Wednesday, 26 May 2021
Financial Regulator Assessment Authority Bill 2021, Financial Regulator Assessment Authority (Consequential Amendments and Transitional Provisions) Bill 2021; Second Reading
Before the debate on the Financial Regulator Assessment Authority Bill 2021 and the Financial Regulator Assessment Authority (Consequential Amendments and Transitional Provisions) Bill 2021 was adjourned, I was talking about the impact of the royal commission and how that has led to the bills before the House today. I'd also like to take this opportunity, before I continue with my remarks, to formally move the second reading amendment which has been circulated in my name. I move:
That all words after "That" be omitted with a view to substituting the following words:
"whilst not declining to give the bill a second reading, the House notes that the Government has taken too long to address misconduct in the financial sector, particularly in response to the Royal Commission into Misconduct in the Banking, Superannuation, and Financial Services Industry".
When the banking royal commission formally broke through the Prime Minister's web of spin and deception, it revealed that David Murray's warnings about the need for a regulatory oversight body were spot on. It revealed, in the case of ASIC and APRA, corporate cops that were hesitant to enforce the law—regulators who were aiming to achieve compliance through negotiation and persuasion rather than through the strict letter of the law. Litigation was the last resort, not something that was considered as a first resort. A cosy culture prone to capture by the banks, the insurers, the superannuation funds and the regulator community was put ahead of the interests of those whom the laws were intended to protect. This culture enabled much of the misconduct that the banking royal commission revealed: fees for no service, charging dead people fees for products, selling vulnerable people products that they couldn't afford and didn't need, conflicts of interest that were never disclosed and a system of remuneration that encouraged rorts and rip-offs.
As we debate this bill today, we ask members to ask themselves some simple questions: How many Australian families have suffered in the eight years since David Murray made that recommendation—a recommendation that was ignored—to government? How many years have passed since he first rang the alarm bells about the culture and the potential for culture in ASIC and APRA? How many farmers were forced off their land while the government dithered and dallied? How many families have been forced into financial hardship as a result? How many parents struggled to provide for their children while the bank took more and more out of their pay cheques? How many elderly Australians were consigned to poverty, losing their life savings to dodgy schemes that should never have been sold to them? Ten thousand Australians made a submission to the banking royal commission. That's 10,000 Australians whose lives were impacted, but we know the number is much more than that.
The Financial Regulator Assessment Authority that this legislation will establish should have been established eight years ago. It will bring extra scrutiny and accountability to our financial regulators. It will serve as an early warning system for any government with an interest in effective regulation. It will keep the financial cops on the beat honest. These are necessary and valuable steps. However, there remains reason for concern. The royal commission shone a spotlight on the culture that existed within the regulator of client service, of stakeholder management, a culture that had emerged over many years, a culture where the regulator community failed to fear the regulators. This culture thrives when the regulator community believes that it will have a political backstop here in Canberra, and it's quite clear that the banks, the superannuation funds, the insurers, the financial advisors—the bad ones—had every reason to believe that this was true. Scott Morrison himself, as Treasurer, and the Morrison government voted 27 times. They gave the banks, the insurers and the super funds every reason to believe that they had a political protector here in Canberra. They argued against the need and they neglected its oversight. So it is little surprise at all that the regulators, taking a signal from the government, adopted the culture that was exposed by the royal commission.
We have reason to be concerned that a culture that was exposed and saw a reaction from the regulators in the immediate aftermath of the royal commission is falling back to that bad old days that were exposed by the royal commission. Evidence abounds—the government's jawboning of ASIC, for example, with the responsible lending laws and its proposition to remove responsibility for responsible lending laws from ASIC and transfer it to APRA, a completely inappropriate regulator for this particular part of the law.
There was the failure to prosecute, the failure to ensure rectification of all of the reported breaches between 2013 and 2018 and the failure of the oversight committees to do anything about it. I want to point out the Standing Committee on Economics and the House PJC committee as sterling examples of this, and we have every reason to believe that that culture continues. Under the chairmanship of the member for Goldstein, as an example, the Economics Committee has neglected its statutory responsibility and has—
Mr Tim Wilson interjecting—
Thank you, Deputy Speaker. Let me cite a few examples of where the economics committee has neglected its responsibility to this parliament and to the consumers of financial services in this country. For several years now, the banking community, mortgage brokers, have complained to this parliament, to the government and to others that the reasonable intent of the responsible lending laws has been distorted by the regulatory guidance that has been produced by the Australian Securities and Investment Committee. A chair of the economics committee that has a responsibility for oversighting these regulatory authorities might say, 'This is something that we should be inquiring into. We should bring the regulators before the committee and ensure that the regulatory guidance in implementing the legislation is, indeed, what parliament intended.' It has not happened.
An economics committee that was performing its functions might be looking at the caseload that has been brought forward by the royal commission and be keeping the regulators on their toes by ensuring that these matters were being properly prosecuted. It has neglected this responsibility. And, when they do turn their gaze towards the regulated community, they do it in an entirely biased way that singles out one section of the industry, because of their political bias, and neglects another section of the industry. It is quite clear that, instead of fulfilling their responsibilities—responsibilities delegated to committees by acts of parliament—they have abused the responsibilities that these committee have.
It is exactly for this reason that the royal commission has said that we need to put in place another layer of oversight for these regulators. These regulators are actually some of the most overseen bodies in the Australian Commonwealth. They have oversights in place by parliamentary committees. They have oversights in place by Senate committees and by two House committees. They have oversights in place through the Ombudsman's office and through the Audit Office. They are highly regulated and oversighted by committees. But there has been a failure—particularly the failure in this place since 2013, under the stewardship of successive chairs of both committees—in their duty to ensure that the regulators are kept on their toes. That's one of the reasons that there has been a need to bring this bill before the House—to ensure the regulators are doing their job.
We support the legislation. We think it is a step in the right direction. But it serves as a warning to those who have the honour of serving on those important parliamentary oversight committees to ensure that they do the job that the parliament has delegated to them—that they do the job of ensuring that the regulators are properly overseen—and that they don't abuse their role on these committees in going off on frolics and vanity exercises for politically motivated purposes. I commend the bill and the second reading amendment to the House.
The original question was that the bill be now read a second time. To this, the member for Whitlam has moved as an amendment that all words after 'That' be omitted with a view to substituting other words. If it suits the House, I will state the question in the form that the words proposed to be omitted stand part of the question. I also remind the House that it's been agreed that a general debate be allowed covering this bill and the Financial Regulator Assessment Authority (Consequential Amendments and Transitional Provisions) Bill 2021. The question is that the words proposed to be omitted stand part of the question. I call the member for Goldstein.
If ASIC and APRA are the police, who will police the police? The answer is: the Financial Regulator Assessment Authority, which will be added to the list, in addition to the House Economics Committee, which currently oversees ASIC and APRA—and does, I might say, an outstanding job. I say that because it is important to make sure that there is proper pressure on regulators to do their job.
You may not be aware, Deputy Speaker, but the way these committees work is we have regular inquiries into the annual reports of ASIC and APRA, we have references of inquiries—on which we then issue reports—and then there is the opportunity for members of the government and the opposition to ask ASIC, APRA, the ACCC and the Reserve Bank questions. So, while the member for Whitlam argues that we are not carrying out our role, because he wants to score some cheap, pathetic, poor-landing argument, the reality is that we've actually held lots of inquiries and we've actually delivered lots of reports—and, frankly, some of them have been scathing, particularly the committee's report on ASIC late last year. But, of course, he's also condemning the members of the opposition. If he's saying that the committee isn't doing its work, he's saying that the opposition aren't asking the questions, either.
I'll rise in defence of the deputy chair, the member for Fraser and even the member for Dunkley in saying that they do ask APRA and ASIC questions. They do drive forward issues that are important to the committee. They do make sure substantive issues are on the agenda. They may not always be the questions that I would ask, but that's the point of the parliamentary committees. So, member for Whitlam, I will defend the right of opposition members to continue to do their role. He thinks it's some sort of cheap slight at me or the coalition members of the committee. I can assure you that's not the case and, of course, we have the Marxist member for Melbourne on the committee too.
At every point ASIC and APRA have seen oversight. We have given scrutiny to their work and we will continue to do so. But prior to my elevation to chair of the House Economics Committee, APRA and ASIC were scrutinised and criticised by the Hayne royal commission. There was a recommendation for a financial regulator assessment authority to be established. I have to say that I question the merit of this because I think there's outstanding parliamentary oversight, but we're here nonetheless and we took it to the last election. I actually think ASIC and APRA are moving in the right direction. I do believe there was a legitimate reason for criticism of them and whether they were doing their roles. But we've actually seen that, since the House Economics Committee in this term of parliament has been pursuing issues and making recommendations to them, they are taking up those recommendations.
We, through a series of questions during our inquiry, asked questions about things like insider trading within superannuation funds throughout the first-half of last year, particularly in that period around the start of the COVID-19 pandemic when there was no re-evaluation of unlisted assets, but there was in reflections of the price of equities. We discovered that a number of directors and funds had engaged in forms of insider trading, where money was moved between different accounts and funds to manipulate the market, seemingly to the benefit of the few. Of course, we have sent that to ASIC and APRA, and ASIC and APRA, following our hearings, are now investigating it, and I encourage them to do so. But these matters wouldn't be done if the House Economics Committee wasn't on the ball and focused on all of the issues.
The member for Whitlam is expert at one thing. He's expert at running interference for the fund manager mates and funds that he likes and demonising their competition. That's how he operates at every step of the way. I can understand he's very angry with ASIC right now. They have launched investigations into REST, the major superannuation fund, for its conduct, and are pursuing it in the courts. I can understand the member for Whitlam is very angry with ASIC because of a similar pursuit of Statewide Super. It's entirely reasonable, when you have so much of the financial interests of the party you represent and the power it seeks to control in the structures of our superannuation system and particularly in industry super funds. When the regulators turn their attention to the misconduct that they engage in and that you benefit from, it's hardly a surprise that you don't like the regulators. But that's why they have to be independent from government. If you ever saw the Labor Party on this side of the chamber and the regulators weren't independent, we know that the regulators would be used and manipulated, not through the persuasion of argument or evidence but to pursue bloody minded agendas in the interests of the Labor Party at the expense of the community.
