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Transcript of press conference: Sydney: 12 April 2016: royal commission into the financial services industry; ASIC; Australia's credit rating; negative gearing and BIS Shrapnel

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CHRIS BOWEN, SHADOW TREASURER: Good morning. I’ll deal with three matters this morning before taking some questions.

Another day, another day of division at the heart of the Turnbull Government about an important matter, as to whether to hold a Royal Commission into Australia’s financial institutions. We have seen Coalition backbenchers complaining about Malcolm Turnbull’s captains call not to hold a Royal Commission into banking and financial services. As well they might. Now Mr Turnbull and Mr Morrison might want to spend some time with victims of financial scandals. They might want to spend some time with whistleblowers of financial scandals and re-assess their decision that Australia’s financial system does not need a thorough examination, through a Royal Commission.

We have seen the Treasurer be factually incorrect over the last 24 hours saying that ASIC has more powers than a Royal Commission. That is just not true. ASIC of course pursues individual matters, individual complaints. ASIC’s inquiries are undertaken in private. A Royal Commission can pursue, and will pursue, under a Labor Government, systemic issues in an open and public and transparent manner. It will provide an opportunity for victims and whistleblowers to provide evidence to a Royal Commission. It will provide an opportunity, for example, to consider whether Australia’s protections for whistleblowers in the private and financial sector are strong enough for people to come through and report things they are concerned about. That is not an opportunity available through ASIC.

The fact of the matter is that Mr Turnbull and Mr Morrison have been hinting in the last 24 hours that they are going to fix everything by fixing ASIC’s budget. Well they cut ASIC’s budget by $120 million over the forward estimates. They should get no applause; they should get no thanks for correcting their mistake. Increasing ASIC’s budget, which Mr Medcraft has said before Senate estimates, has had a real on the Government’s ability, on ASIC’s ability, when it comes to surveillance. They deserve no thanks and no credit for reversing that, if indeed they do. But a small increase in ASIC’s funding will not be enough to deal with the systemic issues in Australia’s financial services industry.

Secondly, we have seen concern with Australia’s triple-A credit rating. Now I am always very careful and considered in my commentary on matters like the triple-A credit rating as is appropriate for the alternative treasurer. Let’s be very clear, the triple-A credit rating is very important for Australia. It makes sure that we are not paying more than we need to when it comes to the cost of borrowing. It improves confidence in the Australian economy. And it flows through to higher credit ratings for Australia’s large corporate entities.

If the triple-A credit ratings were to be lost under Mr Turnbull’s and Mr Morrison’s watch, they would be responsible. The triple-A credit rating: the three triple-A credit ratings from the three major credit rating agencies were earnt under Labor. It is Mr Turnbull’s and Mr Morrison’s job to protect them. They can protect them by implementing Labor’s policies: on high income superannuation, on negative gearing, on capital gains tax, on tobacco, on not proceeding with the Baby Bonus, on not proceeding with the same sex marriage plebiscite. These are some of the policies the Government could adopt to improve the health of the Budget.

And finally, on negative gearing, I see some press commentary this morning about this. Now, let’s run through a few things.

The BIS Shrapnel did not model Labor’s policy. The BIS Shrapnel report was fundamentally flawed, contained factual errors, and as the Prime Minister himself acknowledged himself just a few moments ago in Western Australia, it couldn’t model Labor policy because it was done before Labor’s policy was finalised and announced.

Now I notice that Mr Tony Bongiorno has confirmed in the media this morning that he commissioned the report. Now I met Mr Bongiorno on one or two occasions. I saw him last year at a function where he lobbied me about negative gearing and he argued that negative gearing should not be changed, as many people did, because it was in open and transparent fashion that Labor was considering changes to negative gearing. He then subsequently as I understand it had some discussions with my office.

But at no point was it clear to me that the BIS Shrapnel report when it became public had been commissioned by Mr Bongiorno for his own purposes, as I understand it he provides a substantial service to many people who undertake negative gearing in Victoria in particular. I did not know whether it had been commissioned for a client. He

has, and I have no reason to disbelieve it, said this morning he commissioned it of his own volition. I made the point at the time that the journalists and the newspapers who wrote that story should have confirmed that. I know many people in the press gallery agree with me as to that it should have been pursued as to who had commissioned the report before it was published.

Many people in the press gallery have told me they would not write that story because it was unclear who had commissioned it. That was the point I made at the time, every single statement I have made about the BIS Shrapnel report has been factual and is still factual today. It was flawed, it remains flawed. We didn’t know who commissioned it, we now know who commissioned it, that is what has changed.

It would have been better if that had been clear when it was first dealt with, but the person who got skewered for his use of the BIS Shrapnel report is the Treasurer of Australia because the Treasurer of Australia took a report hook, line and sinker which was wrong and I’m very pleased that I have staff in my office who can hear analysis and know immediately that it is flawed, know immediately that it is not relevant to Labor’s policy and that therefore it is not relevant to Labor’s policy because they modelled something completely different.

Happy to take some questions.

JOURNALIST: Your policy….

BOWEN: Yeah, I did actually point here but we’ll go with you and then we’ll come back.

JOURNALIST: Your policy is actually more severe than what the modelling was because you include capital gains tax (inaudible)

BOWEN: Well the policy model….

JOURNALIST: Isn’t the effect on the property market likely to be larger (inaudible)?

