Monday, 15 February 2021
Financial Sector Reform (Hayne Royal Commission Response No. 2) Bill 2020; Second Reading
Two years ago the Treasurer stood before the Australian people, puffed up with confected anger, and cried a river of crocodile tears. Releasing the final report of the banking royal commission, he could barely have been more explicit in his criticism of the banks and the system which allowed them to perpetrate serious crimes on thousands of unsuspecting victims. He said the report was a scathing assessment of the banks' behaviour, driven by a culture of greed that breached the law. He said the price paid by the community was 'immense'. He spoke of broken businesses, the emotional stress and the personal pain that thousands of victims had experienced. He promised change. This is what he said at the time:
… the community's trust in our financial institutions has been lost and this is why it must now be restored. From today, the banking sector must change, and change forever.
He then promised action on all 76 recommendations of the royal commission.
Those of us who've been involved for a long period of time paid careful attention to those words. Promising action on all of the 76 recommendations is not the same thing as promising to implement each of those 76 recommendations. We were sceptical because this government had voted 26 times against the forming of the royal commission. So resistant had they been to a spotlight on the goings-on within the financial sector, we could not trust them to implement the recommendations of that royal commission. We were right to be sceptical, and their actions every day since have proven that to be true. You could fill Lake Illawarra with the crocodile tears the Treasurer wept on that day. Two years on, just 27 of the 76 recommendations have had any action—that's just one-third. Worse, the very first recommendation, recommendation 1.1 to keep the responsible lending laws in place, the government has sneakily rejected; and it now plans to unwind those laws that were put in place over a decade ago helping us to get through the global financial crisis and this most recent crisis.
I will come back to that issue. But for now I want to say that the issue of the wide gulf between what the Treasurer says and does is growing by the day. This is not the only broken promise this government has made. Time and time again, the government has broken its promises to the Australian people, particularly when it comes to their personal finances. When this government makes a promise, it's time to take out some insurance. Remember the last election, when the Prime Minister and the Treasurer promised workers that they would get their legislated superannuation contributions, that he wanted to see them paid in full? It was another broken promise from this two-faced government that simply cannot be trusted with workers' money. While they pay themselves a healthy superannuation contribution of 15.4 per cent, they are now planning to cut workers' superannuation contributions—9½ per cent is enough for the workers, according to this government. Where they once told everyone that 12 per cent was adequate they now argue, all of a sudden, that 9½ per cent is adequate—15.4 per cent for them, 9½ per cent for the people who clean their offices. That tells you everything you need to know about this government.
Between now and the next election, we will be reminding every one of their voters what they intend to do with their superannuation. There is absolutely a big con going on here, a huge con. First, they are trying to use the COVID crisis as cover to cut workers' superannuation. But workers aren't buying it. The second big con is this: they are somehow trying to convince people that if their superannuation is cut they will somehow get a pay rise. Workers aren't buying it. They know what happened to the last bloke who cut their superannuation and they know what happened to their wages after that. I am of course talking about former Prime Minister Tony Abbott. He argued that if you cut superannuation then wages would magically grow in response. What have we seen since 2013? Wages have flatlined.
If this Prime Minister gets his way and gets to cut workers' superannuation again, the very same thing will happen. We are not going to see a magical increase in wages. In fact, we know it because we have before this parliament this week legislation which is attempting to enable workers' wages to be cut, their penalty rates to be reduced and their job security to be made even more insecure. You cannot trust a word that this Prime Minister and this government have to say about superannuation, about workers' wages and their personal finances. The Morrison government's plan for economic recovery is quite simply this: cut workers wages and conditions and hope for the best. We're not buying it and the workers of Australia won't buy it either. There is nothing more certain than this government being willing to run a protection racket for those organisations that are exposed by the royal commission.
Let's go through the history that has led us to this point. First, they tried to stop the royal commission. They voted against it 26 times. At least that was an honest approach. Having failed to stop Labor's campaign to get the royal commission happening, they then promised the Australian people, through a veil of mock outrage, that they'd implement the royal commission's recommendations. Predictably, when the news cycle moved on, they invented excuse after excuse to break that promise. Two years ago, Josh Frydenberg promised to protect Australians from greedy banks who were too willing to break the law for a quick buck. Now, instead of making the banks follow the law, he's changing the law so that the banks can keep taking advantage of vulnerable Australians. His excuse is the pandemic. We are not buying it.
