John Williams (NSW, National Party) Share this | Hansard source

Can I say first of all, Mr Acting Deputy President Whish-Wilson, that both you and I have given ASIC a bit of stick over the years in the 10 years I have been here. If you'd asked me a few years ago, 'What is the definition of frustration?' I would say, 'ASIC.' I remember when I launched an inquiry into liquidators and insolvency practitioners years ago, there were unanimous recommendations. Sadly, for years the Labor government did absolutely nothing about bringing those regulations in and changing the laws and the responsibilities of liquidators, receivers or administrators. Thankfully, we got them changed, and September last year was the finalisation of those changes.

The situation is that with a majority vote in favour of the creditors, a committee can sack a liquidator with one vote. That is a very powerful thing. Normally, prior to that, to get rid of a liquidator you'd have to go to the courts. It'd be going on and on, dragging on for years, with huge costs, et cetera, and that money would not be going to the creditors, where it should have been going. I've found that I get on very well with ASIC members these days—the boss, James Shipton, and many of the commissioners—and I work closely with them. But it is still frustrating.

For example, a Mr Cowper, whose breach was reported by NAB in 2010, just a couple of months ago was scrubbed out of the industry. He went on to AMP after being sacked by NAB, if I remember rightly. Why does it take eight years to scrub out a financial planner?

I remember well being in Senate estimates and asking Mr Kell, 'Why did it take you 16 months to respond to the whistleblowers from Commonwealth financial planning? His answer was: 'Senator, we got a great result; we got an enforceable undertaking.' I said, 'That is not the question I asked you. I asked you why it took so long.' Mr Kell went on to say: 'Well, we got a result.' Former Labor Senator Mark Bishop was the chair of the Economics Committee. I turned to the chair and I said to Senator Bishop, 'How do you get these people to answer a question?' One of Senator Cameron's staffers said to Senator Cameron, 'I think Wacka is getting a hard time up there in estimates,' and Senator Cameron came in and put some pretty powerful questions to ASIC. Senator Cameron then said to me, 'Why don't we have an inquiry into ASIC?' I said, 'What a great idea.' So we launched an inquiry into ASIC, and out of that, came the financial planning rorts, scandals et cetera—and this year ASIC banned 46 financial planners in 12 months.

Senator O'Neill talked about the funding for ASIC. Yes, it is true that years ago we cut the funding for ASIC and then it was reinstated. In this budget there's a cut of $13 million. But Senator O'Neill is missing one thing: we're putting in a system of user-pays. A couple of years ago we had the situation where ASIC would spend $30 million a year policing and investigating financial planners but would collect just $2.8 million in licensing fees. They spent $10 million a year on oversight of the insolvency practitioners industry, but collected just $40,000 in registration fees for liquidators. That is now changing, and that funding gap will be more than filled by those two industries contributing with their licences and paying a fee to ASIC to fill that gap, as they should. Why should the taxpayers of Australia pay all the costs for ASIC to do its job when it is looking at the financial planning industry and the insolvency practitioners industry? So let's hope that ASIC has the funding, the powers and the courage to go after these people who are doing the wrong thing in the corporate world and in the financial sector world and bring those who do the wrong thing to account.

The royal commission has even surprised me—even though I've asked for it for about eight years or nine years in this place, and I'm glad to see that everyone is on board now. I'm even surprised at what's coming out. But, as I said here recently, when Paul Keating introduced superannuation, there were no criminal charges or fines or laws for people stealing our superannuation. We saw through the royal commission that many are doing the absolutely wrong thing by our super. Super is there for people's retirements—wholly and solely for that. Of course, group life insurance is involved in that as well. Billions have been taken out. There have been terrible returns, with people who might have their money in cash, in super, and getting one per cent or less. You get three per cent in any of the big banks. If you wanted to put a couple of hundred thousand in for two or three years, you'd get three per cent. Why are they only getting one per cent in their super?

Legislation on this issue came into the Senate in September last year. You know how this place works, Mr Acting Deputy President: if you don't have the numbers, the legislation gets pulled. When that legislation came here to bring in criminal punishments—$420,000 and up to five years jail—for people doing the wrong thing with our superannuation, Labor and the Greens opposed it. I hope when it comes back—and I hope it comes back soon—you don't oppose it, given what the royal commission has brought forward.

