Friday, 12 June 2020
Australian Prudential Regulation Authority Amendment (APRA Industry Funding) Bill 2020, Authorised Deposit-taking Institutions Supervisory Levy Imposition Amendment Bill 2020, Authorised Non-operating Holding Companies Supervisory Levy Imposition Amendment Bill 2020, General Insurance Supervisory Levy Imposition Amendment Bill 2020, Life Insurance Supervisory Levy Imposition Amendment Bill 2020, Retirement Savings Account Providers Supervisory Levy Imposition Amendment Bill 2020, Superannuation Supervisory Levy Imposition Amendment Bill 2020; Second Reading
The original question was that this bill be now read a second time. To this the honourable member for Whitlam has moved as an amendment that all words after 'That' be omitted with a view to substituting other words. The question now is that the words proposed to be omitted stand part of the question.
I rise to speak on the Australian Prudential Regulation Authority Amendment (APRA Industry Funding) Bill 2020 and related bills. There are many people who at times find it very difficult to get to sleep at night. I believe that a replay of this debate that we are having should put them to sleep in a jiffy! In fact, I'm thinking about recording it and playing it to my boys at night when they're having trouble passing out.
The Australian Prudential Regulation Authority was brought about by the Wallis inquiry. The Wallis inquiry was certainly referred to at the time of the HIH collapse and is used in National Australia Bank foreign-investment lending. APRA itself was a child of three other organisations, if my memory serves me correctly: the Insurance and Superannuation Commission; the Reserve Bank of Australia, which played a part in that commission; and the Australian Financial Institutions Commission, I believe. Why do I know this? It was almost cognate with myself being an accountant at the time.
APRA's role is to oversight financial institutions, superannuation funds and life insurance companies so that they have the capacity to pay out facilities and that the Australian people have a sense of confidence in what they do. In Australian history it's had its challenges from time to time. We have seen internationally what happens if financial institutions collapse or are even deemed to be at risk of collapsing; it can have devastating effects throughout an economy. APRA's role is absolutely essential in that space, and it really mimics the roles of other institutions throughout the globe.
The government is now doing a cost recovery process. A cost recovery process has to have capacity from time to time to amend and change fees so that we get a better reflection of what the costs are for the process that APRA has. It needs a determination in respect of each class of levy for that financial year, specifying the amount of levy money payable to the Commonwealth in respect of that class of levy for that financial year to cover the following cost to the Commonwealth: supporting the integrity efficiency of markets, which are leviable by the bodies that operate.
I suppose everyone is aware that last night the American market took a bit of a dip. The ramifications of COVID-19 have breathed some real uncertainty into the markets. For a while there, we heard people using the D-word—depression. Thank God that doesn't seem to be what is coming our way, but Australia is most certainly going to be affected by a recession after record years of growth—a record held throughout the globe. APRA's role going forward, especially with these markets, is going to be one that we have to be very aware of.
We are also going to have to look forward to what the money market will do in the future. I believe that at the time we had a tightening of the short-term money market, which probably doesn't work in direct correlation with Reserve Bank rates; people should be very aware there is a difference between them. For Australia itself, this is going to be a big issue. The other day the Australian Office of Financial Management announced—and I was watching—that Australian government securities outstanding had reached $666.3 billion. That is a record—two-thirds of a trillion dollars. If you look back at your interest rates, maybe if you go back to 1982, you'll find that most of them come with two digits, not one.
What this means for the future is that we're going to have to make substantial payments just to reach our interest. To use an example: I envisage we'll end up about a trillion dollars in debt. I hope that will not be the case, but I believe it is where we're going. Of course, when you get there, why will things turn around? Why will things head back in the other direction? What are you proposing to do? The immigration rates after this will probably fall, and one of the big drivers of our economic growth has been immigration. As that falls, it's going to make things more difficult no matter what government is in place to try to manage this.
If we were to assume a seven or eight per cent interest rate—and I think that would be a fair call, noting that now we have record low interest rates, but a money market by its very nature is a fluctuating thing, otherwise it wouldn't be called a market. As circumstances inevitably change, you will find interest rates going back to probably more of a median of its historical position. I think seven or eight per cent would not be an unreasonable assessment of that. As I said, you have to say to yourself: at $1 trillion, that is $80 billion a year in interest.
Recently we invested half a billion dollars into the construction of Dungowan Dam, as one. To put this in terms that people can understand, that is 160 Dungowan Dams a year. That is the opportunity cost of the interest we paid. One hundred and sixty extra Dungowan Dams in Australia would have an immense economic stimulus on this nation. But if you are taking $80 billion out of our economy and sending it overseas, the opportunity cost of that will also be immense.
I think this is something that both sides of the political fence have to really concentrate on. It is unreasonable and unfair and without foresight to think that, at some stage in the future, the Labor Party will not be the government. This problem may become theirs. Therefore, there has to be a concerted effort on both sides to work on how we are going to bring this debt back under control.
When there is a discussion about further expenditure, that only comes from one spot: borrowed money. It's from that borrowed money. If you look at the final residing place of the bonds—noting we usually have an intermediary, UBS being a classic one—from what we can discern, it is only a broad aspect: Asian markets. I suggest that the biggest one of those is the Communist People's Republic of China. So what you now have is a large section of the Australian bond market whose final residence is with a country that was probably the source of the problem in the first instance.
I've heard other people start with, 'Foreign investment in Australia' and then quote the most recent figures, but they don't actually go to where our bonds are, because it's very hard to ascertain the final residence of our bonds. I was very much applied to this back in 2009 in the Senate, when I was trying to devise with my colleagues on both sides of the political house how we come up with a process of discerning this. If a nation has an inordinate amount of our bonds, whether we're aware of it or not, and they decide to play the market with them, that can have an immense effect on our nation, so it's something that we have to be cautious about. The first act of caution would be to make sure we haven't got so many of them outstanding. This is not what's happening at the moment.
I've had concerns, to be quite frank. When the GFC was on, I did not vote for one of the so-called GFC stimulus packages. I made a point of not voting for them, because I believed that spending on immediate consumables was secondary to our investment in capital infrastructure that could build the economy over the longer term. I believe that, if you invest in a dam, you have the capacity to repay your debts. If you invest in things such as ceiling insulation, it's gone. It's an important product, predominantly, in any case. Investments in things which will be consumables, whether in the construction of a house or what you furnish it with, I don't see will have the same stimulus effect as the construction of a railway line or the upgrade of a dam or the construction of a new airport. Obviously it's an iconic utilisation of capital expenditure—dams, as far as I'm concerned, is at the top of the tree.
APRA has to work in the foreseeable future and in an uncertain world, therefore it has to be able to finance the job it does. That uncertainty has been brought on by the COVID-19 pandemic. Even as we speak, there are people who are taking actions that exacerbate that risk. I commend the member for Maribyrnong for noting the other day that those who participate in the protests are actually causing a problem that will exacerbate the issue they are protesting against. If you have an issue about Black Lives Matter, then you'd better consider those in remote Indigenous communities. The remote Indigenous communities are the ones who are probably at the pinnacle of risk. If this disease were to get into remote communities, people would die. We don't want to be party to being responsible for that. As part and parcel of the uncertainties that are in the financial markets, the seed of which is the coronavirus, you would think that people would use a mechanism of public discourse, whether it be online or letters to the editor or waiting for a time where we have better control over our issues, and not completely flaunt every health regulation, and, in many instances, every law, because they so choose on that day. In noting the demonstrators, I don't think their actual attachment to the issue was as pertinent and they would put forward. Many of the demonstrators were merely 'look at me' demonstrators. It was their big day out. It was a day at the tracks for them. If you actually sat down with them and drilled down and asked them to name some of the black deaths in custody, I think they would really struggle to name one of them.