The House Economics Committee has found many other things throughout this term of parliament, let alone what we discovered in the last term of parliament, while the Labor Party shouted down and hounded down anybody who said, 'Yes, I'm going to be pushed below the poverty line if there's a retiree tax introduced with the removal of refundable franking credits.' Before the last election, the Labor Party said that it wouldn't have that impact, that people would be exempt and it would only hit those who were well off. Yet we found time and time again that single mothers and retirees and people with disabilities who got additional assistance from their deceased parents relied on refundable franking credits to be able to survive and to have an income. The only response of the Labor opposition at that time was to shout and hound down anybody who dared tell the truth.
Make no mistake, during my chairmanship I made no apology that I was going to give those people a voice come hell or high water, and we did. Funnily enough, there are a lot of people affected that Labor wanted to turn a blind eye to, and, funnily enough, it did have a mild impact on how they voted, because they were going to have a third of their income removed overnight if there were a Labor government elected.
I do understand why the Labor Party has a big problem with that, because their ultimate objective is to empower themselves at the expense of Australians, and, when Australians are empowered, they can stand up to those people who want to rob them of their future. I make no apology for doing that, and all of the criticisms targeted at the committee and myself, as chair, and anybody else: bring it on, because we will stand proud and firm and back the Australian people against vested interests. And it does not matter who they are, what type of super fund they are, what type of bank they are, what type of regulator they are or whether they're members of the Australian Labor Party, because that is who we are. We are on the side of Australians today, tomorrow and as part of securing Australia's recovery.
The Labor Party, of course, would also be angry with the operations and the oversight the Economics Committee has provided of ASIC and APRA, because we exposed other misconduct in the banking sector. It wasn't just up to the Hayne royal commission. Frankly, Commissioner Hayne had a blind spot to a lot of the issues that this House committee has consistently exposed in the superannuation funds in addition to the millions of dollars that they're spending on advertising and needless marketing in a compulsory system, the $400-odd million that it has spent over the past five years that didn't get any criticism or any comment, let alone the money that is laundered by super funds through their own fund, called IFM Investors, paying bonuses of up to $36 million to individual fund managers. If a bank did that, members of the Labor Party on the other side of this chamber would be screaming that this is Australian shareholders and deposits and that that deserves to be condemned and held accountable. But, when it's the industry super funds, it's let rip—take the money out of average Australians bank accounts and funnel it and launder it through to the profit-making of their mates, and it is wrong. We will call it out, we will investigate it and we will never stop until we get to the bottom of it. And, whatever interference the Labor Party wants to run, let them do it, because it only exposes their commitment to stand by themselves at the expense of Australians.
My hope is that this new body, the Financial Regulator Assessment Authority, might start to make sure that ASIC and APRA do the same, because it shouldn't just be up to a very active chair and committee to make sure that ASIC and APRA do their job and follow through and get the evidence and hold financial institutions to account. My hope is that this body will make sure that they are the police that polices the police.
It isn't just those examples which I've outlined earlier. As I outlined earlier, we have our regular hearings with the big four major banks as well as small banks, which are coming up shortly. But we also held hearings into small banks like ME Bank, which used to be owned by industry super funds, and through our consistent focus on their various forms of conduct have identified things like there were serious and systemic breaches of the banking code. We also identified where they were adjusting people's balances and not giving people forward notice in return.
The Labor Party, of course, didn't like those hearings—we just need to make it clear. Why? Because ME Bank was owned by their industry fund mates and, as a consequence, it devalued its sale price and ultimately led to the former CEO Jamie McPhee to have to resign. This is scandalous—the intricate relationship between the Labor Party and these funds—and that's why they don't like the regulators, that's why they don't like oversight bodies, that's why they don't like the economics committee, because at every point we have kept the focus where it should belong, in making sure misconduct is focused on, a bright light is shone in the dark crevices and we ask the questions that they don't want to ask. My hope is that maybe one day they'll start to put the Australian people first in their decision-making. My hope is that one day the Labor Party might understand, about decisions made by financial institutions, whatever their financial relationships and power relationships with them are, how critical it is to get these types of laws and this type of accountability and oversight right—because there are very serious issues that were not covered in the Hayne royal commission. There are many examples of questionable conduct which we have identified and continue to identify that leads to legislative change.
Let's not ignore the fact that we had industry super funds taking money out of low-balance inactive accounts, which they were legally—legally—obliged to give over to the Australian Taxation Office to conserve people's balances, and they were rolling them into a fund that they owned called AUSfund. And, when they rolled that money, those low-balance inactive accounts that often represented the super savings of some of the poorest and lower income Australians were reactivated so the super funds could mine them for fees and insurance premiums that underwrote the balances and bonuses of fund managers. It literally took the economics committee to expose this deception, this manipulation, this misconduct, which has now led to a change in the law. If we want to talk about fees for no service, there is absolutely misconduct by the retail service sector and the banking sector. They got up to this behaviour and should be held to account and are being held to account.
But, funnily enough, when it comes to the industry super sector doing the same thing, the position of the Labor Party is not just to turn a blind eye, though they did—they weren't the ones that asked questions about how low-income Australians were being ripped off by industry super funds; that was up to the coalition members—but to then run interference to try and stop this misconduct being highlighted. They tried to run interference to try and keep people's hands in the tills and in the pockets of low-income Australians to deny them their super savings. It's no surprise that Labor would take this approach. At every point, they have prioritised super interests ahead of Australians and their ambitions to be empowered and financially secure.
We see that not just in these issues of misconduct in the superannuation sector; it's in Labor's very philosophy of prioritising superannuation over homeownership. You saw it in the opposition leader's budget speech the other night. In a choice between empowered owners or indentured renters, he wants a nation of indentured renters, of people who have large superannuation balances while they're working, so his fund manager mates can fiddle with them at the expense of the realisation of empowered Australians of owning their own home.
There can be no mistake about which side I am on: home first, super second. Homeownership is the most important financial decision that Australians can make. The second most important is their retirement savings. To prioritise their second most important in favour of their first is a form of economic social engineering designed only for one benefit, and it ain't Australians. It's designed to prioritise the interests of super funds, at the expense of Australians, and I won't stand idly by. It should be home first, super second.
No contribution from the member for Goldstein is complete without a mention of the 'Wilson first, Australians second' campaign he's been running. Unable to persuade his own parliamentary colleagues, he continues to come in here with fluff and bluster, saying that Australians can't get a government that will actually deal with housing affordability and what they need is to be poorer in retirement. The member for Goldstein wants Australians to rip money out of their retirement savings, to lose the compounding returns and to increase the pressure on the age pension, which of course will be paid by future generations of taxpayers, all because he is part of a government that has overseen the homeownership rate fall to 60-year lows.
The measure before the House is largely uncontroversial. It flows out of a recommendation of the Hayne royal commission. The royal commission report referred to 'shortcomings' of the regulators. Let me quote from a larger slab of the report, taking into account some of the concerns that led to the regulators:
… the answer seems to be greed—the pursuit of short term profit at the expense of basic standards of honesty.
… … …
From the executive suite to the front line, staff were measured and rewarded by reference to profit and sales.
It goes on to say:
When misconduct was revealed, it either went unpunished or the consequences did not meet the seriousness of what had been done. The conduct regulator, ASIC, rarely went to court to seek public denunciation of and punishment for misconduct. The prudential regulator, APRA, never went to court. Much more often than not, when misconduct was revealed, little happened beyond apology from the entity, a drawn out remediation program and protracted negotiation with ASIC of a media release, an infringement notice, or an enforceable undertaking that acknowledged no more than that ASIC had reasonable 'concerns' about the entity's conduct. Infringement notices imposed penalties that were immaterial for the large banks. Enforceable undertakings might require a 'community benefit payment', but the amount was far less than the penalty that ASIC could properly have asked a court to impose.
As a result of that, ASIC is now under a range of oversight mechanisms. These include two parliamentary committees—the House Economics Committee, of which I am the deputy chair; and the Senate Corporations and Financial Services Committee, where Senator Deb O'Neill does vital work in keeping ASIC and APRA to account—ministerial oversight, audits by the Australian National Audit Office, established public governance frameworks and so on.
This bill, the Financial Regulator Assessment Authority Bill 2021, adds a further layer of assessment, which is in the form of a new statutory body consisting of three part-time members and the Secretary to the Treasury. It will provide a biennial assessment to the minister on the effectiveness and capability of ASIC and APRA, which will be subsequently tabled in parliament. It's not a watchdog with any great level of teeth. As the member for Goldstein has so articulately put, we have the House Economics Committee, who are, in his words, 'the police that polices the police that police'. I'm not sure that one will go on a bumper sticker. I don't think it gives much credit to the real police themselves. But it is certainly true that the House Economics Committee was the committee to which Commissioner Shipton announced that he was stepping down temporarily, which ultimately became his resignation, regarding issues surrounding expenses. The House Economics Committee has also overseen the major banks.
Curiously, in our oversight of the major banks, it's been the Liberals that have said that they don't want the major banks to face more scrutiny. The member for Mackellar thinks that scrutiny by this parliament of major banks' CEOs is a 'complete and utter waste of time'. That's what the member for Mackellar, Mr Falinski, says. That's despite the fact that the Hayne royal commission report revealed within the financial sector a culture of greed, activities including terrorist financing and money laundering for drug gangs and a range of misconduct which hurt thousands of Australian families. So that is why the Hayne royal commission was so essential. It's why the Liberals were so wrong to campaign against it for 18 months. But, having campaigned against it for 18 months and voted against it more than 20 times, they're now attempting to water down the House Economics Committee's hearings with major banks' CEOs. They're like goldfish: they've forgotten already the lessons of the Hayne royal commission.
