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Tuesday, 12 May 2009
Page: 2378

Senator CAMERON (2:19 PM) —My question is to the Minister for Superannuation and Corporate Law, Senator Sherry. Given that in the last 12 months Australia and the world have experienced unprecedented financial turmoil and many Australian investors have lost money through inappropriate lending practices, can the minister inform the Senate of what action the Rudd government is taking to ensure that Australia does not experience a similar subprime lending crisis to that which has gripped the US? Can the minister update the Senate on what initiatives the Rudd government has announced to ensure responsible lending in Australia?

Senator SHERRY (Minister for Superannuation and Corporate Law) —The Rudd government is very well aware of the impacts of the international financial and economic crisis we are seeing in the global economy. In 2008 the Council of Australian Governments ministers agreed to a Commonwealth request to transfer the remaining regulation and supervision of all financial services, products and providers into a single standard national regulatory regime, including, importantly, what is known as consumer credit. Included in this new regime will be important new safeguards for consumers. The Rudd government has recognised that in the context of the US one of the root causes of the financial crisis was irresponsible lending. There are some families who can in fact maintain a reasonable sized mortgage but are often saddled with more debt than they need and more often than not more than they can repay. The new responsible lending provisions in the new national laws will make it illegal for a lender to extend credit to a consumer when it is unsuitable for them and it is reasonably believed the individual—

Senator McGauran —You’re just going to make credit harder. You are going to wreck the market.

Senator SHERRY —I will take that interjection. Maybe Senator McGauran should listen to some of his National Party colleagues, who have been very interested in Storm Financial of late, and get their views on responsible lending—or, in that case, irresponsible lending. This is about brokers and other intermediaries who suggest credit for a consumer that is unsuitable based on their needs and their financial capacity. Breaches of responsible lending will result in serious sanctions ranging from fines through to civil and criminal penalties. The new regime will include a low-cost dispute resolution service to award compensation and will also include appropriate licensing, education and training. (Time expired)

Senator CAMERON —Mr President, I ask a supplementary question. The minister has mentioned the government’s commitment to providing a simple national regulatory environment for providing Australian consumers with credit facilities that incorporate a responsible lending requirement. Can the minister update the Senate on how this new regime will impact on the regulation of margin lending?

Senator SHERRY (Minister for Superannuation and Corporate Law) —Currently in Australia there is no regulation or supervision of margin lending—none whatsoever. Following on from the neo-liberal interjections of Senator McGauran—perhaps I should say neo-national; certainly not neo-national party—maybe he believes there should be absolutely no regulation and supervision of margin lending, given what we see has happened in this country over the course of the last 18 months. For the first time, the Commonwealth government, the Rudd Labor government, intends to take responsibility for the regulation of margin lending. For the first time, lenders will have to hold an Australian financial service licence, be regulated by ASIC and be members of low-cost external dispute bodies. Lenders will also have to effectively and clearly disclose all fees and commissions before lending, and the new responsible lending rules will also apply in respect of margin lending, and we make no apologies— (Time expired)

Senator CAMERON —Mr President, I ask a further supplementary question. The minister touched on the benefits of a national regulatory framework for credit. Can the minister advise the Senate how a national regulatory regime of credit providers will benefit Australians and the impact on Australia’s businesses?

Senator Abetz —Which regulation is going to get knocked back? Which is it going to replace?

Senator SHERRY (Minister for Superannuation and Corporate Law) —Thank you, Mr President. I take Senator Abetz’s interjection. He asked which regulations are going to get knocked out. Let me tell the Liberal opposition: 2,500 pages of inconsistent state and territory regulation are going to get knocked out, Senator Abetz, through the introduction of these standard national laws, and many of the 2,500 rules and regulations in respect of the state regulation of financial services have existed for well over 100 years. So, if you want to blame past governments, it is both state Labor and Liberal governments that have built up 2,500 pages of regulation in respect of financial services, and, in our new single standard national regime, we will reduce it to approximately 300 pages. Business, at least, welcome this particular aspect because they want one set of rules— (Time expired)