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Thursday, 24 May 2001
Page: 27052

Ms JULIE BISHOP (4:18 PM) —Let us, first of all, put aside the pious utterings and the contrived hand wringing of the member for Chisholm. Let us put the facts on the table concerning the HIH collapse and the government's response. They are these. First, there is to be a royal commission into the collapse. The government announced the establishment of a royal commission within weeks of the insurance company going into liquidation. Perhaps the member for Chisholm, just before she leaves the House, could ask the member for Fremantle how long it took her to call a royal commission into the collapse of Rothwells when she was Premier of Western Australia—I think it was four years; perhaps it was five years.

Ms Burke —Mr Deputy Speaker, I raise two points of order. The first goes to relevance to the question before the House. The second is that I ask her to withdraw that scurrilous remark.

Mr DEPUTY SPEAKER (Mr Jenkins)—There is no point of order.

Ms JULIE BISHOP —So we have announced the royal commission. This is one of the most powerful inquiry tools that this country has. In fact, the shadow Treasurer only a short time ago seemed flummoxed as to what was required, for he said:

Well it may be that we have to have some judicial inquiry.

Then he said:

I don't think you can make that call at this stage until we see the full extent of the problem from the provisional liquidator.

By the time the shadow Treasurer made that profound observation, the government had already focused attention on the plight of the HIH policyholders who were facing financial hardship, for that was, quite appropriately, the first priority of the government in response to the corporate collapse. When it was in a position to ascertain the extent of the collapse and the options most likely to bring about the most thorough investigation of the collapse and its causes, the government acted and announced the establishment of a royal commission, which will run in conjunction with an ASIC investigation.

The opposition would have you believe that the legislative framework surrounding financial regulation in this country had nothing to do with them, that the creation of a prudential regulator, APRA—the creation of ASIC, even—was something that passed them by. But, no, the opposition, in a very rare display of cooperation, unanimously supported the financial system that gave rise to the establishment of the prudential regulator. In fact, as the minister pointed out earlier, it seems that Hansard can reveal a raft of support from members of the opposition for the establishment of APRA.

Secondly, let me turn to the actuality of another aspect of the government's response to the HIH collapse, and that is the belief that we had that our priority was to those left destitute by the HIH collapse. We are a responsive government. We could not, would not and will not abandon those most affected by this event. It is easy, perhaps, for some to regard this as a private sector issue and one where government has no role to play. I must say I sympathise with that view. It does resonate with me.

Mr Laurie Ferguson —Leave Ross Cameron alone. Leave Cameron alone.

Mr DEPUTY SPEAKER —Order! The member for Reid has extended the standing orders enough today.

Ms JULIE BISHOP —You cannot just shrug your shoulders and say, `Oh, well, bad things happen to good people.' This government says, `No, there are people suffering hardship. We cannot stand by and we won't.' The government's package announced last Monday is worth more than $500 million, funded from the federal budget. We are in a position to be able to assist in this way. As an aside, I congratulate the Treasurer again for the excellent budget, because it was a responsible and prudent one and it allowed us to respond to this collapse with a compensation package. It is a comprehensive package, it is targeted to those most in need, it focuses on hardship, and we can expect the first payments to be made in weeks. It seems, by virtue of this debate, that the opposition objects to that response, it objects to a compensation package of this nature. Is that right? A very heartless, very mean opposition!

The other aspect of our response to this corporate collapse is that the Prime Minister has announced the establishment of a royal commission. Do Labor have a problem with that? Within weeks of the collapse we have announced the establishment of a royal commission. This is one of the seemingly most complex and widespread corporate collapses. We call a royal commission to investigate, an authority which will have very wide coercive powers, and we have Labor in here complaining about it. I do not know what they are complaining about, actually. I am not sure that they know what they are complaining about, as long as they get attention away from the success of the budget, it would seem. The fact is we are holding a royal commission into all matters relating to HIH, in cooperation with the work and activities of the Securities and Investments Commission.