APRA is going to have a full book as it goes forward. It's going to have a full book making sure that people are able to claim on their superannuation and that those funds are available. It's going to have a full book making sure life policies can be paid out. It's going to have a full book making sure that one of the great strengths of the Australian economy, which is the strength of our banking sector, remains, while, in the same breath, making sure that they don't rule out the competition in the banking sector so that banks, such as the Regional Australia Bank, are able to grow in the book they hold and offer alternatives to the four major banks.
Most of what I see in the Australian Prudential Regulation Authority Amendment (APRA Industry Funding) Bill 2020 is perfunctory. I believe that most of it should not cause much disquiet. It is merely a bill that allows us to cover costs, but it is also a great avenue to allow people to talk on a range of things that they believe to be pertinent today.
I look forward to the next speech. It looks like it's going to come from the member for Maribyrnong. I would suggest that, out of his 20 minutes, he will talk for approximately two minutes on the bill and will use the other 80 to 90 per cent of the time to talk on other issues.
I acknowledge a rare burst of telepathy from the member for New England about what I'm going to say.
The Australian Prudential Regulation Authority Amendment (APRA Industry Funding) Bill 2020 makes some sensible reforms, including changing the way the regulator is funded. The bill also provides an opportunity to speak about Labor's decades-long crusade for the national nest egg and what superannuation does for our nation and, in particular, to sound a warning about the dangers in rating it as an easy out for tough times. Of course, the government's providing of access to superannuation in the pandemic gets couched in the language of individual choice and freedom. But it really is a form of immature financial vandalism.
There was a time in Western politics when the conservative parties were conservative, when they were considered in the metaphor of responsible adults who did responsible things like long-term planning, fighting against reckless change, keeping what is good and saving for a rainy day. But this has all changed with the arrival of the neo-cons, the slash-and-burn happy cultural warriors who would happily lay waste to over-the-horizon policies, from the higher education sector to future funds, if they did not suit their immediate needs. These neo-cons have a shaman-like faith in the invisible hand, and that's not going to save us if we spend the future retirement funds of millions of Australians now. This leaves social democratic parties of labour to have to be the conservative in the room, the adult in the room, not arguing in favour of change for change's sake, being the ones, in fact, who have to issue the warnings and the counsel about storing stocks for coming winters, about not eating the seed corn, and we see this most clearly in the time of the coronavirus. In a global emergency, timely action is vital, but panic is dangerous. Telling Australians who are doing it tough to dig into their superannuation risks inflicting damage on individuals and families and the economy that will ricochet down the decades after the COVID-19 danger has passed.
Labor were cooperative and constructive in the parliament in March. We voted for government stimulus not because we thought every measure was exactly right but because we didn't want to hold it up and wait for wiser measures, and we knew that it was not a time for delay, nor national disunity. Indeed, in this parliamentary chamber in the pandemic, there were no apostles of small government; we were all social democrats. But also, as a conscientious opposition, we have a responsibility to be candid with the public and to try and protect Australians from bad decisions of government. In amongst the welter of rushed stimulus, there were mistakes made by the government. Government forcing workers to sell their superannuation at the bottom of a global market crash is indeed the grandaddy of all bad decisions.
This raid on retirement savings is not being presented to people as a fallback measure or a last resort. Instead, workers who have lost their job or taken a cut in pay and hours are being told they can take up to $20,000 from their super to supplement their income now. We're not talking about a small group of people here, either. So far, 1.8 million Australians have accessed $3.5 billion out of their plans, with a further 160,000 Australians set to increase that figure further. This is more than $3½ billion out of the national savings pool.
One of the strategies of the government is, sadly, seeing working people paying for their own safety net twice. What I mean by that is that, first of all, working people get their regular pay and then they see their superannuation dollars put aside for their retirement. This is the future safety net. Secondly, working people get their regular pay; they've seen their dollars taken out in tax and given to the government for, amongst other things, the maintaining of an emergency national safety net. This is how workers pay for their immediate safety net. But, now that we're in an emergency, the government is saying, 'We don't want to fully support you out of your tax contribution for the current safety net; you need to rob your future safety net, your future super savings—the safety net for retirement.' The government is asking you to rob your future to pay for the present.
Further, leave aside government's obligation to support its taxpayers in an emergency. The early access to super scheme is very easy to satisfy; there will be people doing so who are not in dire financial hardship. Where has some of the early access super money gone to? A recent sample of 13,000 people who accessed their super under the early release scheme shows 64 per cent of spending went on discretionary items—clothing, restaurant food, gambling and alcohol. So we are cracking open the national nest egg and throwing away the yolk. I listened very carefully to the member for New England, who said that his critique of some of the 2009 stimulus measures is that it wasn't building the long term but was just individual stimulus for the short term. Well, consistent with that critique, this early access measure, unfortunately, meets the same test that the member for New England set for the 2009 measures.
This raiding of the superannuation is not only bad for individual Aussies; it puts a strain on the liquidity of super funds and it causes new pain for the Australian companies that they invest in. In the short term the policy will be counterproductive. In the long term the damage will actually be far worse. Smashing open the nation's superannuation is a decision that will compound every year. For example, taking $20,000 of your super as a 30-year-old will leave you around $100,000 worse off by the time you hit 65—$100,000 worse off! Albert Einstein once called compound interest a miracle. The benefit of investing now is that you get the benefit of compound interest and your savings increase. But if you withdraw that money now you can't get the benefit and the miracle of Einstein's compound interest.
Let us pause and reflect on what it was like before there was compulsory superannuation. Millions of Australians worked hard all their life, only to fall into poverty upon retirement. We shouldn't treat superannuation as a luxury—something which only the well-off are entitled to and something to be sacrificed and thrown away when times are tough for the bulk. Telling Australian workers struggling to make ends meet that the government can only look after them if they dip into their own superannuation, as if it's just a matter of giving up an additional pay TV channel or cutting back on Uber food, is beyond risky; it is downright negligent and reckless.
We understand that the economic climate is tough and we understand that it is getting worse. I know that a lot of very good Australians—businesses, people on the land, people in the regions, people in the cities—are coming under terrible pressure, and increasingly so in the coming weeks and months, when the hammer falls in late September and the government abandons the safety net. But the government of Australia should not be telling Australians to steal from their own future to survive their present. You should never have to steal from your own future to survive the present. If you've lost your job, you shouldn't be forced to raid your retirement savings to provide for your family.
This is a time for cooperation, but it's a time for clear heads. We know that some in the conservative ranks of politics regard superannuation as a Labor and union conspiracy and so they dislike it. But the great Australian safety net, contributed to by Labor and social democratic values, needs to be defended—superannuation and Medicare. This government needs to make peace with the fact that Australians like superannuation. They like it because it gives them a sense of control over their future, not just a means for their current survival. Instead of taking the easy option of raiding superannuation, the government should spend more time listening to experts. In years to come we will look back with bemusement and we will shake our heads at the panic buying which gripped our supermarkets—the images of adult Australians fighting over toilet paper. But if this government repeatedly encourages people to panic-sell their superannuation, our whole country will live for decades with the regret of this government's panic buying. The thing about robbing the future is that the future still arrives, and it has a way of demanding that its debt is settled. I commend the legislation.
