Mr MARTIN (1:32 PM) —Of all the nonsense I have heard spoken in this place about banking and the former government's attitude to deregulation, I would have to say that the contribution of the member for Moreton (Mr Hardgrave) is on top of the hit parade. I would commend to the honourable member for Moreton the report, the genesis of which is the legislation we are debating today, Financial system inquiry: Final report , otherwise known as the Wallis committee report. Unlike the member for Moreton, who clearly has not read this, Stan Wallis and his colleagues in putting that together did a stocktake of the financial deregulation that occurred under previous Labor governments and gave them a big tick.

Let me just refresh his memory. In 1983 who was it that floated the Australian dollar and freed up the exchange rate controls? The Australian Labor Party; P.J. Keating, Treasurer. Who was it that allowed the entry of foreign banks by issuing licences in 1984 to 16 of them, 15 of which took them up? The Australian Labor Party; P.J. Keating, Treasurer. Who was it in 1987 that deregulated the housing interest rates sector? The Australian Labor Party; P.J. Keating, Treasurer. Who was it that was behind freeing up the capital that could be raised through the acquisition by the Commonwealth Bank of Australia of the State Bank of Victoria that saved the depositors of that state from great grief? The Australian Labor Party; P.J. Keating, Treasurer. Who was it that subsequently put in prudential supervision arrangements and saw the Council of Financial Regulators established? Who was it that freed up foreign bank entry into this country? The Australian Labor Party; P.J. Keating, Treasurer; P.J. Keating, Prime Minister of this country. That is where it came from, my friend. All that this government has done is to take it a step further with the legislation that is here.

Let me refresh your memory a bit more and give you a bit more reading to take on after you get out of this place today. Go and have a look at this report. You talked about what it was that governments had done in the past, particularly the Labor government, in looking at reports and acting on them. Let me refer the honourable gentleman to the report of the House of Representatives Standing Committee on Finance and Public Administration of November 1991 entitled A pocketful of change: Banking and deregulation.

Have a look at that report and then talk to the honourable member for Wannon (Mr Hawker). He knows about it because he was a member of the committee and he now chairs its extension. He is now looking at yet another inquiry into banking services in rural and regional Australia—again an issue which was canvassed here and about which recommendations were made. He knows for a fact that 102 of the 103 recommendations made in this committee's report were adopted by the government of the day. They went to things like supervision. They went to things like assisting consumers. They went to things like providing services in regional and remote Australia. They went to such things that you claimed in your contribution today that we were somehow rooted in the past.

I had a bit of a laugh when you talked about things like service and all the rest of it and then went on to talk about world's best practice in banking. What do you think is going on with electronic commerce today? What do you think is going on with the holes in the wall that appear all over Australia at the present moment? What do you think is going on when you can pick up a telephone and do all your banking from your own place of business? Do you think that is not moving into the next century? Do you think that has all just happened in the last two years since you have been in government? I think not. It has been the process of the banks themselves over a long period of time working in harmony and in tandem with governments and oppositions of the day in developing those products. If you want a history lesson on this, go and talk to the member for Wannon because he knows all about it, and he knows what I am saying is correct.

The legislation that we are dealing with today goes to extending one of the major issues which was canvassed by the Wallis committee report. I found the Wallis committee report an extremely good piece of research and an extremely good summation of what has been going on in the Australian finance sector over the last several years. Having taken an interest in matters dealing with banking for quite some time—I actually chaired the committee inquiry that I referred to—I was particularly interested to see some of the recommendations that might flow from Wallis. In the typical style of this government, whilst they appointed a committee to examine specific issues, they did not go all the way in the ultimate response. I know that the shadow Treasurer, the honourable member for Holt (Mr Gareth Evans), has made some comments on the six pillars policy, and I will make some comments on that in a moment.

The provision that this legislation is seeking to put in place—that is, the Australian Prudential Regulation Authority—is in my view a step in the right direction. Without breaking the confidence of committee deliberations, my friend for Wannon will remember that when we examined the question of prudential supervision back in 1991 there was a body of view within the committee that having one megaregulator was the way to go. I have to say that was my view at the time. I felt we needed to have a megaregulator because banking services were being blurred at the edges. We know that there was superannuation. We know that there were banking services directly. We know that there were fringe dwellers in the marketplace. In my view, it seemed quite ridiculous to make Chinese walls to isolate elements of the prudential supervisory arrangement that was necessary to protect depositors against failures and potential failures in the banking system. As a consequence, in the course of our committee deliberations, I tried to argue that perhaps the best way to achieve that was to have this megaregulator.

