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Bill Shorten explains payday lending reforms -

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TICKY FULLERTON, PRESENTER: In the last week, Lateline Business has been following the growing
tensions over the Government's proposed reform to payday lending - an industry which has grown 10
fold in 10 years in Australia by offering small, short-term loans at very high interest rates to
consumers who often can't make ends meet.

Assistant Treasurer Bill Shorten is also the Minister for Financial Services driving these reforms,
and we are speaking to him tonight.

Minister, thank you for joining us.

BILL SHORTEN, ASSISTANT TREASURER: Good evening.

TICKY FULLERTON: Well, rates on hold today. Do you hope to see rates go down by year end?

BILL SHORTEN: Listen, the Reserve Bank's independent, the decision it makes are up to it and the
evidence it's got.

I'm pleased the rates are on-hold. We'll have to wait and see what happens with the economy.
There's no doubt in my mind that the mining boom is good for those affected by the mining boom,
working in it, but that we have an uneven economy and that the high dollar and rates are hard in
other parts of the economy.

TICKY FULLERTON: One of the reasons, of course, they've given is the international markets at the
moment, the situation in Europe and the US. We've had the European Commission president here, who
says Europe is not heading for a recession. Some people in business find that comment
extraordinary. What do you think of his views?

BILL SHORTEN: Well, I know that Australia is very interested in what happens in Europe. We're very
interested to see what the liquidity of the European banks are like.

We're equally keen to see, across the north Atlantic, how the Americans are going handling their
debt issues.

We shouldn't forget, in amongst all this gloom and doom about Europe and North America, that India
and China do as much trade with Australia as the whole of Europe and North America.

TICKY FULLERTON: Those two big nations, as you mention, are also dependent on Europe though. Do you
see a recession on the cards in Europe?

BILL SHORTEN: Listen, I think that there are problems in Europe. You just have to look at the
difficulties in the bond markets in Italy, some of the challenges for their private banks, the
German and the French banks in Europe, the fact that there's been a series of bailouts.

So what's going on in Europe is tough, but in terms of what that means for Asia and Australia:
Australia, seven of our top 10 trading partners are Asian economies, you know, our commodities boom
certainly is fuelling items which Asian economies want - so fortunately we don't have all our eggs
in the European basket.

TICKY FULLERTON: Also this week, we saw the unions arguing that the Productivity Commission should
butt out of industrial relations, is that your view?

BILL SHORTEN: I'd need to know what the precise quote was. The Productivity Commission has got an
important role as an independent economic research body, but what I also know is that industrial
relations is best left to the workplace: unions and employers engaging in collective bargaining,
trying to seek value and wealth creation for both employee and employer.

TICKY FULLERTON: But it's an integral part of productivity, surely?

BILL SHORTEN: Sure, and there's many people who have got things to say about industrial relations.
The Productivity Commission reports to me, I have absolute confidence in the Productivity
Commission.

What I also know about industrial relations in Australia is that the conservative debate - which
says that if we could only just get rid of the industrial relations framework we'd have a new
nirvana of productivity - it's just not that simple.

Productivity is influenced by lots of factors, from capital to technology. I also think there's a
big role for leadership in the workplace. In my experience - and I've dealt with 1,000 different
corporations - bargaining can work, you can gain productivity, but it requires hard work.

The time to make productivity improvements isn't at the wage negotiation, it's the intervening two
and three years, and all too often people in between wage negotiations perhaps don't focus as much
about the day-to-day improvement of business which is the real meat and potatoes of productivity.

TICKY FULLERTON: Let's move to your financial reform agenda and payday loans and boy, the payday
industry is pretty mad. They say they will lose 2,000 jobs in largely Labor electorates due to your
proposed cap on fees?

BILL SHORTEN: Well, the payday lenders don't want any change at all. I've met with each of the big
players, I've met with their peak body, my staff and Treasury have been meeting constantly.

There are caps already in a range of state jurisdictions - state governments all agree, Liberal and
Labor, all agree that the Commonwealth should regulate this provision of credit. What we are doing
is pretty modest.

