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Labor takes aim at big banks, promising royal commission -

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MATT WORDSWORTH, PRESENTER: Labor has opened a new political battle line over some of the nation's most powerful companies.

Today, shadow cabinet declared that if it wins government, it would hold a royal commission into the banking and financial services industry.

It's an attempt to shame the Prime Minister into more dramatic action than his verbal lashing of banks earlier this week.

The Government's dismissed the move as a massive distraction.

But it sets up an election war based on duelling inquiries - Labor with its banks, the Coalition over unions.

Political correspondent Sabra Lane.

MALCOLM TURNBULL, PRIME MINISTER: We expect our bankers to have higher standards. Our bankers have not always treated their customers as they should.

BILL SHORTEN, OPPOSITION LEADER: Today, I say enough is enough. And if Mr Turnbull and the Liberal Government choose not to hold a royal commission, an incoming Labor government will.

SABRA LANE, POLITICAL CORRESPONDENT: Bank-bashing is something of a national sport. Now, it looks set to become a key battleground in the looming federal election campaign. The Prime Minister lashed the banking industry midweek at a Westpac event delivering this slap-down.

MALCOLM TURNBULL: We have to acknowledge that there have been too many troubling incidents over recent times for them simply to be dismissed.

SABRA LANE: Westpac invited the Prime Minister to its 199th birthday party. His gift was the tongue-lashing, delivered because earlier in the week, Westpac was accused by the Australian Securities and Investments Commission of rigging the inter-bank interest rate market and that was something Mr Turnbull couldn't ignore.

MALCOLM TURNBULL: We expect them always rigorously, to put their customers' interests first. And this is not idealism, this is what we expect.

SABRA LANE: The Federal Opposition gave credit to Mr Turnbull for giving an important speech, but says he didn't follow through by calling a royal commission.

BILL SHORTEN: It's not taken lightly because the use of a royal commission with its very strong powers is a decision not made very often by an executive. But after scandal after scandal, and with the importance of banking to the lives of everyday Australians, something needs to give, doesn't it?

SABRA LANE: Shadow Cabinet ticked off on the policy this morning. It had been weighing up holding such an inquiry for quite some time, following the financial planning scandals at the Commonwealth, Macquarie and ANZ banks.

Bill Shorten denies it's a form of tit for tat politics, dismissing the suggestion that it's payback against the Coalition's major support base, big business, for holding the controversial royal commission in the trade unions.

BILL SHORTEN: No, this is a much bigger issue, I suggest, than some of those matters in terms of industrial relations. Labor, sadly, hasn't invented tens of thousands of financial victims. The reality is that we trust our banking sector with our savings, small businesses, retirees, people with life insurance policies. The problem is that this government has selective hearing.

JOHN WILLIAMS, NATIONALS SENATOR: I'm glad Bill Shorten's supporting an idea that I've pushed forward for many years now.

SABRA LANE: The Nationals Senator John 'Wacka' Williams has long campaigned for a royal commission into the banks. At times, he's been a lone voice in parliament calling for action.

JOHN WILLIAMS: The people I speak to want this royal commission. I've even had a text message from a bloke from Adelaide just half an hour ago saying he's no support of Labor, but he supports a royal commission. I think it would be a popular decision. I've actually suggested it to the Prime Minister at one stage. And I believe if it's not now, it certainly will be later. The case builds, the more we hear of the bad behaviour, the wrongdoings, the bad products, the bad culture, then the more the case builds for a royal commission.

SABRA LANE: The Senator's spot-on. This will be really popular with voters and could frame the approaching election campaign as a contest between the Government going after union corruption and thugs, and the opposition in hot pursuit of the banks.

Labor hasn't announced the terms of reference yet. It says it could run for about two years and cost $53 million. The Government argues the sector's already well-regulated, and under the watch of the Securities and Investments Commission, which has greater powers than a royal commission. Its formal response provides a taste of what's to come.

SCOTT MORRISON, TREASURER: What we know about Bill Shorten is he doesn't respect royal commissions. Didn't respect the Cole royal commission when he was a minister because he abolished the Australian Building and Construction Commission, which the Cole royal commission recommended. The Heydon royal commission says that the Australian Building and Construction Commission should be restored. He doesn't respect that decision either.

SABRA LANE: The banking association representing the big banks argues the idea is a waste of time and money.

STEVEN MUNCHENBERG, CEO, AUS. BANKERS' ASSOC.: We have one of the most sound and stable banking systems in the world. It sits at the core of the Australian economy and it serves the Australian people well.

But our international investors at times of considerable volatility are going to be asking what is wrong with the Australian banking system that it warrants a royal commission?

PETER WHISH-WILSON, SENATOR AND GREENS FINANCE SPOKESMAN: The culture itself is actually the context - the backdrop to what goes on in the financial services sector and I don't believe that cultural change, unless we have a very significant inquiry.

SABRA LANE: Before entering parliament, Senator Peter Whish-Wilson was a merchant banker. On Monday week, when parliament's recalled, he'll put a motion to the Senate calling for a royal commission. It'll be similar to the one he put to the Upper House last June. Labor voted against it then, and Senator Williams crossed the floor to vote for it.

PETER WHISH-WILSON: A royal commission is taking action. It has the powers to get to the bottom of this. It has the power to throw people in jail and send a message. It has the power to make recommendations on whether our laws are good enough, and whether we should actually have a compensation scheme in place for them.

Let me tell you that tens of thousands of Australians out there that are suffering as victims of financial crime.

SABRA LANE: The banks are in the spotlight for their behaviour in Arrium Steel's decision to call in a voluntary administrator under the weight of nearly $3 billion in debt which is owed to the big banks.

Liberal MP Rowan Ramsey, South Australian electorate of Grey, is home to Arrium's Whyalla plant. If the company shuts, nearly 7,000 jobs will go - 1,600 alone in Whyalla.

ROWAN RAMSEY, LIBERAL MP: It would be a rolled-gold disaster. There is no way to gussy this up and say it'll be alright, it'll be alright. It wouldn't be alright. We'd end up with a precipitous fall in real estate. People would be - I think people over 45-50 would feel as though they were locked in because the value of their life savings has just been snipped in half or more, and that doesn't give them the ability to move on, and then we end up with a whole raft of people, you know, I think in the thousands, probably on - on - on - on the dole.

SABRA LANE: He believes the banks have a moral obligation to Whyalla and Australia, and should write off their losses to ensure the nation has a home-grown steel industry.

ROWAN RAMSEY: They need to say, "Right, we backed the wrong horse. Sorry to our investors. We don't always get it right. But this one, we need to cut away, and make sure that this industry survives."

SABRA LANE: The sector is banking on it.

MATT WORDSWORTH: Sabra Lane there.