The Treasurer was quick to try and get a photo op with an unsmiling Commissioner Hayne. But, years later, his colleagues are attempting to wind back scrutiny of the major banks. Labor believe that's absolutely the wrong approach. We think there should be appropriate scrutiny of the major banks. We believed that the hearings with major banks shouldn't have been deferred during COVID at a time when the major banks were receiving unprecedented government assistance. It was pretty extraordinary that the government took it upon themselves to defer parliamentary committee scrutiny of major banks' CEOs. But that's the way they think. The way they think is that they will come down like a tonne of bricks on a welfare recipient who might have been overpaid a hundred dollars, but if it's parliamentary scrutiny for a major bank's CEO, they'll describe that as a complete and utter waste of time.
The second reading amendment refers to the government's failure to focus on misconduct in the financial sector. One form of this misconduct is proposals that are being put forward by this government. In late April, Treasury put forward proposals for proxy advisers to have to give their analysis to the firms that they're analysing five days in advance for so-called fact checking. This is despite the fact that the Australian Securities and Investments Commission in 2017 and in 2018 inquired into proxy advice and found no cause for concern and is despite the fact that their providing such advice beforehand is effectively taking the intellectual property of proxy advisers and handing it over to the people that they're attempting to monitor.
It is not as though we have seen undue influence at AGMs. If you're a board-endorsed director of an ASX 300 company, the average vote for your re-election is 96 per cent. There have been in recent years only six candidates for office who failed. Thirty-eight candidates have withdrawn their nominations. To a large extent, shareholders are voting to support the decision of boards. Proxy advisers provide the analysis which can inform investors. As Dean Paatsch of Ownership Matters has put it: 'Proxy advisers identify the problems, but shareholders sort out the solutions.' There hasn't been any identified problem with proxy advisers. No clients of the advisers have complained. Investors haven't claimed to have been misled or deceived. There haven't been systematic errors committed by proxy advisers. There haven't been meeting resolutions that failed because proxy advisers gave misleading advice. There's none of that. The real problem that this government has with proxy advisers is that they allow shareholders to have a better insight into how companies are run. It's no wonder that the Business Council of Australia and the Australian Institute of Company Directors have backed in the government's proposals for a crackdown on proxy advisers.
It's got to be said that perhaps this is some form of payback. The government, after all, has been scrutinised for the fact that it has given so much of the $100 billion JobKeeper scheme to firms with rising earnings. Some one-fifth of listed firms that received JobKeeper had their earnings go up last year rather than down. A program designed to stop firms from hitting the wall and workers from going into unemployment was instead used to fund executive bonuses for millionaire CEOs and dividends for billionaire shareholders. At least 11 Australian billionaires own shares in companies that received JobKeeper and paid out dividends. This is a way in which JobKeeper has become 'BillionaireKeeper'. The work that underpinned this overpayment to firms that didn't need it was done in part by proxy advisers. I acknowledge the work of Ownership Matters. Its important reports outlined first of all the extent to which JobKeeper was going to fund executive bonuses, a practice which was condemned by the head of the Business Council of Australia, condemned by the Australian Taxation Office, condemned by former Liberal Premier of Victoria Jeff Kennett and yet not condemned by the Prime Minister. When we asked the Prime Minister about this he said Labor was playing 'the politics of envy', as though a firm that takes corporate welfare and uses it to pay bonuses to millionaire CEOs is in some way entitled to do that. The very same Prime Minister who designed robodebt to illegally hound welfare recipients over a couple of hundred dollars turns a blind eye when firms get millions of dollars and use it to pay executive bonuses.
If it's true right across the program that a fifth of the money went to firms with rising earnings, we're talking about some $15 billion to $20 billion. How much is that, for Australians listening? That's $1,000 each for every Australian adult. We're talking about $1,000 of your taxes spent through the JobKeeper program to firms that didn't need it—firms like Premier Investments, firms like Harvey Norman, firms that have seen their earnings rise substantially during the pandemic. Within the car industry, we've seen dealers such as A.P. Eagers. We've seen hedge funds such as K2. We've seen the investment bank Moelis. We've seen a range of firms that didn't need corporate welfare putting their hands out and asking for it.
Meanwhile, plenty of businesses that were eligible chose not to claim the cash. I was speaking to an industry association yesterday. They said they did the numbers and worked out they were eligible but they felt that they weren't under any risk of closing, and so they didn't take JobKeeper. They felt that was the morally right thing to do. But another industry body, in a similar industry, got millions of dollars from the taxpayer. I've spoken to small-business owners who were doing it incredibly tough—travel agents in my electorate—who can't understand, for the life of them, why so much money was given to a firm like Premier Investments, paid out to a billionaire like Solomon Lew, at a time when they were having to lay off staff as a result of the pandemic. They say it's just not fair that the government ran JobKeeper in a way that would benefit millionaire CEOs and billionaire shareholders.
Some firms have done the right thing. Toyota, Domino's and Iluka are among the firms that have paid the money back. But too many firms have hung onto the cash. They've used that old shareholder theory of value, which should have hit its use-by date when the first Wall Street movie came out. They think that firms are just there for their shareholders and their executives. They don't realise that a modern firm should be there for its customers, for its workers and for the broader community. Firms that have recognised that have paid back JobKeeper money they don't need. Firms that haven't recognised that have taken cash they didn't need.
The Morrison government has done nothing to provide the public with a sense of transparency. I've asked the Treasurer how much of the money went to firms whose earnings rose. He won't answer. I've asked him how many of the firms that forecast that their earnings were going to fall actually saw their earnings rise. He won't answer that question. I've asked him how much of the money went to firms that paid out executive bonuses. He won't answer that question. I've asked the Treasurer how much of the JobKeeper cash went to firms that paid out huge dividends. He won't answer that question. That stands in stark contrast with New Zealand, where there is full transparency over their program. You can plug the name of a firm into the New Zealand website and find out who received their program. That's the thing about the Morrison government: they are as soft on the strong as they are hard on the vulnerable.
I rise to support the Financial Regulator Assessment Authority Bill 2021 and the Financial Regulator Assessment Authority (Consequential Amendments and Transitional Provisions) Bill 2021, which act in response to the Hayne Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry. Throughout the royal commission, we heard the complex and galling stories of failures of the Australian banking system. They were difficult stories for the public to hear, stories of ineptitude and corruption, stories of greed and failing to put the needs of customers above those of vested interests, stories of short-term profit put before the needs of customers. Commissioner Hayne highlighted widespread failures of governance and compliance in banks and other financial institutions that led to failures to detect and address misconduct internally, as well as failures to report misconduct to the regulators in a timely manner and, in some cases, failing to report it at all. That is not to say all the eggs in the financial markets are bad ones. Indeed, our banking and financial sector is one that we should celebrate for the most part as a stable, respected and trusted sector, which has helped us in our darkest hours, including through COVID-19 last year and into this year.
The Morrison government has listened to the concerns regarding these failures in the system, and these failures are not contested by either side of this House. These failures have resulted in terrible and heartbreaking stories that should never have happened, and the Morrison Government is acting. Indeed, we take our responsibilities in financial regulation with the utmost seriousness. The Morrison government has committed to accepting the findings of the royal commission and agreed to act on all 76 recommendations. The bill today acts in part to address those recommendations.
The royal commission considered that existing accountability mechanisms were not focused on how well the regulators performed against their statutory mandates. It also considered that some of the accountability mechanisms lacked strategic focus on regulator performance over time. That is why this bill facilitates the disclosure of sensitive, confidential and protected information from the Australian Prudential Regulation Authority and the Australian Securities and Investments Commission to the Financial Regulator Assessment Authority.
The Morrison government's response to the royal commission, including through measures in this bill being debated today, builds on an earlier report in 2016 on ASIC, commissioned by then Minister for Revenue and Financial Services, the Honourable Kelly O'Dwyer—my predecessor as the member for Higgins. The task force chaired by Treasury observed five key themes in its assessment of ASIC. These themes cut across the main elements of the capability framework, governance and leadership, strategy and delivery, and drew together many of the observations highlighted throughout the report. As such, there were five main themes from the report on ASIC that were grouped as follows: first, that sound governance architecture was not well-used; second, it found the expectations gap was much greater than expected; third, it also found there was an opportunity to reorient for greater external focus; fourth, a cultural shift was needed to become less reactive and more strategic and confident; and finally, future-proofing and forward-looking approaches were needed to improve ASIC's capabilities. The bill today will help address these flaws in ASIC's capability to function effectively.
For Australians to have trust in banks, superannuation funds and the finance industry, the regulatory framework that governs the sector must be enforced by effective regulations. Indeed, recommendation 6.14 of the royal commission called for the establishment of a specialised expert authority to assess the effectiveness and capability of the regulators. It recommended that a new oversight authority for APRA and ASIC, independent of government, should be established by legislation to assess the effectiveness of each regulator in discharging its functions and meeting its statutory objects. The royal commission report recommended the authority should be comprised of three part-time members and staffed by a permanent secretariat. It should be required to report to the minister in respect of each regulator at least biannually.
It is worth noting APRA and ASIC are independent regulators responsible to the parliament. This independence is critical to their ability to fulfil their mandates and for them to have the confidence of the consumers who rely on them. Regulator independence is also important for maintaining the confidence of the market, including in the credibility of the regulators. That is why the Morrison government is today taking decisive action following the royal commission to enhance the power, funding and competency of regulatory authorities. Accepting the royal commission's recommendation, the Morrison government is responding through the introduction of this very legislation. This is congruent with the government's commitment to end misconduct within the finance sector. Indeed, we are acting on all of the other 75 recommendations contained within the royal commission's final report.
The Financial Sector Advisory Council will be disbanded given the establishment of this new body, and consideration will be given to streamlining other accountability mechanisms. As recommended in the royal commission report, the Financial Regulator Assessment Authority will comprise a panel of three independent and expert part-time members and an ex-officio member from the Department of Treasury. Further, this will be supported by a secretariat within the Treasury to ensure this newly created body fulfils its roles.
