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Transcript of interview with Virginia Trioli: ABC News Breakfast: 7 August 2018: Turnbull Government expands ASIC's armoury, company tax cuts



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Interview with Virginia Trioli kmo.ministers.treasury.gov.au/transcript/047-2018

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7 August 2018

Transcript SUBJECTS: Turnbull Government expands ASIC’s armoury, company tax cuts

VIRGINIA TRIOLI:

Kelly O’Dwyer, Financial Services Minister, good morning, thanks for making time for us.

KELLY O’DWYER:

Good morning Virginia.

VIRGINIA TRIOLI:

Tell us whose idea was this, this idea of embedding the so-called corporate cops, did it come from James Shipton or from the Government?

KELLY O’DWYER:

It came from James Shipton, but I don’t want to burst your bubble Virginia, with your little introduction before.

VIRGINIA TRIOLI:

Oh I’m sure you do.

KELLY O’DWYER:

But I do want to let you know the first thing we did on coming to Government was have a Financial System Inquiry. One of the recommendations was to do a capability review of the regulator. We did that and the regulator needed some improvement… (interrupted)

VIRGINIA TRIOLI:

Can I, I’m just going to jump in there if I can, I am well aware of the inquiry, but nonetheless you went on in the Budget and cut ASIC by about $26 million.

KELLY O’DWYER:

So no, that’s not right. We had project funding that ended but we had already increased the funding for ASIC, for surveillance and enforcement activity in the previous Budget, and we’re increasing it again today by $70 million… (interrupted)

VIRGINIA TRIOLI:

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Yes you are certainly increasing it, and sorry to be jumping in this morning, but we do like the conversations to move on quickly. It is fact that the budget was cut and ASIC has been on the record and off the record as grumbling about them, but nonetheless, as you say, you've restored funding of $70 million for all of these, new, well, new regulatory allowances, I guess, it actually allows ASIC to do more of a job than it did before.

KELLY O’DWYER:

Well look Virginia, you can ask the questions and answer them, but if you give me an opportunity I will do my level best to actually respond to your questions. James Shipton - we announced him before we announced a Royal Commission and we said there needed to be a changing of the guard at ASIC and a new approach at ASIC, to make sure that ASIC could be a far more proactive regulator. Now the Budget for ASIC had been cut several times by the previous Labor Government. Certainly there was an efficiency dividend when Tony Abbott was Prime Minister. But we have made sure that with the funding that ASIC has been provided with, it’s there for it to be able to do its job, which is to be able to deter and prevent misconduct, to be far more proactive but also where it occurs to make sure that they have got the firepower to be able to litigate and go after the people who have done the wrong thing, including with brand-new powers, again, already announced, brand-new powers that will give them the ability to, in circumstances where people and financial institutions have done the wrong thing, take 10 percent of their turnover. So these are serious new powers, serious resources and the serious ability now for the regulator to do what so many other regulators have done overseas internationally. In fact James Shipton, the new regulator who is Chair of ASIC, has worked in Hong Kong, is replicating what has been successful in Hong Kong, what's been successful in the UK and what has been successful in the US. Having the corporate cop embedded in our big four banks and AMP to prevent harm to consumers.

VIRGINIA TRIOLI:

So how do you want to measure the success or not of embedding ASIC staff members in banks, at the AMP as well? What are the parameters in your mind as Financial Services Minister you will be setting to see whether that's successful or not?

KELLY O’DWYER:

Well one of the criticisms of ASIC in the past has been that they are too slow to respond, which means harm continues to occur, and embedding them in the banks we think, will ensure that it prevents misconduct either from occurring in the first place, or if there are concerns about behaviour that has occurred, it will be dealt with very swiftly. At the end of the day we want people to have confidence in their financial institutions. They need to build that confidence themselves, but we as a Government need to play a role in ensuring we have the tough cop on the beat doing its job and providing people with broader confidence in our financial system overall.

VIRGINIA TRIOLI:

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Yeah that’s an important point and it goes back to the point you were making before about best practice overseas and the boost to regulation that we see. Clearly this decision and everything that we are learning from the Royal Commission shows that, probably over successive governments, but also recently as well, we just haven't had the regulation in relation to the financial service industry that we need. Is that pretty clear now?

KELLY O’DWYER:

We have certainly had regulators with a variety of powers. The question will be did they use their powers when they needed to. Certainly we’ve recognised that more powers have been required, which is why we have already announced a product intervention power… (interrupted)

VIRGINIA TRIOLI:

Which means, to get to the point here, that the regulation in and of itself in relation in particular to the financial services industry is a good thing, isn’t it?

KELLY O’DWYER:

Well good regulation absolutely is but… (interrupted)

VIRGINIA TRIOLI:

Well of course.

KELLY O’DWYER:

…regulation for the sake of it, for a tick the box exercise, which doesn’t actually prevent harm really doesn't do terribly much.

VIRGINIA TRIOLI:

Well no one’s talking about that, we’re talking about solid regulation that actually prevents, well here’s just a grab of things we’ve learned from the Royal Commission recently:

struggling mortgagees been given a week to get off their properties, rogue advisers giving shoddy advice and just being counselled afterwards but keeping their jobs, fees to dead clients, goes on and on and on. Given that we know all of that, we’ve sort of been flapping in the wind without regulation haven’t we?

KELLY O’DWYER:

Well no, if you want to actually look at who has got runs on the board, The Treasurer and this Government… (interrupted)

VIRGINIA TRIOLI:

Oh it’s not a competition, Minister. I don’t want to go down the line of it being a competition, who did better, who did what.

KELLY O’DWYER:

Well I was about to say what we did, because you're talking about regulation and we put in 3/5

place the Banking Executive Accountability Regime so that there is, for the first time, very clear lines of accountability. When questions are asked, when things go wrong, we actually understand who is ultimately responsible and that means that there are as a result going to be much better internal processes because if there aren't, someone will be held responsible, and in many cases will face a very significant personal financial penalty as a result.

VIRGINIA TRIOLI:

Just a couple of quick questions on some other aspects because I know you're pressed for time too. The final tranche of the corporate tax cut, will it make it through the next sitting of Parliament do you think?

KELLY O’DWYER:

Well I’ve learnt not to predict what happens in the Senate and… (interrupted)

VIRGINIA TRIOLI:

And this one’s particularly shaky. Given the political reality now it seems of it perhaps not being the wisest political move.

KELLY O’DWYER:

Well no, I think there’s a very strong recognition that the company tax cut for small and medium-sized enterprises with a turnover of less than $50 million is very welcome...

(interrupted)

VIRGINIA TRIOLI:

Yeah but we’re not talking about that are we.

KELLY O’DWYER:

…and we would like to go even further, it’s down to 27 1/2 cents in the dollar and we would like to take it down to 25 cents. Now that only happens when we’re actually able to legislate corporate tax cuts right across the board and the reason we want to do that is because we want to encourage investment because we know that when we can do that we can actually create more jobs. Now we’ve been very successful as a Government in seeing more than a million jobs created, the majority - I’m happy to say as the Minister for Women - have actually been taken up by women. But we know that after 26 years of uninterrupted economic growth, we can't take that for granted. We need to continue to make sure that we are competitive internationally. When we dropped the company tax rate in 2001, there were 19 other OECD countries that had a higher tax rate, today it’s only two, so we are in a global war for capital and we need to make sure that we are competitive.

VIRGINIA TRIOLI:

Alright good to talk to you this morning, Minister, thanks so much.

KELLY O’DWYER:

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Great pleasure.

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