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Economics Legislation Committee
Department of the Treasury

Department of the Treasury

CHAIR: Welcome, Ms Quinn and your team from Markets Group. Good to see you, Minister Hume. I will give the call to Senator McAllister.

Senator McALLISTER : Treasury issued a consultation paper on proxy advice in April last year. When did the Treasurer first ask Treasury to review the proxy advice industry?

Ms Quinn : I will check to see whether I have that date. Obviously it was before we issued the release of the consultation report. I don't have that date with me. I will check if my colleague Mr Dickson does.

Senator McALLISTER : I'm really just asking some process issues about the steps that were taken in the lead-up to the release of the consultation paper on proxy advice. My specific question was: when did the Treasurer first ask Treasury to review the proxy advice industry?

Mr Dickson : Looking at the time line, I know that the media release for the consultation being published was on 30 April. I don't have the precise date leading up to when we were asked to prepare advice, but it would have been in advance of that date. Looking back, it would have been before 30 April 2021.

Ms Quinn : We are happy to take it on notice to see if we can find more detailed information. I am aware of advice having gone in previous times, so it wasn't just one set of advice. I have a recollection of a series of discussions around parts of the financial system. I'm happy to take on notice the timing.

Senator McALLISTER : I do have further questions about it, but I'm most interested in understanding the sequence. I wonder if one of my colleagues may wish to ask some questions about other matters, and you could see if you could just let me know. I appreciate ASIC looked at this some years back, in 2018. Obviously there's a process within Treasury that leads to the issuing of a consultation paper. I'd like to understand when that began. Can I ask that you check that now. We can go to another senator and, when that advice is available, we can come back. Would that be alright?

Ms Quinn : Yes.

CHAIR: Mr Dickson, that gives you an opportunity to check whatever you need to check.

Mr Dickson : Sure. It's past closing time for the department, so we might not be able to get back to the team to get an answer, but I will do my best.

CHAIR: Just do your best, and you can come back and we'll see where we're up to, if that's okay. Senator Watt?

Senator WATT: Can I ask a few questions about the proposed North Queensland cyclone and flood damage reinsurance pool. I saw some media last week where the government claimed that it now has modelling that shows the reinsurance pool will deliver savings on insurance premiums of up to 46 per cent for homeowners and 58 per cent for strata policyholders as a result of the pool. Could you tell is a bit more about this modelling that shows this?

Ms Quinn : This is analysis based on a process of refining the arrangements for the scheme and design features of the scheme, working with industry and insurers—both sides of the insurance market—to get extra information. Then there was detailed analysis using consultants to come to expectations about the savings that would be arrived at, given the final design features. And you are right: it is expected that the cost pressures will produce discounts of 46 per cent for households; up to 58 per cent for strata properties to, because it depends on the particular characteristics of properties; and then up to 34 per cent for small and medium-sized enterprises as well.

Senator WATT: Who did the modelling?

Ms Quinn : There were two different steps in the process, but these numbers are drawn from analysis from Fidelity.

Senator WATT: They are drawn from?

Ms Quinn : A consultancy with Fidelity.

Mr Kelly : Just a correction: Finity was the actual consultant.

Ms Quinn : Sorry.

Senator WATT: So Finity are the consultants who were engaged and did the modelling. When was that finalised?

Ms Quinn : I'll pass to my colleague; I don't have that detail.

Mr Kelly : Maybe I'll say a bit more about the modelling to add some context before we get to the date of the answer. Finity was the primary actuary consulting firm that we used. They did initial scoping early in the process in March, and then we entered into a second contract with a few variations as we went along. As part of finalising the final design, they assisted with the design and estimating the impacts on premiums and other elements of the process. We also engaged Risk Management Solutions, which is an internationally recognised catastrophe modelling firm, and they provided supplementary and supporting information as part of the process. We also had the Australian Government Actuary involved in all steps of the process to provide a level of insurance around the modelling.

I don't have the precise date on which we received the final report on the final design as announced or put into legislation by the government. I'd have to take that on notice, but it was near the end of last year.

Senator WATT: Could you please table that modelling.

Senator Hume: No. I'm afraid the government is going to make a public interest immunity claim in relation to the production of modelling on two bases. One is that it informed and was the subject of cabinet deliberations, and for that reason disclosure would then disclose the deliberations of cabinet. The government believes it's not in the public interest to disclose information about cabinet's deliberations as it may impact the government's ability to receive confidential information and make appropriate decisions impacting the Australian community. I advise the committee that the government also claims public interest immunity over the information requested originally by Senator Chisholm a couple of days ago on the basis of commercial confidentiality.

In accordance with the resolution agreed to by the Senate on 30 October 2003 relating to claims of commercial confidentiality, the following statement sets out the basis of the claim and the commercial harm that may result from the disclosure of the information. Parts of the modelling were prepared and provided to the Treasury on the basis that it would be kept confidential as it contains commercially valuable information. To disclose such material would undermine the ability of the Treasurer as well as other government agencies to obtain the benefit of such services in the future as well as provide advice to government.

Senator Chisholm also requested copies of all stakeholder submissions provided to Treasury during the consultation process for the reinsurance pool. A relatively small number of these submissions were provided to Treasury on a confidential basis and marked 'Confidential', so the government also claims public interest immunity in relation to the production of those confidential submissions. To disclose information that Treasury has received on an explicitly confidential basis is likely to erode stakeholder confidence in the consultation process and deter stakeholders from openly engaging with and providing any commercially sensitive information to the government to inform future policy development.

Treasury did, however, receive over 100 submissions that were not provided on a confidential basis so non-confidential stakeholder submissions are currently being processed for publication on the Treasury website shortly.