It's my pleasure to speak on the Australian Prudential Regulation Authority Amendment (APRA Industry Funding) Bill 2020 and associated bills. I concur with the member for New England: this might make for good bedtime reading—short bedtime reading! But, nonetheless, it is an important bit of law. What we are doing here is fixing an issue with the levies, the taxes, that we put on some of the big banks. In the current financial year, 2019-20, what we've found is that legislative barriers are preventing the largest banks from paying their fair share of the cost of the Australian Prudential Regulation Authority to actually regulate them. This has resulted in $3.1 million in levies being deferred. These levies will be paid by these institutions once this barrier is addressed, which is what this bill is intending to do. It's intending to address the legislative barrier and ensure that the government—the Morrison Liberal-National government—has adequate flexibility to set the level of levies required so that the big banks pay their fair share into the future. That is very, very important because one of the major costs that we need to recover from the banks—and I really hope that it is going to come from the banks' profits and not be passed on to customers, because I can tell you: customers are well and truly aware of these little things that the banks do to sting them, when the cost should be taken out of the banks' massive windfall profits, and customers will vote with their feet—is of the new regulations relating to supervising banks in the light of the banking royal commission.
I want to talk about the banking royal commission in detail today, actually, because it is important to know the history of how we got the banking royal commission. I want to give some thoughts on where I think that banking royal commission might have been a little bit deficient. But, in the main, it has been a good thing in terms of cleaning up the industry and it has certainly made a lot of the big banks and their executives sit up and take notice of what the public has been saying on these matters for quite some time.
I had held concerns about the banking industry and their misconduct for quite some time, long before it became fashionable to call for a banking royal commission. I'd raised the matter repeatedly in government. The member for New England, who was the leader of the Nationals, knows that all too well. I was raising these issues alongside others, particularly then senator John 'Wacka' Williams, who was on this matter well and truly before I or anyone in this place or the other place was. The member for Wide Bay, the member for Leichhardt, the member for Kennedy, former member of this place Ann Sudmalis and former senator Barry O'Sullivan were some of those from this side of the House or the other place who were well and truly agitated by some of the misconduct they'd seen from the big banks.
In late 2016, I realised that the then Prime Minister, Malcolm Turnbull, was not for turning. He'd come from the big banks, from the banking sector, and he was not going to upset his mates. So I resolved in late 2016 that if we got a meaningful motion—not a do-nothing motion, because there are plenty of motions that come before this House that just say, 'We support this,' or, 'We support that,' without actually having anything concrete to show for it—to the floor of parliament then I would vote for it, and the only meaningful motion that this parliament could actually vote on, on this matter, would be one for a bill for a law that established a parliamentary commission of inquiry into the banks.
A commission of inquiry, for those in the know, is simply another name for a royal commission. Royal commissions are established by the executive—by the government of the day, not the parliament—and the only one with the authority to set that up would be, obviously, the Governor-General, on the advice of the Prime Minister. I did some deep diving into this and saw that a parliamentary commission of inquiry was something that a parliament could bring into effect which has exactly the same powers as a royal commission. So I resolved in late 2016 that if we got to a position where there was a bill that could be brought before this place then I would be voting for it, regardless of the government's point of view on the matter.
In early 2017, I realised that the only way that that would happen was if I was part of the move to actually get such a bill. So I started working with the member for Kennedy on a draft bill that was later picked up and amended, and probably made stronger and better, by then senator Barry O'Sullivan. It is not just my recollection of history that would lead you to think that. There are many commentators, but I'll just go through a few who have shown that. This is important, because it is to get the facts straight. During the last election, and before that, I had missives from the Labor Party and the union movement coming into my electorate, claiming that I had opposed a royal commission into the banks. The facts are another matter altogether. Samantha Maiden, writing in The New Dailyan online journal that is certainly not favourable to me or to the coalition, said:
The government’s backflip on a royal commission was ultimately informed by the threat of backbenchers, including Nationals MP George Christensen, to cross the floor.
James Massola of the Sydney Morning Herald, no friend of mine or the government's, reported:
Nationals MP Llew O'Brien is set to join his Queensland Nationals colleague George Christensen and vote in the lower house for the banking commission of inquiry after the revolt was kick-started by Queensland senator Barry O'Sullivan.
Independent Australia, a left-wing online journal, said:
With his eye on the 2019 election, Turnbull told us in November 2017 that a royal commission was unnecessary and will harm the image and reputation of our major banks. 'There is not going to be a banking Royal Commission', he thundered.
Was he what?
An honourable member interjecting—
Yes, that's right, the former Prime Minister was involved with HIH.
Independent Australia goes on to say:
Nevertheless, Nationals Senator Barry O'Sullivan and MPs John (Wakka) Williams and, to a lesser extent, George Christensen had their ears to the ground and were listening to their electorates, whose members were recounting stories of disgraceful behaviour by the Big Four, and demanding action.
Success has many fathers, but the real heroes of the Royal Commission should be recognised. It pains me to say this, but these are the three National Party representatives who forced Turnbull’s hand.
Barry O’Sullivan, John Williams and George Christensen: take a bow!
That is echoed by Michelle Gratton, the esteemed journalist of The Conversation, who previously had written that while cabinet had considered, and people in it had argued, whether the government should be pragmatic and hold a royal commission into the banks—and Turnbull had refused that. She said:
… the Government was forced to drop its resistance when Nationals rebels threatened to revolt.
Take a bow, Queensland Nationals backbenchers Barry O'Sullivan, George Christensen and Llew O'Brien. You did everyone a service.
Sharri Markson of The Daily Telegraph said of the banking royal commission:
They were facing a backbench revolt led by Nationals MP George Christensen over the issue at a time when the Coalition’s numbers in Parliament were down as a result of the dual citizenship crisis.
She further said that, in effect, the banking royal commission 'was forced on the Turnbull government by the renegade George Christensen'. I distinctly remember the day that there was that grand backflip and the announcement that a royal commission into the banks and banking misconduct would go ahead, but the ABC reported that Malcolm Turnbull had done what he vowed he would never do: call a royal commission into the banks—'If the government hadn't set up its own inquiry, parliament would have forced one.' It would have forced one through the very legislation that I worked on with Bob Katter, the member for Kennedy, and then senator Barry O'Sullivan. This legislation would have established a parliamentary commission of inquiry into the banks. It probably would have been something that would have been greater than the banking royal commission that we got, because it would have looked at so many other areas.
I reiterate the words that I said that were quoted in that ABC News story that night. It's very sad that it took a number of National Party backbenchers to drag the then Prime Minister kicking and screaming to the decision of holding a banking royal commission. I'll leave this part of my comments at that, but to say that if anyone wonders why the former Prime Minister pursues a vendetta against me, it's this.
The banking royal commission exposed so many different areas of misconduct, but it actually didn't go far enough. I think there was a great deficiency in looking at small business, because what we had was a situation where the banks were basically wantonly throwing money at different small businesses regardless of their capacity to pay. They had structured loan deals as such that if a small business ran into a bit of turmoil or, even if it hadn't, if the region, such as the Mackay region, suffered a downturn—which we did when the mining industry had a bit of a dip—the banks would come in and say, 'We're going to set up some sort of emergency measures and put you into management,' to the small business. They would impose on them measures like penalty interest rates. They would impose on them measures like having their books audited, their businesses audited, by major accounting firms, which costs tens of thousands of dollars. They would put on them all of these restrictions and all of these costs, which were what actually crippled the business. It was not the natural economy but the banks intervening that would bring about the harm that would cause a difficulty to make payments. The banks would just bleed and bleed and bleed the business until the business had no more to give. At that point the bank probably got just about all it could out of them, which would have been more than what had actually been loaned to that business, and then they would move to wind them up. That's what happened.