These inquiries will, of necessity, look at the directors, the auditors and advisers of the HIH Group—the board, independent directors, executive directors, the audit committee, presumably, senior management and internal and external auditors. This was Australia's second largest general insurer, with more than two million policies issued to more than a million policyholders. Its last audited annual report, for the year to 30 June 2000, indicated a company with net assets of over $960 million. The provisional liquidator in fact said that as recently as 15 March this year the company was marginally solvent, and it was not until 11 April that it was clearly insolvent. Given that time frame, given the auditors' report, this government has moved swiftly—first the compensation package, then the royal commission. Clearly, there are some internal machinations of HIH that only a royal commission will be able to reveal. On the judgments of the directors, any prudential regulation puts the first line of responsibility onto the board and management. At the end of the day, it will always be the case, it must be the case, that a board must act with good judgment, acting honestly and fairly.

Hindsight is such a wonderful thing. The member for Chisholm obviously has exceptional gifts in the art of 20/20 vision: she knew all about this in 1995. But, given the role of the board and the auditors, given that there must have been assumptions and valuations, presumably performed by actuaries, given the financial statements that would have existed and given the whole internal and external framework that was in place within HIH, it is clearly ludicrous for the opposition to try and sheet home blame to the government for each and every aspect of the workings of HIH.

The very diligent Minister for Financial Services and Regulation has been the greatest champion of tighter insurance industry regulation and the greatest champion of improving corporate governance in this parliament. He has been relentless in his support for a better, stronger, tougher regulatory approach. It has not been easy for him—there are sectors of the community that resist his approach, claiming that tougher laws would deprive managers of the `right to manage'. But the minister for financial services knows what is in the public interest and he has fought for it. In the case of HIH, the minister knows that the public require a complete explanation and appropriate accountability in respect of HIH. The royal commission that this government has called will have every opportunity to get to the bottom of what happened, why and how it happened, and to determine accountability.

We have Labor over there, hands on hearts, claiming to be concerned about those in need, yet offering nothing but platitudes. They are pointing the finger and making nasty, ugly gibes, yet offering nothing by way of support for the government's most appropriate response, of a compensation package—the minister articulated the detail; it is a most appropriate response—and the establishment of a royal commission. We trust that the royal commission will not only reveal what deficiencies or actions led to this collapse and indicate where liability ought to lie, but will also provide insight into other broader issues—and perhaps auditor independence might be one. All the while, the liquidator must also be able to continue with what must be a most complex task, with asset sales in various jurisdictions, reinsurers meeting their obligations and the like. So our approach, our response, our handling of aspects of the HIH collapse have been mindful of the role of the liquidator, mindful of the ASIC investigation and its purpose and intent—that is, whether there have been breaches of the Corporations Law. I point out that it is not ASIC's role to inquire whether or not APRA met its regulatory obligations. The royal commission can be expected to consider that issue, along with consideration of the performance of the company.

I turn to one aspect of this matter that has been conveniently ignored by Labor, and that is the role of a number of state authorities. There are, in fact, state agencies with similar powers, in some cases with more or greater powers than APRA. There is the Motor Accidents Authority in New South Wales. So we welcome the opportunity for the royal commission that this government has called to investigate what a number of state authorities knew or did. The states, quite rightly, will be under scrutiny. Yet we hear nothing on that score from the opposition.

Finally—and this is an important matter—I point out that the government, recognising that there is no Commonwealth insurance company to step in and take over the claims of HIH, has got the assistance and expertise of other insurance companies to process the claims that have been left abandoned by the HIH collapse. That will give certainty in that regard.

It has been a pretty bad week for Labor: nothing to say on the budget—unable to score a point there; nothing to offer on the HIH collapse—unable to point to any lack of response on the part of the government. The compensation package is an act of a compassionate, responsive government. The royal commission is the act of a responsible, accountable government. (Time expired)

Mr DEPUTY SPEAKER (Mr Jenkins)—The discussion has concluded.