So that ASIC and APRA have operational independence and are not unreasonably impacted, the Financial Regulator Assessment Authority will not have the ability to direct, make, assess or comment on specific cases of the regulators' enforcement actions, regulatory decisions, complaints and like matters. The Financial Regulator Assessment Authority will be required to conduct biennial reviews to assess the effectiveness and capability of ASIC and APRA over time. The minister is also able to request ad hoc reports from the authority on any matter relating to the effectiveness and capability of ASIC and APRA. The introduction of the authority will help increase regulator accountability and oversight. Additionally, by having the authority review ASIC and APRA consistently over time, the authority will be able to provide strategic insights to help improve overall performance. Further improving our already strong and independent regulator will further improve market confidence, which is important as we secure our future in a post-COVID global economy.
As we continue to make inroads into enhancing transparency and accountability within the financial system, we are continuing to improve consumer outcomes and helping to restore trust. The importance of these objectives is heightened to ensure our economic security continues as we recover from COVID. I look forward to the government's appointment of the authority's panel members to further strengthen the regulatory regime. Australia needs its banking and financial sector, just as the reverse is true. But, equally, trust and respect between the Australian public and those who support the economy through banking and financial services are needed now more than ever.
This bill, the Financial Regulator Assessment Authority Bill 2021, implements recommendations 6.13 and 6.14 of the financial services royal commission. The first of those recommendations is that the Australian Prudential Regulation Authority and the Australian Securities and Investments Commission should be subject to quadrennial capability reviews, and the second recommendation, 6.14, is that a new authority should be established to assess the effectiveness and capability of the financial sector regulators. This bill implements those recommendations, but in a minimalist way.
A new statutory body will be established, consisting of three appointed part-time members as well as the secretary of Treasury as an ex-officio member. The authority will be responsible for providing a biennial assessment to the minister on the effectiveness and capability of ASIC and APRA, and these reports will be tabled in parliament. The new authority will have no grounds or authority to make directions in relation to the regulators or to advise on specific individual cases of the regulators' enforcement actions.
ASIC and APRA are already subject to a number of levels of oversight—through parliamentary committees, ministerial oversight, audits by the Australian National Audit Office, established public governance frameworks and the International Monetary Fund's Financial Sector Assessment Program. While this bill does implement 6.13 and 6.14 of the royal commission's recommendations, it's time that the Morrison government got on with some of the other important recommendations of the royal commission, particularly the ones that they seem to be ignoring, most notably recommendation No. 1, which relates to ensuring that responsible lending standards for Australian consumers are kept in place.
The government is going to ignore the No. 1 recommendation of the royal commission, which was to keep those protections in place to ensure that consumers couldn't be ripped off and taken for granted by the banks. Particularly in the lead-up to the global financial crisis, there was a lot of irresponsible lending going on, with banks lending for assets that were assessed to be of questionable value over time. When the wall came crashing down, it was Australian consumers and workers that suffered. It wasn't the banks themselves. They went on to continue to operate profitably. It was Australian workers that lost their homes. It was Australian consumers that were put out by the collapse of the financial system. And many of these recommendations in the royal commission were specifically to address that and to ensure that that cannot occur again in Australia. But it appears that this government is willing to ignore the No. 1 recommendation of that particular commission in relation to responsible lending laws.
It's also rather ironic that the government is once again taking an interest in ASIC and APRA in the wake of what occurred, particularly in the early days of this government, when the Abbott government cut funding to ASIC and that resulted in ASIC losing a number of people that had particular expertise in assessment of financial crime and prosecution of financial fraud and misconduct. Because of those cuts to the ASIC budget that occurred under the Abbott government, the regulator lost a lot of its expertise. That resulted in the claims that were being made by Australian consumers and whistleblowers that ASIC wasn't up to its job and wasn't doing its job properly. We saw that with the financial scandals that then began to be uncovered in this industry, most notably the first one that gained notoriety and attention, and that was the scandal that occurred in the CBA, the Commonwealth Bank of Australia, in relation to their wealth management practices.
We had whistleblowers who were willing to risk their livelihoods, to risk their reputations, and blow the whistle on some very dodgy and, in some cases, very inappropriate practices and breaches of Australian financial laws that were going on at that time in the Commonwealth Bank. They were reported to ASIC on numerous occasions, yet ASIC did nothing about these reports. There were emails that were sent and there were phone calls that were made by people with extensive experience in the financial services industry blowing the whistle on some very dodgy practices indeed by financial planners at the Commonwealth Bank. These were reported to ASIC, yet ASIC did nothing. It took these whistleblowers having to go into the ASIC office, physically walking into the office to demand that they take their allegations seriously and have a look at them. It was only after those brave people took that action—most notably Mr Morris who was working at the Commonwealth Bank at the time—that ASIC finally investigated these issues. When they did, what they uncovered was truly shocking and completely exposed not only that bank but also most of the other big four banks in respect of their wealth management practices, and that opened the door.
Then we had the parliamentary inquiries that ensued. Again, the government had to be forced into them by Labor senators like Doug Cameron, who forced the government to investigate these issues through parliamentary inquiries. He was joined, I might add, by former Senator Williams, a Nationals senator, who was also quite brave in forcing the government that he was a member of to take this issue seriously. When we had those parliamentary inquiries, more people started to come forward and tell their stories. It became evident that this wasn't an issue that affected only tens of Australians, but it was an issue that affected hundreds of thousands of Australians. Then we had scandals in Comminsure. We had scandals in wealth management and the collapse of managed investment schemes. In every single one of them there was a consistent characteristic, and that is that it was working Australians that lost their lifesavings, lost their homes, had family members lose jobs, had mental health problems, had family members commit suicide. Yet not one of the executives of those organisations was ever prosecuted and went to jail. Can you believe it? Not one of them.
It was the same thing in the global financial crisis. Everything that happened in the United States and that spread throughout the world and collapsed the international economy—literally hundreds of millions of workers put out of work—all came out of Wall Street. Do you think any of those executives ever went to jail? One of them did! It's an absolute disgrace.
That was why Labor pushed so hard for the royal commission. That is why that royal commission was so important, because it uncovered what was going on across the industry in Australia and those shocking practices, not only in banking but in wealth management, in insurance, in managed investment schemes, in mortgage broking, in all of the financial services that Australians rely on a daily basis and, more importantly, that they establish a trust relationship with. They were found to be manipulated in all of those.
It took the royal commission to uncover on a wide-scale view what was going on, and that, unfortunately, came down to the fact that at the time ASIC was ill-equipped to deal with these investigations. ASIC had had its funding cut by the Abbott government. It had lost people that had that expertise that could have done that work, and, if they had have done it a lot earlier, a hell of a lot more Australians may have been able to keep their life savings and keep their homes and wouldn't have been put in the precarious financial situations that they eventually were put in because of the government's delayed reaction and inability to act on something that they knew for a very long time was a big issue in this country.
Let's not forget that Labor kept forcing the issue here in the nation's parliament, the place where we make decisions like that, by requesting the government hold a royal commission on 26 occasions, and on each occasion they voted against that recommendation. It wasn't until, unfortunately, the executives of the big four banks agreed and wrote to the Prime Minister at the time and said: 'Okay, we're copping it in public. The public relations exercise that we're going through at the moment is damaging our reputation. We'll agree to a royal commission. We want it done quickly so we can get it out of the way and get on with making money again.' That was the approach that the government took—it took the banks agreeing to it before they acted—and, yet, they try and claim in this place that they're on the side of workers, they try and claim in this place that they act for consumers. We should never forget they voted against that royal commission 26 times and it took them a hell of a long time to take these issues seriously, but only because they were coming from working people and they didn't like the fact that working people were saying bad things about people that were running our banking sector and, of course, the fact that they were willing to vote against this 26 times as they'd cut funding from APRA and they'd cut funding for ASIC—the bodies that were put in place and specifically have the role assigned by this parliament to look into financial fraud and misconduct in this country—so they didn't have the resources. It took those brave whistleblowers to force ASIC to take this issue seriously and blow the whistle, and that led to the opening up of what was going on and the financial services royal commission.
I'm quite proud of the role that Labor played in forcing the government's hand on this, because, once again, Labor was on the right side of history with this issue in backing those working people who'd lost their life savings and were asking for support from the government to look into what was going on. All of those people deserve the credit of this parliament and the Australian people for forcing this government's hands, and Labor was very proud to support them through the royal commission.
This bill is important. It does implement recommendations 6.13 and 6.14 of the royal commission. But, I say to those opposite: if you're fair dinkum about the royal commission recommendations, if you're fair dinkum about ensuring that this can't happen again in Australia, then don't water down our responsible lending laws, because if you do, again, you're going down that path of opening up the gate to financial misconduct and fraud. It may not happen immediately, but it's the thin end of the wedge. Over a period of time, when you relax laws like that—we saw what happened in the United States with the global financial crisis and the changes that were made by the Bush administration in relaxing responsible lending laws over there and allowing free rein in their markets. That was the beginning of the global financial crisis. I fear if we do the same here again it will be the beginning of another series of financial scandals in Australia that will develop, and the Australian people deserve better from their government when it comes to that.
It's always a pleasure to follow the member for Kingsford Smith. The member for Kingsford Smith and I have served time on the Parliamentary Joint Committee on Corporations and Financial Services. We have spent many a long meeting discussing these issues and many more. There is much of what he had to say that I can agree with, but there is plenty that I would disagree with.
In essence, Financial Regulator Assessment Authority Bill 2021 reflects the necessity to ensure that our regulatory bodies have proper oversight. That's not to take away from the oversight role of the Parliamentary Join Committee on Corporations and Financial Services—and I know that Deputy Speaker Wallace is the chair of that committee. There is the work that we do in that space, along with other oversight bodies in this parliament and externally. But I have had the view for some time that better oversight of those regulators is required, because I've felt that they've moved into an area where, rather than focusing on enforcing the regulations and the laws that are already in place and ensuring they do that job properly, they have strayed into other areas, in terms of maybe seeking to set policy through regulatory guidance notes and other things. I'm pleased to see that we're seeking to put in place a level of oversight that hopefully, in time, sooner rather than later, will minimise that. Even in the last few committee hearings that we've had, there's been a much greater focus on what ASIC in particular—in our case—is doing to ensure that they're regulating and applying the regulation properly, and oversighting it properly, rather than getting involved in other areas.
