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Transcript of doorstop interview: Parliament House: 27 February 2014: Four pillars banking policy; Future of Financial Advice reforms; Ministerial protection; High Court Chaplaincy case.



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THE HON CHRIS BOWEN MP

SHADOW TREASURER

MEMBER FOR MCMAHON

E&OE TRANSCRIPT

DOORSTOP INTERVIEW

PARLIAMENT HOUSE

THURSDAY, 27 FEBRUARY 2014

SUBJECT/S: Four pillars banking policy; Future of Financial Advice reforms; Ministerial protection; High Court Chaplaincy case.

SHADOW TREASURER, CHRIS BOWEN: Good morning everybody thanks for coming. I’ll deal with two issues today. Firstly let me just deal with reports the Government is secretly negotiating to end Australia’s four pillars policy as part of international trade negotiations. Obviously the Labor Party hasn't seen the source material and generally we don't comment on WikiLeaks. But the Government has refused to deny these allegations and the Trade Minister has said they are a beat-up. Let me just make very clear the Labor Party's position on four pillars. The Australian financial system was tested in 2008 and 2009 in the greatest financial and economic crisis since the 1930s. The Australian financial system passed the test and a big part of that success was the four pillars policy. Labor built the four pillars; Labor will defend the four pillars. The last thing the Australian banking system needs is less competition.

The last thing the Australian banking system needs is more and bigger banks. The Australian banking system needs properly regulated competition and that's what the four pillars policy provides. We will defend banking competition. We will defend the four pillars policy and if the Government wants to knock down the four pillars of the Australian banking system we will defend them and we will fight it.

Now I call on the Treasurer and the Trade Minister to make clear their support for the four pillars policy in the Australian banking system. The other point I'd make is

this, we have a financial systems inquiry under way, commissioned by the Treasurer. If there were to be any changes it would be something properly examined by the financial systems inquiry. So on the one hand you have the Treasurer commissioning an independent review into the financial services industry, on the other hand you have the Trade Minister negotiating apparently to make changes. It's not clear whether the Treasurer even knows what the Trade Minister is doing.

So all I can do is outline the Labor Party's very clear position. We support four pillars; we will defend four pillars and fight any moves to reduce competition in the Australian banking system.

Secondly today, the Finance Minister and acting Assistant Treasurer has released changes to the Government's financial advice changes. Now we've just been through a Senate inquiry in which witness after witness called on the Government to drop these changes completely. These changes undermine and unwind important consumer protections. Now the Finance Minister's been saying for weeks and months that his changes didn't allow commissions. Now he's been forced today to specifically change his proposals to make it crystal clear that commissions wouldn't be allowed so we welcome this back-down and we welcome what is in effect recognition of what the Labor Party has been saying is right but we do, nevertheless, maintain deep and ongoing concerns about the Government's approach.

The Government simply hasn't learned the lessons. They're continuing with the mechanism of doing this by regulation when there needs to be a proper Parliamentary debate. Labor will look at these regulations very closely but we will fight to maintain consumer protections. Consumer protections which are built in to the best-interest test, consumer protections which are built in to the requirement to opt in to financial advice and we'll defend those and we will use every mechanism available to ensure consumer protection is appropriate, including disallowing regulations, including fighting legislation.

Just this week I met with victims of the Timbercorp scandal. That was a very human and personal reminder of why we introduced the Future of Financial Advice reforms in the first place. Victims of Timbercorp are still struggling years later to get back on their feet and we will not let this Government water down and undermine important consumer protections. We will fight to defend Australian consumers of financial advice, we will fight to ensure the Australian financial advice industry is professional, is acting in the best interests of all of their clients and that people never have to go through again: Storm, Westpoint, Trio or Timbercorp, or events like them.

That is why these reforms were introduced in the first place. The Government just doesn't get the importance of what they’re doing. They don't understand that they're undermining those important consumer protections but Labor will fight to defend them, we'll work with other parties in the Parliament to ensure that consumer

protections are protected and that Australian consumers can invest in the full knowledge that they have protection under the Act, that their financial planner must be acting in their best interests and they are acting appropriately.

Happy to take questions.

JOURNALIST: What will the changes mean for the stability of the finance system?

BOWEN: You mean the FOFA changes or the four pillars?

JOURNALIST: FOFA.