BOWEN: No because BIS Shrapnel modelled a scenario in which negative gearing would be allowed for new property investments but not existing property but would continue to be allowed for shares. So what they really implied and found was a great sucking of investment out of property into shares for which negative gearing would still be allowed. Now negative gearing is not allowed for shares under our policy.

So it’s fundamentally and completely different and I remind you about some of the independent commentary. John Grattan, Chief Executive of the, John Daley, my apologies, Chief Executive of the Grattan Institute said it didn’t pass the giggle test. Well it didn’t pass the giggle test, he was right. Saul Eslake has pointed out it’s a fundamentally flawed piece of policy work containing factual errors.

Now, there’s an important principle here. Do political parties make a decision based on vested interest or the national interest?

Now of course people with vested interest can commission modelling and then can use it to try and influence Governments or Oppositions. Mr Morrison might take their spiel, I don’t. I determine policy in the national interest and if somebody with close links to the property industry makes an argument, they have to back it up in the national interest. They have to show that their arguments meet the national interest test, not the vested interest test. The proponents of keeping negative gearing exactly as they are, as Mr Bongiorno‘s one, did not meet that test.

We will not let vested interests determine our policy, even if Mr Turnbull and Mr Morrison are happy to.

I did say I’d come here next.

JOURNALIST: On the Royal Commission call, ASIC’s Greg Medcraft made it clear he doesn’t believe there’s a need for a Royal Commission...

BOWEN: I think he said it was a matter for Government.

JOURNALIST: Saying ASIC already has extensive powers to request document, compel testimony and prosecute offenders so why do you believe it’s necessary and what sort of surveillance powers would a Royal Commission have that ASIC doesn’t?

BOWEN: Well, I think Mr Medcraft rightly said it was a matter for Government. I also think that one of the things that the Royal Commission would examine is the power and ability of the regulators, so is Mr Turnbull really suggesting that the right way of determining the resourcing and the ability of ASIC is to have ASIC conduct an enquiry into themselves? I mean that is what a Royal Commission is for and of course a Royal Commission can require people to give evidence, can require people to give evidence, it is an obligation on people to give evidence if they’re called before a Royal Commission. There are different sets of arrangements in place for ASIC.

I will remind you that sometimes Royal Commissions and ASIC can work side by side, as they did with the HIH scandal, there was an ASIC inquiry and a Royal Commission So it’s not saying that by having a Royal Commission, ASIC stop their work, no they don’t. ASIC’s important work will continue.

JOURNALIST: Were you open and frank enough with the Australian people when you dismissed the BIS Shrapnel report, when actually your office knew about it?

BOWEN: Absolutely, everything I said about the BIS Shrapnel report was accurate, remains accurate today. It was incumbent on those saying the BIS Shrapnel report had credibility to determine who had commissioned it. Now the fact that Mr Bongiorno was aware of the report and had been promoting the report had not meant that he

commissioned it. When I found out that Mr Bongiorno had commissioned it, on his own volition not at the request of one of his clients, was this morning when I read it in the newspaper.

JOURNALIST: So in that case do you withdraw your criticism that it’s vested interest? I mean an accountancy firm just provides services to clients, they don’t get away with minimising tax on negative gearing.

BOWEN: Well Mr Bongiorno clearly provides advice…I’m not interested in a personal attack on Mr Bongiorno, I’ve met him once or twice, he might be a fine character for all I know. I saw him last at a function in Melbourne in which he lobbied me about negative gearing. Now that’s his entitlement.

But what is not right is that a report is commissioned, it is written up in newspapers as being modelling of Labor’s policy which it was not, which it is not. It wasn’t Labor’s policy then, it’s not Labor’s policy now. It’s a flawed report then, it’s a flawed report now. Now who commissioned it was not something I was aware of until I read it in this morning’s newspaper. Clearly Mr Bongiorno had made no secret in parliament house that he was aware of the report and that he was promoting the report but on his behalf it was commissioned was a legitimate area for the newspaper to examine. I made that point then and I make the same point today.

JOURNALIST: Back on credit ratings, have you spoken to the likes of Moody’s, Standard & Poors, about the outlook of Australia’s credit rating? And are you concerned perhaps the Government isn’t saying the right things to boost consumer confidence?

BOWEN: Well it is incumbent that the Government of the day to ensure that they are being measured and responsible in their public commentary and previous commentary from this Government about debt and deficit disaster and budget emergency has been unhelpful in that regard. I make myself available to the ratings agencies when they request it to discuss Labor’s policy, that hasn’t happened for some time but if they did request any discussion I’d be more than happy to be available to the ratings agencies as I did as Treasurer, as I have been as Shadow Treasurer and would do as Treasurer again.

JOURNALIST: Is it now time to ramp up talks?

BOWEN: Well the ratings agencies will contact the people they want to contact when they’re writing their reports. I don’t know what their timetables are for particular reviews. There’s three of them, they have different reviews, if the ratings agencies ever want to talk to me then I’ll make myself available.

JOURNALIST: Have you modelled your own economic analysis of your negative gearing policy?

BOWEN: This has been modelled to death, whether you’ve got McKell Institute, or ANU, and the modelling which is credible and independent shows that Mr Turnbull’s scare campaign is exactly that, a completely incredible, shrill and irresponsible scare campaign.

Thank you very much.