Louise Pratt (WA, Australian Labor Party) Share this | Link to this | Hansard source

My question is to the Minister for Superannuation and Corporate Law, Senator Sherry. Can the minister please update the Senate on how Australia’s regulators are responding to the challenges posed by the global financial crisis?

Nick Sherry (Tasmania, Australian Labor Party, Minister for Superannuation and Corporate Law) Share this | Link to this | Hansard source

As Senator Conroy and I have said on many occasions in the Senate, I am sure listeners and senators would be aware of events in global financial markets. The very serious events caused by what is known as the US subprime financial crisis have been very fast moving, and the circumstances have made it very difficult for regulators and participants to make decisions in this climate.

The global financial crisis has now seen 30 banks worldwide—it was 27 a fortnight ago—collapse, or be bailed out, or be nationalised or be forced to merge. That has of course had a significant impact not just in those countries, particularly Europe and the US, but worldwide. It has also had a significant impact on confidence, on the share market and on economies across the world. As the Australian government have said before, and I will say it again, we are well placed to weather the storm but we are not immune from these events.

The crisis is causing a severe downturn in global economies, and all the countries in what is known as the G7, the seven largest economies in the world, have experienced negative growth at some point this year. The government have acted to protect our financial system and our economy from the worst effects of this crisis. We have been upfront and honest about the job that requires doing. Economic growth in Australia is expected to slow to 1.5 per cent in 2008-09, according to the Reserve Bank, or two per cent, according to Treasury. This is slower but still solid growth given the international circumstances we face. As I said earlier, all of the G7 countries have had at least one quarter of negative growth, but Australia has not had those circumstances. So growth still remains solid and it compares favourably with other advanced economies.

We have a strong and well-regulated financial system. Four of the world’s strongest banks are right here in Australia. As I mentioned earlier, 30 banks have failed worldwide, but no banks have failed in Australia, which is, in part, due to the decisive action this government has taken in providing a bank guarantee. It is at this point that our world-class regulators, who are the guardians of our financial system, have worked very effectively with the government to protect Australia’s financial markets and the economy from the worst effects of this crisis. Our Australian regulators are world class and deserve support for their prompt and very strong efforts in the current climate—the Australian Prudential Regulatory Authority, the Australian Securities and Investments Commission, the Reserve Bank of Australia and Treasury.

It is very unfortunate, I think, in this very, very serious climate, that what we have seen from the Liberal-National Party opposition is blatantly partisan with personal attacks on the integrity of officers in these various organisations. Such attacks at this time do not inspire confidence in our financial system, and I think they reflect poorly on the Liberal opposition. Whilst we are not immune, we have an independent assessment that both the Australian government and the Australian regulators are doing a very good job. It would be fair to say that our banks and financial system are weathering this global storm well as a result. As has been said before, the events in the US illustrate just what can happen when there is poor regulation or oversight of financial markets, institutions and practices, particularly lending practices. For years in Australia the last remaining areas of financial services, approximately 20 per cent of Australia’s financial services— (Time expired)

Louise Pratt (WA, Australian Labor Party) Share this | Link to this | Hansard source

Mr President, I ask a supplementary question. Could the minister update the Senate on further measures the government is undertaking to protect investors during this crisis?

Nick Sherry (Tasmania, Australian Labor Party, Minister for Superannuation and Corporate Law) Share this | Link to this | Hansard source

As I was saying, in Australia about 20 per cent of the financial services market is still regulated by the states and territories. This includes areas such as nonbanks, margin lending, mortgage brokers, trustee companies and a range of consumer credit. The Labor government together with the state governments—and, I might say, the new Western Australian Liberal-National Party government—have all agreed that it is time to transfer regulation of these various areas from the states and territories to the Commonwealth with a single standard national regulation of all financial services in Australia. Whilst this is an important issue in terms of improving consumer protection and improving efficiency in our financial services market, it is also taken against the backdrop of the disasters that have occurred in the US, which, in part, were down to ineffective regulation of and consumer protection in the distribution of mortgage products in that country. (Time expired)