BOWEN: FOFA. Well, the Government is creating more instability and more uncertainty. This has been a farce from the beginning. You had Arthur Sinodinos trot out these regulation changes days before Christmas. You saw the Labor Party respond and the community and the sector respond and the Government then have to withdraw them because they weren't going to pass the Parliament, and because the consumers and representatives of the sector had pointed out just how dangerous they were. many people in the Government didn't seem to understand that so this created massive uncertainties and now you've got again this new Assistant Treasurer, the Finance Minister, again not learning the lessons of that, going down the road of introducing regulations which go way beyond what regulations are normally used to do and then going to have legislation as well, creating more uncertainty.

So that's why we called on the Government to start again, to drop these changes, to let the FOFA reforms actually work and if they want to have a transparent process of review down the track then that's something that we'd be constructive about.

Instead, they just create more uncertainty for the financial planning industry and consumers.

JOURNALIST: These FOFA changes and the idea of changing the four pillar system, do you think it shows that the Government is moving to an American deregulated model and what risk does that pose to our financial institutions?

BOWEN: Well, let’s look at both. To knock down the four pillars policy, if that is even under serious consideration, would be highly irresponsible, just plain wrong. The Australian people understand just how important it is we have properly regulated, competitive banks and to get rid of the four pillars and move to a smaller number of bigger banks would be just irresponsible and would be an undermining of important protections. The same with FOFA. I want more people getting financial advice. I want that financial advice to be as professional as possible. That's why we introduced the FOFA reforms and the Government, in doing this is just showing that they don't understand the importance of properly calibrated, carefully designed regulation in the best interests of the entire economy, the entire economy.

JOURNALIST: Will it mean financial advisers can act in their own interests instead of their clients?

BOWEN: I believe the vast majority of financial advisers want to act in the best interests of consumers and do. But there need to be protections in place for that small number who act in their own best interests, not in the best interests of their clients. And again, we’ve seen an example of that. We've seen in media this week where a financial adviser clearly didn't act in the best interests of their clients and we need protection against that, the Australian people need protection against that and those financial planners, the vast majority who do act in the best interests of their clients, shouldn't have their good name damaged by the small number who don't and who will be allowed to operate under the Government's proposed changes.

JOURNALIST: Do you think getting rid of the four pillar system will make us more susceptible to falling into recession if we face an environment like the GFC?

BOWEN: I think if we got rid of the four pillars, if that is serious, and again we haven't seen the detailed reports I've read about in the media, but the Trade Minister has refused to confirm or deny their accuracy. If that is serious, that would undermine the stability of the Australian financial sector, it would lead to greater uncertainty and it would lead to a greater uncertainty of outcomes.

There's two reasons to defend four pillars. One is to ensure the stability of the financial sector; two is to ensure proper competition between Australia's banks. The Australian banking system does not need less competition. Many people would argue it needs more, but it certainly doesn't need less.

JOURNALIST: What does it say that Government Ministers are having to have body guards?

BOWEN: These are matters between the Australian Federal Police and the Ministers concerned. In my experience, when there is a direct threat to a Minister, the Australian Federal Police act very professionally and appropriately and obviously the Federal Police have access to information which the rest of us don't have and I would have no cause to question the accuracy of that information and I'm sure the Federal Police are acting perfectly appropriately. They advise Ministers on these matters and I would leave those matters between the police and the relevant Ministers.

JOURNALIST: But surely Ministers should be able to go to work without fear of attack?

BOWEN: Every Minister wants to do that. Every Minister of course wants to be able to move freely around their community but from time to time people in the public

eye and Ministers do need close personal protection. That was the case under the previous Government, will be the case under this Government, will be the case under future Governments. These things should always be based on the advice of the Federal Police. I assume that is the case in this instance. I assume that is the case that the Federal Police have put these measures in place and advised these measures should be put in place. That is a matter between the police and Minister concerned.

JOURNALIST: The chaplaincy program, the Prime Minister said today the Government is considering going through the States. (inaudible) What do you think about that idea?

BOWEN: Let's be clear about what the High Court dealt with. The High Court made a ruling based not so much on the chaplaincy program itself but on the High Court's interpretation of what Federal Governments can and can't do based on constitutional powers and there are implications way beyond the chaplaincy program of yesterday's judgment. What we have said is these are matters that have been dealt with the High Court before under Governments of various persuasions.

When the High Court considered them under the Rudd Government, it was in relation to measures put in place under the Howard Government, now under the Abbott Government, about measures put in place under the previous Labor Government.

It's right and appropriate that both sides of politics work together to ensure that the Federal Government can do what it needs to do and fund what it needs to fund.

ENDS