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Monday, 16 September 2002
Page: 4163


Senator CONROY (7:46 PM) —I thank Senator Murphy for that contribution to the debate on my disallowance motion. I think he made a number of very valid points, particularly his last one. Unfortunately I do not share your faith in the government's or the industry's bona fides on this, Senator Murphy. I hope to be proved wrong; I hope that we can still reach an agreement with the government on this.

I think it is important to go through some more of the issues on this. Recently IFSA commissioned some work on the level of fees and charges, particularly those for managed investments in this country. At the time they also said they were going to commission an international comparison, because they wanted to show that, following the introduction of the Managed Investments Act, there had been a fall in fees and charges both here and, comparatively, across the world. When they tendered their evidence to the Senate inquiry in this area, in actual fact they supplied the Australian data, which showed a small fall following the introduction of the Managed Investments Act—and Senator Ian Campbell played an important part in introducing that act. One of the reasons why we all supported MIA was that that had been held out to us.

Interestingly, despite promising to deliver an international comparison, it may come as a surprise to you that IFSA did not supply any information. When IFSA were questioned about this, they said, `Look, it's very hard to organise this and to compare apples with apples. It's a tricky area. It's very complex and very complicated.' They could do it for Australian products, funnily enough, but when trying to look at products issued in the US and products issued here in Australia they suddenly lost all their expertise. That is interesting because they did not have to go too far to get some evidence and some expertise on the US figures, because the SEC, the premier regulator in the United States, had recently done some work on the level of fees for managed investments in the US. Despite the efforts to pretend that you could not compare the US figures with the Australian figures, in actual fact you could: they were very comparable figures. In actual fact what IFSA's Australian figures and the United States regulator's figures and calculations showed was that for virtually identical products with the same features—the same apples with apples, the same pears with pears, the same oranges with oranges—Australians were paying twice the level of fees compared to US consumers. You have to ask yourself: why is that? Why is it that Australians have to pay twice as much as an American consumer for a managed investment? Why does an American consumer pay half? That is the valid question. You have to say that at the end of the day it is because we do not have enough information for Australian consumers.

The bill is well intentioned, and Senator Murray and you have argued that this was designed to protect consumers. I never lose sight of the fact that this bill was initiated with the purpose of being beneficial to consumers. We are seeing here an attempt by the industry to run away from disclosing to Australian investors the true level of fees they are being charged. That is what this debate is about. Senator Sherry spoke for 20 minutes and outlined case after case under the OMC regime, which is what we have now—the so-called international best practice championed by those on the other side of the chamber. These atrocities, these outrages, these rip-offs are taking place under the regime that Senator Campbell wants to put into legislation. They are happening now. This legislation will not change that. Senator Campbell wants to see some cover for IFSA, the fund managers and the people who own them now—the banks—and we are seeing here an attempt to give some protection, via a dodgy OMC, to the big end of town to protect it against those battling consumers. When those consumers that Senator Sherry is talking about try to seek redress in a court— if we agree to this regulation today—the big institutions will be able to stand up in court and say, `But we haven't done anything wrong.' The act in the opening statements says:

The main object of this Chapter—

that is, chapter 7—

is to promote:

(a) confident and informed decision making by consumers of financial products and services while facilitating efficiency, flexibility and innovation in the provision of those products and services; and

(b) fairness, honesty and professionalism by those who provide financial services; and

(c) fair, orderly and transparent markets ...

The OMC meets none of these. The OMC is something put in place to protect financial institutions against consumers. They will be able to stand up in court, wave it and say, `The government said that we could do this.' That is what is at stake here. What is at stake is whether or not consumers are going to continue to be ripped off, overcharged and misled about the fees they are charged by this government's complicity. That is why the Labor Party is fighting so hard on this. That is why the Australian Consumers Association is saying, `This is not good enough.' That is why ASFA have said, `We have actually gone and tested this. This is something the Treasury did not do, something the government did not do. We have actually tested this and it is a disaster. People are confused, they are worse off and we would rather see the status quo continue than put this in place.'

