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Wednesday, 12 October 2011
Page: 11599


Mr SHORTEN (MaribyrnongAssistant Treasurer and Minister for Financial Services and Superannuation) (13:30): The Gillard government has a broad agenda to ensure the strength and sustainability of Australia's financial system for the future. Whilst I do not agree with everything the member for Moncrieff said, I do appreciate he made such a valiant effort to be in the House both yesterday and today.

Three years ago, when the global financial crisis hit, we acted decisively to secure the flow of credit to millions of families and small businesses. We are now focused on building Australia as a financial centre by ensuring our banking system has a diverse range of funding options. The Banking Amendment (Covered Bonds) Bill 2011 to allow covered bond issuance is at once both a natural step and a significant step forward towards our future economy. The government has been working on this important reform for some time. In January last year the Treasurer directed the Treasury to begin methodically consulting with industry and our regulators on a framework for covered bonds in Australia. This was 10 months before the shadow Treasurer had even heard of covered bonds when some of his industry mates advised him to include a reference to the concept in his speech to the Australian Industry Group in October last year. We have worked closely with industry to design this bill since early last year. It is a critical economic reform to strengthen and diversify the Australian financial system's access to cheaper, more stable and longer-term funding in domestic and offshore wholesale capital markets. Treasury estimates the government's framework will allow Australian institutions to issue some $130 billion of covered bonds in coming years.

This is just one part of our agenda to build Australia as a financial hub within Asia. Australia has a deep and sophisticated financial market sector. Australia is recognised as a regional leader in investment management, particularly given that we have the fourth-largest number of private funds under management in the world for our superannuation system. We are a regional leader in areas including infrastructure finance and structured products. The strength of Australia's financial services sector is underpinned by a highly-skilled, highly-educated, multilingual workforce and advanced business infrastructure. Finance and insurance is the fourth-largest sector in Australia's economy. It is also a major employer and a growing source of exports. Beyond these more immediate contributions to the economy and employment, a well-functioning financial system is vital for broader economic prosperity given its role in efficient capital allocation. It is also important in addressing future macroeconomic challenges, including the need to grow and manage our retirement savings as our population ages and to diversify our economic base. A deep and liquid covered bond market will help channel our pool of superannuation savings through the financial system into productive investment in all sectors of our economy.

Twenty years ago the Keating Labor government introduced one of the great economic reforms: nine per cent superannuation for every worker in Australia. This year sees the Gillard Labor government progressing the necessary steps by increasing the universal compulsory savings rate from nine to 12 per cent, getting rid of unfair fees and charges to leave more money in people's balances for retirement, finding lost superannuation, consolidating multiple accounts and improving the duties of trustees. By putting money into superannuation Australians steadily build up capacity to have lifetime income security. The goal of lifetime income security is a Labor vision and goal for the whole nation. It also improves the circumstances decades ahead for our children. The more private savings people have to retire on, the less the remaining workers need to pay in tax to help support these retirees. That is why lifting the superannuation guarantee from nine to 12 per cent is so important.

Delivering these latest reforms in covered bonds, financial services and superannuation helps establish Australia for the future. As the Treasurer has confirmed, our framework ensures the absolute security of depositors' savings and the protection of taxpayer funds. This is an important reform for all Australians. It is critical to ensuring our banking sector can keep providing reasonably priced credit to households and small businesses. For that reason it deserves the strongest support of the parliament. I commend this bill to the House.

Question agreed to.

Bill read a second time.