I've got to say, it's not happening so much now but we've got a perverse outcome where because the banks now realise—because of the royal commission, because of the focus on them, because of the regulations that have been put in, because of the regulations that have been coming—they can't enter into these dodgy deals anymore. The banks had no risks. They basically stitched up contracts where they said: 'We will never ever lose here. We will bleed you dry. We will never ever lose.' People, if they had their eyes wide open and saw what their contracts actually said when they entered into those loans would never have signed the bottom line.
Now that situation's changed and banks aren't loaning. They're not providing any money. I think that's a bit of an indictment still on the banks, because any business arrangement has got to be one in which both parties accept some form of risk. You can't have a situation where we just simply don't supply finance because we have a risk. Well, welcome to the world, big banks, welcome to the economy, welcome to business. Everyone starting a business, everyone entering into a business arrangement has got to accept some form of risk and the bank should too. What we've had is the government stepping into that void and providing capitalisation, billions of dollars, through to the non-big banks and the smaller lenders to try and fill that void for small business. Hopefully big banks will see the error of their ways but, I have to tell you, this bill will make sure that they pay for the regulation that oversights those errors.
The Australian Prudential Regulation Authority Amendment (Apra Industry Funding) Bill 2020 provides for funding of APRA through industry levies. The government learnt the hard way about the importance of adequately funding our regulators that look after financial services in this country when in the 2014 budget, we all know, they cut the funding of ASIC, the Australian Securities and Investments Commission, which meant that there were staff losses and a lot of expertise, a lot of prosecutorial expertise in that particular regulator were lost. Then we had the wealth management scandal hit the Commonwealth Bank, followed by CommInsure and a number of insurers, which resulted in the banking royal commission. In that royal commission, we saw just what damage was done to regulation of financial services by those cuts that were undertaken by the Abbott government in 2014. So the government learnt the hard way but it's pleasing to see that the regulators, in the wake of that, have been given additional funding. This bill provides for industry levies to ensure that there is adequate funding for the work of important regulators, particularly APRA.
The levy imposition amendment bill changes schedules, increasing the statutory limits on the amount of levies that APRA can collect from the entities it prudentially regulates. The bill also makes amendments to how indexation factors are used to index the statutory upper limit. These changes will allow the levies to be more fairly distributed. This has been an issue that has been particularly identified by some of the smaller banks. The current upper limits result in large entities paying less as a percentage of APRA costs and smaller entities paying more. Many of those smaller banks have been disproportionately affected.
This bill will allow for a wider range of APRA activities to be funded through industry levies as well. That includes the costs incurred in connection with supporting the integrity and efficiency of markets in which leviable bodies operate, the costs incurred in connection with promoting the interests of consumers in markets in which leviable bodies operate and the costs relating directly or indirectly to regulation of leviable bodies. All industry funding levies charged by APRA are set out in the legislative instruments approved annually by the regulators.
It's important that we have adequately funded regulators in financial services. The royal commission that we recently had proved that. But it's also important given that many of these regulators oversee what was the fourth-largest pool of investment funds anywhere in the world, in our wonderful superannuation system. Unfortunately, we've seen the government fail to heed both the advice of experts and the warnings Labor issued in respect of the measures that they've put in place regarding the early release of superannuation to deal with COVID. Of course we now know that, under their early release scheme, people can apply in two lots for up to $10,000 for the early release of their superannuation.
There are two points that Labor made about these changes when they were proposed: firstly, that people should seek financial advice. Seek independent financial advice before you dip into your pool of superannuation savings. We also warned the government that this scheme may be subject to fraud because it had been rushed and the checks and balances hadn't been put in place for people to adequately have a look at whether or not some people were rorting the system. The government has ignored both those concerns. We've had some of their MPs and senators actually encouraging people to withdraw money from their superannuation.
On 16 April, Senator Bragg sent an email to constituents saying that, if you need super, 'you should apply for it'. I was alerted to this by one of my constituents when she sent me a copy of the email that she received from Senator Bragg. This person said to me, 'It's highly inappropriate to receive financial advice from an unlicensed senator.' I completely agree with the constituent who sent me that email. Senator Bragg should not be giving financial advice to vulnerable Australians during this difficult time, firstly because he's not licensed to and doesn't hold an Australian financial services licence. But he should not be using Australian workers and potentially risking their retirement savings because of his ideological crusade against industry superannuation—
Mr Tim Wilson interjecting—
a crusade which I suspect is shared by the member for Goldstein, who's rudely interrupting over there. The correct advice is to advise Australians to seek advice from a registered financial adviser and assess whether or not accessing your superannuation early is the right thing for you to do.
We've seen what has occurred with this early release scheme and the fraudulent activities that have been uncovered by the AFP and the ATO. Some $100,000 worth of people's superannuation savings has allegedly been stolen from 150 superannuation accounts. Labor warned the government about the potential for fraud in this scheme. We wrote to the minister, Senator Hume, on 1 May and asked her to put in place measures to ensure rigorous checking to combat potential fraud. The very day that the minister sent a letter out to the industry superannuation funds assuring them that there was no fraud and saying, 'Substantial checks are in place to guard against fraud,' the AFP was notified that more than $100,000 had been stolen from people's superannuation accounts. Senator Gallagher uncovered in the Senate, through the COVID committee hearings, that at least three government ministers had done nothing about that alleged fraud. We say to government MPs and senators: this is an extremely difficult time for many Australians, and you need to be on your game. Many programs have suffered from poor planning and poor execution by this government, and the early release superannuation scheme is one of those.
On 1 June, a couple of weeks ago, AlphaBeta, a consultancy firm, released some analysis of real-time bank transaction data and a sample of 13,000 Australians who had accessed their superannuation early through the early release scheme. That data, and what it uncovered, was quite startling, but it was also quite horrifying, because the sample of 13,000 people showed that 64 per cent of them had spent their early release superannuation on discretionary items like furniture, alcohol and, worryingly, gambling. I think 10 per cent of that expenditure had gone on online gambling. Forty per cent of those who had accessed their superannuation had not actually suffered a drop in their income so far due to COVID-19, and that's the startling statistic—that 40 per cent of those people didn't actually suffer a drop in their incomes as a result of COVID-19. That's the reason why Labor and financial planners were saying to Australians, 'Make sure you get independent advice before you dip into your superannuation.' It appears, based on the AlphaBeta analysis, that the money was being used for lifestyle reasons rather than for necessities and to get by.
What does that mean? The effect of that is that this scheme will weaken the ability of Australians to save for their retirement. As a result of this, we're going to see many more Australians retire with inadequate savings in their superannuation accounts. It's going to reduce superannuation balances. We all know the compounding effect of withdrawing money from your superannuation account now and what that can do to superannuation balances at retirement age, particularly, unfortunately, for those who have breaks from the workforce, and most notably it's women in those situations. Again, this is another policy from this government that detrimentally affects women compared to men. We've seen that with the announcements that they made this week regarding the withdrawal of childcare support in this country, and it's a shame that the same effect is going to be prevalent in this early release superannuation scheme because more women are going be affected by withdrawing money from their superannuation accounts than men, simply by dint of the fact that they have smaller balances and they take breaks from the workforce.
