving force behind the creation of the Parliamentary Friends of Mutuals and Co-operatives and Mutuals, co-chaired by myself and Senator McKenzie. The Customer Owned Banking Association has been a strong advocate for this reform, and their work has been important, too, in shaping Labor's policy.
Labor's cooperatives and mutual reforms promote ethical competition and productivity. They encourage social investment and the wellbeing of workers and small businesses. Since we first announced the reform that is in today's bill as Labor policy at the end of 2016, the coalition cycled through multiple Prime Ministers, multiple Treasurers and multiple assistant ministers, but there has been one unchanging fact, which is Labor's support for the cooperatives and mutuals sector. If only the coalition had been as cooperative as the sector, we perhaps could have done this quicker but we are here now. It has only taken us 2½ years to get here.
But this isn't the end of what we need to do to assist cooperatives and mutuals playing a bigger role in the Australian economy. As I said before, they account for seven per cent to eight per cent of GDP. We believe they could account for even more, with their important role of shaking up sectors, providing strong ethical leadership and ensuring that there are customer-owned alternatives to investor-owned business models. One such reform would be to ensure that cooperatives and mutuals have equal access to government grants, particularly under the Indigenous Advancement Strategy.
It is particularly apposite that we are debating this legislation just a couple of months after the royal commission into the banking sector came down. Labor called for that royal commission in 2016, some months before we announced our cooperatives and mutuals policy. At the time, the member for Cook said that the royal commission was just a 'populist whinge'. The government in announcing the royal commission only did so after the big four banks had called for a royal commission. The member for Cook said it was regrettable that we had to have a royal commission into the banks. But no-one now looking at Commissioner Haynes' report would argue that was a regrettable report. I think there is broad recognition in the finance sector that this was the royal commission we had to have. We've seen the chair and the CEO of AMP step down. We have seen a range of referrals to the Director of Public Prosecutions. We have seen scandals involving fees paid for advice not received and fees charged to dead people. We have seen allegations of envelopes stuffed with money, of breaches of AUSTRAC notification procedures and of collusion to fix the bank bill swap rate. The royal commission has been a litany of scandals and has again reinforced the simple fact that, when it comes to ethical competition within the economy, there is only one side of this parliament, Labor, that makes the right calls.
The Customer Owned Banking Association has made a strong argument for the role of cooperatives and mutuals in providing real competition in the banking sector. So one of the important things that we get from this bill is additional competition in a sector which is highly concentrated, even by global standards. It's important that we have a strong banking sector but it's also important that we have a competitive one, because it's that competition between our banks that places downward pressure on the margins and ensures that Australians get proper choice when they're taking out a mortgage or looking to get a good return on their savings.
With customer owned banks, there is an alternative to the investor owned opportunities which, again, have a long tradition in economics. The cooperatives and mutual sector is a sector which harks back to the words of one of the founders of economics Adam Smith, who said, 'Man naturally desires, not only to be loved, but to be lovely; or to be that thing which is the natural and proper object of love.' When you speak to people in the cooperatives and mutual sector, those words of Adam Smith's, written more than two centuries ago, resonate with them as well. The choice is not between economy and society, as Margaret Thatcher so falsely posited. It is possible to have organisations operating ethically within our economy. Indeed, free markets depend on trust, morality and decency. It is the role of mutualism which can ensure that the best spirits of Smith are able to be found in our economy. This notion from theory of moral sentiments is absolutely critical to the reforms that we're advocating today.
Labor knows that these reforms will promote ethical competition and productivity, that they'll encourage social investment and the wellbeing of workers and small businesses. It is Labor's advocacy for this sector which has brought these reforms to the House today.
It is Labor's advocacy which has ensured we are here today. I hear the Assistant Treasurer interject, 'No, it's not.' Well, we simply have to look at the range of reforms that have been led by Labor during this term of parliament. We had, just back in February, the example of Labor's laws on access to justice, which were introduced by Labor into the Senate, passed the Senate on the voices when the coalition decided that they were going to lose the vote on the floor and then were passed through the House—another Labor reform passed through this parliament. This reform today would not be being debated were it not for Labor's strong advocacy and for the catch-up politics in which the coalition are engaged.
The Hammond review simply ensured that the ideas in the Ketter review were brought to this parliament. But Chris Ketter's work as chair of that Senate Economics Committee laid the foundations for Labor's reforms and ensured that Labor was able to get to this point.
It's extraordinary to hear the Minister for Energy, the Don Quixote of the parliament, when he's not out tilting at windmills, arguing that Labor is not the party for competition. Labor is the party of competition and will remain the party of competition. Labor is going to the next election advocating that we should give more resources to the ACCC, that we should do postmerger reviews, that we should ban unfair contract terms. But, when it comes to the big stick, this is a policy which the minister has been forced to abandon. He has had to take his big stick and stick it under the table because his big stick is so unloved anywhere he attempts to bring it out.
I'll take that interjection, Minister. The fact is that, if there is one party that supports crony capitalism, it's the party on the other side. That is why neither a single serious economist nor a single serious business leader supports the idea of divestiture powers in a single sector. Of course some countries have divestiture powers, and we'll periodically have debates over this, but the notion that you would have divestiture powers in a single sector is utter anathema to serious economics.
The fact is that the Minister for Energy is now hyperventilating over a policy killed not by Labor but by his own party room. His own party room killed the big stick.
Mr Taylor interjecting—
So, Minister, don't go shouting at me. Turn around and start shouting at the people behind you, because the people behind you are the ones who've rejected your big stick, along with the Australian people.
The notion that the Liberals are a party of competition rather than a party of crony capitalism flies in the face of the traditions of the Liberal Party in supporting every single monopoly and tax loophole it can find. The Liberal Party is the party of the big end of town, and no—I feel as though the Assistant Treasurer wants to say something, but I'm happy to keep on speaking. The minister has no credibility when it comes to arguing for competition. Labor's competition policies—the Deputy Speaker may give the Assistant Treasurer the call or she may not, but I'll keep on speaking until she chooses to do that. The fact is that if you want to understand crony capitalism you need look no further than the Fadden Forum, an outfit which was given a donation by a firm that then went into liquidation owing money to the Australian taxpayer.
Everyone's been offering a lot of advice as I assumed the chair right now. I remind everybody at the table that, yes, it is correct parliamentary procedure to refer to each other by the parliamentary titles. I ask you all to try and do so. I'm giving the call back to the member for Fenner.
Thank you very much, Deputy Speaker Claydon. In conclusion, Labor is the party of competition. Labor supports the cooperatives and mutuals sector. We are pleased to see that the government is bringing these reforms, 2½ years late, to the parliament. We would be delighted to support the bill and delighted to see a reform championed by Australia's great cooperatives and mutuals sector finally become reality.
I thank those members who've contributed to the debate and I thank the shadow minister. This bill demonstrates the government's support for cooperatives, mutuals and member owned firms by enabling these institutions to raise the funds they need to grow and compete. The sector is diverse and represents an alternative model for delivering important customer and community focused services across many industries, including agriculture, banking, finance, housing, insurance and retail. The government is committed to removing the impediments facing the mutual sector, and this bill delivers on that commitment. These changes will not only result in better outcomes for members of cooperatives and mutuals but also improve the capacity of member owned firms to innovate, grow and compete, delivering better outcomes for all Australians. I commend the bill to the House.
Question agreed to.
Bill read a second time.