Note: Where available, the PDF/Word icon below is provided to view the complete and fully formatted document
 Download Current HansardDownload Current Hansard    View Or Save XMLView/Save XML

Previous Fragment    Next Fragment
Wednesday, 21 March 2012
Page: 3923

Mr TEHAN (Wannon) (19:04): I rise to support the member for Hasluck and to congratulate him on an excellent speech where he detailed, I believe beyond doubt, the reason why if the passage of this future of financial advice legislation is to go ahead we definitely deserve to see the government cooperate and put through the coalition amendments. If they do not, we will be forced to oppose it because the bills as they stand at the moment cannot be supported. Before I detail the reasons why the bill in its current form cannot be supported I would like to go back a step, and start by thanking Senator Matthias Cormann, our shadow Assistant Treasurer, for the excellent job he has done in prosecuting the case as to why this bill needs serious amending. Senator Cormann very kindly came down to the electorate of Wannon—it was about six months ago now—to talk to small businesses, to talk to the financial services sector, in the electorate of Wannon, to go through this bill and to get an idea of what their concerns were. It was very interesting and informing. We had 60 people at the forum. It was very well attended because in Wannon we have a lot of small regional and rural towns, and there are lots of financial services businesses which give financial advice, especially to surrounding agricultural producers or people who work in local manufacturing et cetera. So, at a very well attended forum on this subject matter, Senator Cormann spoke very objectively about the Ripoll inquiry and what we were intending to occur as a result of the Ripoll inquiry and the making of some regulatory change in this area.

Senator Cormann pointed out very clearly that what we in the coalition were looking for was regulatory change where the parliament would focus on making things better, not just more complex and more costly for everyone. This was a message which was overwhelmingly well received within the forum. Senator Cormann then asked for questions, and the very first question that was asked by one of our financial services providers was: 'Senator Cormann, do you think that this bill that is going to come before the House, given who is taking it there, will favour the big super funds rather than all the small business providers of financial service advice?' That was the first question which came from the audience; that is what they were worried about. They understood who the relevant minister was who was putting this bill forward. They understood that he is very much beholden to and at the behest of the trade union movement and that, as a matter of fact, he is a former big union boss, so not only is he likely to prosecute on behalf of them, he understands their requirements and their needs. He also understands that as he wants to step further in this place he is going to need their factional support to deliver the numbers for him.

That was the question which came from the floor: do you think that it is going to be that connection to the big trade unions and to their industry funds that will in the end determine what this bill looks like? Senator Cormann said that he hoped not but he feared that would be the case. The fact that we are standing here tonight debating this bill and the way it has been presented in its original form shows that that question was, sadly, absolutely spot-on. It is a pity that the minister could not have been more objective, because the Ripoll inquiry was, and it set very clear guidelines as to how this legislation could look and how we could get bipartisan support for this legislation in this place. Yet this government could not put the legislation together in a form whereby it just said: 'Okay, we have agreement across parties on what the regulatory burden should look like when we make the changes here. We can do it in such a way that we reduce costs, simplify it and change the nature of the regulation but do so in a way which actually helps the industry to flourish rather than to help one part of it flourish and the rest of it to decline.'

So that is where we are today, and this is why the coalition really wants to make four points about this bill in its current form. Firstly, it is unnecessarily complex and, in large parts, unclear. Secondly, it is expected to cause increased unemployment. Sadly, that increased unemployment will occur in those smaller businesses in this sector. It will not be the big industry funds tied to the trade union movement; it will be the mum and dad businesses, especially out in the regional and rural areas and the suburbs. They are the ones which, sadly, are going to suffer and that is where the unemployment is most likely to occur.

Thirdly, it is legislating to enshrine an unlevel playing field amongst advice providers inappropriately favouring a government-friendly business model. That really draws on the second point. This bill will mean that those mum and dad family businesses will suffer. It changes the playing field and it does so in a way favourable to those bigger organisations that I have already mentioned. Fourthly, it is likely to cost about $700 million to implement and a further $350 million per annum to comply with, according to conservative industry estimates. That is the regulatory burden that this bill in its current form will place on this industry. That is a very important fact to remember—and I am going to come back to this point. When you look at how the government went about examining the regulatory burden that this legislation would have on the sector, it did not follow due process. I will come back to that because Senate estimates has been very enlightening when it comes to that point.