Apparently, there's a consumer credit squeeze that's threatening to derail the economic recovery. That's news to everybody else outside of the government party room. Apparently, the responsible lending laws are somehow to blame, the same laws that simply ask banks to do two things: if you're going to offer a loan to somebody, make sure they can afford it; and make sure that it's appropriate. It's not a very high hurdle to get over. In the old days, we would have called it just good business sense: make sure that the loan you're going to offer somebody is affordable and make sure it's appropriate. But, apparently, according to this government and to this Prime Minister and to this Treasurer, that hurdle is too high and is, somehow, choking off the recovery. This excuse runs in the face of the facts.
Auction clearance rates in the housing market in Sydney last weekend were up to 90 per cent. Home lending over the month of December alone was up 10 per cent. In fact, many economists are concerned we're at the very beginning of a housing price bubble. Housing prices are booming. There is absolutely no evidence, no evidence whatsoever, that the current responsible lending laws are choking the economic recovery. The hint is in the name: responsible lending laws. They ensure that if you're lending somebody some money you're doing it responsibly. We're going to back the laws that have been critical to our economic stability for the last 11 years—an observation that was made by the Treasury themselves when they gave a submission to the banking and finance royal commission. Far from putting a restraint on economic activity, they argued that the responsible lending laws were probably stabilising economic growth and ensuring that credit flowed responsibly, a submission that we 100 per cent endorse.
Where is the evidence that asking banks to take a responsible approach to lending is hurting the economy? It simply is not there. All we have, instead, is a desperate Treasurer looking for ways to retreat from his pantomime of sympathy just two years ago. For evidence of this, look no further than the Treasurer's confected concern about the Down syndrome teenager sold life insurance by an unscrupulous commission-hungry bank salesman. Two years ago the Treasurer said, 'This is appalling.' He promised that such things would never happen again on his watch. Late last year the man's father wrote to the Treasurer and begged him not to scrap these laws. We call on the Treasurer, we call on the government—we call on every member of the government—to listen to the words of that father. Do the right thing. Keep the laws in place. Back your very own promise to implement the recommendations of the royal commission.
We are running a very real risk that the whole story of the royal commission gets overturned. A very dangerous story is being peddled by members on the government benches, at the moment. Three years after the royal commission—and let's not forget the 10,000 submissions from victims of financial misdoings and financial crimes—and two years after the royal commission handed the report to the Treasurer, what we heard back then was the government saying: 'We were shocked. We did not know—we could not know—that this behaviour was going on.'
Of course, this could not be further from the truth. If you look at the recommendations that were issued by the royal commissioner, by Ken Hayne himself, and if you look at the history of those recommendations, the overwhelming majority of them had been presented to government before—through recommendations of the Productivity Commission, through recommendations of the Australian Securities and Investments Commission, through recommendations of the Australian Prudential Regulation Authority and through recommendations of committees of this parliament. If you go back and trace each and every one of those recommendations, you'll find that they had been presented to government before. Far from the government being surprised at what the royal commission found, far from the government being taken back and saying, 'Oh my God, these recommendations—there's a lot of work here; we didn't expect any of it,' each and every one of those recommendations had been presented to government before. So there can be no excuse for ignorance and there can be no excuse for inaction.
But the government is peddling this myth: 'That that was then and this is now. COVID has changed everything. The banks have learnt their lessons, and they are now going to behave in a responsible way, as are the insurers and the superannuation companies.' Well, putting that argument at its very highest, let's just assume they're right—that the senior personnel within those banks and insurance companies have learnt the lessons of the royal commission and will correct their behaviour. History teaches us one thing, and of this we can be certain: the senior personnel of those banks will move on and their behaviours will creep back in, by stealth at first and then with great force. It is exactly for this reason that we need strong laws and strong regulators. But what we have seen from the government and government members is that, each and every time they have the opportunity, they seek to undermine the authority and the powers of the regulators. Their argument beforehand was that the regulators, who they put in place and who were under their watch, somehow weren't doing their job at the time. But we've also seen some pretty extraordinary things said by government members more recently. When the regulators actually do their job, we see aggrieved government members arguing that they should stop, that ASIC's going too hard on the poor banks and the poor financial sector; they should stop going so hard on those they regulate.