I would add that I think Commissioner Hayne is wonderful. I think he is going a great job. He's very direct, and he doesn't take any prisoners in the way he asks question—along with Ms Orr, who has become a household name. When the royal commission reports—and at the end of this month we will get the interim report and at the end of February the other report—I think the regulators are going to get a bit of a touch-up. I'm seeing what is going on and I think APRA and ASIC have a lot of questions to answer. I would ask: are they big enough to do their job; do we have to treble their funding; and do we have to treble their size to see that the corporate crooks are taken out of our country? It will be very interesting to read that report from Commissioner Hayne. As I said, I think he's doing a marvellous job. I like his attitude and I like the way he asks questions—and I get a bit of a laugh. When I had a hip replaced about nine weeks ago, I had a week in hospital, and I must say I enjoyed every minute of being at home. I did some exercises the physio told me to do, but watching the royal commission was very entertaining, I can assure you, with what was coming out.

It's clear that ASIC is going to have to play a major role in the future of our whole financial sector. This bill is about competition in ASIC, as we believe that in the competition and financial sector that competition keeps prices down; monopolies don't. You often question whether that's always the case in the financial sector. Just in the last couple of weeks we saw one bank raise its interest rates slightly—I think about 14 or 15 basis points—and people said, 'Well, won't be long, and the rest will follow.' Two others did follow: Commonwealth and ANZ. Westpac led the rise. But NAB didn't—pleased to see that.

I understand the cost of funds are going up for banks. Wholesale funds from overseas are creeping up. Interest rates will creep a bit and the cost will go up a bit, so they'll pass those costs on to their customers. Being frank, they've got a fair bit of leverage in the profit they were making to perhaps give some relief. They are giving some relief, and I must make a comment here a bit off the track: I commend ANZ Bank—they are giving a one per cent discount on their interest rates to farmers in drought.

The banks have a somewhat different attitude now, because of the royal commission. Previously, when you missed a payment with the bank, you defaulted. What would happen? You'd get hit with penalty rates. You might be on seven per cent. What are penalty rates? They might go to 17 per cent. There are no penalty rates for farmers in drought, which I think's a very good thing and a good change of attitude. In fact, most of the big banks are giving holidays for making payments. They realise that the future of agriculture's very, very strong.

When you're on the land—and I'd imagine the four generations of my family preceding me did this—you use your one commodity pretty well. It might be wool, for example. When wool's good, you can bet your life cattle is bad, fat lambs aren't that flash, mutton prices are down, and wheat and barley prices are ordinary. But now we have a situation on the land where all the prices are good. The banks are seeing that. We've got record wool prices. Lamb prices are breaking records—up to $300 a head—and that's making it very expensive for the average family to have a leg of lamb these days, I can assure you. Cattle prices have come up because of the drought, but they've been very strong as well. Wheat prices are the highest I've seen in my life, because of demand and supply and the drought et cetera. The banks realise that agriculture has a great future, and I do commend them for being sympathetic towards those who are doing it tough in this drought.

Back to this bill, the government considers competition, not regulation, is the best means of ensuring consumers get value for money in the financial services. Schedule 1 of this bill amends the Australian Securities and Investment Commission Act 2001, the ASIC Act, to mandate that the Australian Securities and Investment Commission must consider the effects that the performance of its functions and the exercise of powers will have on competition in the financial system. The measures fulfil the government's commitment to implementing recommendation 30 of the Financial System Inquiry, tasking the Productivity Commission with the review of competition in Australia's financial system and funding the ACCC to undertake in-depth inquiries into specific financial systems competition issues.

Also, removing the requirements for ASIC to employ people under the Public Service Act is very important. They might need specialist people in specialist fields. However, it'll mean when they employ those people, they've got to compete with the private sector, so they may have to bid up pretty well with their wages. So, recruiting staff with the knowledge of financial markets and services, and competing against the private sector, will allow that very issue.

ASIC has a lot of powers, a lot of strength and a lot of finance put into them. But, clearly, the royal commission will show they are falling behind in many areas and have to lift their game. Of the bill's amendments relating to competition in the financial system, you might ask the question: what are the benefits of this measure? I already talked about the competition issues. So why is competition in the financial system so important? Competition in the financial system puts strong discipline on businesses to lower costs associated with the delivery of products and services. It further encourages innovation and deployment of new technology, and delivers more choice for consumers at lower prices.

The effects of stronger competition in the financial system are felt well beyond financial markets and into the other parts of the economy. Increased competition can benefit the economy as a whole by improving to productivity and economic growth. I must commend the former Labor government. I don't do this often, because I saw the mess they made of many things, but at least they did away with establishment fees and exit fees. If you have a home loan and you are not getting the best deal, you can walk, free of cost. If you go back many years, to establish a home loan for $200,000, they would say it is a $5,000 establishment fee. And then if you wished to get out of that bank and go to another institution, they may charge you a $5,000 to 10,000 exit fee. It is good to see the charges are gone and that brings real competition back to the system.