As I mentioned earlier, on our side we think that when you pursue regulatory change you have to focus on making things better, not more complex and more costly for everyone. Yet that is what this bill does. What we need to hear from the government is: why, when we had the Joint Committee on Corporations and Financial Services conduct a comprehensive inquiry and make a number of well-considered and reasonable reform recommendations, did the government not sensibly adopt those recommendations and take them forward? Why has it gone beyond that? Why has it sought to favour one part of the industry over another? That is the one question I would like to leave with the government tonight. That is what we need an explanation on. I think it is beholden on the minister especially to give that explanation as to why he is serving the interests of a narrow base in this sector rather than putting forward legislation which would provide the whole industry a secure future going forward.

There are a few points that we need to touch on about the legislation. The bills do not meet the government's own standards. This is a very important point. I would like to read into the Hansard part of the transcript from Senate estimates because I think it is enlightening when it comes to this point. Jason McNamara is the executive director of OBPR. When he came before Senate estimates, he had this to say:

Mr McNamara: Treasury provided a number of RISs—

regulatory impact statements—

in that area. I think that there were six separate RISs in that area. But we found those RISs not yet adequate. They had not met the best practice requirements.

Senator CORMANN: … My question is: why?

Mr McNamara: In regard to those RISs, essentially the impact analysis was not at a standard that we would pass.

Senator CORMANN: You say 'the impact analysis'. Can you be a bit more specific?

Mr McNamara: The impact analysis of a regulation impact statement is generally the area of the RIS that refers to the costs and benefits associated with the policy. It is the detail—the impact on business, consumers or the government. It is that sort of analysis—'this change is meant to do particular things in the economy; it is likely to have these costs and these benefits'.

Senator CORMANN: Are you saying that the government did not even have in front of it adequate information to assess the cost benefit of the FoFA regulation changes?

Mr McNamara: The government did not have an adequate RIS in front of it when it made those changes. That is true.

…   …   …

Senator CORMANN: … the government's proposal to introduce the mandatory opt-in requirement and the annual fee disclosure, are they the sorts of things that were not properly assessed?

Mr McNamara: Yes. There were six elements.

Senator CORMANN: Can you list those six elements for us please?

And it goes on. I could read the whole transcript into the Hansard. It is there in Senate estimates for everyone to see. Basically, the government decided that it was going to pursue an agenda to favour a select few and impose huge regulatory cost burdens on the rest of the industry. I will again repeat what the regulatory cost is. That regulatory cost is about $700 million to implement and a further $350 million per annum to comply with, according to conservative industry estimates. No wonder the government did everything it could to make sure that there was no proper regulatory impact statement done on this legislation. No wonder it wanted to hide the true burden of this legislation on the sector.

The coalition will be moving a series of amendments, the most important of which are that the government be required by parliament to table a regulatory impact statement on FoFA assessed as compliant by the government's Office of Best Practice Regulation; the opt-in be removed from FoFA; the retrospective application of the additional annual fee disclosure requirement be removed; the drafting of the best interest duty be improved; the ban of commissions on risk insurance inside super be further refined; and the implementation of FoFA be delayed to 1 July 2013 to align it with MySuper.

These are straightforward amendments. They will improve this piece of legislation beyond doubt. They will immediately take away, in particular, the regulatory burden—that $700 million start-up burden and then the $350 million per annum compliance cost. These are sensible, straightforward amendments which are true to the Ripoll inquiry. As we know, the Ripoll inquiry had broad support in this parliament. It is the basis on which this legislation should have been built. It was not, and sadly that is why on this side we are saying that we will oppose this legislation for what it will do in particular to all those mum and dad family businesses in the suburbs, in the regions, in the rural areas, who will be severely impacted by this draconian legislation.