You're also going to see in the future, as a result of this, more Australians relying on the age pension because they won't have an adequate retirement income. In the context of trying to get the budget back into a sustainable position, we all know that the budget deficit coming out of the COVID-19 pandemic is going to be substantial. When you're talking about trying to stabilise the budget, the worst thing you can do is ensure that more Australians have to rely on income support through the pension into the future, but that is exactly what this government's policy will end up doing.
It's also a great shame that this policy's effect will be to reduce the pool of investment savings that exist in Australia into the future to spur business investment and to provide funding for infrastructure investment in this country, which is going to be crucial to ensuring that we get the economy back on a growth trajectory, get productivity moving again and ultimately have the national income to reduce some of that budget deficit into the future. We've seen what's happened to business investment in this country under this government. Basically, since 2013, when this government was elected, business investment has fallen off a cliff in Australia because of this government's policies and its failure to attract and incentivise business investment in this country. Reducing the pool of investment savings by having less in people's superannuation accounts won't help spur business investment into the future but will simply prolong the recovery of the Australian economy.
All in all, what we have seen from this government's management of policies relating to COVID-19 is their incompetence writ large. It basically proves that this government are not good administrators. They are not good at delivering policies that are meant to help Australians deal with the COVID-19 situation. We have seen with JobKeeper that they overestimated the number of people who would be accessing JobKeeper to the tune of $60 billion. They found $60 billion down the back of the couch because of their incompetence in managing this scheme. We've seen their incompetence writ large with robodebt: 370,000 Australians have been affected by the administrative blunders of this government and are $721 million worse off because of this government's incompetence. Now we are seeing through the fraud related to the superannuation early release scheme and the reductions in the pool of investment funds that this government are not good administrators.
The government are not good at managing government policy on behalf of the Australian people. It's unfortunate that it's the Australian people who will suffer into the future and that the Australian economy will be prolonged in its recovery and weakened into the future.
It's wonderful to follow the former deputy chair of the House of Representatives Standing Committee on Economics, the member for Kingsford Smith, in speaking on this legislation. I suspect he was sacked from that job by his Labor colleagues on the basis that he wasn't prepared to stand up to the committee's chair in the last term of parliament successfully, as we drew attention to the dishonesty and misinformation that was promoted by the Labor Party regarding its campaign to whack a massive, great, big, new tax on Australian retirees.
This is a particularly sore point in the context of this legislation, because it comes back to financial regulation and financial security, which APRA oversees. Before the last election we had the Labor Party going out and smearing me and others—Australian retirees—who dared to stand up and say that if a Labor government was elected people would lose a third of their income overnight if they were an Australian self-funded retiree. They said that was misinformation and that honesty goes to the heart of the confidence you can have in the retirement security system. They said that it was misinformation, that it wasn't true, that people were exempt. They would never own up—until they lost the election, in part because of that very issue. They have now had to concede that they're not going to prosecute—or they claim they're not going to prosecute—that agenda again. But they've given themselves wiggle room. Don't misunderstand them: they want to come after Australian retirees and do a hit job on their security again.
The now Leader of the Opposition conceded after the election that, actually, they were going to hit some people who were on low incomes. In fact, what we on the economics committee said at the time was right, that the consequence of a Labor government was going to be the pushing of Australian retirees beneath the poverty line. That would have been a disgraceful action that needs to be exposed and called out. There is nothing worse than centralised authority taking from Australians their hard-earned living, their own security, through a dishonest misinformation campaign that tries to suggest that somehow they are the benefactors of public largesse. That's what this legislation ultimately goes to. Yes, it's a rudimentary piece of administrative legislation around who pays what to manage and operate our financial regulators—notably APRA. But it's about what capacity they then have to do their job to make sure we have security, trust and honesty at the heart of our financial services system.
As members in this place will know, in the last term of parliament, the then Treasurer and now Prime Minister commissioned the economics committee to have regular oversight of the four major banks. Under the stewardship of the two previous chairs as well as myself, we held regular hearings into the four major banks to reveal and uncover misconduct and questionable practice to make sure that they are properly held to account as part of a stable financial system. We had a royal commission organised by the former Prime Minister Malcolm Turnbull which revealed further misconduct and questionable practices across the board. As a consequence, the economics committee in this term of parliament has been given a term-long inquiry to oversight the ongoing implementation and, of cause, to continue to question the financial services sector about their conduct and make sure that trust, security and confidence can be at its heart.
We have already done so and will continue to do so. Nearly one year into this inquiry, we have already revealed industry funds deliberately reactivating accounts and transferring money between themselves and into their group AUSfund so that they can harvest the hardworking savings of Australians to reactivate their accounts to harvest them for insurance and fees. Because of the work of the economics committee, the parliament has now taken action to shut down that practice for industry super to harvest low-balance inactive accounts.
Of course, we've continued to look at the misconduct in other sectors. We returned to the banks and have looked specifically at some of the challenges we've faced around ME Bank, a wholly owned subsidiary of industry super funds that for five months had been conspiring to close down the account options of the people whose money they were entrusted to hold by closing down their regional facilities. For five months, they knew they wanted to do this—contestability longer—and never once did it enter their minds that they should turn around to those Australians who entrusted their money with ME Bank and tell them that they're going to shut down their options. For a not-for-profit bank that's supposed to be there to help its customers, you've got to question where their priorities sit. Worse: they told ASIC, the regulator, about the plan and ASIC said, 'If you go down this path, you have an obligation to tell customers that you are going to shut down their options and design a strategy.' To be fair to ME Bank, they did have a strategy. It was to impose silence and implement communications after they had shut down those options.
This is the misconduct that we continue to pursue through the economics committee, to make sure that there's proper accountability working with APRA and ASIC to make sure that there's accountability in our financial services system. But there is a long way to go and, trust me, I can assure you there is a long way to go. What we continue to unveil—whether it is the deliberate intention of transferring money through low-balance inactive accounts to harvest for unnecessary fees and industry super's fees-for-no-service moments or it is the misconduct of ME Bank that they then misled the parliament and the committee until the regulator exposed their dishonesty—raises broader questions about the conduct of some sectors that have gotten a free ride.
We haven't just looked at super. We've asked difficult and challenging questions of the banks—the major banks. The economics committee asked—in fact, I, as chair was the first person to ask—Westpac about their issues with AUSTRAC, which later led to the downfall of Brian Hartzer. We've spoken to the small banks, particularly around some of the challenges that they're facing but also to make sure that both they and the major banks are doing the right thing by small businesses and making sure they're passing through the cost benefits of low-cost routing. And that isn't over yet, either. In fact, in the lead-up to the next hearing on the Reserve Bank of Australia and their payment systems, I want to make sure that it's clear that we expect banks to be able to pass on to small businesses lower-cost options, rather than those being provided only to larger institutions and larger customers.
And, yes, we've looked at retail super. One of the first actions we took at the end of the last round of hearings, late last year, was to put on notice one of the largest retail super funds, AMP, that they would be recalled and there'd be an expectation that they would continue to answer questions over past conduct but also their conduct into the future.
Recently we had the insurance sector before us and we've continued to provide questions on notice to them as well, about making sure they're passing through any cost savings on insurance products to Australians who don't need extra costs associated with risk, as a consequence of the COVID-19 pandemic. If you can't drive your car to work, why does the cost of your car insurance stay the same? If you're a small business that can't open your doors, then why are you paying the full cost of public liability insurance or other types of insurance to do with having customers? Those cost savings should be passed on. If you've got a travel insurance product and you can't go overseas, then you should get a full refund during this pandemic period.
