Mr HAWKER (8:27 PM) —In listening to the member for Hotham speak on the Financial Sector Reform (Amendments and Transitional Provisions) Bill (No. 1) 1999 and cognate bills, I felt he was rather confused and confusing. The contribution left one wondering just how much work he had done in looking at some of the proposals and the thrust of this legislation. While we would welcome his qualified support for the bills, I did find it a bit odd that, even though the Wallis inquiry reported nearly two years ago, he was trying to insinuate in some of his earlier comments that it has taken the government this long to respond. I find that very hard to understand, given there were 115 recommendations in the Wallis inquiry.

One of the major recommendations from the Wallis inquiry—and which we have heard quite a lot of debate about already—was the setting up of APRA. That was no small change to financial regulation, yet I remind the honourable member that APRA actually came into being on 1 July last year. So I do not know that this accusation about the government being tardy in responding to the Wallis inquiry is all that reasonable; I think it is fairly unreasonable.

I found quite a few of the comments in the member for Hotham's response somewhat inconsistent on these sorts of points. I almost felt at one stage that, in his comments, he was actually agreeing with the government's approach to economic management. I thought that was a very welcome response, and I hope he will continue to offer that support.

I think all people in Australia recognise that the fact Australia is in such a sound economic position at the moment is very much due to the government's economic management, very much due to the fact we have the budget back into balance and very much due to the strong leadership of the current government. It is those factors that have placed Australia and Australians in a very much stronger position than they otherwise would have been—particularly given the Asian financial crisis and the fact that something like six of our 10 major trading partners are currently in recession. Yet Australia continues to post very strong economic growth and some rates that are the envy of not only the rest of the world but, secretly anyway, the Labor Party, who wish they could have achieved something similar.

I do find his comments on the four pillars policy a little bit strange also. Given that the four pillars policy was never set in concrete under Labor, why should it suddenly be set in concrete under the coalition? Let us face it, it was not set in concrete under Labor. But suddenly, because the boot is on the other foot, you say that it ought to be. I find that a bit confusing too.

The whole question of whether APRA, the Australian Prudential Regulation Authority, should or should not consult with the ACCC seems to overlook the fact that the ACCC has its own charter. Its responsibilities are very clear on the question of competition. The question of whether or not it has to consult seems to overlook the fact that the ACCC is independent and can indeed step in, as the Treasurer has made very clear on a number of occasions, when it comes to the whole question of competition.

Before getting back to the first two bills before the House, I want to say that I did have a wry smile when the member for Hotham talked about the third bill in this cognate debate, the Income Tax Rates Amendment (RSAs Provided by Registered Organizations) Bill 1999 . He had the sheer audacity to come back to the l-a-w tax cuts. I just could not believe that. He was actually prepared to revisit the l-a-w tax cuts. No wonder he has left the chamber. He did not want to hear that one. It really was quite amazing.

I think it is important to note that these bills are part of the government's moves to further improve financial regulation. I welcome the qualified support. I trust that, as we go through this debate and as the Senate looks at the bills, we will see continuing support from the opposition on these bills. As is, I think, recognised by the opposition spokesman, the member for Hotham, the financial services inquiry, led by Stan Wallis, provided a very good framework for further improving our financial regulations in Australia. As I said, there were 115 recommendations. The govern ment has moved with, I think, responsible haste to implement these recommendations, and I think that we are already seeing some of the benefits.

The financial system inquiry reported in March 1997, and the first bill, the Financial Sector Reform (Amendments and Transitional Provisions) Bill (No. 1) 1999 , is one of a package of 11 bills implementing some of the recommendations. As Chairman of the House of Representatives Standing Committee on Economics, Finance and Public Administration, there are some aspects of this bill in which the committee does have a particular interest, these obviously being the changes that come with financial supervision and the changing of responsibilities from the Reserve Bank to the Australian Prudential Regulation Authority. Mr Deputy Speaker Causley, having also served on the committee in the last parliament, you would be very much aware of these changes as, indeed, is the next speaker, the member for Chisholm, who is also taking a very keen interest in these changes. The logical progression of changing this regulation and setting up APRA has been welcomed throughout the financial community and has, in fact, been strongly supported in this parliament.

Schedule 1 of this bill seeks to expand and clarify APRA's functions undertaken as a result of an agreement with a state or territory. We recognise that it is important that we bring building societies and credit unions under the one regulatory authority. That has been recognised also by the states, and they have moved to make complementary legislation to achieve this.

The bill will also enable APRA to be contracted to provide prudential regulation or advice services on a fee-for-service basis, subject to the agreement of the minister. In schedule 2, the amendments extend the scope and reach of the Banking Act 1959 to include not just banks but all deposit taking institutions. Clearly, if we are going to have an efficient financial sector, we ought to bring the whole gamut of deposit taking institutions under the one prudential regulation. As has already been discussed, the bill also removes the responsibilities and powers of the Reserve Bank to supervise banks and gives them to the Prudential Regulation Authority. The bill also allows for the establishment of a single licensing regime for banks and other non-bank deposit taking institutions to be overseen by APRA.

As I stated earlier, APRA was established in July last year with operational autonomy to prudentially supervise banks and other deposit taking institutions, life and general insurance companies and superannuation entities, and to develop policies in the performance of that role—a very responsible role.