This bill is just another one in a range of measures in relation to the Hayne royal commission that the government is putting in place. The government is committed to taking action on all 76 of those recommendations contained in that final report from the banking royal commission. Of the 76 recommendations for reform, 54 were directed to the government, 12 to the regulators and 10 to industry.
I come from a background in the banking and financial services industry, as many in this place well know. I do not for one minute condone in any way many of the activities and practices that were revealed in the royal commission. I actually think it's very sad. The vast majority of people in those industries are professionals at what they do, but a small minority of people were not, and a number of very large institutions should have known better, given their histories in this country—in particular, the Commonwealth Bank. It was formally set up in approximately 1912, I think, as the people's bank. AMP was set up as mutual society back in the 1800s and has a long history in this country. To see the Commonwealth Bank, our other big banks and AMP lose their way and lose focus on their history and what they were ultimately set up to do was a very sad day for this country. And I hope, through the outcomes of the royal commission, that our big financial institutions actually rediscover what their actual purpose is, and that is to provide a vital service for the Australian people. It is through serving the Australian people that they will be sustainable, long-term businesses. Yes, they're going to make a profit, but there is nothing wrong with businesses making a profit; they just need to do it ethically and responsibly.
Equally, where there are times when malfeasance occurs or practices that are not in accordance with the law occur and whistleblowers do take that step to blow the whistle on those activities and report them to our regulators, such as ASIC and APRA, it's critically important that our regulators do take action on those reports and that we don't have to resort again at some point in the future to another royal commission to deal with those issues, because the regulators haven't dealt with them. I think that's critically important. That's why I support this bill—because I think that having an additional lever of oversight outside of the existing parliamentary processes is critically important to ensure that our regulators operate in the best manner possible and are fit for purpose for the 21st century.
We all know that the financial services world, with the range of products, is getting more and more complex each and every day, and we need to make sure that our regulators are across that complexity and that they can provide advice back to government to amend the law as necessary to deal with that increasing complexity—not only the increasing complexity but also the variety of new products and new ways of people getting access to finance. We see many non-bank lenders now and we are seeing growth in the use of buy-now pay-later arrangements. We need to ensure that our regulators have the capacity and the focus to ensure this increasing myriad of options and systems across our financial services sector are properly regulated and are properly kept an eye on. Having something like the Financial Regulator Assessment Authority to oversight them to ensure that they're doing that properly and efficiently is, I think, going to be of great benefit to everybody in our community and across the nation. It will ensure that there is a level of confidence, both for ordinary consumers but also for our businesses, who generally have a much larger exposure to our banks through their finance facilities.
As part of this, it's also important to note that, from a government perspective, through a range of initiatives over the past 12 months to 18 months in attempting to support our business community through COVID-19, the government now actually has, the government and the Australian people have significant exposure, particularly on the lending side, to the activities of the banks and their lending standards. So for ASIC and APRA to be doing their jobs properly, and for that to be oversighted by the new body, is critically important.
I commend the work that the government is continuing to do to enact the recommendations of the Hayne royal commission to ensure that our financial system retains the stability, the transparency and, importantly, the confidence of the Australian community and consumers in being able to access funds when they require them, knowing that the advice that they're going to receive from professional advisers across the industry is there and available in a cost-effective manner for when they require it and, equally, that our regulators are doing the job that they're tasked with doing to ensure the regulations are being upheld and enforced for their benefit. I commend this bill in its unamended form to the House.
Labor will support this bill, the Financial Regulator Assessment Authority Bill 2021, and I'll support this bill because the royal commission recommended it—that's what it boils down to. It puts in place quadrennial capability reviews and a new authority to assess the effectiveness and the capability of financial sector regulators. It does it in a minimalist way, though, it's fair to observe It's almost, you might say, like the government doesn't actually want to do it, but the royal commission said they should so they're kind of going along with it. There are three part-time members and the Secretary of the Treasury ex officio. I mean, the Secretary of the Treasury is probably a little bit busy to take this very seriously and put time into it, but, nevertheless, there it is.
The fact that the royal commission found it necessary to put in place these recommendations for a new authority to oversight financial regulators is a sad indictment of the government's failure to manage effectively the oversight of financial services and the economic regulators. To say they've had a laissez-faire approach to this in their eight years in government would be an understatement.
The financial regulators are already some of the most heavily oversighted parts of the public sector. They're oversighted by multiple ministers—cabinet, junior, outer ministry and assistant ministers—and multiple departments and agencies. The Australian National Audit Office pays regular and ongoing attention to their performance. Public governance frameworks and legislation apply across the board. The International Monetary Fund's Financial Sector Assessment Program also does a bit of this work. And there are multiple parliamentary committees. There's no shortage of oversight, already.
What is lacking is the political will of the government—of ministers and the backbenchers who comprise these committees—to actually do the job and take it seriously. This stuff requires focus and serious work. I acknowledge, Deputy Speaker Wallace, you've recently been appointed Chair of the Parliamentary Joint Committee on Corporations and Financial Services. I was recently appointed as a member. The first two meetings have gone well. I'll give you a tick for that. People have participated. We've actually initiated a couple of inquiries, which, if they proceed, will double the amount of work the committee's done in this term of parliament. But this stuff really matters. It's not esoteric. It might be pretty dry. There's a lot of paper. But it really matters to the real economy, to oversight the capital markets and the whole financial services system and banking sector.
I want to call out the failure of the government and the parliament's committees with government majorities to actually do their job. The House Standing Committee on Economics, as we heard the member for Goldstein rabbit on about earlier, and the Joint Committee on Corporations and Financial Services are powerful committees. They're always described as such in the media. In fact, the Joint Committee on Corporations and Financial Services has one of those rare own-motion inquiry powers—it can actually go and initiate inquiries into anything without a reference from a minister or a house of parliament. That's a serious power and a serious responsibility. It's got formal responsibility to inquire into the activities of ASIC and the Takeovers Panel. It also has purview over the ASX, the ACCC, APRA and AUSTRAC. The committee is required to examine the annual reports of the Financial Reporting Council, the Australian Accounting Standards Board, Australian Auditing and Assurance Standards Board and the Companies Auditors Disciplinary Board, amongst others.
Under Labor, these committees did serious and important work. I'll give you an example. Under the former Labor chair of the joint committee, Bernie Ripoll, 10 years ago, they launched a serious inquiry into the collapse of Trio Capital that assessed the failure of the regulators in a very methodical way—a brutal way, some might say. They handed down a serious report into the regulatory system and the serious reforms that were needed to overhaul it, which were then implemented. Bernie Ripoll was also responsible for the Future of Financial Advice reforms—landmark reforms, as they were described and still are. Under this mob, though—little serious work. So far, in this term of parliament, the joint committee has handed down two reports—two reports in two years. In the last term, they handed down five in three years. In the term before, they handed down four in three years. Yet, in the last term of the Labor government, from 2010 to 2013, there were 21 reports in three years. This committee did serious work. It was taken seriously by Labor members. They did important landmark work which has stood the test of time. This mob, under the Liberals, have been failing to do their job on these committees, going off on ideological frolics and personal political vendettas.
One of the two reports that the committee's done this term was into litigation funding, an ideological pursuit by a bunch of extreme right-wing backbenchers—senators and members—trying to get their names in the paper. It was a politically motivated inquiry that was trying to make it harder for ordinary Australians to access justice in the courts. Their objective was to shut down public interest litigation and have a few little wrecks on the way through to weaken corporate regulation—weaken disclosure requirements. What did the stakeholders make of their work? They said it was a great day for the corporate cowboys to weaken disclosure of corporations. The committee's work got bagged by everyone, and that was only one of the two inquiries. It's no wonder, with that kind of work, that the royal commission said, 'We need some more oversight in this area.'
But then the member for Goldstein in the Economics Committee stood accused last term of misusing the committee, shamelessly, for political purposes and party political objectives. He was accused 'of improperly using a taxpayer funded inquiry into Labor policy'. He racked up more than $200,000 in travel bills, hotel bills, car bills and room hire bills to have a series of public hearings—better described as public circuses—around the country. They didn't actually have formal witnesses, like every other parliamentary committee I've been on; they were just free-for-alls, like an angry mob they whipped up, telling untruths about Labor policy. Worse than that, though, they colluded with private interests. His own relative Geoff Wilson founded a company that's managing $3 billion of funds, including two that the member for Goldstein had a personal interest in, which he didn't declare at the committee hearings. He was—
I'm being very careful. I've researched this, and I had a look at exactly what was reported—what was referred to the privileges committee and the Speaker's report. This is all factual. It's a fair caution, and it's all factual.
He stood accused of coordinating the committee's hearings, not doing serious work on the regulators but running a public circus around the country, having a crack at the Labor Party. He was not doing his job of examining government policy or looking where regulation could be improved; he was running a public circus on the taxpayer bill around the country, coordinating the committee's public hearings with a private company's meetings. He set up a dodgy website; this was all referred on. Initially, it was a personal website on his Liberal Party website, with the Commonwealth logo on top. If you wanted to register to come to the hearings, first you had to sign a petition and give your details, which were then mined and used for a Liberal Party database, because people got spammed. You had to sign the petition to be allowed to come to the hearing. Then there were the fundraisers that were held around the committee activities.
Deputy Speaker Wallace, I'll keep my words brief, because I know that you can't respond from the chair. It was the Deputy Speaker here who was handing out membership forms for the Liberal Party at the public hearings. This was referred to the Speaker. His report noted that the actions failed 'to conform with the conventions usually adopted by the Chair of the House Economics Committee' and specifically called the handing out of Liberal Party material as 'inappropriate'.
The member for Goldstein, of course, has a great advantage over most of us in this place; he really does. It's not his intellect or his judgement, his intelligence or his charm; he has no shame, because he's at it again this term with this nutty personal idea to use superannuation for housing. As everyone has said—serious economic commentators and even former Treasurer Joe Hockey—that's just like pouring petrol on the fire of current house prices. Putting more cash in people's pockets as they go to bid at an auction pushes up prices. It's all demand side. You don't make housing more affordable by making it more expensive. You may as well put a vacuum cleaner into your super account to suck the money into the pocket of the guy selling the house, because the only people who benefit from this policy—being driven by the Chair of the House Economics Committee running a political proposal instead of doing serious work oversighting the regulators—are people who already own houses. Let's be clear on that.