While there are some people who go around deliberately slurring the work of the committee by saying we are focusing singularly, I can assure you: to the Labor members—even though I don't always agree with their line of questioning—we give full ambit, to make sure that we challenge every part of our financial services system so that it's acting in the best interests of the Australian consumer, unapologetically. And our expectation is that APRA and ASIC do the same.
I will say that I actually have some concerns around the practical operation of this bill because, while it is a good thing that the burden of responsibility for covering the costs of APRA is shared, one of the biggest concerns I have out of the royal commission is the broad capture that occurs between financial institutions and the regulators. We should never allow a situation where the heavy burden of the cost of running the regulator falls onto too few hands and shoulders because, when it does, it raises questions about whether the regulators are prepared to use the full extent of their powers against those who are, ultimately, compelled to feed them.
So, while I support this piece of legislation, I make it clear: we are watching you, APRA, and we are watching you, ASIC, to make sure that you are doing your job. You are entrusted, on behalf of the people of Australia and this parliament, with holding our financial institutions to account—and let me make it clear: all financial institutions. It's not just about pursuing the easy wins that appear in the newspapers from time to time, where you can take legal cases to represent activity and responsiveness. The expectation is: where there is misconduct, it will be revealed; where institutions mismanage, you will pursue them. And that goes across the whole structure of the financial services system.
I go back to the example I used just before, of ME Bank. When I look at some of the questions on notice to them that I have submitted as chair and then at the answers they have provided, it is increasingly clear to me that there are questionable financial practices within that institution, and I will have more to say about that in the future. That underlies the valuations and the assets of funds, and the retirement security that Australians have, that leads to the financial stability of the nation. APRA has a job to do to make sure that those valuations are credible. It has a responsibility to make sure that, when reports are audited, they're factual, they're evidence based, they're credible and they're comparable to other financial institutions, and that nobody is cooking the books. Anybody who thinks that simply asking questions on these important matters is an inappropriate use of this parliament's time or the committee's time is delusional, because, when you turn a blind eye to the conduct that we are supposed to be inquiring into, that is where misconduct festers. It is not in light; it is in darkness. It's what people think that they can get away with.
We saw that at the last election. Labor thought they could get away with removing up to a third of the income of Australian retirees. The economics committee provided a platform for Australian retirees to stand up and speak out and to highlight the misinformation—where people who had sacrificed their whole lives, who were living on marginal incomes, were going to be pushed below the poverty line; where families that had set up small pools of shares to support loved ones into the future were going to be robbed; and, where Australian retirees thought they could turn to security, it would have been denied. It exposed a difficult truth. Regulators have the job to expose difficult truths too—to tell the truth and to bring light to dark places. In passing this legislation, we should expect APRA to stand up and step up.
The measures contained in this package of bills, including the Australian Prudential Regulation Authority Amendment (APRA Industry Funding) Bill 2020, are a modest step forward when it comes to the way in which APRA will levy industry for its funds. As such, we support these measures. As with so many bills in this place, what we see are relatively modest steps forward, but not an engagement with the broader issues touched on by pieces of legislation.
Today I want to speak about a couple of the measures in these bills, but being modest measures, as they are, I want to spend the bulk of my speech talking about some broader policy and systemic issues in the superannuation industry. The measures today impose or change the schedules, increasing the statutory limits on the amount of levies APRA can collect from the entities that it prudentially regulates. It also makes amendments to how the indexation factor used to index the statutory upper limit is calculated. These changes will allow levies to be more fairly distributed. This is particularly important with respect to the banking sector, where customer-owned banks are disproportionately affected. The APRA industry funding bill 2020 also allows for a wider range of APRA activities to be funded through industry levies. I'll take this opportunity to say that APRA, as the prudential regulator, plays a critical role in the regulation of Australia's financial services sector, and we do support measures that improve the way in which it imposes levies on the industry.
As I said, I want to spend the bulk of my contribution today talking about what I consider to be a serious policy error by the government in the design of its response to the current recession. In particular, I want to focus on the early release program with respect to people's superannuation accounts. This is a wholly unnecessary measure. Not only is it wholly unnecessary; it's very damaging to the superannuation sector and undermines one of its key precepts. I think it's important, when talking about this issue, to spend a bit of time looking at the policy underpinnings of our superannuation sector—our world-leading, path-breaking superannuation sector. I think it's worth going back three decades, to 1991. I'm going to make some references here to some speeches made by Paul Keating and the then Treasurer, John Kerin, when introducing a system that would dramatically expand private accounts so that they would be universally accessible to workers right across the economy.
Paul Keating spoke about the need for the superannuation sector to be expanded so as to provide for more dignity, more self-reliance and prosperity in retirement:
A system of more adequate private provision of retirement income sympathetically interfaced with the public pensions system will not only better provide for the aged, but is more likely to preserve the dignity and independence each have enjoyed in their preretirement years.
It will make Australia a more equal place, a more egalitarian place and, hence, a more cohesive and happy place.
He talked about the fact that, in addition to providing dignity in retirement for retirees, it would also have significant macroeconomic benefits. He said, 'The really attractive advantage is that a much more generous retirement income scheme will not be at the expense of the Australian economy; it will be to its immense benefit.' He said, 'Superannuation can become the biggest single source of increased private savings in the community.'
That was 1991. Fast forward three decades, and, as earlier speakers on this side have mentioned, we have the fourth-largest pool of private savings in the world—what foresight! John Kerin, the Treasurer at the time, when introducing the 1991 budget, said, 'The government's retirement income policy aims to provide adequate income support through the aged pension for those who have not been able to save during their working lives.' He also said, 'The super system will encourage those now in the prime of their working lives to provide a higher standard of retirement living for themselves through saving.' It was that key duality—the maintenance of the pension system to provide for those who hadn't been able to save for themselves while at the same time encouraging private savings so as to provide support for that. Back in 1991 Kerin was already alluding to the fact that our pension system, our old-age retirement system, needed to achieve multiple goals.
Fast forward three years. In 1994 the World Bank, in what many see as its seminal piece of work on how countries should design their retirement systems, argued that old-age pension systems should satisfy objectives both for individual people in retirement and the broader economy. For individual people in retirement, the World Bank argued there should be a savings or wage replacement function, a redistribution or policy alleviation function and a social insurance function. It argued that, for the broader economy, there should be a sustainability rationale, there should be minimisation of hidden costs that impede overall economic growth and there should be transparency. Fast forward another couple of decades. Mercer, in its world-leading evaluation of pension systems around the world, argued that one should look at pension systems through the prism of three criteria: adequacy, sustainability and integrity.
The reason I think it's important to establish that policy framework—and this is the point that the World Bank and other organisations made way back in 1994 and many times since—is that no single policy mechanism can satisfy all of those objectives. We need to have multiple policies working together. That's why we look at the United Nations approach to pensions reform. It set up what it called the three pillars: a public pension system, a mandated private savings account system and a voluntary savings account system. The World Bank adopts a similar system: non-contributory means-tested assistance to the poor; a public pay-as-you-go pension system; private occupational pension schemes—much like our super accounts; individual savings; and labour market policies aimed at extending working life.
The point is: we cannot achieve all of the policy goals that we must achieve through one mechanism alone. The World Bank, the OECD and many others have argued that the public pension must remain at the heart of social insurance. For those who aren't able to save for themselves, for those who fall by the wayside, we need to have a safety net. But the World Bank argues that it is also critically important that we have another pillar, one based on personal savings accounts: 'The important point is that it should be fully funded and privately managed but publicly regulated, and it should link benefits closely to costs.' Again, this is years after we had, in 1991, enacted exactly that framework. We were leading the world, and years later the rest of the world enacted our very framework.
