Mr KELVIN THOMSON (8:13 PM) —I am pleased to join in such a lively debate. This package of the Australian Prudential Regulation Authority Bill 1998 and cognate bills applies some of the recommendations of the Financial System Inquiry report, widely known as the Wallis report. I want to speak briefly about some aspects of the Wallis report which I have concern about. I want to examine those aspects of the Wallis report which apply to the superannuation industry, a public policy area which this government has handled appallingly—seriously undermining public confidence. Unfortunately, the areas of the Wallis report that the government seems to have embraced are areas which will potentially undermine it even further.

The Deputy Leader of the Opposition (Mr Gareth Evans) has already outlined Labor's position on these bills—that is, our broad support for the initiative of creating two super regulatory bodies, one overseeing the prudential requirements of the financial services market and the other overseeing the consumer protection aspects. Of concern, however, is the diminishing of consumer protection as a result of reducing the jurisdictional powers of the Australian Competition and Consumer Commission to regulate the financial services industry. Labor has been broadly supportive of the government's financial services regulatory changes, for example, the regulation of managed investments and the regulation of companies. After all, some of the bills presented by the government have been previously canvassed by Labor when in government and they have simply been simply re-badged by this government to gain credit for work that Labor has already done.

But we have not been supportive of the government's changes to the regulation of the superannuation industry and superannuation changes in general, which have undermined public confidence in superannuation as a savings vehicle, with potentially disastrous implications for retirement income levels and for national savings.

Like the package we have here before us today, Labor will be carefully scrutinising any further changes to the regulation of corpora tions through the CLERP reform process to ensure that the interests of ordinary Australians are not swept under the carpet either in the name of economic efficiency or in the name of a Treasurer seeking to deliver to the big end of town to consolidate his chances of taking over the Liberal Party leadership.

The package of bills before us gives effect to major changes to the structures of the regulatory bodies themselves by establishing two megaregulators, the Australian Prudential Regulation Authority and the Australian Securities and Investment Commission, lovingly known as APRA and ASIC. The government, therefore, is changing the regulation of financial services markets—for example, collective investments, superannuation, company law, Corporations Law, payments systems, financial sector shareholdings and banking—at the same time as it is changing the regulatory bodies themselves.

ASIC will effectively see the Australian Securities Commission, ASC, combine with the Insurance and Superannuation Commission, ISC, to become the principal consumer protection and market integrity regulator across the financial services market. In addition to ASIC, we have the creation of APRA, which will oversee the prudential regulation of banks and other deposit taking institutions, life and general insurance companies, superannuation funds and retirement income accounts. APRA represents the third component of what the Treasurer (Mr Costello) describes as the `three fundamental regulatory objectives for Government intervention in the financial system'—that is, the prudential supervision component.

Like ASIC, APRA is a major upheaval of the currently fragmented prudential regulatory bodies and rolling them into the one body presents challenges of its own. But APRA is also being created at a time of major change to market regulation. That these two bodies are being created during a time of such great regulatory change is of concern to the opposition and is something that I believe the Senate Economics Committee should be examining closely.

Unless the government is vigilant, some things are bound to fall through the cracks as the regulators change and the regulations change at the same time. That is just about a rolled gold certainty. Things falling through the cracks is certainly not a desirable aspect of Australia's financial system and it is something that we have been trying to avoid. I think we have all been trying hard to learn some of the lessons of the eighties and about the operations of the white shoe brigade. But, as the Four Corners program pointed out on Monday night in its investigation into what it called the `superannuation stakes', there is the potential that neither of these regulatory bodies will be up and running by the 1 July this year start-up date that is anticipated. That may not be due to legislative delay in the parliament. It simply may not be physically possible to achieve these changes by the start date or to have the two bodies operating effectively in time to oversee the regulatory changes.

Four Corners last Monday night mentioned the example of the regulation of the superannuation industry as an area where regulators need time to adjust to new public policies. That is one of the many reasons why I have been calling on the government to support an opposition amendment to schedule 5 of the Taxation Laws Amendment Bill (No. 7) which would delay the start-up date for choice of superannuation fund until 1 July 2000, which would allow consumers of superannuation to be educated to make an informed decision about choice.

A single licensing regime for financial services, advisers and intermediaries is a welcome step in the right direction, particularly given the further deregulation of financial services at the retail level which is occurring in, for example, the superannuation market.

I want to turn to two specific issues raised in the Wallis report which affect the area that I have opposition responsibility for: superannuation industry. Those two issues are the reduction in consumer protection as a result of theft and fraud and the moving of the regulation of what are called `excluded superannuation funds' from the ISC or ASIC to the Australian Taxation Office.

