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Tuesday, 21 June 2011
Page: 6727


Mr CRAIG KELLY (Hughes) (19:20): I rise to speak on theNational Consumer Credit Protection Amendment (Home Loans and Credit Cards) Bill 2011. In his second reading speech on 24 March this year, the Treasurer said:

I announce new reforms to promote a competitive and sustainable banking system to give every Australian a fair go.

What the Treasurer failed to mention in his second reading speech was that one of the reasons we need reform to promote a competitive and sustainable banking system is as a result of the Treasurer's monumental blunder in approving the Westpac takeover of St George Bank in 2008. The Treasurer has no excuse. He was aided and abetted by the flawed and misguided advice from the ACCC, an organisation dangerously ignorant of the risks to our nation's long-term economic prosperity, by allowing markets to degenerate into the state of hyper- concentration. For while the test applied by the ACCC to approve a merger is under section 50 of the Trade Practices Act, it is no more than crystal ball gazing to guess if the merger will result in a substantial lessening of competition. The test that the Treasurer applies to such proposed banking mergers arises under section 63 of the Banking Act 1959, which provides that the Treasurer must take the national interest into account when considering such a merger. Simply, the St George-Westpac merger—the removal of St George Bank as an active and aggressive competitor in the market—was not in the national interest and the Treasurer abrogated his responsibility by allowing this merger. It is worth noting that even former Prime Minister Keating has made it clear that he would have never agreed to this merger, due its detrimental effects on competition. But this misguided decision from the Treasurer should not have come as any surprise, for we have seen time and time again that this government possesses the reverse Midas touch—from Ruddbank to GROCERYchoice, to winding back border protection, to the ceiling insulation scandal, the green loans affair and live cattle exports, everything this government touches turns to mush.

The long-term success of our economy and our future economic prosperity rely on increasing our nation's productivity. As history has taught us time and time again, it is small business that drives innovation and productivity improvements, not the big end of town.    As a former vice-chairman of the General Electric Company once noted:

Not a single distinctively new electric home appliance has ever been created by one of the giant concerns—not the first washing machine, electric range, dryer … razor, lawn mower, freezer, air conditioner, vacuum cleaner, dishwasher, or grill.

These were all created by small and medium sized firms. The success of small business depends upon the ability of small businesses to obtain finance and start-up capital. But when you reduce the number of banks in the market, as the Treasurer did by allowing the St George-Westpac merger, you reduce the number of options for small business to obtain finance and, in doing so, you undermine the long-term economic prosperity of our nation.

The history of business is littered with stories of businesses' successes after being rejected by bank after bank and finally finding a bank that would provide start-up capital and give them a go. I will give just one example. Almost every child in the world has heard of and loves Disneyland. Today, as well as Disneyland in California, there is Disneyworld in Florida and there are Disneylands in Hong Kong, Tokyo and Paris. Over one billion people around the world have visited a Disneyland. Disneyland is one of the great business success stories in history. Yet, when Walt Disney went to the banks to try to get funding for his very first Disneyland, he was rejected by more than 100 banks before finally being accepted. The top executives of the major banks turned Disney down because they thought no-one would come. Just imagine if, at the time, some misguided fool had swallowed, hook, line and sinker, the merger buzzwords of 'synergies', 'greater economies of scale' and 'improved efficiency' and allowed a series of mergers whereby Walt Disney only had four major banks to turn to—the current situation in Australia. The Disneyland that is known and loved throughout the world would never have come into existence.

We will never know what new products, new inventions and new jobs will fail to come into existence, killed before they were born because of the deluded theory which underpinned the Treasurer's allowing the St George-Westpac merger, thereby reducing the number of banks in the market which small business can seek to obtain finance from. We will never be able to compute the price that all of us will pay and how our standard of living will be lower than it would otherwise have been because of the Treasurer mistakenly allowing our banking sector to become more concentrated.

As the Treasurer scratches his head, befuddled as to why productivity in the nation has stagnated under his watch, he need look no further than the damage being done to our small business sector by our overly concentrated banking sector. History has shown time and time again that small business plays the leading role in the experimentation and innovation that lead to technological change and drive productivity growth. If you attack small business, as this Labor government has done time after time, if you make it more difficult for them to obtain finance, as this government has done, you will retard productivity growth.

Over the past few years, we have witnessed an unprecedented increase in concentration in our banking sector. The problem is not only the reduction in the options of small business to obtain finance; it is also the increasing interest rate margins that small businesses pay and the fees and charges that they are being slugged with. Figures from the RBA confirm that the big banks have now become parasitic on the small business sector. The banks are simply gouging small business on interest rate margins.

It is not only interest rate margins that small business are being gouged on. Late last week, we had the RBA release further data exposing how the banks are ripping off business, as these figures showed that the banks had massively increased fees and charges to businesses—by 14 per cent, to hit a record $6.87 billion—and this increase came despite business borrowing actually falling. So the banks are actually loaning less but they are taking more. This is the classic test of an uncompetitive market.