The member for Goldstein owns five properties. He's declared them on his register with his husband. It's not the people trying to get in the housing market who'd benefit as house prices go up. To his credit, the Treasurer said no. The member for Goldstein has been pushing this big idea, using the committee's time on this. He wrote to the Treasurer and said, 'I want to do an inquiry into this—have another circus to beat up Labor.' The Treasurer said, 'Yeah, but no. We won't be doing that.' He's not deterred, though. He was out this morning still pushing the idea and bagging his own government. Perhaps that's clever. It looks like he believes in something. Pushing demand-side measures through the House economics committee, not oversighting the regulators—hence the need for this bill and the royal commission's finding—is incredible hypocrisy whilst he's out actively opposing investments in housing by superannuation funds.
I make the point that we do support this bill. The royal commission found it necessary to recommend it. The government is doing it in a minimalist way. It's not really committed to it. But we have to call out the failure of government members, backbenchers, to take seriously the parliamentary committee processes. There has been a revolving door of chairs of the joint committee, and I do hope that through your chairmanship, Deputy Speaker Wallace, which has started out well from early signs—I'll reserve judgement—we see an acceleration in work and a degree of seriousness which has been lacking for eight years under this government. There have been two reports this term, four reports last term, five in the term before that and 21 under Labor, who took this issue seriously. We wouldn't need legislation like this, we wouldn't need more bureaucracy and more regulators and the royal commission wouldn't have been found necessary if government MPs had been doing their job and not running party political services misusing committees of the parliament, wasting taxpayer money.
I rise to speak on the Financial Regulator Assessment Authority Bill 2021. Can I say, having sat through the speech of the previous speaker, the member for Bruce, it makes me tired of this place. Personal attacks on other members: why can't we be debating ideas in this place rather than constantly sniping? It really does put this place to shame. What I want to do in my contribution is actually talk about some ideas.
This idea, which is going to be legislation now, of establishing a regulator for ASIC and APRA is very important. As we know, it was a recommendation of the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry, a royal commission that many of us in this place had the idea for and pushed for in different ways. It eventually took the then Prime Minister, Malcolm Turnbull, kicking and screaming to the decision where he called that royal commission. Now there is hardly anyone who would say that that royal commission was a bad thing, or that the idea of doing it was a bad thing. It proved to be a good thing in coming up with recommendations that would clean up some of the unethical acts that we've seen in the banking sector and in looking at our regulators APRA and ASIC and what they were doing, or what they were not doing, to police banks and insurers.
I hope that this regulator is going to be on the ball in looking at what ASIC and APRA are doing and what they're still not doing. One of the things that have concerned me about ASIC and APRA is their drift into wokeness, their drift into politics, their drift into ideology, their drift into the extreme environmental movement. We now have ASIC and APRA, both, coordinating what essentially is not some government policy but some sort of quasi policy of theirs that they're pushing on banks, on companies and on insurers. What I talk about was reported earlier this in the Australian, on 18 January:
Corporate watchdog puts climate change warnings into action
An internal briefing document to the corporate regulator has shown the regulator putting its climate change warnings into action, revealing deep-dive surveillance of five of the nation’s biggest listed companies.
The document, prepared for internal eyes in August last year, came only two months after ASIC temporarily suspended its investigations in June on the back of the COVID-19 pandemic.
These deep-dive surveillances of five companies in the energy, real estate, materials, consumer staples and industrials sectors have seen corporate regulators examine climate-related disclosures in public documents released by the companies. These include annual reports from those five companies, and any sustainability, environmental or climate change reports or policies.
So what we have is ASIC doing deep dives on major companies in this country, not for some underhanded operations that they've been involved in, not for swindling mum-and-dad investors, not for maybe hostile takeovers or some manipulation of the share market or anything like that, not looking into big banks and their lending practices still, but the focus seems to be on climate change and climate change risk. Okay, we all have to be aware of risks, but what are the actions that ASIC wants to put in place here? It almost seems to me that what they're saying to company directors is, 'Get ready for a change of government policy,' which would only happen if the other side got into power and we have things like a carbon tax or, as they like to call it, 'the fixed price on carbon' or an emissions trading scheme. That's not policy at the moment and it will never be policy while we are in power, I would hope. But if the other side gets into power, yes, there could be a risk to business. But what business is that of a regulator, to be determining what might happen in the future based on politics? It is no business of ASIC. It is also no business of APRA, which is doing exactly the same thing.
I have had people in the insurance sector come to me saying, 'Look, yes, we are driving a bit of a green agenda; yes, we are walking away from some businesses based on the fact that they've got something to do with thermal coal.' But you know what's partly driving it? I'll tell you the three things they said was driving it. The first is activist shareholders; the second is major institutional investors, who are basically activist shareholders themselves; and the third is the regulators going outside of their remit and pushing this woke green ideology on to company directors and saying, 'You've got to do this.' Now, that is beyond the pale; it's not government policy to do it.
What the hell is going on in APRA? What the hell is going on in ASIC? These people need to get back to their core business. Their core business is policemen finding out whether there's white-collar crime going on, whether banks are doing the wrong thing, whether companies are doing the wrong thing, whether they're swindling customers, whether they're swindling investors, whether insurance companies are doing the wrong thing. I have to tell you, there's a plethora of examples still; there was a whole heap of them that weren't touched that the banking royal commission exposed. These people were twiddling their thumbs or had other digits up other places, not doing their core job; instead, focusing on this wokeness—ridiculous stuff. And to think that they're getting paid by the taxpayer to sit around and talk about, 'Oh, what climate change risks might emerge in the future?' and 'We should impose this on company directors,' when it's not government policy. It's not government policy at all. So I say to all those pinheads in APRA, to all those pinheads in ASIC: get back to your core job. I really do hope that the Financial Regulator Assessment Authority that's going to be established is going to have the courage to actually say that to these people in ASIC and APRA. They need to get back to their core business. They need to get back to being policemen for the business sector, for banks, for insurers, for the financial services sector, not being some ideological driver of environmental wokeness.
As earlier speakers on this side of the chamber have indicated, we will support the Financial Regulator Assessment Authority Bill 2021. But I think it's important to indicate the context in which we will support the bill. This is—I think everybody would agree—a minimalist response to a couple of recommendations arising from the Hayne royal commission. But we shouldn't forget that this is a drip-feed approach that we're getting from the government in response to that royal commission, a royal commission that they never wanted—which is reflected in the way that they're responding to it. Some years down the track, we've seen barely more than a third of the recommendations of that royal commission acted upon. We see dribs and drabs come into this chamber, when in fact, as earlier speakers on this side have indicated, some of the systemic issues that were highlighted by that royal commission remain unattended to. This is a sector that is absolutely critical to not just Australia's economic wellbeing but the wellbeing of so many vulnerable people. So we need to see much more urgency from those opposite when it comes to dealing with some of the substantive issues relating to that royal commission.
As earlier speakers on this side indicated, when we look at the specific issue being addressed here, the regulatory culture in relation to ASIC and APRA, the government had problems in that culture raised many years before the royal commission, by the Financial System Inquiry, and they sat on their hands for year after year. Then, when it was clear that there were issues in relation to regulatory culture but also in relation to abuses of many vulnerable people, it took many years to drag this government finally to implement a royal commission. The government voted over 25 times against a royal commission being held. They never wanted the royal commission. As I indicated earlier, we are seeing that reflected in the fact that, having had the royal commission recommendations handed to it, this government now is dragging its feet in responding to the royal commission recommendations.
The royal commission, when it was finally called—despite the government's hesitation and despite the government having voted against it over 25 times—received thousands and thousands of submissions from people who had been abused in so many ways by major actors in the financial services sector. We saw people who were receiving fees for no service. We saw conflicts of interest. We saw charges to dead people. As speakers in this debate have indicated, we saw many instances of inappropriate behaviour.
What we're seeing in this bill is that, having had all of that brought to light, there is too little urgency in fixing the system. This bill relates to recommendations 6.13 and 6.14. We're happy to support a mechanism that responds to those. Those recommendations related to the fact that APRA and ASIC should be subject to quadrennial capability reviews and that a new authority should be established to assess the effectiveness and capability of financial sector regulators. What we're seeing here is the establishment of the Financial Regulator Assessment Authority. It is a minimalist model that will create a statutory body consisting of three appointed part-time members and the Secretary of Treasury, as an ex officio member. It will be responsible for providing a biennial assessment to the minister on the effectiveness and capability of ASIC and APRA, and it will be supported by a secretariat of Treasury staff. Even though we might not have implemented it in precisely the way that it is being implemented, we do support an implementation rather than nothing. But I do want to stress, in providing context to these remarks, that this is yet another bill in this area which is belated and yet another bill which is too narrow in scope.
In supporting the establishment of the Financial Regulator Assessment Authority, it is also important to acknowledge that there are a number of existing oversight mechanisms, as earlier speakers have indicated. There are two prominent committees in the Australian parliament. There is ministerial oversight. There is oversight by the Australian National Audit Office. There are public governance frameworks. And there is oversight by the IMF Financial Sector Assessment Program. So it is going to be critical that the work of this new authority dovetails with and complements the work of existing oversight mechanisms.
This debate has prompted an assessment by a number of contributors to this debate as to the effectiveness of some of the parliamentary oversight of ASIC and APRA. I want to make a few observations on that as a member of the House Economics Committee. The chair of that committee spoke earlier, and it was a fascinating insight into his assessment of or his views on how that committee should operate. He stressed at the beginning of his comments that he defends the right of all members of the committee to ask whatever questions they wish. I would also defend the rights of committee members to ask whatever questions they wish. But I also say that committee members should be held to account for the questions they ask, for the emphasis they take and for, where it can be shown, the bias that they might show.
One could argue—and I would certainly say—that the chair's speech at times developed into a bit of a rant against the industry funds. He said early in his speech, 'I'm not biased.' But if one were to then read the following 10 minutes of the transcript, it would show his speech was on his allegation of crime after crime after crime by industry funds. One would be left after reading that speech thinking that the problems in the financial services sector were all about industry superannuation funds. It was a rather bizarre confluence: 'I'm not biased,' and then 10 minutes of focus on one single part of the financial services sector. Again, it's rather strange that that was the entire focus of his rant, given that the Hayne royal commission largely gave that sector a clean bill of health.
