Tuesday, 21 August 2018
Space Activities Amendment (Launches and Returns) Bill 2018, Treasury Laws Amendment (Financial Sector Regulation) Bill 2018, Unexplained Wealth Legislation Amendment Bill 2018; Second Reading
That these bills be now read a second time.
I seek leave to have the second reading speeches incorporated in Hansard.
The speeches read as follows—
On 24 October 2015, the Turnbull Government announced that we would review the Space Activities Act 1998.
The aim of the review was to ensure that Australia's space regulation accommodates technological advancements and does not unnecessarily inhibit innovation in Australia's space capabilities.
The review concluded in November 2016.
It found that the Space Activities Act should have additional flexibility to accommodate the changing operating environment for space activities and support innovation and investment in the sector.
The Space Activities Amendment (Launches and Returns) Bill does just that.
It reduces red tape for businesses undertaking space-related activities in Australia.
The Turnbull Government is committed to ensuring businesses are able to grow and create more jobs without the burden of unnecessary red tape.
The Bill will support innovation and investment, and provide additional flexibility to adjust to the changing operational environment of the space industry—while balancing safety and risk of potential damage with the national interest.
The global space sector is worth over USD 345 billion, and growing at 10 per cent annually.
Australian businesses represent just 0.8 per cent of this industry internationally: a disproportionately small share considering our immense capability in space-related sectors, including our immense advanced manufacturing capability, and our world-leading work in fields such as automated mining and precision agriculture.
Combined with our expertise, the extraordinary growth of this global industry makes it vital for Australian businesses to be able to participate with minimal regulatory burden, while maintaining Australia's international obligations.
I would like to thank all stakeholders who have participated in the review's consultation processes, as well as the subsequent consultations on an appropriate legislative framework.
Today's introduction of the Space Activities Amendment (Launches and Returns) Bill 2018 is the culmination of these processes.
The Bill broadens the regulatory framework to unlock potential further opportunities for space sector growth in Australia and reduce barriers to participation in the space industry.
It will bring us in line with agreed international practice and standards by streamlining the approvals process and insurance requirements for launches and returns.
The Bill will encourage our businesses to innovate, invest and create jobs.
The global space sector is a major source of technological advancement that provides broader applications and benefits across industry and society—not just in space exploration, but in sectors spanning communications, defence, mining, transportation and agriculture, to name but a few.
This Bill will allow our emerging space industry to keep pace with international and technological developments, while updating and streamlining regulation to encourage private investment.
It will create a more flexible regulatory environment to make it easier for these businesses to tap into global supply chains and access the benefits on offer for all Australians.
To reflect the changing nature of launch facilities, the Bill includes licencing arrangements for launches from Australian aircraft in flight, in addition to more traditional ground launches.
The Bill also provides appropriate safeguards to mitigate the risk of damage from the launch or return of a space object, or from the launch of a high power rocket.
This Bill will enable Australian business to engage more fully with the global space industry, supporting extraordinary opportunities to create jobs right across the economy.
I commend the bill to the Chamber.
Over the life of this Government, we have consistently demonstrated our commitment to building a financial sector that is unquestionably strong, unquestionably accountable, and robustly competitive.
This Bill takes the next step on this path and delivers on promises that we made in the 2017-18 Budget to ensure that our regulatory architecture keeps pace with changes to the financial environment. It includes two measures relating to financial sector ownership restrictions and bank licensing that will work in tandem to make this critically important sector of our economy more contestable, more innovative, and improve overall choices and outcomes for consumers.
We are building on reforms including:
Today's Bill significantly reduces barriers to entry that are preventing the innovation that our financial system needs, while still prioritising the safety of consumers and the broader financial system.
In particular, and consistent with the draft recommendations of the Productivity Commission's review into competition in the financial sector:
- Financial Sector (Shareholdings) Act 1998
- Banking Act 1959
I will now provide additional detail on these reforms.
Under the Financial Sector (Shareholdings) Act, no individual can hold greater than 15 per cent of a financial sector company without being subject to approval under a national interest test.
This is an important mechanism to ensure, among other factors, that prudentially regulated institutions have access to sufficient financial resources during times of stress and that their owners have the capabilities necessary to fulfil their responsibilities.
However, as identified by the House of Representatives Economics Committee in its first review of the Four Major Banks, the criteria against which a national interest determination is made are not transparent, and this can have unintended consequences, particularly for start-ups.
The Government believes the broadness of a national interest test is warranted when assessing significant transactions under the Financial Sector (Shareholdings) Act. However, the Government agrees with the view that it is less justifiable when considering ownership of small institutions when they are just starting out, given that due to their size they pose limited risks to financial stability or a large numbers of consumers. This is particularly true given that:
- Financial Sector (Shareholdings) Act
- Financial Sector (Shareholdings) Act
This is an unacceptable outcome that this Bill will fix in two ways.
Firstly, the ownership threshold beyond which Financial Sector (Shareholdings) Act approval will be required for all financial sector companies will be increased from 15 to 20 per cent, in line with the threshold that exists in the Foreign Acquisitions and Takeovers Act 1975. There is no policy rationale for this discrepancy. Making the two Acts consistent will simplify investment in the financial sector and remove a significant regulatory hurdle for institutions where owners are seeking to hold 15 to 20 per cent of available shares.
Secondly, we will introduce a streamlined Financial Sector (Shareholdings) Act approval path for small domestically incorporated financial sector companies—that is, banks and life insurance companies with less than $200 million in assets and general insurance companies with less than $50 million in assets—that are seeking a prudential licence for the first time or have been licenced for fewer than five years.