The government is proposing to weaken superannuation investor protection from theft and fraud. The protection of superannuation investors is something that Labor treats very seriously and we are very proud of our record in this area. Labor established the SIS legislation with the purpose of ensuring the prudent management and essential protection of the superannuation deposits of all Australians. To date, with few exceptions, SIS has proven to be an outstanding piece of regulatory legislation which has effectively safeguarded superannuation assets. However, if the government gets its way, this will change and the protection of investor superannuation funds from theft and fraud will be reduced.

Under current arrangements, the Treasurer has the power to grant financial assistance to a superannuation fund which suffers a loss of funds due to theft or fraud when he or she considers it to be in the public interest. The Treasurer may also impose a levy on each superannuation fund in the industry of up to 0.05 per cent of the funds' assets to raise the required amount to meet funds which are stolen or lost through fraudulent conduct.

However, the government's proposed new arrangements in response to the Wallis report will significantly weaken superannuation fund protection measures. The government has listed the Superannuation (Fraud) Amendment Bill on its forward list of bills to be introduced in the autumn sitting session, but it has not been introduced for reasons the government knows best. Indeed, this government's management of the legislative program has been little short of abysmal. But we do expect to see that bill introduced some time in the next sitting, and I believe it will reflect the recommendations of the Wallis report as adopted by the government which are as follows. Firstly, under the new measures the Treasurer would need only to apply a national interest test, rather than a public interest test, in determining whether he or she should grant financial assistance to a superannuation fund which suffers from fraud or theft. Labor believes that the public interest test should remain. The government's No. 1 priority should be to secure every Australian's retirement nest egg from theft or fraud.

Secondly, the new measures propose that the Treasurer's grant of financial assistance to a superannuation fund should be reduced from up to 100 per cent, under the current arrangements, to 80 per cent of the entitlement of the beneficiaries of a fund. That represents a significant watering down of the current superannuation protection measures. I am sure that millions of Australians who have money invested in superannuation accounts will be less than impressed to hear that, under the government's proposed model, in the event of theft or fraud of their superannuation money they would receive only 80 per cent of their entitlements compared with the full 100 per cent that they are entitled to under the current arrangement.

Labor strongly opposes any measure to reduce the entitlement of all Australians to receive the full amount of their superannuation benefits if they are lost as a result of theft or fraud. This is particularly important given the increased spread of superannuation and the increased level of contributions as a result of the Labor government's superannuation policies. They would have increased further, of course, had the Liberal government not failed to honour its commitment to pay the three plus three per cent co-contribution into superannuation.

Thirdly, the government's new arrangement will apply only to superannuation fund losses which result from `fraud'. Does that mean that the superannuation funds will no longer be protected from theft? Labor strongly believes that there should be no weakening of the current arrangements which protect superannuation money from both theft and fraud, and that the arguments put forward by the Wallis inquiry concerning moral hazard are wrong. The concept of moral hazard rests on the notion that individual superannuation investors should make their own decisions about the safety of their superannuation fund. To insure them 100 per cent, so it is said, is to encourage unsafe behaviour by investors and by those trustees who invest moneys on their behalf.

I want to suggest that that is an incorrect assumption. First, superannuation investors, ordinary employees who receive superannuation contributions paid on their behalf by employers, do not currently have the appropri ate level of education to make this type of investment decision. All the evidence to the Senate Select Committee on Superannuation inquiry into choice of fund confirmed that. Secondly, the compulsory nature of superannuation contributions requires that superannuation funds are protected by the highest possible protection regime. There should be no doubt in the mind of the public that, if their superannuation moneys are stolen or embezzled, the government can make a decision to levy the industry to replace those moneys. On the issue of moral hazard, it is the superannuation industry itself which is better qualified and placed to detect theft and fraud rather than an individual who is having superannuation contributions paid into a fund on their behalf and who is much more remote from the process. In that sense, the industry has an incentive to self-regulate to detect theft and fraud from within in order to avoid being levied by the government to account for shonky behaviour.

The issue of theft and fraud is unique. It is a crime which is generally unusual in the superannuation industry, although there are exceptions. It is not like risky investment strategies, where a fund manager indulges in risky behaviour with the thought that if things go wrong the rest of the industry will bail him or her out. The SIS Act has provisions in it, including personal responsibility for directors, designed to protect against that type of behaviour. So the argument that there is a moral hazard in allowing the government to fully replace superannuation moneys in the event of theft and fraud is wrong, and I look forward to debating that issue when it comes before us. With a greater reliance on superannuation for retirement, Australians must be able to rest easily in the knowledge that their retirement nest egg is safe and secure.

The other issue that the Wallis inquiry raises is the issue of the supervision of excluded funds shifting from the ISC, which is now to become the ASIC, to the Australian Taxation Office. On the face of it, I am not opposed to such a move. The ISC has had some concerns about the regulation of small excluded funds, particularly in the area of taxation concessions. However, we do intend to closely examine this issue to ensure that those with excluded funds and are not unfairly disadvantaged.