I go back to the offer that was made by Senator Campbell in his letter to me when he said that he was happy to progress the suggestion of a sunset clause and had asked the CEOs of ASFA and IFSA to suggest a reasonable timetable for testing of the existing provisions and formulating any improved position. He said:

I believe that a sunset date of no earlier than 11 March 2004 would be reasonable but I will be guided by key stakeholders including investors and shareholders.

So he has gone away and he has consulted and, as Senator Sherry has made the point and Senator Murray and Senator Murphy acknowledge, there was a division. ASFA would have preferred six months to 12 months and they have written to everybody outlining their position: having an implementation phase and outlining the way to handle the transition and the costs that Senator Murphy has talked about. There is a way to handle all of that. But Senator Campbell has fallen into line with the other industry body. He is saying that he wants to give life to the IFSA position; namely, those with the single strongest vested interest, owned by banks now, who want to continue to mislead their customers about how much they are being charged.

At the end of the day is it so much to ask, from one of the richest industries in the world, that they tell the truth to their customers about what they are being charged? Is it so much to ask? Is it so much to ask why Australians are paying twice what Americans pay for virtually identical products? It is not so much to ask, but this is an industry that is going to resist this every single step of the way. It is the same as accountants resisting change to their auditing practices. As Senator Murray and Senator Bartlett would know, it is the same as this government and this very same parliamentary secretary, who resisted disclosure of executive remuneration—they wanted another review, another postponement of the inevitable. Four years down the track they are clutching to their bosom the fact that those changes were made to the Corporations Law, changes that were moved by the Labor Party and the Democrats. Now they want to claim them as their own.


Senator Ian Campbell —It was Senator Chapman actually.


Senator CONROY —Senator Campbell, I can actually give you the page of Hansard where Senator Cook, on behalf of the Labor Party, moved the changes and they were supported by Senator Murray. I do not know what you think I am talking about, but when it comes to executive remuneration you were on the Hansard record opposing it and then accepting it as inevitable because the numbers in the chamber were going to make that disclosure and transparency happen. Four years down the track after resisting disclosure and transparency, this government now wraps itself in the very amendments that it rejected and resisted. Down the track that will be the same again, because you cannot beat transparency and disclosure. It is what makes a market function, Senator Campbell. It is the basis of the capitalist society and, as Maurice Newman, Chairman of the Australian Stock Exchange—and someone who is known to you and me—often says, `Sunlight is the best disinfectant.' I say, `Hear, hear,' to Maurice Newman. What we want to see in this industry is a bit more sunlight for consumers. We want them to stop losing thousands and thousands of dollars they do not know they are losing. We want them to know that their final benefits at the beginning of their retirement have not been significantly reduced.

To allow the richest industry in this country to continue to deceive and mislead their customers should not be allowed by this Senate. There are some I know who have been frightened by the statements by the industry and frightened by some of Senator Campbell's commentary that if you knock this regulation out things will be worse. All of the atrocities, all of the rip-offs that are taking place now are taking place under this regime. The OMC is something Senator Campbell continues to say—and I am still scratching my head about this—was introduced by the Labor Party. I am fascinated by how the Labor Party has introduced this. It is in no piece of regulation and we do not control both chambers, so I do not know how the Labor Party introduced the OMC at any stage—eight years, I think you said, that it has been around. It has been industry best practice for eight years, and all of the consumers who have been ripped off have been ripped off under this industry best practice for the last eight years.

Do not fall for the scare campaign that there is going to somehow be nothing more. You will be sanctioning big companies to be able to go into court, hold up the Corporations Law and the regulations and say, `But the government said we could mislead these consumers. The government said that, as long as we put the OMC in place, it was okay.' The fact is consumers cannot understand it—and I invite Senator Harradine, Senator Harris and Senator Bartlett to have a look at the OMC and try to understand it. The OMC misleads consumers about what they are paying. It is dangerous and more costly than it should be if we do not make this government and this industry come to the table and do something right by their customers.