Mr Falinski interjecting—
This is exactly what they are doing! I've heard the member for Mackellar, who's always got an interjection to make, make exactly the same argument. Then they argue that somehow the regulators should spend less time making regulations and more time going out and chasing corporate criminals. I ask you to interrogate that for a moment. I have stood at this dispatch box over the last three years and I have argued—when bills come before this House with a thin stream of legislation meandering its way through vast meadows of regulatory delegation—that this is not the way the parliament should be doing its job. If something is important enough to legislate and regulate then the force should be in the legislation itself and not delegated to a regulator, such as ASIC, Treasury, APRA or another regulator. The parliament is the place where this regulation should be done. These members over here, including the member for Mackellar, have argued against me and said that this is confected outrage. Yet they themselves are the ones who are saying that ASIC is too busy making regulations, under the powers authorised by the government, to do its job of hunting down corporate crime and corporate misgivings. It's confected outrage! The member for Goldstein should know it. The member for Mackellar and the senator for New South Wales in the other place are equally culpable in this respect. We should resist the narrative that is being peddled by this side that somehow the royal commission is done and dusted, that COVID has changed everything and that we can turn back the clock and let everything go back to the way it was before. We should resist this narrative, and we should start by doing it in this place.
We will, of course, support the measures within this bill. We welcome the enhancements contained in the bill governing the provisions of financial advice to clients under ongoing fee arrangements. We support the new disclosure requirements for financial advisers. They ensure any adviser who is not truly independent must provide written outlines detailing any of the potential conflicts of interest that they may have in advising their clients.
In supporting this amendment, we make the observation that members of the government have fought against these provisions for seven long years or more. Indeed, when we go back to the Ripoll inquiry in 2013 where some of those matters were first exposed and the Future of Financial Advice reforms were brought into this place, members of the Liberal Party and the National Party fought Labor tooth and nail—an egregious restraint on financial advice. The world would come crashing down. They fought against it. In fact, they rolled it back when they had the opportunity to do so. They rolled back many of the key provisions of the Future of Financial Advice reforms. We then had the royal commission. We now have this legislation before the House today. It's through gritted teeth that we know that members of the government will be voting for this provision, which will implement that recommendation of the Hayne commission. About damn time.
It's also about time we had new provisions contained within this bill prohibiting the charging of fees for advice on superannuation accounts without the expressed permission of fund members. The Hayne commission exposed this and gave it a name: fees for no service. There should be outrage. It's a behaviour that members on this side of the House ran a protection racket on year after year after year.
Mr Tim Wilson interjecting—
And when the game was over, they protected their mates, because they knew in one section of the industry this was the only way that they could keep that steady flow of dividends running from unsuspecting member accounts through to shareholders of those for-profit organisations. They protected that, year after year after year, and, once they knew that the jig was up, they then turned on the industry as a whole. Without Labor's pressure, this measure would not be coming before the House. The member for Goldstein knows it, and that's why he makes so much damn noise about the provision. It's confected outrage. He makes so much noise about the position because—
Mr Tim Wilson interjecting—
This guy makes so much noise, because he has been running a protection racket for this part of the industry for decades. Now that it's been exposed he wants to make a lot of noise about it but has been caught out. The rank hypocrisy of this guy is unbelievable.
These measures are going to go some way to address the unethical conduct laid bare by the royal commission hearings. The health of our economy is underpinned by trust and ethical behaviour. As Commissioner Hayne observed, advisers 'cannot stand in more than one canoe'. The duty to serve a client's best interest should come ahead of the heedless pursuit of sales and fees, but all too often it did not.
I want to pause for a moment and give a shout-out to the very many honourable, diligent financial advisers who were ashamed of this behaviour. They knew it was going on. They counselled government to do something about it because not only could they see that it was a crime being committed against those unwitting customers of those financial advisers—the rogues—and there were victims of that rogue behaviour but they could see that it was bringing down the reputation of the profession as a whole. They urged government to do something about it. Government was not willing to move until it was exposed by the Hayne royal commission.