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Tuesday, 21 June 2011
Page: 6701


Mr TEHAN (Wannon) (17:23): With your indulgence, Mr Deputy Speaker Scott, I would like to recognise in the gallery today a delegation from the Catholic Church. I would like to recognise, in particular, Bishop Peter Connors, who looks after the pastoral care in my electorate of Wannon and does so very well. I would also like to recognise some other friends, particularly of the Tehan and O'Brien families, who have known my family for many years; on your indulgence, Mr Deputy Speaker, I welcome them to the gallery this evening.

I rise to speak on the National Consumer Credit Protection Amendment (Home Loans and Credit Cards) Bill 2011. There are five points I would like to make on this bill. One is that the coalition will not be opposing it. Amendments have been made; many which are embarrassing for the government have had to be made at the 11th hour and highlight the deficiencies, sadly, in their approach to decision making.

In many ways, this bill was heading down the path of many others that have come into this chamber in that the unintended consequences had not been thought through. Industry and institutions warned on a number of occasions throughout the legislative process that some of the elements contained in this legislation would have unintended consequences—a fact that the government has chosen at the last minute to recognise but still has not recognised in a comprehensive way. The coalition believes that the government's approach of imposing additional regulation and interfering in the commercial decisions of banks is not the preferred approach to addressing market deficiencies. What we are calling for, and I will take this opportunity to call for now, is a full root-and-branch review of Australia's financial system. This was set out in the coalition's nine-point banking plan, put forward by the shadow Treasurer over eight months ago and which, in many ways, has led to the bill before us today.

I would like to go into some detail about the coalition's nine-point plan because it has set the platform for the bill before us today. In many ways the Treasurer has been dragged, kicking and screaming, to present this legislation as a result of what the coalition put forward. When we hear that the coalition is not setting a positive agenda, I think this issue makes nonsense of that claim. In many ways our nine-point banking plan has led us to see these reforms being introduced today, some of which have merit and some of which do not.

In our nine-point plan, we set out that we wanted the ACCC to have the power to investigate anticompetitive price signalling. We were prepared to, and did, put forward a private member's bill on that. We encouraged APRA to investigate whether the major banks are taking on unnecessary risks in the name of trying to maximise short-term returns that conflict with the preferences of those who backstop the system—namely, the taxpayers. We wanted to mandate the RBA to publish regular, rather than irregular, reporting on bank net interest margins, on returns on equity and on profitability so that we can all determine whether the major banks are extracting monopolistic profits. We wanted to investigate whether we could allow Australia Post to make its 3,800 branches available as distribution channels for small lenders. We wanted to ask the Treasury and the RBA to investigate ways to further improve the liquidity of the residential and commercial mortgage backed securities markets, which are an alternative source of funding for small lenders, including consideration of the coalition's proposal to extend the government's credit rating to AAA rated commercial paper in those markets to improve liquidity to further help the small end of town.

We wanted to explore further simplification of the Financial Services Reform Act to make getting out and doing business easier and simpler, so rather than introducing more red tape, as this bill does in parts, the idea was to reduce it. We wanted to direct APRA to explore whether the risk weightings on business loans secured by residential properties are punitive. The idea would be to ensure that small businesses received sufficient financial benefit from pledging their family homes to secure their borrowings. We wanted to resolve the debate about whether the banks should be able to issue covered bonds, in the same way that other jurisdictions allow their banks to issue them, which would provide a more affordable line of credit. Most importantly, we wanted to have a full review of the financial system.

It is now 13 years since the last major review of banking. The Wallis review brought forward substantial reforms in the banking sector. It is high time that we had another review into the banking sector because reform is necessary, but it needs to be done in a way that we think through sensibly how the banking system needs further reform driven through it and what the policy approach should be, and it needs to be done in a way that makes sure we take into consideration the unintended consequences. As I said, the coalition put forward its nine-point plan. We could talk, as I have highlighted here, about the various merits of points one to eight and whether some were necessary and some were not. But I think the last point, the one about a root-and-branch review of our banking regulations, should be supported by everyone in this House. Two months after the coalition put forward its plan, we had the Treasurer dragged, kicking and screaming, to announce his own policy approach in this area. That is what led to this bill before us.