So it's that pillar, the private account pillar, which those opposite are so determined to undermine. The shadow Assistant Treasurer, in recent days, has said that everybody in this place, particularly those opposite, has been saying that we should put down our weapons. Well, it's time to put down the weapons with respect to superannuation. It's time to stop undermining one of the critical pillars of our retirement system. I can even quote someone who is about as far from socialism as you can imagine: Martin Feldstein, who was the Chairman of the Council of Economic Advisers to Ronald Reagan. Martin Feldstein, in his very important 2005 address to the American Economic Association, argued very strongly for private personal accounts. If one goes back to that very important speech, he was basically arguing for the Australian superannuation system. I can cite the World Bank, the OECD and leading economists from right across the political spectrum. They all say that a pillar of our retirement policy based upon private personal accounts is absolutely critical. The Keating vision has now become best practice around the world and yet those opposite, at every stage, want to undermine it.
The most recent attempt to undermine it was early release as one of their responses to COVID. When, for the vulnerable in our community, they should have been fully funding a safety net in response to their vulnerability to the COVID recession, instead what they did was to say to the most vulnerable in our community, 'Hey, why don't you self-fund part of your attempt to get out of these dire economic straits?' As the member for Maribyrnong said, there's no excuse for forcing people to raid their savings in order to cope with economic downturns such as the COVID recession that we are currently in—no excuse whatsoever.
So let's look at the way in which this is playing out. As earlier speakers on this side have said, the reason why it is so critical that we encourage people into superannuation accounts as early as possible is the magic of compound interest. Warren Buffet said:
Time is your friend, impulse is your enemy. Take advantage of compound interest and don't be captivated by the siren song of the market.
Charlie Munger, another of this century's great investors, said exactly the same. The quote that compound interest is the eighth wonder of the world is often attributed to Albert Einstein. Many have questioned whether he actually said it, but the fact that it is so plausible that such a genius would have said such a thing shows what a wise statement it is. Compound interest is absolutely critical to a private account system working.
Some opposite say, 'Well, it's their money.' What a hollow debating point on such a foundational part of our pension retirement system! If one were to use that retort, 'It's their money,' then why have a private account system at all? The argument, 'It's their money,' undermines the whole principle that people should save for their retirement years. It's simply not good enough and shows the ideological basis upon which so many of these attacks are based.
Let's look at what's happening in practice as a result of the policy that has been instituted by the government. Mercer has found that seven per cent of the 90,000 customers accessing their savings as a result of this policy have reduced their accounts to zero, totally clearing out their accounts. APRA also believes that seven per cent of the early release applications that it has had any oversight of have led to account balances of zero. When the OECD in 2012 examined critical aspects of best practice in what we should be looking for governments to do with respect to retirement incomes policy, one of their key recommendations was that we should encourage people to enrol and to contribute for long periods. It is absolutely critical that people stay in super for as long as possible to attain the benefits of compound interest.
As the member for Kingsford Smith alluded to in his speech earlier in this debate, one of the great challenges of super, for many disadvantaged groups, such as women, is that, when they have gaps in their working lives, that can lead to significant reductions in their retirement balances, and this is exactly what we are going to be imposing on a whole generation of workers. So many people now in their 20s who have cleared out their accounts are going to be starting their savings a decade behind when they should have. This is compounded by the fact that they're selling at the depths of one of the great bear markets and by the fact that many of them are going to be out of the labour market, potentially, for years. It is the worst of all possible outcomes for some of the most vulnerable in our community.
By the end of May, according to ISA, around 50,000 super fund members had already wiped their super accounts to zero. That's tens of thousands of individuals who, when we fast forward decades, are going to be in a far worse position than they should have been. As alluded to by earlier speakers, so many people, whether it be Andrew Charlton and his work at AlphaBeta, whether it be ASFA or whether it be ISA—it doesn't matter who it is or what assumptions they use, they all say that this is going to result in many multiples of disadvantage down the track because of that compounding that people will miss out on.
Then, of course, there's the other side of the coin: the macroeconomic benefits that we miss out on. Keating, Kerin, the OECD, the World Bank—all of the public finance experts, and I could quote them if I had more time—allude to the fact that this second private-accounts pillar massively boosts the capital stock of a country. This has proved to be so critical in Australia in economic downturns. It was so critical in getting out of the GFC. It is going to be so critical in the investments that super will make to help us get out of this recession.
And then we can look at the counterfactual: if we don't have a strong private accounts system, what kind of tax rates are going to be required to fund the pension system? Let's look at OECD forecasts for the taxation burden of public pension systems in 2050. The forecast Australia to be 3.7; the OECD average, 9.4; Germany, 12.4; and Italy, 17.3—17.3 per cent of GDP to the pension system in Italy! These are scary numbers. Of course, it's good that we're all going to be living longer, but there's a reality to that, which is that, if we don't save more, it is going to impose massive distortionary taxes on our economy.
As earlier speakers have said, it's time that the government accepted that the Australian people like the superannuation system. It's time they accepted that world-leading experts, the OECD, the World Bank and just about every public economics expert in the world like superannuation. It's time they started supporting it, not undermining it. (Time expired)
That was an excellent contribution by the previous member. I very seldom say that in this place! We pay him a tribute. Having said that, I was going to go in a different direction but I'm going to just carry on from what he said. In spite of it being an excellent contribution, he missed the most important factor here. In another life, I sold savings contracts. They called us AMP agents. Back when I sold them, in superannuation there was a 60-40 rule: 60 per cent of all superannuation went into government securities. When that magical government in Queensland, the much-maligned Bjelke-Peterson government, built 6,000 kilometre of railway line to create the coal industry in Australia—we were a coal-importing country before they undertook that program, and then we became the biggest coal-exporting state on earth—it was done out of the superannuation moneys, that 60-40 arrangement. A retiree had a guarantee by a state government that his savings would be secure. A superannuation investor now is watching 51 per cent of his moneys go into the stock market.
The stock market is just a Ponzi scheme. I don't think there are too many people under any illusions about that. I don't make assertions in this place without backing them up. Some 20-odd years ago, $70 billion a year was going from superannuation into the stock market. Now, $1,670 billion a year is going into the stock market. If you're only bumping $70 billion a year, it'll go along fairly steady, but, if you start pumping $1,670 billion, you're going to push the prices up through the roof. Is there anything backing that up? Is there any creation of a coal industry? Is there any substance behind it? No—there's no substance behind it at all. All you've got is a bunch of kids with a shiny Master of Business Administration coming out of RMIT in Melbourne flashing their credentials around and buying and selling shares to each other. They know absolutely nothing about the shares. I'd like to ask them what 'Cenozoic' means, what 'epigenetic' means or what an 'enriched zone' in mining means. If you're going to invest in mining and you don't understand those terms, you shouldn't be investing in mining. Superannuation has been placed in the greatest of jeopardy. Fifty-one per cent is going into the stock market, and, lamentably, half of that is going into the American stock market, not the Australian stock market. I don't know what a young kid out of university is going to know about shares in an American company.