I do not think that we have yet said enough in this place concerning the problems associated with the proposed introduction of choice of superannuation fund by 1 July this year. Yesterday I issued a press release calling on the government to support Labor's amendments designed to delay the start of choice of superannuation fund. I have already outlined to the parliament my view that the government should delay choice as part of a commitment to ensuring workers are able to understand the decisions they will be forced to make under the government's model. However, the government's insistence on beginning choice of fund on 1 July has drawn a lot of criticism from the industry and the media, not least because we question whether the regulation package will be in force by that time. It is becoming increasingly clear that the government is not interested in listening to employees, employers or the superannuation industry concerning this issue but wishes to drive choice forward as part of a quest to give the banks a share of the superannuation pie in order to give the banks ever larger profits.

It ought to be said that what the bills in front of the House do is to establish a new regulatory regime and that without such a regulatory regime for banks people simply would not put their money in them. They would not have confidence that there is an appropriate regulatory regime in place and that therefore their money was safe. This puts banks in a privileged position, as does their special place in terms of the issuing of banking licences. With that privileged position, in my view, come obligations to the community. But banks are saying to us directly that their obligations are not to the community, not to their customers, but to their shareholders alone.

We have witnessed this in the drive to push people away from retail banking towards automatic teller machines and towards EFTPOS. That is a drive which has no community support and, if the banks maintain it, there will be a massive public backlash. In my own electorate of Wills, going back a month or two, the Commonwealth Bank moved to close its Strathmore branch. It was the only branch in that suburb and one which enjoyed very strong support from local people—the bank never denied that—and one which was very important to the Napier Street Strathmore shopping centre. Notwithstanding massive community protest, hundreds of people attending a public meeting, thousands of petition signatures and hundreds of letters—

Mr Price —Which bank?

Mr KELVIN THOMSON —Indeed, which bank? The Commonwealth Bank proceeded to close that branch. They did not stop there. They have written to me a couple of days ago announcing that, not content with that, they are proposing to close the Brunswick East, Brunswick West and Oak Park branches as of Friday, 1 May. Given that that is my birthday, it is a pretty ordinary birthday present, but it is even worse for those people who make use of the Commonwealth branches in those places.

I know the Oak Park branch quite well. When I was a state member of parliament, my office was located in the Oak Park shopping centre. That is a shopping centre that has endeavoured to keep itself alive and to attract patronage. Just a fortnight or so ago they had a festival, and that was particularly well received. There was a lot of public interest and support for it, and it was a sign of a future for that shopping centre. But along comes the Commonwealth Bank now and says, `We've got no need of the Oak Park branch'—indeed, there were a couple of branches there before the amalgamation with the State Bank—`and we are going to close that branch.' They have said the same thing concerning Brunswick East and Brunswick West.

As I said earlier, this is simply part of a drive to say to people, `We don't want you to use banks any more; we want you to use automatic teller machines or, even better from our point of view, we want to completely hand over this part of banking to the supermarkets and get you using the EFTPOS.' It is my view that automatic teller machines represent an unsatisfactory alternative for many older people who are uncomfortable with the technology and also uncomfortable with the security. There have been a number of reports of people being assaulted and robbed at automatic teller machines, whereas it is, of course, much more difficult for people to hang around bank branches waiting for customers to come out. The security issues are important issues.

Not only have the banks been progressively closing their branches and providing a lesser standard of customer service; it is also the case that they have been hitting us ever harder with fees and charges. Indeed, some of the reports about lowering of interest rates, particularly spouted by the Prime Minister (Mr Howard), are in fact belied by some of the facts. We have had drawn to the opposition's attention recently the case of Gerard White, a farmer in Ballarat, who had a Commonwealth Bank rural loan which was reviewed every two years—due to be reviewed in April this year—with a two-year rate of 9.6 per cent. The bank contacted him in January and said it would be willing to refinance his loan but under what they call a `better business loan' with an interest rate of 12.52 per cent. So, for him, his rates increased by of the order of 50 per cent.

Similarly, as housing interest rates have fallen, banks have been raiding fees and charges. Under this Treasurer (Mr Costello), who is taking no interest in the issue of monitoring fees and charges, this has gone on to new and ever higher points where banks are earning billions of dollars. It is said that $1 in every $3 earned by the major banks now comes from fees, with more than 200 different charges. We have seen account-keeping fees up to $7 a week, branch withdrawals up to $1, overuse of ATMs up to 45c a transaction, EFTPOS use up to $1.25, dishonoured cheques from $12 to as high as $35 and special cheque clearance from $8 to $15. It was reported in the Financial Review in February that, last year, the banks made $6.3 billion in fees and charges. This is simply not good enough and the public is entitled to much better treatment from the banks. (Time expired)

Motion (by Mrs Bishop) put:

That the question be now put.