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Wednesday, 27 May 2009
Page: 4523

Mr PEARCE (3:45 PM) —The opposition welcomes this opportunity to reply to the minister’s update on the government’s policy objective of promoting Australia as a financial services hub. At this stage, I do not intend to respond in detail to the particular measures that the minister has touched on today—suffice it to say that these are matters the industry has also raised with me. I recognise that these are important objectives in ensuring that the domestic industry is in a strong and competitive position to export its capability and to continue to grow and generate high-skilled jobs in our country at a time when they are most needed.

My concern today is not with what the Assistant Treasurer has spoken about but, rather, what he has not said. The Assistant Treasurer has today failed to say how, for example, attacking confidence in Australia’s superannuation system is a good thing for Australia’s ambition in the region, or how removing incentives for employees to access share schemes is going to attract and help retain talented individuals in the Australian financial services sector. The coalition’s view is that we can no longer look at policy responses like these in isolation. These things are all interconnected—as the government discovered when it introduced an unlimited bank guarantee which overnight resulted in the freezing of $20 billion worth of mortgage funds. These are all policy decisions which impact upon Australia’s attractiveness as a financial services hub in our region.

The briskly constructed and poorly executed bank deposit guarantee continues to significantly distort the Australian financial system. The key questions surrounding the distortion caused by the guarantee remain unanswered and, indeed, unresolved. The originally unlimited guarantee cover, which is now capped at $1 million, has not been wound back despite calls from many key stakeholders that it be wound back to $100,000. Further, there remains no plan for the phasing out of the guarantee in three years time. This alone has caused more instability within the market and the region than would have otherwise occurred because of the financial crisis.

The removal of the risk and return differential undermined formerly stable and reliable investments such as mortgage trusts and cash management trusts, resulting in the freezing of the funds of 300,000 Australians. These were cash management trusts and funds that people from the Asia-Pacific region were attracted to because they were offered here in Australia. Those 300,000 Australians were told by the Treasurer to ‘go to Centrelink’. Does the government intend to leave these distortions unresolved for the next three years? When does the government plan to restore confidence and stability to the marketplace?

Another troubling aspect of the government’s mismanagement of the financial services sector is their approach to short selling. Short selling is an important mechanism in the Australian Securities Exchange and exchanges across the Asia-Pacific region. Labor has dithered over the short selling regulations and, to this day, the so-called urgent short selling bill remains impotent and vacuous. If ASIC had been provided with an appropriate disclosure regime which appropriately regulated short selling, the ban may have been lifted earlier and players not only in Australia but across the region could again have looked to Australia as an attractive financial services market.

The government’s indecisiveness has resulted in a proliferation of instability in the financial markets, and this has impacted on our attractiveness across the Asia-Pacific region. There is no disclosure regime because the government have not tabled the regulations. On this, however, the government would not agree—because they think that they have—but clearly such claims are contrary to the statements made by ASIC. Last week ASIC said that they looked forward—in other words, in the future—to the commencement of the government’s permanent disclosure regime. On the same day, the SDIA said that what they would really like to see now is the detailed obligations in relation to short selling regulations, which are yet to be released by the government. So it seems that there is no consensus that there is a comprehensive disclosure regime. Again, this is having an impact upon Australia’s attractiveness as a financial services hub in our region.

What is lacking, of course, is certainty and stability. If this government is serious, it needs to consider all financial services policy actions in the context of its overall vision for the sector and for the region. This is the only way to capture and foster long-term investment in our financial services sector. In this regard, we are supportive of the establishment of the Australian Financial Centre Forum and, of course, its objectives. But clearly it does not go far enough, as the above policy bungles highlight.

I want to remind the House that it was the former coalition government that established Axis Australia in 1999 to position Australia as a global financial centre in the Asian time zone. Australia’s role as a global financial services centre in the Asia-Pacific region is one that successive Australian governments have supported through various policy and promotional initiatives. Indeed, the financial services sector today generates some $81 billion in value, or 8.7 per cent of real growth, with an annual average growth rate of 4.3 per cent since 1991. This contribution to GDP is up from 6.5 per cent two decades ago, and its expansion has also aided growth in related sectors such as communications, property and business services, providing hundreds of thousands of jobs for Australian workers.

Let us not forget that superannuation is a vital component of the Australian financial services industry—and confidence in that system is being eroded by this government. In the interests of short-term political expediency, the government has undermined efforts to provide self-sufficient retirement benefits for all Australians and to provide a stable and sustainable budget. This is an important point that again impacts on our attractiveness as a financial services sector. For more than 20 years successive governments have succeeded in encouraging Australians to take control over the planning of their future yet, over the course of one evening, Labor has systematically swept aside any sense Australians may have had of a secure future and instead left working families with uncertainty and a loss of confidence in the superannuation system.

I believe that governments have an obligation to provide a stable and certain environment via which people can plan their future. Labor has instead brought on a crisis of confidence over compulsory super and is shaking the public belief that we should take responsibility as best we can to secure arrangements for our own future retirement needs. As a matter of fact the Prime Minister said, just 12 days before the last election, that there would be no change to the superannuation laws, not ‘one jot or one tittle’. And Senator Sherry, the Minister for Superannuation and Corporate Law, said in April that Labor would maintain the co-contribution scheme. At this difficult time for savings and superannuation and for the whole of the Australian financial services sector, confidence in our laws is paramount for encouraging much needed stability. Uncertainty in superannuation and in other areas of financial services undermines this system’s credibility and undermines the perceived safety of the Australian system. The government seems incapable of realising that continually changing the rules is not the best way to promote certainty and to attract inbound investment. This government would do well to remember that superannuation is the bedrock upon which the funds management industry and many others have developed and matured. It is time to restore confidence in the system and ensure that Australia continues to be seen as having world’s best practice.

In this regard, the coalition also has serious concerns with the government’s approach to competition in the sector. Default fund monopolies are inconsistent with a vibrant and open financial services sector, yet the government tacitly approves the work of the AIRC with respect to the so-called modernising of awards. The more we restrict competition the less our market will be seen as an attractive one in which to do business and the less likely it is that offshore markets will open their doors to our Australian firms. At this time, with record debt and record budget deficits, we need government measures that will attract capital, not measures that will impede its flow. This is a very important consideration for us here in Australia, given our geographic location within the world. We have to make Australia an attractive destination for the flow of capital; otherwise people can send their money elsewhere. We are a long way from the rest of the world and unless we are an attractive destination for capital it will not flow to us. I believe it is time the government took a comprehensive approach to growing Australia’s financial services sector and stopped giving with the one hand and taking away with the other.

Allowing huge structural problems that impact on our financial services sector—such as the bungled bank deposit guarantee—to fester alongside inaction on short selling and the winding back on superannuation is, I believe, a sure-fire way to actually destroy and take away from Australia’s reputation as a financial services centre. Creating a global financial services centre is all about providing certainty and stability. You have to ask the question: how can we attract foreign investment and position Australia as a leading financial market if the government continually undermines, in all of its policy initiatives, certainty and stability? How can you possibly achieve that when certainty and stability are constantly being undermined?

That Australia should be a financial services centre is an important objective for the future of our country. We must consider this goal as a holistic concept. Political expediency by this government should not get in the way of us as a country achieving this goal, of us working towards truly making Australia the most attractive centre for financial services across the Asia-Pacific region. I urge the government to set aside its political strategy and to actually adopt an economic strategy so that Australia can achieve the position of being a leader in global financial services and, most importantly, be a leader in financial services in the Asia-Pacific region.