If the Treasurer wants to give every Australian a fairer go in regard to banking, he should be tackling the huge problem in our banking industry, and that is the penalty fees and charges imposed by the big banks. Although there has been a slight recent decline in bank fees charged to consumers, which the banks have made up for by slugging businesses, according to a 2009 report by Fujitsu Consulting, Australian bank customers pay the Western world's highest bank fees. The report's author states:

A lack of competition in Australia meant local banks were collecting $5 billion in fees from consumers, making them the most expensive in the western world.

The report's author goes on:

The average household is, in our view, paying up to $200 more each year than they should thanks to the wide range of fees and charges levied in Australia, and to the lower levels of competition in the market.

The real concern that this government should be tackling is that many of these fees and charges imposed by the banks are possibly unenforceable. It is a well-established legal principle that a contractual term—

Mr Craig Thomson: Mr Deputy Speaker, I rise on a point of order. We have been going nine minutes on this contribution. The member has not addressed one issue in relation to this bill. He has not been on the topic at all. He has had a complete spray. It is time he was brought back to what the bill is actually about.

The DEPUTY SPEAKER ( Hon. DGH Adams ): The honourable member for Hughes will address the bill.

Mr CRAIG KELLY: I am talking about bank fees. The real concern is that many of the measures this bill proposes to regulate the fees and charges imposed by the banks are possibly unenforceable, for it is a well-established legal principle that a contractual term which requires one party to the contract to pay the other 'innocent' party a sum of money upon default or breach of that contract is only enforceable if it provides that the sum is a genuine pre-estimate of the loss or damage suffered by the innocent party. If the fee is inflated to a level where it does not represent a genuine pre-estimate of loss or damage suffered, it is a penalty and is unenforceable at common law.

In our democracy only the government can issue penalties, not the big four banks. The possible illegality of many forms of bank fees that this bill attempts to regulate is something that a well-resourced ACCC should have been looking at.

Mr Craig Thomson: Mr Deputy Speaker, I have the same point of order. You have been very generous to the member. Far be it from me to defend the banks, but we have had a 10-minute spray against the banks. Not one part of this contribution has gone to what a very important piece of consumer protection legislation this is. It is time the member be brought back to what this bill is about.

The DEPUTY SPEAKER ( Hon. DGH Adams ): The bill is the National Consumer Credit Protection Amendment (Home Loans and Credit Cards) Bill 2011. I ask the honourable member for Hughes to address the bill before the chamber.

Mr CRAIG KELLY: Thank you, Mr Deputy Speaker. This bill addresses the issue of bank fees and charges to consumers and that is the issue that I am addressing. The question is the possible illegality of many forms of these bank fees, and that is something that a well-resourced ACCC should have been looking at, especially remembering that Australian consumers pay the highest bank fees in the Western world. But, as usual, the ACCC were asleep at the wheel on this issue—and no wonder, because the ACCC have been more interested in spruiking government policy.

As if to highlight the inaction of the ACCC on bank fees and charges, the UK Office of Fair Trading, the UK's equivalent of our ACCC, have been taking an active and vocal role in standing up for consumers by dragging the banks through the courts to challenge the legality of many of their fees. While the ACCC have closed their eyes, one might ask: where is the government's minister on competition? It would help if this government even had a competition minister. Following the disastrous stints of the members for McMahon and Rankin as failed competition ministers, this government no longer even has a competition minister. So, despite all the problems we have with competition in Australia, with the grocery duopoly punishing consumers—

The DEPUTY SPEAKER: Order! I ask the honourable member to come back to the bill. The bill deals with credit card protection and matters dealing with information for consumers. It does not go to a lot of the points that the honourable member is dealing with. This is not an appropriation bill, on which a wide-ranging debate is allowed; it is a bill dealing with a narrower matter. I ask the honourable member to come back to the bill.

Mr CRAIG KELLY: Thank you, Mr Deputy Speaker. This bill addresses the issue of fees and charges, how they should be regulated, how they should be listed and what information consumers could have about them, and they are the issues that I am addressing.

Since the ACCC and the government have dropped the ball on looking at and regulating these fees and charges, it has been left to a private law firm to run a class action test case seeking to prove that many of the banks' fees and charges that this bill seeks to regulate are in fact unlawful penalties that may have to be refunded. This case is already proceeding before the courts and involves over 27,000 individuals and businesses, holding 40,000 personal and business accounts, acting against the ANZ, attempting to recoup over $50 million worth of unenforceable penalties that the bank has gouged from consumers.

This bill simply misses the mark. It fails to address the problems in our overly concentrated Australian banking sector, a sector which has now become so highly concentrated and so big that the big four banks are all too big to fail, whereby they require special regulation to protect them from the forces of competition. This bill does little to improve a competitive and sustainable banking system and it fails in its aim to give every Australian 'a fair go'. It fails to address the gouging of small business and consumers by the banks. That is why it is correct that the bill was sent off to the House of Representatives Standing Committee on Economics and that is why the government should support the coalition's call for a root-and-branch review of Australia's financial system.