Under this bill, there are more issues. Why is the government changing ASIC's mandate to only be required to consider competition rather than promote competition? ASIC has a critical role to play as the conduct regulator of Australia's financial system. The government considers that it is important for ASIC to consider the competition impacts of its decisions. However, it is not necessary for ASIC to go beyond this and look at using its powers to proactively promote competition. This is because Australia's competition regulator, the ACCC, is best placed to promote competition in the financial system by regulating anti-competitive behaviour.

Further, the government provided the ACCC with $13.2 million as part of the 2017-18 budget for the ACCC to undertake inquiries into the financial system competition issues. The government's proposals for ASIC to consider competition is in line with the recommendation of the financial system inquiry. The FSI did not envisage that ASIC would be required to promote competition.

If you ask the question: how does this amendment relate to the Productivity Commission inquiry into competition in the financial system currently underway? The amendment is consistent with the Productivity Commission's draft report on competition in the Australian financial system. The draft report proposes that ASIC could be a competition champion in the context of giving careful consideration to the impact of regulatory decision making for competition in the financial system. Should the government wait for the completion of the royal commission and the Productivity Commission inquiry into competition into the financial systems before implementing these recommendations? My answer is no. This measure is implementing a recommendation of the FSI inquiry, consistent with the Productivity Commission's draft report.

The financial systems inquiry received over 6,800 submissions—that is a hell of a lot of submissions. It undertook hundreds of stakeholder meetings including with financial institutions, market participants and regulators. The government undertook consultation on this measure following receipt of the final report. Stakeholders the government consulted included the Financial Services Council, Choice, Customer Owned Banking Association and the Australian Bank Association. They were generally supportive of a stronger focus on competition in the financial system, including amending ASIC's mandate to include consideration of competition. In addition, there have been significant discussions with ASIC as part of the finalisation of this amendment, so it's more power to ASIC. It is encouraging competition in the financial sector, which we desperately need, not just through loans but through investments as well, through financial planning and through managed funds and superannuation.

I think one of the biggest problems we have in this country is education systems. Our education system is hugely lacking when our year 12s leave school. Many go to university. They will eventually get a job after they are qualified, hopefully. When people go out to work, do they know they have life insurance with their superannuation? Millions wouldn't. Do they know if they change jobs, if they don't change the super fund, it will dwindle away and the superannuation fund will take it? That's why we are bringing in changes for under 25s to opt in for life insurance in their super. Even though ASIC does a lot of educating through the schools, I'd like to see a couple of semesters of school devoted wholly and solely to financial management—warning them about super, where they invest their super; if they change jobs, make sure they have one fund only; warn them of the dangers of credit cards. You get a young mechanic, a rev-head like I was in my young day, and next thing they get a pretty cheap car and a credit card with a $2,000 limit. Well, in the boot goes the big speakers and the big sound system. He goes down the street, and you can hear the 'boom, boom, boom' coming down the street and you think, 'Young fella, you're going to be deaf by the time you're 40 and probably half the people on the street as well.' He's very proud of his car and his big music system, until he realises it will probably take him four or five years to pay the credit card off at a 17, 18 or 19 per cent interest rate compounding. What do we do to educate our kids about this? I think there are huge improvements that can be made in education about finance to teach our people—our youngsters—when they get out in the big wide world of work and are earning their own money: don't leave your superannuation in a fund and say, 'It'll be right, mate.' It won't be right. And, as I said, if you change funds, you'll dwindle your life savings and your retirement fund will just dwindle away.

There are many things we can do about life insurance as well. I think the royal commission has done a great job on life insurance and done a great job all up. I'll say this now: I hope the royal commission is extended, and I hope it looks at insolvencies, receivers and liquidators. I know, for the farmers who appeared at an inquiry we had last year, there were some terrible situations. I remember one case where 3,600 sheep had to be shifted 400 kilometres. Now, being an old livestock carrier, I thought: '3,600 sheep is six six-decker B-doubles. At 100 a deck, that's 600, so 6 B-doubles. Give them $6 a kilometre, and 400 kilometres is roughly $2½ thousand dollars.' For those six trucks, they should have charged about $15,000, but the receiver charged in excess of $90,000, and I question why—even for something like $20,000 to have security there the day they loaded the sheep. This is money that could go back to the creditors and to the banks. I've encouraged the banks: 'Please do not send receivers into family farms.' You can in the corporate world—with corporate farms, the management's retained.

There are many things we need to do, and education, I think, is going to play a major role in the situation. We'll be benefiting future Australians in a big way if we were to have year 10s, for example, spending half the year being trained on financial management and if we take a bit of pressure off ASIC so ASIC can do their job—going out there as a corporate cop and scrubbing the crooks out of the industry. And hopefully, with the support of Labor and the Greens when those bills come back here, those who commit criminal offences can face the proper music when they actually steal. I commend the bill to the Senate.