Here we are, as I indicated earlier, in a very belated way responding to recommendations arising from the Hayne royal commission. Here we are, years after that royal commission was handed down, with a government that's barely responded to a third of the recommendations of that royal commission. Here we have the chair of the economics committee, in response to an assertion that we as a committee aren't paying enough attention to the Hayne royal commission, spending 10 minutes of his speech in a rant about a part of the sector that got a clean bill of health. This is exactly what the deputy chair and I and other members of this committee have pointed out on occasions. We don't deny the member for Goldstein the right to ask whatever questions he wants. We don't deny that, where there are instances of bad behaviour in that sector, light should be shone on them. But it's a question of proportionality. It's a question of bias. It's a question of asking: 'Are we using our time and our resources to the best effect?' The entire focus of some members of the committee seems to be on one part of the financial services sector, almost to the exclusion of all others, and on pushing a particular highly misguided policy option.
As members on this side have pointed out, the committee is also being used at the moment as some kind of vehicle for what is sometimes described as 'housing first, super second', which is a nice bumper sticker. But it is really a demand-side policy flop, which I don't think any serious macroeconomist or housing expert has publicly come out to support. Here we have a committee where we have a royal commission with many recommendations yet to be implemented for the largest and most complex sector of our economy, and our committee seems to be focusing on a sector that got a clean bill of health from that royal commission. We seem to spend an inordinate amount of our time trying to support some policy with not a single economic expert backing it up. I might say, not only is not a single economic expert backing it up but not a single member of the frontbench of this government, not a single economic minister of this government, is backing it up. We have a chair desperately wanting us to hold an inquiry into something he's written a book about, but fortunately the government is not having a bar of it.
Let's look at some of the things that this committee—or, rather, government members of this committee—has spent barely any time on. Have they looked at the super guarantee increase in a way that balances the pros and cons? It's fortunate that the government has backed down on its threat of not following through on its election commitment to increase the superannuation guarantee, but I didn't see many members of the government on this committee holding the government to account on that side of things.
Let's look at the threat in terms of legislation, which we are going to discuss later today in this House, to exclude the consideration of administration fees from evaluating fund performance. Is that something government members looked at in detail? Is that something government members focused on? There was barely a word. The government members were focusing on the ills of industry super funds, but a deeply flawed bill which was going to exclude the consideration of admin fees—which would have had an extremely deleterious effect over the long run on members' final balances, particularly those on low incomes—got barely a mention by members of the government on the committee. Again, fortunately the government has backed down on that. There are other objectionable parts of that bill which we still need to see them back down on. Fortunately, they've backed down on it, but no thanks to the government members of that committee.
What about early release? Consideration of early release of super, which is a fundamental undermining of people preserving assets in super for their retirement, has barely been examined in detail by members of the government. To the extent that we've looked at early release, it has tended to be an attempt to back up vanity projects and policy thought bubbles, like removing massive amounts of funds for housing in a way that would do nothing other than drive up prices and have extremely damaging long-term consequences for people's retirement balances.
Let's look at the hearings themselves—and this is a point that has been made publicly by the deputy chair and backed up by other opposition members of the committee. The emphasis in hearings, in terms of the amount of time allocated to different parts of the financial services sector, has indicated a lack of appropriate priority to royal commission hotspots, to concerns raised by the royal commission, and to areas of concern in the financial sector that have arisen since the royal commission. We have seen a number of entities drawn into multiple lengthy hearings with very little connection to anything raised by the royal commission. For example, we've seen fund managers called in to give evidence if they have a relationship with industry funds, but no fund managers, no other actors in that part of the financial sector supply chain, in other parts of the sector. It's clearly an uneven and biased way in which to examine the sector.
Then there's the weight—the amount of time that is allocated. We've had lengthy hearings for multiple industry funds, who have been given a clear bill of health and who have very healthy returns, whereas one can only question the amount of time that has been allocated to funds who've had serious questions raised about their returns or other governance issues. When it comes to the big-picture issues, like ensuring that people get high returns over the long run and that they pay low fees relative to those returns, I would argue that there has not been an appropriate focus by the committee over the course of this term of parliament.
As the chair did, I defend everybody on the committee's right to ask whatever questions they want of members who come to public hearings and to ask whatever questions they want on notice. But I would say this: this bill raises a question about the effectiveness of parliamentary oversight. I think there is a real question mark as to whether or not our committees—the House Economics Committee, as an example—have been focusing on the issues that matter most for the welfare and financial security in retirement of ordinary Australians.
Thank you, member for Fraser. I say this quite sincerely: I am someone who loves finance. From a very early age, I was someone who got compound interest. I was someone who understood the important role that finance can play in a modern society. It has done more to set people free and improve the lives of the downtrodden and the vulnerable than any other invention in the history of humanity. When William Pitt was asked how did he win the Napoleonic Wars, most members of the House of Commons expected him to answer: 'Why? It was Horatio Nelson that won it for us.' He said, 'No, no, it was the government bond market, because without that I could not have been able to fund the war.'
In the state of Alabama in the United States, some technical laws that they introduced in the mid-1980s didn't allow credit bureaus to exist or do their work the way the modern credit bureaus do. The result of that was that it impoverished the very people who it was meant to protect. People on low incomes, people who didn't have assets and people from marginal communities found it impossible to get even small loans so that they could get out of the circumstances into which they found themselves or into which they were born. When they reformed their credit bureau laws and allowed credit bureaus to do the role and the work that they should do—that is, using computers and models to allow financial institutions to make assessments on what sort of financing people could do—they found a growth in capital, they found a growth in loans and they found that the rate of poverty declined absolutely and completely.
There are three types of market failure. The first type is unpriced externalities, where somehow you are getting something for free that is actually costing someone else a lot of money. It's best described as the free-rider effect. The second is asymmetric information, where people are basically buying a good from a seller who knows a lot more about what they're being sold than the buyer. And the third, of course, is regulatory failure.
I have listened to the Labor Party during this debate, and I have to say I've been appalled. Instead of using this as an opportunity to point out how we can use one of the greatest inventions in the history of humanity to further help those who are impoverished to be able to stand on their own two feet, how we can take people in marginal and vulnerable communities and give them the opportunity that all of us, or many of us, in this chamber got simply by right of birth and provide that to them, they have come in here to criticise those on this side, who hold their donors to account. If there is a bigger clown in this chamber than the member for Bruce, I don't know how that is possible.
Indeed, Deputy Speaker, and I would hope that, as you were not in the chair at the time, that those rules and those standards are applied to all members of this chamber equally, because I cannot think of a speech that the member for Bruce has given recently where he has not managed to use unparliamentary language and criticised people who disagree with him, not because of their arguments, not because of what they are proposing to do, but rather simply because of who they are. Is that what the left wing of this country has been reduced to? He criticised the parliamentary joint committee for its reports since this term began and a critical report into litigation funders in Australia. I will only briefly take the time to tell the chamber what that report found. That report found that litigation funders in this country are driving a class action tsunami that is ripping off customers, investors, shareholders and ordinary Australians who have no opportunity or cannot possibly comprehend what they are signing up to.
We have seen a recent class action here—those on the other side should keep this in mind—and, when they won an award from an employer who gave them money simply to go away, they kept 97 per cent of the payout. Those who they sought or pretended to represent received less than three cents in every dollar, yet their funds—the ones that would answer our questions, I might add—are having returns of 580 per cent. In the old days, that would be called usury. Yet the Labor Party, the member for Bruce, comes into this chamber and defends them over ordinary Australians. It is absolutely beyond my capacity to comprehend how the Labor Party can possibly do that. They fought tooth and nail to protect the outrageous profits that are being earnt on the back of Australians who do not have any other way of seeking justice. They continue to support a class action legal industry that puts profit before justice.
The member for Bruce, I might add, failed to mention that Maurice Blackburn, on the very day that the Victorian government said they would allow contingency fees into the Victorian legal system, which have been recommended against by the ALRC, the Australian Law Reform Council, and by every credible body known to this House—we have seen the disaster of contingency fees in the United States, where more money is spent on class actions than on R&D and creating jobs. On the very day that the Victorian government ignored all that advice, this committee that the member for Bruce apparently derides was able to discover that the then Attorney-General of Victoria, Jill Hennessy, had a meeting with Maurice Blackburn, and on that very same day Maurice Blackburn donated $100,000 to the Labor Party. But of course it had nothing to do with that meeting! They gave it to federal Labor, not to state Labor! This is the work that parliamentary committees do. This is the work that those on that side want to shut down.
The member for Fraser, a person that I hold in the highest regard, makes the point that the Economics Committee has been undertaking an inquiry into the implementation of the Hayne royal commission's recommendations. What we've found in that inquiry is that the Hayne royal commission was deficient. It was deficient in its inquiry; let this chamber be in no doubt. It brought forward two industry funds for questioning. It never questioned IFM, another donor to the Labor Party. It never questioned Industry Super associations.
We asked APRA, 'How is it that Industry Super can be using members' money, when members were never asked whether they wanted to give that money to Industry Super—it was taken from them by force of legislation and industrial agreement—to pay journalists at the ABC?' The answer from APRA was that they didn't know, because Industry Super holdings were so complex that they had no oversight. The Hayne royal commission had two industry funds come before it who admitted that they had spent tens of millions of dollars on marketing to fund managers for no clear benefit to their members, but it just let the inquiry cease, stop. What we on the Economics Committee have found is a cartel that is using the money of Australians to probably advance the political interests of that body. But we don't know that, because our regulators have refused to do it. I'm not saying 'have not wanted to' or 'have been incapable of'; they have refused to do it. And the Labor Party wants to shut that discussion down.
