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Thursday, 7 July 2011
Page: 8020

Mr BRADBURY (LindsayParliamentary Secretary to the Treasurer) (12:51): The government will not be supporting this amendment brought forward by Mr Bandt. There are a number of reasons and I will set out some of those reasons shortly. But can I say from the outset that the government endorses much of the sentiment of what the member for Melbourne has just said, particularly in relation to the importance of competition in this sector. That is why it is important that that be a discussion that be given its proper context. The proper context of that discussion is to acknowledge that the price signalling legislation which we are currently debating in the bill before the House is one component in a broader package of reforms that the government announced in December last year under the competitive and sustainable banking package. This parlia­ment has already passed and enacted into law a number of those measures and they will contribute towards the objectives of that package. The objectives of the package were to empower consumers, to provide support to the smaller lenders so that they could provide competitive pressure into the marketplace, and to secure a sustainable banking sector into the future. I will not go into each and every one of the measures but some of them continue to be under discussion as far as the government is concerned, and a number of consultative processes have previously been engaged in.

In relation to the substance of the proposal that the member for Melbourne has brought forward, the government has concerns on a number of levels. The first and most significant concern we have is that there is in place a consistent and very effective framework for competition policy, particu­larly in relation to mergers and acquisitions. Section 50 of the Competition and Consumer Act is the vital provision that needs to be considered in this context. Section 50 has been in place in this country since 1993. It is representative of similar provisions that exist in similar legislation elsewhere in the world. There has been a considerable amount of jurisprudence built up around section 50, and in addition to that jurisprudence has been the practice of the regulator in the way in which they have dealt with merger and acquisition proposals in the past. It provides the community, the business community and indeed individuals at large with some certainty around how these provisions will be dealt with when any future merger or acquisition is to be considered.

One aspect of the proposals within the amendment put forward by the member for Melbourne that the government has partic­ular concern about is the impact of these provisions where an institution were to be in some financial distress. To seek to put in place a mechanism which would preclude or prohibit the ability of one of the larger institutions to enter into a merger or acquisition of a smaller institution may well lead to an outcome that is against the national interest and against the economic interest of the company concerned, the institution concerned. Certainly it may lead to an outcome that is against the interests of shareholders, employees of the company, depositors and other creditors. We think it is appropriate that there be flexibility available for mergers and acquisitions to be considered in those circumstances. We think that is adequately dealt with under the existing regime and we certainly support that continuing to be the case.

I will make a few further observations in relation to the way in which section 50 operates. I specifically draw the House's attention to a non-exhaustive list of items set out in section 50(3) of the Competition and Consumer Act. This sets out some of those matters to which regard should be had when a merger or acquisition is being considered in the context of the substantial lessening of competition test. Factors that need to be considered include the actual and potential level of import competition in the market, the height of barriers to entry to the market, the level of concentration in the market, the degree of countervailing power in the market, and it goes on. There are a range of factors that guide the deliberations of any court and indeed the regulator. We believe that they form part of an effective regime set out in the Competition and Consumer Act, and that is a regime we believe should be retained in its current form. So the government will be opposing this amend­ment.