Tuesday, 15 October 2019
Treasury Laws Amendment (2018 Measures No. 2) Bill 2019; Second Reading
I am very supportive of the substance of this proposed legislation, which gives life to a concept that will be of particular use to a lot of firms that are engaged in the fin-tech space—basically the utilisation of technology to come up with new products and services in the financial services realm. The array of laws that are in place, rightly, to protect consumers and to ensure the proper operation of financial services organisations in this sector are very important. For these new firms that are emerging—the fin-techs that will be most interested in this legislation—to conceive of new offerings and to then consider how they can breathe life into those new offerings is not like any other sector where start-ups emerge, other than, say, in highly complex areas, particularly around medtech.
But in this space, a lot of the firms do need to think through how they can structure their offering so that it not only attracts consumer support but that it satisfies the expectations, the demands and the rigours of the law. To help get around that, various jurisdictions across the world have created what's been described as a 'regulatory sandbox'—that is, a freer space in which to start thinking about these types of products, where the full effect of laws do not apply and where these products are given room to grow for a smaller group of customers and with a less onerous application of legislation.
The benefit is clearly that these innovative concepts can be tested in a much easier regulatory environment and, in doing so, potentially offer consumers new products that are in their best interests as opposed to the concern that many have expressed—that a lot of the products work in the interests of a lot of big financial firms. But, having said that too, you can't give people free rein. You do need to set some boundaries and you also need to ensure with these fin-tech regulatory sandboxes that the concepts that are being explored are legitimately innovative, that they are something new, something different, something better than what's been in place previously. Consumer advocates have rightly pointed out that firms have got to be able to demonstrate that legitimate need.
I had some association with this legislation in the previous parliament and have certainly argued that other jurisdictions put a test before firms can get access to regulatory sandboxes. The test is simple. It is: 'Are you doing something different? What is innovative about what you're proposing?' This is not an outrageous or heavy requirement. These types of rules are in place in the UK, in Singapore and in Hong Kong, where, in fact—when you compare the records of the way in which those sandboxes have operated compared to our own—they're doing quite well. So it's not like this is an anchor or lead weight in terms of the performance of these things.
In the Australian context, off the top of my head, the regulatory sandbox has existed since 2016, and it has not necessarily proven to be a smash hit, if I can put it very delicately. There have been a number of reforms considered to improve the outcomes. But, like so much fintech reform in this place, it has taken ages to get these things moving. The government talks a lot about supporting start-ups and innovative activity in this country, but it rarely delivers. It rarely does stuff in a timely way or through a meaningful or concrete form of action to support these start-ups. We have constantly pointed this out—from equity crowdfunding to the angel investment reforms that had been put forward. By the way, we're still waiting to see evidence on those. Three terms this coalition has been in place; it's had ample time to demonstrate whether or not some of the moves it's made, particularly around angel investment and taxation arrangements, have actually worked. We have seen very little evidence. It should have flowed through. We've gone through financial years. That data should be available, and we've got no evidence that some of the reforms that have been undertaken have worked. While we supported them, we did raise concerns that some of the reforms, which had been based on the UK Seed Enterprise Investment Incentive Scheme, hadn't necessarily mirrored what had worked in other jurisdictions. But we gave them the support to ensure that they got through and that investment funds would be made available for start-ups eager to get that investment, particularly through angel investors, at that point in their growth cycle. We have seen very little evidence on that.
Again, there has been a lot of talk, a lot of movement, a lot of sound, a lot of noise and not much evidence. We have seen it with equity crowdfunding, which took ages to get through and then was put through in a way that was deliberately, we said, designed to get more a headline than an outcome and then had to be re-reformed in the space of 12 months after that. These other measures, as I said, we are still waiting to see evidence on. And then there's the sandbox. People have said you can start to align these in ways that have been used elsewhere and been quite successful, and that should be done.
I note that in the last sitting in the other place we had a senator set up what's been called the Select Committee on Financial Technology and Regulatory Technology. That's just fantastic. It sounds great to set up a special select committee on fintech, but we've had in place a Treasurer's advisory council on fintech. If you can't get that Treasurer's advisory council that had been in place when the now Prime Minister was Treasurer to fast-track reforms that would help deliver these outcomes and create, in the words of the resolution that was put to the Senate, 'the effectiveness of current initiatives in promoting a positive environment for fintech', how much hope do you genuinely think a Senate select committee is going to have? They already had that in place. Craig Dunn, I understand, was the chair of that. They had a stack of fintechs represented on it. When the test came to actually put the stuff in place to make it work to ensure that we get a much more beneficial environment for fintechs to thrive, the government took its sweet time on the legislation and it replaced its advisory committee with some other advisory committee within the Senate.