The member for Bruce can't count, and he's on the PJC. He says the PJC has only brought down two reports. We've already doubled that. No, Member for Bruce, starting an inquiry is not the same as finishing one. If you continue to make the mistake of ignoring quality for quantity, then that is all I need to know about those opposite. The things that we have uncovered, the abuse that has been underscored—and isn't it funny; when you give all of this to a royal commission full of lawyers, what do they come out with? Apparently the answer is more lawyers, more inquiries, more regulators. Does anyone in this chamber seriously think that a group of public servants are going to hold another group of public servants to account better than the parliamentary committees in this place? Where were the Australian Law Reform Commission when litigation funders were getting returns on equity of 580 per cent? Where were they?
Where were they when there were litigation funders based in Singapore, Holland and Ireland? As the tax commissioner described them to the Standing Committee on Tax and Revenue, it's almost like a checklist of tax evasion. Where was ASIC when all of this was happening? I'll tell you what ASIC was doing. They were cheering them on! They weren't standing up for Australians. They were standing up for themselves.
And the Labor Party wants to shut down the parliamentary oversight committees or don't like the questions we're asking? Where were they on that side? Coming in here, outraged at the fact that ordinary Australians were seeking justice because of some wrong that has been done, who find themselves getting three cents in the dollar.
Let us have a moment to reflect on financial planners and what has happened to financial planners. As I say, we have one of the best financial sectors in the world. There are very few other places where unfunded liabilities, looking forward, are less than three per cent of GDP. We, in this place, have done that. But I assure you: regulators did not achieve that. We have one of the best payment systems in the world. That was not achieved by regulators. That was achieved by ordinary Australians going out there and having a go.
The buy-now pay-later sector in this country—those opposite want to shut it down. ASIC wants to shut it down—to kill it with a thousand cuts of inquiries, until it no longer exists. Only the parliamentary oversight committees have brought them to heel on the question that they cannot legislate and they cannot argue for more laws to shut down a service that is providing so much freedom for so many Australians and makes our nation a fairer one. If it were left, I'm sure, to a group of public servants, all that they would do is tick it off.
So we're implementing this Hayne royal commission recommendation. I'm sorry that it's taken us so long. There was this little thing called the global pandemic in the middle. But, in the meantime, Australians have found themselves with some of the world's best financial services and products.
But I would direct members to the interim report of the Hayne royal commission—that was the report not written by lawyers—which made the point that Australia has 4,000 mortgage products. An ordinary Australian trying to buy their first house has to navigate the 4,000 types of products that they can get. This, in behavioural economics, is called 'sludge'. This, in the legal community, is called an opportunity. What the report recommended was actually to get rid of the asymmetric information created by the endless number of recommendations for more regulation coming out of ASIC and make it easier for consumers to understand what the differences between the products were. What about that? What about actually saying to hardworking Australians: 'We're going to give you the opportunity to choose. We're not going to give it to litigation funders, to class-action lawyers and to more public servants.' Well, of course, that entire report got shredded before it made it into the final report of the Hayne royal commission. But we're implementing that report.
The same people who made these arguments said: 'No, no, no; we need to really put a lot of regulations in place around the mortgage market. We'll misname them "the responsible lending laws"'—which, as history has shown, were just the most irresponsible piece of legislation in the financial sector to come out of this chamber. People who got their loans before the responsible lending—or irresponsible lending—laws, actually have lower rates of credit default than those who got theirs under them. We now have banks that have to ask you if you can produce your Uber receipts; we now have banks who have to ask you how often you go to the hairdresser and if you get your hair coloured—because, apparently, that's the big difference! We have a royal commissioner who thinks that computers and algorithms and machine intelligence are not as good at determining someone's household expenditure as someone's own memory and that we should have banks that go through that over and over. (Time expired)
I rise following that very passionate speech from my colleague the member for Mackellar. I don't take his antipathy towards lawyers to heart or personally, and I do note and endorse the comments he made with respect to litigation funders, class action lawyers and financial advisers. Having served on the committee to which he referred, I know that significant and important work was undertaken by that committee highlighting a lot of issues, which the member for Mackellar eloquently and loudly stated in this chamber.
I'm pleased to speak in favour of the Financial Regulator Assessment Authority Bill 2021. In 2019 the government released its response to the banking royal commission. The government's response committed to taking action on all of the recommendations of the banking royal commission and made additional commitments to ensure that the issues identified by Commissioner Hayne were addressed. The royal commission report is lengthy, but among the many recommendations contained within it were a number related to ASIC and APRA. This bill gives effect to recommendations 6.13 and 6.14 of the report. Specifically, 6.13 recommended that APRA and ASIC be subject to at least quadrennial capability reviews, and 6.14 recommended the creation of a new authority to assess the effectiveness and capability of each regulator. The rationale behind these recommendations of the royal commission was that, while ASIC and APRA operate within complex accountability frameworks already, the regulators' effectiveness in delivering on their mandates is not subject to consistent and independent review over time.
The array of external assessment that ASIC and APRA are already subject to is outlined in the explanatory memorandum—and I understand that other speakers today have referred to it—but, just by way of recapping, those scrutiny levels include parliamentary committees. I've served on two of those committees. I was on the Parliamentary Joint Committee on Corporations and Financial Services and I'm currently sitting on the House Standing Committee on Economics. I'd hate to think that these committees don't serve a purpose, otherwise there's a lot of wasted time. In my view, these committees do serve a very useful purpose. They are public when they hold inquiries. Meetings are conducted with both ASIC and APRA. They are made public. It's an opportunity for the public to see two regulators being held formally to account. The same happens in Senate estimates when they're called to make representations and respond to questions. These committees do serve a purpose. But, as the financial services royal commission pointed out, while these committees do serve excellent purposes, there are some limitations in these bodies with respect to some of the oversight of a regulator that is required. For example, the level of expertise of parliamentarians is diverse and it's not necessarily all in financial services regulation, thank heavens, but, because of the diversity of the background of parliamentarians, their ability to drill down and grill both ASIC and APRA on specific and technical issues is limited.
Other areas of oversight include, obviously, ministerial oversight. ASIC and APRA both have to report annually against the government's Regulator Performance Framework. They are also bound by the public governance framework established by the Public Governance, Performance and Accountability Act, which includes requirements such as the publication of annual reports containing statements of performance. But I do note that this doesn't require that measures of effectiveness that are included in the corporate plan are assessed by any external third party. So, yes, they have to make the information available, but it currently is not assessed by an external third party.
Of course, these bodies are also subject to annual audits by the Australian National Audit Office. The Australian National Audit Office also has the ability to undertake ad hoc audits of other matters, but the key phrase here is 'ad hoc'. The ANAO has responsibilities over a wide range of organisations, so its capacity to spend any detailed time on particular organisations or to conduct more than ad hoc investigations is limited. The two bodies, ASIC and APRA, are also subject to the International Monetary Fund's Financial Sector Assessment Program, which reviews regulators on a five-yearly basis. Again, they serve a purpose, but their purpose and their role are quite limited in scope.
In short, the royal commission found that, while ASIC and APRA are currently subject to a lot of scrutiny, there are key gaps in the current level of scrutiny and accountability. Predominantly, the gap that was identified was with respect to how well the regulators performed against their statutory mandate. Is there anybody that is actually focusing strategically on their performance over a period of time?
In its response to the banking royal commission, and through this particular bill, the government is creating the Financial Regulator Assessment Authority. The FRAA will be a statutorily independent authority consisting of three appointed part-time members, including an independent chair, and the Secretary of the Department of Treasury as an ex-officio member. It will be supported with resources from the Department of Treasury. Under this bill, the FRAA will assess and report on the effectiveness and capability of ASIC and APRA over time. This is the gap that is currently not being addressed by any of the existing oversight mechanisms. Reports on each of ASIC and APRA will be produced either biennially or at the request of the responsible minister. The minister is also able to request additional ad hoc reports from the authority on any matter which relates to the effectiveness and capability of ASIC and/or APRA. The FRAA's role and activities are designed to complement and augment the existing external accountability mechanisms that apply to the regulators, not to duplicate them. Its reports will inform and improve the performance of the other accountability measures. So it is to sit alongside and booster and give a more holistic picture to ensure that all aspects of ASIC and APRA are being properly regulated.
The key thing that this comes down to—and I think it came out in the royal commission quite clearly—is that, for both consumers and financial service providers to have confidence in the financial sector, we need to have trust and confidence in our regulators. To have trust and confidence in our regulators, they must be independent in fact and they must be seen to be independent. Of course, they are ultimately accountable to the parliament, but they must in fact be independent bodies.
In setting up independent bodies, we have to ask the question: who regulating the regulators? Parliament has its role, as we saw before. We have got parliamentary committees and we have got ministers, but we need a level of expertise. The FRAA is being set up to provide that level of expertise in the oversight of our regulators. Our regulators perform an incredibly important function in our financial services sector, both nationally and internationally, in ensuring confidence in Australia and in our financial services. We must have efficient and effective regulators. The royal commission identified that that is perhaps something that we need to step up on, to make sure that we've got the capacity to address it. As to the governance structures of ASIC, by virtue of serving on a number of the committees, I do have questions about the current governance structure of ASIC. A body such as the FRAA, when established, will be able to actually look into the governance structure and make recommendations as to whether or not it is effective in carrying out the mandate of what ASIC is set up to do.
This particular bill, in setting up the FRAA, goes to a key plank of accountability, of integrity and of ensuring that our financial services system maintains that level of integrity and that level of confidence from people. Setting up this body will help to ensure that people dealing with our systems can be satisfied that we've got regulators who are effective, who are independent and who are doing the job that we need them to do.
I would like to thank all members who have contributed to this debate. The government is committed to implementing its response to the Financial Services Royal Commission and is delivering on this. The Financial Regulator Assessment Authority Bill 2021 creates an authority which will be charged with assessing the effectiveness and capability of the Australian Securities and Investment Commission and the Australian Prudential Regulation Authority.
The Financial Regulator Assessment Authority (Consequential Amendments and Transitional Provisions) Bill 2021 facilitates the flow of confidential information between the regulators and the authority. By improving the accountability of ASIC and APRA, these bills will help to restore trust and confidence in Australia's financial system. I commend these bills to the House.
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 immediate question is that the words proposed to be omitted stand part of the question.