Senate debates

Monday, 17 September 2018

Bills

Treasury Laws Amendment (Enhancing ASIC's Capabilities) Bill 2018; Second Reading

5:04 pm

Photo of Deborah O'NeillDeborah O'Neill (NSW, Australian Labor Party, Shadow Assistant Minister for Innovation) Share this | Hansard source

I rise to speak on the Treasury Laws Amendment (Enhancing ASIC's Capabilities) Bill 2018. I say at the outset that Labor supports this bill. This bill will require ASIC, the Australian Securities and Investments Commission, to consider the effects that the performance of its functions and the exercise of its power will have on competition in the financial system. The ASIC Act includes specific objects that ASIC must strive towards in performing its functions and exercising its powers. These include, amongst other things, promoting the confident and informed participation of investors and consumers in the financial system; maintaining, facilitating and improving the performance of the financial system and entities within that system in the interests of commercial certainty, reducing business costs, increasing efficiency and developing the economy; taking whatever action it can take and is necessary in order to enforce and give effect to the laws of the Commonwealth that confer functions and powers on it.

The bill would mean that, without limiting these existing elements, ASIC must also consider the effects that the performance of its functions and the exercise of its power also have on competition in the financial system. The financial system inquiry recommended that the government consider the inclusion of competition in ASIC's mandate. This recommendation was accepted by the government, and this bill will require ASIC to take competition into account among a number of other elements in performing its functions and exercising its powers.

The bill before us today will also remove the requirement for ASIC staff to be engaged under the Public Service Act 1999. This change would align ASIC with APRA and the Reserve Bank of Australia. The change implements recommendation of the ASIC capability review. We would encourage the government and ASIC to ensure appropriate transitional arrangements are in place for existing staff. In particular, we note that ASIC has assured the Senate Economics Legislation Committee that current ASIC staff will remain in their current superannuation arrangements under the CSS and PSS schemes and will be able to remain PSSap members and that ASIC employees will retain the same entitlements to maternity leave that they currently have.

Given the shocking evidence presented to the royal commission so far, it's clear that we need strong and effective financial regulators. Yet it was this government that actually cut ASIC's funding by a staggering $120 million in the 2014 budget. At the Senate estimates after the 2014 budget, the then ASIC chairman Greg Medcraft explained how ASIC would deal with those cuts. Among other things, he said:

In particular, our proactive surveillance will substantially reduce across the sectors we regulate, and, in some cases, it will stop.

Mr Medcraft also said:

Some examples of the changes in our consumer cluster are the deposit takers, credit and insurance team. There will be reduced proactive surveillance. As a result, they will focus on activity by entities that have the greatest market impact at the expense of smaller entities that have a smaller customer basis.

The government only moved to restore funding to ASIC after Labor began calling for a royal commission in 2016. But the impact of these cuts to ASIC cannot be undone so easily. These were cuts to the capability of the corporate regulator and, in fact, they were a free pass to the financial sector misconduct.

This government has certainly been asleep at the wheel when it comes to regulating the financial sector. The change to ASIC's mandate provided for in this bill was accepted by the government in its response to the financial system inquiry back in October 2015. It was foreshadowed then to be completed by the end of 2016. Yet here we are considering this bill in September 2018—over 1½ years later than was promised. The government's response to the financial system inquiry in October 2015 also committed to updating the ASIC statement of expectations. The statement of expectations is an important document that sets out the government's expectations of how ASIC will fulfil its important mandate. Despite the significance of ASIC's role as a financial regulator, it took until 2018, this year, for the government to announce that it had finally settled on a new statement of expectations for ASIC.

Unfortunately, the government's failures in financial services don't stop there. Another change that the government has promised, but is failing to deliver on, is payday lending reform. Since 2016 the government has been promising laws to give ASIC important powers to crack down on dodgy payday lending practices and consumer-leasing rip-offs. But to date, in 2018, as we stand here, it has yet to introduce any such legislation. In February 2017, the member for Higgins said that the bill to implement payday lending reforms would be introduced into parliament 'at the earliest opportunity' and declared 'it will pass this year'. In October 2017, the member for Riverina said the government 'will introduce legislation this year'. But 2017 came and went and there was no legislation. In February 2018, Treasury officials stated that they expected legislation would be introduced 'in the autumn sittings'. It's not really a big surprise that that didn't happen either. And at Senate estimates in May this year, Treasury officials couldn't provide an answer about whether this vital legislation would be introduced, stating that much trotted-out answer, 'It was a matter for government.'