To be honest, fintech is well on its way to getting established in this country. What we do need to see is the government taking other areas of technology seriously. For example, we are being outgunned on the world stage when it comes to the application of artificial intelligence and the support that we are giving to see its wider application within the economy and society. We have to our north the Chinese government dedicating billions of dollars in this space. Across the Pacific, the US is dedicating billions of dollars in this space. You can see in the UK and France similar amounts.
Given the size of our government and the size of our economy, I'm not advocating that we match that, but you would think that we would take it seriously. You would think, for example, that when it comes to investment in artificial intelligence we would be able to at least match what the Singaporeans are doing. Off the top of my head I think that the Singaporeans are investing over five years about $150 million in basically pursuing how AI can support the evolution of the Singaporean economy and society. In Australia what do we get? In the 2018 budget, last year's budget, Australia nominated $30 million over four years and, in another pretence of demonstrated activity, they said that they would develop a road map and they would put stuff in place that would show that we are getting serious on this. The Singaporeans put in $150 million and we put in $30 million.
I'll give you some context. PwC estimated the economic value that can be generated by the proper application of artificial intelligence on economies. They estimated that $15 trillion of economic value can be generated. They reckon two countries are going to basically accrue 70 per cent of that economic benefit—and that will be the US and China. I'll point out some of the thinking people have around this. Kai-Fu Lee in his book AI Superpowers raises the point that there will be two types of economies that emerge over time. There will be economies that are superpowered through the application of AI and then there will be economies that are dependent on those economies. I wonder in which of those two camps Australia is destined to be, given that we are investing only $30 million in AI research, as opposed to the billions that are being invested on the world stage.
You can imagine my surprise when we are investing only $30 million and our Singaporean neighbour is investing $150 million that, as a result of a fancy state dinner in the US, the Prime Minister announced that he'll put $150 million to support another nation's efforts in relation to space. Talk about selling us out. We should be taking this seriously. We should be applying technology to improve the operation of our economy to get better outcomes for the community. But, because we want to crawl and suck up to another country, we're putting $150 million towards their technological ambitions instead of our own. How often are we sick in this country of governments not backing local innovators and not supporting the ideas that can actually make our economy evolve? This is the case.
It's an all-talk, all-squawk government over there. That is all they do. They talk about this stuff, but they're not there when they're needed to make sure that this happens. We see it with this legislation, which has taken its sweet time to get through this place. We've seen it with other forms of legislation. But if there is a sweet announcement that will get them a little bit of coverage and maybe a little bit of kudos elsewhere—if they've set up some sort of a select committee—well, they're there for that. But they're not there for the hard yards, and that's what gets me about this.
We are supporting this legislation, and we've said that. We think that there are some things that can be done to improve it. We won't stand in the way of that. But what we think will work way better than a few cute announcements and a few cute committees is a genuine, wholehearted commitment by the government to make sure that laws get through in a timely way, that regulatory reform occurs when it should and that the investment is made by government to ensure that longer term we can actually see the full benefit of this investment in our economy, and that it will make us stand tall on the world stage and will genuinely fulfil the ambitions that we rightly hold for the application of smart Australian ideas in this country.
I would like to thank those members who have contributed to this debate on the Treasury Laws Amendment (2018 Measures No. 2) Bill 2019. The government remains committed to establishing Australia as a leading global fintech hub. This bill builds on our work to ensure we have the policy settings in place to foster innovation.
Schedule 1 to this bill amends the Corporations Act 2001 to lay the foundations for the government's enhanced regulatory sandbox by extending the regulation-making powers in the Corporations Act. This will support fintech businesses to test their products and services without a licence from ASIC under certain conditions. We believe this measure will reduce the initial burden faced by firms as they look to innovate in providing specified or specific financial services by retaining important measures to minimise risks for consumers. Schedule 2 to this bill makes a number of minor technical amendments to the early stage venture capital limited partnership and tax incentives for early-stage investor regimes to clarify the income tax law to provide certainty to investors and ensure these provisions operate in accordance with their original policy intent.
The measures contained in this bill demonstrate the government's continuing commitment to promote a culture of entrepreneurship and risk-taking in Australia and will help ensure innovative Australian businesses have access to the capital and expertise they need to grow and succeed. I commend this bill to the House.
Question agreed to.
Bill read a second time.