Regrettably, my powers of persuasion in 1991 are not as good as they are today. It was the left-wing members of the Liberal Party and people like Steele Hall that would not come to the party at the time. In order to get a fairly unanimous report on this issue, we settled for making a recommendation about having a council of financial regulators that brought together the individual regulatory bodies within the finance system so that they would meet on a regular basis and so that there was a cross-fertilisation in terms of prudential supervisory matters.

I am delighted, therefore, that some seven years later and after another inquiry—this time by Stan Wallis—the government has chosen to put in place this legislation, which recognises the changing nature of the Australian financial industry. It recognises that, by having a single regulator, as is said here, at arms-length from government but not from government policy, as it should be, in the say way as the Reserve Bank operates, it will provide that stability and that level of supervision that consumers expect. If they are putting their money in banks, building societies, credit unions, superannuation funds, mutual societies or whatever, individuals expect and demand that there be protection for that deposit. They expect that they will get a reasonable rate of interest and rate of return on that investment, but they also expect that there will be supervision of that and that that supervision will entail the fact that, if they wish to withdraw the money, it will be there and it will be there with interest. So the main element of these cognate bills is certainly welcome.

A number of issues that have been raised in public debate in recent times about banks do need some further amplification and clarification. For example, I mentioned a little earlier that the member for Wannon now chairs one of the more important committees of this parliament dealing with an inquiry at the present moment on the provision of banking services in rural and remote Australia. One of the key issues that we are examining in that committee is whether or not the process of rationalisation—for want of a better term—of the existence of bank branches from small communities is appropriate and whether there are alternate ways in which banking services can be provided.

On the public record that we have examined so far and from the evidence of witnesses that have appeared, there seem to be some alternatives that can be provided. Certainly smaller financial institutions, particularly building societies and credit unions, are not averse to moving in and operating in small regional and remote communities if a bank decides, for whatever reason, that it is no longer appropriate for it to operate there. When you marry together the changes in technology with that sort of circumstance and some innovative ideas—such as the banks themselves providing mobile banking facilities and travelling through regional areas and so on—you can see that the doom and gloom that some people suggest is going to befall Australia in providing access by all Australians to banking services is a touch overstated.

It is also important to note some of the other issues that have been around for a period of time as to the future shape of Australia's finance industry. The Wallis committee made a number of recommendations. It made several in respect of the so-called six pillars policy. The six pillars policy says that there should be four major Australian banks and two life offices operating—one of which has already converted to a bank and is now offering bank services and, therefore, must be adding to competition in the marketplace. We also have below that a fairly substantial level of regional banks. We have a substantial number of credit unions and building societies in Australia. Whilst we have seen some rationalisations with mergers already taking place, it is still fair to say that for a population of 18 million people in this country, although the country is large and the population is scattered, Australia is fundamentally still overbanked. Australia is still fundamentally overbanked with the number of banks that we have.

Too often we see people trying to equate numbers of institutions with competition, and that is not the case. If there were three major banks and regional banks, building societies and credit unions, you may still get the same level of competition if they were prepared to go out into the marketplace and compete against each other. But, for some reason, everybody seems to be rooted in the concept of having a specific number.

Let us put aside for a minute the six pillars policy and talk about it in a generic sense. I do not think that necessarily needs to be the case. If consumers are looking for business loans, we have seen in the last couple of weeks announcements by Westpac and the Commonwealth Bank that they now have special small business loan packages in place. That has come because the demand has been there, and at long last they have seen an element of their book that is perhaps undersubscribed at the minute and they see a competitive advantage for themselves in getting into the marketplace. So they have gone hell for leather and they are now offering lower priced interest rates to try to attract small business into that area. We have seen the Treasurer (Mr Costello) and the Prime Minister (Mr Howard) take credit for that in the last couple of days and now trying to cajole the other two major banks to provide similar services.

I am sure they will. I am sure they will get to that position because they do not want to see one of their other competitors get a competitive advantage in this. That is the true test of competition. It is not because there are four, six, eight, 10 or 15 players that we classify as banks. It is not because we also have 30-odd foreign banks that are now in the system. The original reason for the foreign banks being granted licences when they came in here—I think everybody would agree—was to provide additional competition to the four majors in Australia.