To come back to the role of the House of Representatives Standing Committee on Economics, Finance and Public Administration, it will be very much part of the responsibilities of that committee to call APRA to account to the parliament—as, indeed, the Standing Committee on Economics, Finance and Public Administration already has the responsibility to call the Reserve Bank to account to the parliament. We look forward to that opportunity. I believe that the committee will, as has been demonstrated already with the Reserve Bank, show that it is more than up to the responsibility to undertake that task, and we will continue to take our role very seriously and responsibly.

Clearly, prudential regulation is concerned fundamentally with the quality of a financial institution's risk management systems, and APRA has been granted extensive powers of investigation, intervention and administration for the purpose of resolving the position of financial institutions which have become unviable. It is very important that the Australian public and the financial sector do have confidence that that role can be undertaken properly, and I believe that this bill helps to build on that role of APRA.

As I said, there are already moves under way to allow APRA to assume the regulation of building societies and credit unions. It is expected that, ultimately, APRA will have the responsibility for the entire financial sector except for merchant banks, finance companies and non-superannuation investment funds. The legislation also allows APRA to be funded by fees levied on institutions under its supervision in lieu of the current arrangement where by the banks deposit one per cent of their eligible liabilities to the Reserve Bank. So that will obviously be an important change.

APRA will also have the power to issue and, most significantly, the power to revoke banking licences—a control, incidentally, that the Reserve Bank did not have. I would have thought that the member for Hotham would have taken that point on board because it is very significant. When he was talking about shortcomings, I think he overlooked this and a number of other matters when he was trying to nitpick the bills. He was struggling to find something that he could really be critical of, so it was just a nitpicking exercise rather than a serious analysis of the shortcomings because, frankly, I do not think you could find them.

It is also important to note that APRA will have the power to set prudential standards in addition to those made under the Banking Act. APRA will also be able to issue enforceable directions in relation to these standards, thus strengthening its capacity for early intervention in problem cases. That is the sort of reassurance that the Australian public expects from the government, and indeed I believe that the parliament will support that.

I note that the opposition is to move two amendments. The first amendment is to the Financial Sector Reform (Amendments and Transitional Provisions) Bill (No. 1) 1999 . As I said earlier, the first point in this amendment really is a bit of nitpicking and overlooks the obvious when it talks about taking two years to respond. The fact that APRA has now been in place and operating for nearly nine months shows, quite clearly, that the government has moved quickly. It is self-evident to anyone who has the faintest understanding of what this is all about that setting up something new like APRA in any time less than the government has done would be asking the almost impossible. I would commend Graeme Thompson and his team who have set up APRA because I think they have done it very efficiently, very smoothly and very professionally. That is what would be expected, and that is the way the government has moved. As I say, this amendment really is nonsense in the light of that simple fact.

Part 4 of the amendment talks about the question of competition and bank fees and charges. I would draw to the attention of honourable members that the House of Representatives Standing Committee on Economics, Finance and Public Administration in fact focused on this in its hearings with the Reserve Bank. In fact, at our last hearings held late last year, we raised this very issue with the Reserve Bank. We anticipate that the Reserve Bank will be responding to the committee at or before its next hearings in a few months time where in fact we will be seeking to find out just what the net position is for banking customers when it comes to the relative changes of the competition bringing down interest rate margins versus the increase in fees and charges that most bank customers are now paying.

In moving to the second bill, the Financial Sector (Transfers of Business) Bill 1999 , I note that the member for Hotham in his amendment again makes the qualification `while supportive of continuing reform of the financial sector'—in other words, he is trying to have two bob each way, I think. He goes on to call on the government:

. . . to confirm that it will not use the provisions of this bill to relax its `four pillars' policy;

As I said earlier, this wears a bit thin when you look at the fact that, when Labor were in power, they had 13 years to do this, and they did not. They did not amend the Banking Act. They did not see the need to amend the Banking Act. I believe that the former member for Blaxland would have violently opposed any amendment of the Banking Act that would have taken away his discretion while he was Treasurer to have control over whether or not banks were able to merge. I hasten to add that the government has no intention or plans to allow that course to occur, but I do find it somewhat strange that the member for Hotham should be coming in here demanding something that in 13 years of government he never saw the need to have.

I commend the Treasurer for the way that he has handled this whole approach to the reform of financial regulation. I believe that the Wallis inquiry was one of those landmark inquiries that this nation is fortunate enough to get every decade or so. I believe that the government has responded in a very responsible, measured way, which has shown that we are willing to undertake that reform in a way that will enhance the financial sector regulation while at the same time allowing the proper development of our financial institutions to be truly competitive as we go into the next millennium.

I would reject the comments of the member for Hotham. They really do show a somewhat confused approach to these bills, and there are a lot of inconsistencies in some of his comments. Nonetheless, I welcome the way he seemed to endorse the government's economic management in a very cautious manner. I hope that he will continue to find ways of doing that because, when a government is performing well, it does behove the opposition to give a bit of credit where credit is due. Sometimes when you listen to question time you would find that hard to believe but it seems that, when we come into the chamber later in the day, it is possible to believe. I hope that we might find ways of expanding the member for Hotham's compliments when he feels that they really are due.

So I think the government will be rejecting the amendments that have been put by the opposition. And I believe that these bills do, in fact, represent another step in implementing the Wallis inquiry's recommendations. It shows that the government is indeed setting out to build up a financial regulatory authority and a financial system that is capable of taking Australia into the next millennium with a financial system that not only is strong but will indeed enable us to attract business from the region and will truly make Australia a financial centre for this region—something that I know the Prime Minister and the Minister for Financial Services and Regulation are very keen to promote and something that I think, justifiably, this legislation helps to support.