I read an article by one of the more famous people in Australian history, Bob Santamaria. I stopped reading his articles, because I thought it was a really stupid article. He said that control of world investment is now under people who are in their 30s—this was about 40 years ago—who are being paid hundreds of thousands of dollars a year and are moving around hundreds of millions of dollars of investment. I thought: 'The old fella's lost his marbles. I'm not going to read his articles anymore.' Some eight months later, Barings Bank, the oldest and one of the biggest banks in the world, was brought down because of a fellow called Nick Leeson, who was not in his 30s; he was in his 20s. He was not on hundreds of thousands a year; he was on millions of dollars a year. He wasn't pushing around hundreds of millions of dollars; he was pushing around thousands of millions of dollars. So Bob Santamaria had been wrong, alright, but he'd been wrong in the wrong way.
I became a very great acolyte of that famous man following his prescient observation that we were going into this free market system which was absolutely disastrous for the country. Instead of the money going into rail lines to open up coalfields and instead of the money going into dams to build and create irrigation for farms and security of production for our farmers, it was all going into speculation and predation. The greatest economist of all time, Hjalmar Schacht, got control of the German economy, and he confined all moneys. You couldn't raise any money over there unless it went to industry, industrial production, farming production, the renovation of houses and the building of superhighways. You didn't have any money for floating companies or playing your usual stock market games—speculation and predation were out. You're not going to get any money to build a big shopping centre that's bigger and brighter than the one that's already there so they'll leave their shopping centre and go to your shopping centre. That's where we talk about predation: I'll take over your company and sack all your administration and do it from my administration, and it'll be more efficient. Like hell it will be! You'll be more powerful, but they won't be any more efficient. That's predation: I'll build a bigger skyscraper than you; it will be newer, and everyone will leave your skyscraper and go into mine.
And speculation is typically Goldman Sachs during the Great Depression. They said, 'You float your company called Blue Horizon'—don't quote me on the names. So you floated it for, let's say, one dollar, and the representative of Goldman Sachs said yes. Then you floated a company to buy the shares in Blue Horizon. 'That's correct, yes.' And then you floated another company to buy the shares in the company that owned the shares in Blue Horizon. Then you floated another company to buy the shares in the company that owned the shares in the company that owned Blue Horizon. This is what's called a Ponzi scheme. At the end of it, there were tens of thousands of millions of dollars in that company that owned Blue Horizon, and Blue Horizon owned some worthless land in Florida swamps. That was all it owned. That's speculation. All of your superannuation is going into speculation and predation.
To return to Hjalmar Schacht: Hitler came to power, and Schacht ended up in the Dachau death camp because he was the only person in Germany on record that spoke up against the persecution of the Jews. So he was a very, very great man indeed.
Let me move to banking in Australia. I am on record as saying on many occasions that APRA is not a watchdog; APRA is a lapdog. I have had case after case after case, and they have occupied so much of my lifetime, fighting the banks. Let me just give you one case. A sugar mill got into trouble in North Queensland, as sugar mills do from time to time, and fell into the hands of an administrator. The banks put it in the hands of an administrator. The sugar mill, worth $200 million, was sold out from under the farmers for $2 million. I'm not going to go into all the details of it, but those were the basic facts of what happened. APRA was ordered twice by Wayne Swan to investigate, because he was enraged by the case. They completely ignored him. Well, they did an investigation but came back and said there were no problems, nothing to investigate.
Joe Hockey became Treasurer. He looked at the case and again twice ordered APRA to do something, and twice they ignored him—treating the elected government of Australia with absolute contempt. I think you probably know the end of the story with the Innisfail sugar mill. The bank ended up with the account of the people that it was sold to for $2 million, and the accounting firm that had done the dirty deed ended up with the auditing accounts for that company as well. So there was the payola, and APRA whitewashed it.
In Kagara Zinc we had a minority shareholders group on the board that pleaded and forced and cajoled the company into liquidation, so, when the assets were sold, the minority shareholders took up the assets, without any debt. The debt belonged to the company, Kagara. Kagara owed all this money, but, when Kagara's mining assets were sold, they were purchased by the people who were the minority shareholders—a classical round robin, where red flags should have been going up everywhere. Within two days they reported back that there was no problem. How would you investigate a complex structure like this?
I'll put it in a personal way. I was with a journalist with The Sydney Morning Herald who had run 12 major articles condemning APRA and showing that they are absolutely worthless. We were at a cafe in Sydney, and there was an older middle-aged lady serving on the tables. She wore glasses and seemed a very nice lady. She said, 'Did I hear you say the word "Kagara"?' I said: 'Yes. We're discussing Kagara and a number of other outrageous cases of nonperformance by APRA.' She said, 'I'm a schoolteacher and I lost all of my earthly savings in that mining company.' I said: 'It was a good mining company, a good investment to make, but, through chicanery, you've been taken for a ride.' She said, 'Will I get any of my $100,000 back—my entire life savings?' and I said, 'I don't think so. We're here—we're just going to write another attack upon APRA.'
If there has been a single case in my 46 years in parliament in which APRA has done anything to help anyone, I am not aware of it. Yet successive governments will leave that bunch of puppets in place, with the banks pulling the strings, again and again and again. I don't condemn Wayne Swan, because he probably would have done something, and I don't condemn Joe Hockey either. Both of them have moved on. But I think both of them had reached the point where they knew something had to happen. I wouldn't have been the only case going before them.
In Australia, the government went around congratulating itself: 'We were brought successfully through the GFC. Aren't we wunderkind!' And the banks were all parading themselves around saying, 'We have been very prudential.' What absolute rubbish. In America, they have non-recourse lending, so, if the bank lends the money to you to buy a house and you go broke, the bank forecloses on you and takes the house and your debt vanishes. So you've lost your house—you've been well and truly punished. You might have had $50,000 or $100,000 in that house. You've lost that money. But the bank also has lost, because they own the house now and they've got to sell it. So the bank shared the risk with the borrower, as it should be, and they're the businessman. A young bloke that's just started as an apprentice fitter on $40,000 a year wants to go and buy a house. The bank says, 'Yes, you can buy a house—$350,000; we'll give you the money,' knowing that he'll go broke. I sold what they call insurance, but it was investment funds. If we sold an investment fund of that type, we would lose our agency, and every other insurance company would not touch us with a 40-foot barge pole. We would be put on a list. The banks congratulate you; they promote you. The more business you do, the more people who have sold up and are broken and destroyed, the more they'll congratulate you and honour you and promote you. This is not working. APRA has to go and there has to be a standard form contract. (Time expired)
I would like to thank all those members who have made a contribution to this debate on the Australian Prudential Regulation Authority Amendment (APRA Industry Funding) Bill 2020. The bill will ensure that the legislative framework for financial institutions supervisory levies keeps up with the ever-evolving industry. Recent events have highlighted how important the large institutions are in the financial services sector, and it's absolutely critical that regulation reflects their importance in the market.
Through addressing legislative impediments, this package of bills will enable large institutions to be levied their appropriate share of APRA costs. This will ensure no more deferrals of levies on those institutions that create the greatest regulatory burden. In turn, Australia will see a prudential regulatory approach funded in continuing to address financial stability, in protecting the Australian community. It is only appropriate that all sizes of institutions pay their proportionate amount of these costs. Industry have supported these changes, and these amendments will provide certainty for many institutions during this unfortunate coronavirus crisis.
As the financial services sector evolves through technology and innovation, the nature of regulation will need to keep pace. Therefore, regulatory activities in regard to prudential regulatory institutions are required to adapt. The amendments will ensure that the cost of regulatory activities, for which the Commonwealth collects through APRA, can continue to be collected in a dynamic regulatory environment. I commend this bill to the House.
The question is that the words proposed to be omitted stand part of the question.
Question agreed to.
Original question agreed to.
Bill read a second time.
Message from the Governor-General recommending appropriation announced.