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Monday, 20 August 2018
Page: 7814

Mr ROBERT (Fadden) (19:20): I rise to lend some comment on the Treasury Laws Amendment (Financial Sector Regulation) Bill 2018. As I do, can I say I have had a gutful of being lectured to by the Labor Party opposite when it comes to financial sector regulation. I too have been here for 10 years. I too sat on the post-GFC banking inquiry and read every submission and went and listened to every witness at every hearing and, somehow, I find myself at odds with the honourable members opposite on how that went. This was a series of inquiries in 2008 and 2009. Labor had been in government for a number of years when the GFC went through and, of course, had achieved nothing. The post-GFC inquiry looked at something like $60 billion that was lost through MFS and through MISs, including Great Southern and of course the likes of Storm Financial. Storm Financial had brokers, many of them with master's degree qualifications, and the Labor Party wants to recommend greater education. Education wasn't the issue. The unscrupulous acts of bastardry of these people were some of the issues. That requires greater compliance to ensure that doesn't happen again. That's what this government is trying to achieve.

I was there when now Prime Minister Turnbull, back then a backbencher, and member for Wentworth said that things were getting so serious perhaps the government should look at providing a guarantee of up to $250,000 for bank deposits—a guarantee that now exists. The then Prime Minister of the day was not to be outdone by anyone, because apparently he had the smartest intellect in the room, so he made it unlimited. I watched the market distort. I watched banks being bought out. I watched Bankwest be subsumed over a weekend when one of the big four took it up. I watched competition almost disappear overnight. So I will not sit here and be lectured by those opposite about financial sector reform and reform in this area when all I've seen is a concentration of banking power and prowess under their watch.

That's especially so when we come to this bill, because this bill is all about making competition easier. We don't have as much competition as we need in the banking sector. We need more. Competition is a beautiful thing. I'd strongly recommend to those opposite competition in the super area as well, moving away from default funds always being industry funds. Let the light into the super industry, I say. Let's have a good, hard look at where those things sit. This bill is all about two measures designed to make it easier for financial sector ownership and to open up competition. This is a budget measure which we committed to in 2017-18. There are two measures relating to financial sector ownership and restrictions and banking licences that will work in tandem to make this sector more contestable, certainly improve choice in outcome and make it more innovative.

It's not in isolation; we're building on substantial reforms. There is the major bank levy, which over the next few years, will raise $16 billion because this parliament, representing the people of Australia, has applied an implicit guarantee to the banks that they can't fail. That doesn't come for nothing. There is a cost, and the taxpayer expects a return. And they have it: over $16 billion. Labor jumps up and down, but they did nothing when they were in power. We are relaxing restrictions on the use of the term 'bank' and have done a whole bunch of work in terms of crowdsourcing funding to get innovation moving, especially in the areas of fin-tech and other areas of finance. And there is, of course, the introduction of open banking, which does have the potential to transform the competitive landscape of our financial sector in the way that Australians interact with our evolving banking system.

The bill, which implements these measures, is about reducing barriers to entry. It will reduce a whole bunch of barriers. Ownership restrictions are an important way to ensure that institutions are run appropriately and have access to the resources they need to succeed. That's why ownership structures where any one shareholder owns more than 15 per cent has been subject to approval under a national interest test. It has stood the test of time, to a degree. But it is a barrier; it's a regulatory barrier and it limits competition. As a result, anything that arbitrarily limits competition can result in an unintended consequence that is poor. To address this, we're amending the ownership restrictions for financial sector companies from 15 to 20 per cent, as set out in the Financial Sector Shareholding Act 1998. It's designed to allow more players to play and more actors to enter the space. It's designed to drive competition—competition that disappeared on the day the member for Wentworth stepped outside and made a simple statement about, 'We need to guarantee deposits up to a certain amount.' And former Prime Minister Rudd could not be outdone. This is a measure that is designed to address the inadequacies and the distortions driven by the then member for Griffith's ego. It's extraordinary that it's taken a decade to overcome the damage of that one MP. Yet so much more damage is seeking to be undone.

The bill will also create a new streamlined approval for small, domestically based financial sector companies that are seeking a licence, or that have been licensed for something like half a decade—fewer than five years. Where a company is below the relevant asset threshold, their owners will receive approval to hold more than 20 per cent of that firm, as long as they meet the fit-and-proper persons assessment, which is well understood, especially in legal sections. The bill will also support the operation of APRA's new dual-phasing licence approach, announced on 4 May this year. It contributes to the government's efforts, again, to create far more competition.

Schedule 1 of the bill is seeking to overcome the issues that Prime Minister Rudd brought into the competitive sector. It's part of Australia's architecture and the regulator's prudent approach to managing risks relative to where we're going. The government endorses where APRA is going in this space—this is in respect of the restricted authorised deposit institution licensing framework. It's an important framework, based, in some parts, on the UK model, which since 2014 has seen more than 10 new banks commence operations—10! That's competition, compared to only one start-up in Australia in the last decade. One! It's extraordinary! This entire framework is designed to drive the competitive space and to give market operators freedom to create in the banking space.

We desperately need more competition in this area. Start-up banks will be able to receive a restricted licence for up to two years or for a time specified by APRA as the regulator. There will be a limited suite of prudential requirements and regulations and there will be caps on the size of businesses. There will be a whole bunch of these issues to allow them to compete properly whilst keeping it in a box. And after two years they can transition to a fuller framework. This issue of addressing competition is fundamentally important. If we're to see the banking sector grow, we have to pull the shackles off it responsibly, within bounds set by APRA, and this bill seeks to do that.

I commend the bill to the House. I commend the two measures to the House, and I look forward to reversing some of these difficult trends that we have seen over the years to get back to a fuller competitive banking system.

Debate interrupted.