TICKY FULLERTON: One of those people that you've been meeting with, Peter Cummins at Cash
Converters, the largest player, says his EZCORP deal is in tatters now due to the bait-and-switch
that you performed on him.

I'll quote: "The Minister intends to wipe out the micro-lending industry. Over two years of
negotiations with Treasury and Government, we were led to believe the Minister had no intention of
doing that. That's the reason EZCORP withdrew because we led them to believe the same thing."

BILL SHORTEN: I can't tell you about the internals of the business. I do know that in recent years
Cash Convertors has recorded massive profits. I can understand that gentleman and others taking a
position to defend their slice of the business.

What I'm interested in is the consumer. What I'm interested in is making sure that people who are
very poor and have a desperate need for money don't get taken advantage of.

Now I'm sure that it is possible to work through these issues. If the payday lenders just want to
engage in name-calling and try and intimidate the Government and say that, "We're perfect and that
we can't make any reforms to this business", so be it.

I'm interested in making sure that people who are down on their luck, people who have got a
desperate urgency to pay bills do not get ripped off. That's all. And if there's nothing wrong,
people aren't getting ripped off, then we'll work through the issues.

TICKY FULLERTON: They say that the industry says that the cap now means that they're working
basically below the cost of the loan. They say that the number of consumer complaints is
negligible; they've got a petition with 21,000 consumers arguing against you.

BILL SHORTEN: The fact of matter is that there are critics of the payday loan industry, from Joe
Hockey, Shadow Treasurer, right through to all the consumer groups. I didn't invent the controversy
around payday loans. I didn't invent the debate which has a lot of people in the street saying,
"Why on earth do you need to charge 48 per cent interest?"

Why is it that people can borrow a small amount of money, pay a large amount of interest, and if
they can't pay the interest they get rolled over to bigger and bigger debts? What is so wrong with
that proposition which says a person seeking a microloan should not be required to pay back more
than double that amount in a rollover? What is so wrong with requiring that a consumer shouldn't be
given more finance to pay the first loan and get into a greater spiral of debt?

These issues have a solution, but the payday lenders in my meetings just said, "Don't touch us, you
can't ... we are not interested in change". And the problem is that we do get complaints, and if
they say that everything's perfect in their industry well that is not the message I'm getting from
a whole lot of other people.

TICKY FULLERTON: More generally on your FOFA reforms, financial planners are now charging a
percentage of funds under "management" and calling it a fee. Isn't that just getting around your
reforms which are trying to ban commissions?

BILL SHORTEN: No, not at all. Let's be clear. What we want to do in Australia is make sure that
people have confidence in their financial planning advice. We want to eliminate conflicted
remuneration structures. We want to eliminate the sort of scenarios we saw with financial planners
in Trio were receiving 10 per cent commission from the product manufacturer to advise customers to
go into the product which subsequently failed.

TICKY FULLERTON: But if they're still just now receiving a percentage of funds under "management",
isn't that effectively still encouraging them to push a product?

BILL SHORTEN: No, we made it very clear that asset-based fees wouldn't be covered by what we are
proposing, but we are banning trailing fees and commissions.

Five years ago, no one would have said what we're accomplishing now was at all possible. Five years
ago, people said ... some financial planners said it was the end of Western civilisation if we were
to require they work in the best interests of the customer, but we're doing that now.

TICKY FULLERTON: Minister, I can't go without asking you about leadership. The recent Peter
Hartcher piece had you, at a business lunch, described as a particularly "brash performance" by you
in front of some elite businessman who came away with a message of you saying, "I'm ready to serve
as leader", is that accurate?

BILL SHORTEN: No. And when journalists want to write and quote unsourced people, they're entitled
to do it, but I'm happy to go and talk to the journalist - but no, I don't accept that and I don't
even particularly know which event he's referring to.

TICKY FULLERTON: Thank you for clearing that up for us. I thank you so much for joining Lateline
Business.

BILL SHORTEN: Thank you.