That did not come in the form of retail banking because what the foreign banks decided to do was look at niche markets. They got into that niche market area very nicely. They were in small business—large business loans particularly—they were in equity financing for business ventures and so on. They provided a real need in the community. Since the Labor government lifted that restriction on the number of foreign banks that can be here, we have seen quite a number extra come into the place, more licences have been issued and they have been operating and providing competitive banking services—albeit in niche markets. But they are broadening that horizon.

Saying that by introducing this legislation it has been the Liberal government under John Howard and Peter Costello that has led some revolution in the Australian finance industry and the banking industry generally and that it is only in the last two years that we have seen improvements in competition and deregulation take place is disingenuous at best. As I have said for a long time, financial deregulation was one of the hallmarks of the Keating legacy to this country.

I have to say, Madam Deputy Speaker—and you would know this too—that from time to time we on this side of the parliament are criticised for it. We are criticised because we did open up the Australian banking system to more competition. When we go to Labor Party branch meetings there are still people there that talk about the good old days and ask, `Why don't you as a party come forward and advocate buying back the Commonwealth Bank,' as if it was something special again. We sit there and have to listen to this.

The Commonwealth Bank is one of those issues that keeps being raised. The Commonwealth Bank, when it was established, had a real role to play. It was a central banking function as well as just a savings bank. The central banking function—that is, the Reserve Bank function—was taken away in 1959. When the Reserve Bank was established the Commonwealth Bank became just another bank. Which was the first bank that would go in there and start kicking to death pensioners with the fees and charges on pensioner accounts? It was the Commonwealth Bank. Yet people used to say to the Labor Party, `Gee, I tell you what, you should find several billion dollars to buy it back and bring it in to public ownership.' Why? That is a bit off the subject, but it is not a bad issue. I am sort of warming up to the task.

We were talking about the six pillars policy. I did want to say one or two things about that. Today's press, for example, was quite interesting. Both the Australian Financial Review and the Sydney Morning Herald talked about this $130 billion deal that is fuelling a bank revolution. They are talking about America's Citicorp and Travelers Group getting together in one of the world's most significant mergers and the implications that might have in Australia.

I know that the member for Wannon's attention would have already been drawn to the editorial in the Australian Financial Review about that issue. It highlights some of the things I have been saying about the numbers of banks and whether policies on both sides of this place should be maintained in keeping a six pillars policy in place. I heard the Deputy Leader of the Opposition and shadow Treasurer a little earlier on this subject. He is right. The Australian Labor Party's policy at the present moment is that the six pillars policy should be adhered to.

Mr Hawker —You don't agree?

Mr MARTIN —You agree.

Mr Hawker —No, you said you don't.

Madam DEPUTY SPEAKER (Hon. J.A. Crosio) —Order! If you have any remarks, you will make them through the chair.

Mr MARTIN —I understand, Madam Deputy Speaker. But he is all right. He is one of the few on that side who is all right. We have worked quite well together on finance issues over a long period.

The question is, though, whether or not that as a policy into the future will not require reconsideration. When you see what is happening around the world with mergers, within Australia, for example, National Australia Bank has been one of the great advocates for allowing Australian banks to merge to make it stronger to take on the rest of the world. Successive governments have refused that opportunity. Indeed, the present Treasurer has said that that is not part of what the present government would allow. He has even qualified whether or not a foreign bank could buy into one of the majors in this country as well.

However, Don Argus from the National Australia Bank, a great advocate for allowing such acquisitions to take place, clearly sees some benefit. Being frustrated, as NAB is, they have decided to challenge the world anyway. They have recently acquired a second major US mortgage organisation and are expanding into the rest of the world on their own. It was interesting to read some of the recent financial press that suggested now that Argus and NAB are going down that particular road they do not need to look at some second-string bank like Westpac, which they once had their eye on. I do not think Westpac would be too happy to be described in those terms, but I think you get the general drift of what I am trying to say.

Policy in financial services and policy in banking changes as time moves on. The world is a global village. With the revolution and technology that has occurred, it allows financial transactions to move right around Australia and the world in a split second. To think, then, that the sorts of systems that we have in Australia and had back in the 1930s and 1940s are going to be applicable as we go in to the next millennium is just nonsense.

Governments have the responsibility of keeping under review the way in which the financial system is structured in this country. The present government carried out a review that I have referred to already. The legislation we are debating is a product of that review. I think it is timely. I think it is worthy of support. I think it is worthy of rapid passage through this place. But I say again: this should not be the end of it. Any government must keep the financial system under review always with the idea that it should be sound, that it should be well managed and that consumers are getting benefits from it. If those criteria are not met, then it needs to be changed. (Time expired)