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Wednesday, 28 February 2018
Page: 2222

Mr SUKKAR (DeakinAssistant Minister to the Treasurer) (11:16): Firstly, I would like to take this opportunity to thank those members who have contributed to this debate. In summing up, schedule 1 to this bill delivers on the government's commitment to strengthen financial regulation and better protect Australians from the possible abuse and manipulation of financial markets by sophisticated financial institutions at their expense. Financial benchmarks are used to help value trillions of dollars of financial products and have proven to be a weak spot in the international system of financial regulation. There have been many cases of market misconduct regarding the determination of the financial benchmarks, such as LIBOR and all around the world. As of August 2017, penalties paid by financial institutions globally had reached around 25 billion in Australian dollar terms.

We're seeing this play out in Australia as well. ASIC has commenced formal court proceedings against all four major banks for alleged market manipulation and unconscionable conduct in relation to the bank bill swap rate, Australia's most important interest rate benchmark. This case is ongoing. In 2015, in response to these issues and regulatory developments, the Treasurer directed the Council of Financial Regulators to consult on options for reform. Following a lengthy and detailed policy development process, the CFR broadly recommended that: administrators of benchmarks that are critically important to the operation of Australia's financial system be required to hold a benchmark administrator licence and comply with ASIC rules; that ASIC be empowered to compel submissions to significant benchmarks in the case that other calculation mechanisms fail, ensuring that, even in times of financial stress, this critical part of the financial system's plumbing continues to function; and, finally, that the manipulation of any financial benchmark or any product used to determine a financial benchmark in Australia be made a specific criminal and civil offence with hefty penalties of up to 10 years imprisonment for an individual, to effectively deter misconduct.

These reforms, which are embraced by the government, will enhance the robustness of these critical components of our market architecture and improve the integrity, resilience and fairness of Australia's financial systems. They will also align our regulatory regime with international best practice, including with regimes in the UK, the EU, Japan, Singapore and Canada. This is not only necessary to reduce the risk of regulatory arbitrage that could arise for the gaps in the implementation of global standards; without change, Australian businesses and individuals would likely lose the ability to fully participate in global markets. It's the view of the government that this would be an unacceptable outcome and would run contrary to our goals for the continued growth of the financial sector.

Schedule 2 to this bill makes minor amendments to the Productivity Commission Act to appoint an additional commissioner, with experience in dealing with policies and programs affecting Indigenous Australians and involvement with Indigenous communities, to the Productivity Commission. This will ensure that the commission has a specialist commissioner with the necessary skills and experience to oversee the commission's important work in Indigenous policy evaluation and will allow us to better understand which policies and programs are effective in improving outcomes for Indigenous Australians. It's therefore been disappointing to see this bill delayed as a result of Labor's insistence to change the definition of an Indigenous person contained in the act. This definition has been contained in numerous acts enacted by the parliament, including under the previous Labor government. So, if the opposition's interested in changing the standard definition of an Indigenous person, a parliamentary amendment to this bill is clearly not the appropriate way to do it. Adopting an administrative definition, of which there is currently no common form, could set a precedent for future legislation and have significant legal implications. Consideration of how to define 'Indigenous' is a significant matter which we believe is well above politics, and it should be considered in a separate and far more thorough process. The opposition's approach to this matter is only delaying the passage of this legislation and, sadly, preventing the Productivity Commission from commencing its important new functions in the area of Indigenous affairs. Therefore, I commend this bill to the House.

Question agreed to.

Bill read a second time.