The chaos, division and dysfunction in this government have led to paralysis on this issue, and it is vulnerable consumers who are paying the price for this government's inaction. Households that resort to using payday loans face skyrocketing fees and interest rates, with some as high as 200 per cent. We all know the impact that inappropriate lending can have on vulnerable consumers, yet this government is so divided and so dysfunctional that it's only focusing on itself and its own survival, rather than protecting consumers.

In contrast, Labor has a record of standing up for consumers. In fact, it was Labor that introduced the Future of Financial Advice reforms. The FoFA reforms were to improve the quality of financial advice provided to consumers of financial services. They acted to reduce conflicts of interests and to better align the interests of the financial advisers and the consumers. Significantly, Labor's reforms included the introduction of a best interests obligation that requires financial advisers to act in the best interests of their clients when giving personal advice. That's a legal obligation for financial advisers to do the right thing by the customer. Labor's reforms also included a ban on conflicted remuneration—including commissions, volume payments and soft-dollar benefits—when financial advisers provided advice to retail clients. These changes included a requirement that providers of financial advice obtain client agreement to ongoing advice fees, and enhanced disclosure of fees in the services associated with ongoing fees.

We should never forget the government's attempts to wind back these reforms. In opposition, those opposite voted against the FoFA reforms. In government, they tried to wind it back, first by legislation and then by regulation. It was Labor and the Senate that stopped them from proceeding with this. It was also Labor that recognised the need for a royal commission. We had seen that there were far too many retirees who had their retirement savings gutted, families losing hundreds of thousands of dollars, small business owners who lost everything and life insurance policyholders just denied justice. And what did this government do? True to its nature, it defended the big end of town. Mr Morrison fought tooth and nail against a royal commission, and this government ran a protection racket for the banks for more than 600 days. Mr Morrison has previously said about having a royal commission:

… I think it is a reckless distraction that puts at risk confidence in the banking system …

Of the need for a royal commission, Mr Morrison said:

It is nothing more than a populist whinge from Bill Shorten.

Once the royal commission had commenced and we started seeing some of the shocking evidence of misconduct, Mr Morrison changed his tune and said he was 'not surprised' by what had come out. This is, frankly, a government so out of touch with Australians, so focused on supporting the big end of town, that even its new Assistant Treasurer believes that banking scandals are inevitable.

It is reported that Mr Robert has vowed to 'resist left-wing pressure to crack down on banking conduct'. Instead he is going to be backing self-regulation, which has completely failed to protect the many Australians who have come forward to the royal commission so far, with courage, to tell their stories of massive exploitation at the hands of the banks, financial advisers and insurance companies.

The royal commission has exposed appalling rorts and rip-offs right across the financial services sector. There has been evidence about the systemic cheating of customers, banks charging fees for no service—even to dead people—and lenders duping people into inappropriate loans. First Nations communities have suffered from appalling predatory conduct. Lawyers for the royal commission have even recommended that the National Australia Bank and the Commonwealth Bank face criminal charges over their treatment of superannuation customers.

That the new Assistant Treasurer believes that these kinds of scandals are inevitable is just plain appalling. Mr Morrison and this government never wanted the royal commission. They cannot be trusted to implement its recommendations. They cannot be trusted to crack down on banking misconduct. This government's priority will always be protecting the big end of town, not the victims, families and communities harmed by this atrocious misconduct. The government even believed that it should give the banks a $17 billion tax cut—that is $17 billion that could be put towards improving the education and the health of Australians. This government can't help itself. It is hopelessly divided, out of touch with Australians and just about protecting the interests of the big end of town.

Labor will continue to fight for ordinary, hardworking Australians. We will fight for fair funding for the schools that educate our kids, for fair funding for the hospitals that look after our families and for fair rules for a financial sector on which almost every Australian person and business rely. We are the party that will do the right thing by consumers. We'll stand up to the banks and the big end of town.

In conclusion, Labor supports this bill. I want to make a comment about the second reading amendment that has been circulated by Senator Whish-Wilson. Labor will not be supporting this amendment today. The roles and accountabilities of Australia's financial regulators is a serious issue and one that's worthy of proper consideration. It is possible that the royal commission will make findings in relation to the financial regulatory architecture. If so, these findings will be a critical input into any future consideration of the roles and mandates of our regulator.

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