Under this model, qualifying institutions will not be assessed against the national interest framework. Instead, as long as the firms' owners are 'fit and proper' and the firm itself undergoes regular reviews of its ownership structure and provides relevant information to APRA each year, Financial Sector (Shareholdings) Act approval will be granted.
To ensure, however, that new-entrants receiving approval under this framework do not receive a competitive advantage relative to existing firms, or grow so large that their ownership structure begins to pose risks to consumers, once such firms grow beyond the relevant asset threshold their owners will be required to either:
- Financial Sector (Shareholdings) Act
Together, these two elements of the Bill will ensure:
While Schedule 1 to this Bill makes significant inroads to cut red tape in relation to new businesses' ownership structure, the Government recognises that the power of this change on its own is limited. Even with an Financial Sector (Shareholdings) Act approval in hand, start-ups need to obtain an APRA-licence and be ready to comply with a range of prudential requirements covering everything from financial resources to corporate governance and remuneration policies from the day that they start operations.
Meeting these requirements is a central part of Australia's regulatory architecture and APRA's prudent approach to managing financial sector risks was key to Australia's relative success during the Global Financial Crisis. As such, this is not a structure that any Government would want to undermine. However, where there are opportunities to reduce barriers to entry without increasing risks, we support them being investigated.
That is why the Government fully endorses APRA's new restricted Authorised Deposit Institution licensing framework. This will be similar to the United Kingdom's model, which, since 2014, has seen more than 10 new banks commence operations—compared to only one start-up bank in Australia in the last decade.
Under APRA's approach, start-up banks will be able to obtain a restricted licence for up to two-years, or a time specified by APRA. During this time they will be subject to a limited suite of prudential requirements and strict caps on the size of their business, granting them the opportunity to prove their business model and attract the funding they need to successfully compete in the long term. After two years, successful licences will transition to meet the full framework.
Building on our reforms of the Financial Sector (Shareholdings) Act, Schedule 2 to this Bill therefore makes a number of technical amendments to the Banking Act to support this new licensing approach. In particular, the Bill grants APRA the power to:
While the revocation of a licence without the possibility of merits review is a significant step, it is a necessary protection when banks are being allowed to operate at lower regulatory requirements and a bank's continued operations during an appeal process would pose unacceptable risks to consumers. It is also necessary, more broadly, to protect the reputation of all 'restricted Authorised Deposit Institutions' at a time when they are trying to build their businesses and attract customers.
Under this approach, natural justice would still be provided to time-limited licensees, with APRA required to provide notice of its intent to revoke a licence in writing and allow the licensee to make submissions in its defence. This adequately balances the need for licenced institutions to have their rights protected, against those protections required by the broader community. It will also have no impact on existing banks, or new banks that acquire a full banking licence.
To conclude, this Bill is yet another example of the Government's commitment to creating more competition in the financial sector which ultimately leads to better outcomes for consumers. This two-pronged approach to simplifying the process of setting up a new financial institution—relaxing both ownership restrictions and licensing rules for new entrants—will support investment and drive the kind of robust competition necessary to create better, cheaper, products for all Australians.
Full details of the measure are contained in the Explanatory Memorandum.
Serious and organised crime syndicates are operating in an increasingly fluid manner across jurisdictional borders. The Australian Criminal Intelligence Commission estimates that the cost is at least $36 billion per annum.
Depriving criminals of their wealth is a key measure in combatting these insidious individuals. Unexplained wealth laws provide a valuable tool for law enforcement to confiscate the assets of these criminals where they cannot demonstrate that this wealth has been lawfully obtained.
However the scale and complexity of this criminal threat has necessitated an enhanced focus on cooperative, cross-jurisdictional responses by Australian governments.
The Unexplained Wealth Legislation Amendment Bill 2018 will provide a national approach to target unexplained wealth. It will enable all participating jurisdictions to work together to effectively deprive these criminals of their wealth, irrespective of the jurisdictions in which they operate.
Through a referral of powers from participating States, the scheme will allow Commonwealth unexplained orders to be used where a person or property can be linked to a broader range of State and Territory offences.
This will allow the AFP to use a single unexplained wealth order to target criminal syndicates instead of the patchwork of orders that would otherwise be sought by Commonwealth, State and Territory law enforcement agencies.
The scheme will also enhance the capability of State and Territory agencies to contribute to national efforts by providing access to enhanced information gathering powers and the ability to use lawfully intercepted telecommunications information in unexplained wealth matters.
The Bill also incentivises greater cooperation between jurisdictions through the establishment of new equitable sharing arrangements. These arrangements will give participating jurisdictions preferential treatment in the distribution of seized assets.
The scheme will not replace existing unexplained wealth schemes around the country, but rather create a more effective and cooperative network of law enforcement working towards a common goal.
I thank the States and Territories that have worked with the Commonwealth to design the national cooperative scheme on unexplained wealth. In particular I acknowledge the efforts taken in New South Wales, with the introduction of the necessary referring legislation in their Parliament earlier this month. I will continue to negotiate with the remaining States to secure their support to ensure the benefits of the scheme are maximised.
I urge my colleagues to support the passage of this critical legislation. Together we can demonstrate we are committed to working collaboratively to strengthen unexplained wealth laws and strike at the heart of organised crime.
Ordered that the bills be listed on the Notice Paper as separate orders of the day.