There are a couple of specific items in this bill we need to discuss. The first is the banning of exit fees on new floating rate mortgages. The coalition has said that the government has not thought through this part of the bill. We are not arguing that there is not an issue with exit fees. What we are saying is that there should be a choice. This is particularly important for small lenders—and we get a lot of these out in regional and rural areas. The only way they can protect themselves from the major banks is to have exit fees; otherwise, the major banks, if they are being successful, have the opportunity to move in and offer better rates for a short period of time and take borrowers from these smaller lenders.

So what we are arguing about here is choice, and choice for smaller lenders in particular—the type of lenders who are found in my electorate of Wannon and out in regional and rural Australia. These smaller lenders are trying to compete with the major banks. Sometimes, in order for them to be able to offer lower interest rates, they need to be able to put exit fees on. It gives them the protection they need as smaller lenders. So that is what we are arguing here; we are arguing about choice, about allowing smaller lenders to remain competitive in the market, about enabling them to compete with the major banks. One of the things that they need to be able to do, in some instances, in order to provide that competition is to put exit fees on. We are not saying that there is not an issue with exit fees; we are saying that, in some instances, smaller lenders in particular should be given the choice of using them. That is the point we are making on this issue.

The second point I raise today is about the introduction of fact sheets. The requirement for these fact sheets will now come into effect two years after problems with competition in the banking sector were first raised. Once again we are seeing the government come up with a solution two years after the problem was first identified. And now they are having to backtrack and put an amendment into this bill at the last minute to give the banking sector and other financial institutions enough time to introduce these fact sheets. The fact sheets are designed to provide simple information to borrowers so that they know exactly what they are getting themselves involved in. These fact sheets could be important in making sure that borrowers have a simple way to choose between lenders. But you also have to take into consideration that, in introducing a bill like this, you are putting requirements on our financial institutions. Those financial institutions have to be given sufficient time to enable them to produce these fact sheets in a timely manner and in a manner which will not lead to them being rushed and will not lead to the fact sheets failing to do the job they are intended to do.

Sadly, the government has had to move back the date on which the requirement for these fact sheets will come into effect. It will now be 1 January 2012. One has to ask why it has taken so long for the government to get these bills before us and why it has taken it so long to undertake the necessary discussions with the financial institutions to get agreement on what these facts sheets should look like and what should be in them. One also has to ask why the fact sheet requirements are to be introduced by regulation rather than in the legislation. Once again we are seeing the government bring forward a bill where most of the detail—it is especially so in this case—is in the regulations and not where it should be. It should be in the bill proper so that we get a chance to fully examine it and, if necessary, pass amendments to make sure that there are no unintended consequences.

When the government came into office, it committed itself to taking a regulation out for every regulation introduced. One of the things that disappoints me, in standing in the House today and delivering this speech, is that we are not seeing regulation being removed as regulation is being put in. From what I can gather, the Gillard government is now operating under a system whereby there are 220 pieces of regulation brought into the House for every one being taken out. I know that some Rudd policies have been dumped—some of the policies he implemented have not worked and we have had to move away from them. But that commitment, made before Prime Minister Rudd was elected in 2011—that might be a Freudian slip there; I mean 2007—that for every piece of regulation that came into this House one would be removed, was very noble in its cause and is one which the coalition has supported. It is one which we would have liked to have seen the government support in the introduction of this bill. This bill is regulatory and we need to keep in mind that the more we regulate, the more business costs we put on all our financial institutions. And any costs we impose on our financial institutions, they have to get back from somewhere. Ultimately, that usually comes from the borrower and can mean increased interest rates.

I will make one final point on this bill, and that goes to the Treasurer. The Treasurer has said that this legislation will not be a silver bullet; but, at the same time, when he introduced these reforms, he said that they would drive interest rates lower. We only have to go to the front page of the Australian on the day that these reforms were introduced to see that they were aimed at driving interest rates lower. It will be very interesting to see, now that the legislation has come into the House, whether in fact that is what they will do. Sadly, given the government's wasteful spending, we are hearing from the financial market that interest rates are likely to rise rather than decrease in the next six months. But let us hope that the Treasurer will work wonders and this bill will do what he is on the record as saying it will do—and that is drive interest rates lower. We on this side of the House will be holding him to that commitment, especially over the next six months. Cost-of-living pressures are going up and the last thing that Australian communities need and the people in the community of Wannon need at this stage is further interest rate rises, especially when they are the direct result of the wasteful spending that this government has engaged in and the fact that the government has not been able to show budgetary discipline and bring the budget back into surplus sooner than forecast for 2012-13.