Do not be fooled by a scare campaign. All the rip-offs that have taken place are happening now under this very regime, and they just want to give the government a bit of practice. How on earth can the OMC pass a fairness and honesty test; a fairness, orderliness and transparency test. The OMC will protect the business community and the financial service providers, and this government wants us to vote to let them do it. I say let us not. Let us try to find a compromise, Senator Campbell. The Labor Party is still willing to work with you on a compromise on this. We do not trust industry self-regulation on this one, I am afraid. The industry are the ones that are resisting this. We believe we need strong regulation. All we are doing is mandating disclosure. We are not mandating any other behaviour. We are trying to mandate disclosure. What is at stake today is whether or not we can get disclosure.


Senator Ian Campbell —You are trying to knock it out; you are not trying to fix it. Where is your replacement?


Senator CONROY —Unfortunately, Senator Campbell, as you well know, the agreement with this bill was for the legislation to come first and the regulations to come six months later. The trick with regulations is of course that we do not have the capacity to amend on the floor. We can only reject or accept. A government acting in good faith would have sat down with us when it first received my February letter, not wait until a few weeks ago to seriously engage. It is very hard to take you in good faith when you will not talk to us.


Senator Ian Campbell —Where is your alternative?


Senator CONROY —We do not seek to impose an alternative, unlike you, Senator Campbell.



Senator CONROY —That is right, Senator McGauran. We are not seeking to say that we know better than the collective interests of all the industry and consumer groups. We are not actually doing what Treasury has done—put something down and say, `That is it; that is the final outcome.' We are actually saying let us work together to improve what is there. I am not being critical of Treasury. There was an impossibly tight deadline imposed for the implementation phase and Treasury worked as hard as it could to get a regulation in place so it was ready by the implementation date. That is the truth of what happened here. We should not suddenly say that the OMC is some sort of sacred tablet. What happened here was that the Treasury got jammed. It had a start-up date of 11 March. There was an election. It desperately needed to put something down. It was not trying to pretend it was the world's best piece of disclosure—it was a starting point. It was a challenge to the parliament to say, `Here is the best we can do in a very short time.'


Senator Ian Campbell —You are having delusions.


Senator CONROY —Tragically, Senator Campbell, I know your involvement because you were banished by the Prime Minister once before. I know you go to bed each night thinking only 284 days to go until the Prime Minister's 64th birthday, thank God. I know you go to sleep each night saying that. Minister Hockey put the time line down—I am not blaming you for the time line. I am not blaming you for the fact that it was a very rushed situation. But it is because it was rushed that the obligation is on the parliament to try to rectify any deficiencies—and deficiencies have been identified.


Senator Ian Campbell —Five years is not a rush.


Senator CONROY —Five years is certainly not a rush, and that is what you are trying to do. You are trying to make sure customers are ripped off for another five years. You are trying to ensure that customers are not able to find out the truth about how much they are paying for another four to five years. I repeat to you, Senator Campbell, the Labor Party is prepared to work with you. We do not believe that what you have offered so far in terms of the hours goes far enough, and I know Senator Harris shares some of my concerns. I share Senator Murphy's concerns that we know it is possible for you to just designate the public holidays as well. Senator Harris would like to see the hours narrowed, and I am very sympathetic to Senator Harris's position. We are prepared to withdraw part 3 on the understandings and commitments you have given on the floor of the chamber.

We are also prepared to accept your proposition, which you were going away to investigate, of a review beginning on 11 March 2004 for six months. Many products will be out by then—you know that to be the case. Many products will be rolled out. Are you suggesting there will be no new products for the next two years? We are prepared to accept that.


Senator Ian Campbell —I did not offer that. You know that.


Senator CONROY —You wrote to me. You said that you believed that a sunset date no earlier than 11 March would be reasonable. I am offering you a sunset after that. I am saying that the review starts in March 2004 with the sunset a little bit further down the track, and I am offering six months— even nine months if you want to drag it out until the end of the year. But the sunset clause needs to come in to help drive the change. We are prepared to offer that: a sunset clause on 31 December 2004. Labor is prepared to do that against its will, can I say. We do not believe that this is an optimal outcome for consumers but, as a gesture to try and resolve this issue tonight to the satisfaction of everybody, we are prepared to offer that. (Time expired)