Senator WATT: Minister, you say you've got some modelling which shows that people in North Queensland will save up to 46 per cent on their insurance premiums if they're a home owner or 58 per cent for strata properties, but no-one can see the modelling that you say you have—is that right?

Senator Hume: It's not in the public interest to disclose that information about cabinet's deliberations, because it may impact the government's ability to receive confidential information and make appropriate decisions impacting the Australian community.

Senator WATT: So North Queenslanders can't be trusted to see the modelling, that you say you have, that shows that they'll save up to 46 per cent on their insurance premiums. What do you reckon, Senator McDonald? Would North Queenslanders like that?

CHAIR: Senator McDonald is not a minister yet, to answer the question.

Senator McDONALD : North Queenslanders are very pleased to—northern Australia reinsurance put in place—

Senator WATT: But they can't be trusted to see the modelling.

Senator McDONALD : They don't want to see the modelling because they're relying on the government to bring in this announcement. I'm not answering questions, I'm sorry.

CHAIR: Just ignore it.

Senator WATT: North Queenslanders should trust this government—that is known for being able to be trusted, that never tells lies—that you'll give them an insurance cut of up to 46 per cent but you've hidden the modelling away, never to be seen.

Senator Hume: Thank you for the compliment, Senator Watt—

Senator WATT: You may have detected a note of irony in what I just said.

Senator Hume: but I think the people of northern Queensland will be particularly pleased to have access to the reinsurance pool.

Senator WATT: What proof, at all, Minister, can you present today that shows that North Queenslanders actually will receive these insurance premium reductions that you claim they will?

Senator Hume: I think the proof of the pudding will be in the eating, Senator Watt.

Senator WATT: People should just go to the next election and make their decision about who they want to be the government based on knowing one day that they might receive a premium reduction, but you can't prove it now?

Senator Hume: I think people will go to the next election and base their vote on many different factors, including how strong the economy is—

Senator WATT: It's a pretty big issue in North Queensland.

Senator Hume: It's a very big issue in northern Queensland, I know that. But they'll also make a decision on whether it's a strong economy, what their employment status is, how much money they've got back in their pockets from our tax cuts. I think they'll base their decision on a lot of factors.

Senator WATT: So you can't produce any proof at all to back up these claims the government's making.

Senator Hume: That's not what I said. I said we will not be producing the modelling that you have requested.

Senator WATT: I don't accept that you can hide the modelling, but I invite you to present any proof at all that backs up these claims that your government has been making in the media.

Senator Hume: I think the people of northern Australia are going to be extremely pleased that they have a reinsurance pool from which they can draw significant reductions in their insurance premiums.

Senator WATT: You just can't prove it.

Senator Hume: I think the people of northern Australia will be very pleased at the government's announcement.

Senator WATT: Your climate policy, if I recall, relies on technology that hasn't yet been invented, and now we've got a reinsurance policy that relies on modelling that no-one can see. You just think people should trust you?

Senator Hume: I think you're drawing such a long bow there, Senator Watt, that you're going to pull a muscle.

Senator WATT: People have been waiting a very long time for your government to do something about this. There have been promises made for the life of the government.

Senator Hume: I'm going to ruin your Twitter clip.

Senator WATT: I'm not thinking about Twitter clips, I'm thinking about insurance premiums.

Senator Hume: Then ask a question.

Senator WATT: All I can do is ask that you give some respect to people in North Queensland and show the modelling that you say backs up these claims. The other thing I noticed in Minister Sukkar's press release, when he made this announcement, was that he said: 'Homeowners in northern Australia with the most acute cost pressures are expected to benefit from up to 46 per cent premium discounts.' What do we mean by 'homeowners with the most acute cost pressures'?

Senator Hume: I would imagine, and I am speculating, that it means those homeowners that have the highest premiums.

Senator WATT: Ms Quinn or Mr Kelly, can you explain to us what we mean by people with the most acute cost pressures?

Ms Quinn : Just to be clear, the legislation that contains the design elements for the reinsurance pool was introduced on 9 February. The regulations that underpin it were also released. The design features of the reinsurance pool are in the public domain, and they set out the principles on which the pool will be created and managed by the Australian Reinsurance Pool Corporation. Those design elements are designed to ensure that the maximum reduction goes to those people who have experienced the highest increases in premiums in recent times.

Senator WATT: Essentially, that's how we define it: the people who've experienced the biggest increases in their premiums?

Ms Quinn : It's around the most risk that they bear in response to the cyclone risk. In the past the insurance premiums have reflected increases in risks. You can characterise it as either those that bear the most risk or those that bear the highest cost depending on which way you wanted to characterise it.

Senator WATT: In layperson's terms, how would you describe the kind of people who will get this premium reduction? The most acute?

Ms Quinn : I'm happy to pass to Mr Kelly.

Mr Kelly : The way the process is, you can think of categories of low-risk areas or low-risk properties, medium-risk properties and high-risk properties. Those higher end savings referred to by the government are at the higher end.

Senator WATT: What percentage of North Queenslanders are considered to be high risk?

Mr Kelly : You're asking a question that essentially goes to the modelling itself—

Senator WATT: So it doesn't mean, Ms Quinn, that every homeowner in North Queensland will see a premium reduction of up to 46 per cent, it's only the high-risk homeowners?

Ms Quinn : 'Up to' is the expression talking about the largest reductions that people get. How much people will see will depend on their risk and depend on their insurance that they have and other features they co-insure, for example, as well.

Senator WATT: What's the average premium reduction expected for homeowners in North Queensland?

Ms Quinn : That number is not in the public domain.

Senator WATT: Because that's part of the stuff that the government's not prepared to release?

Ms Quinn : Correct.

Senator WATT: Minister, don't you owe it to the average homeowner in North Queensland to tell them what their premium reduction is going to be?

Senator Hume: I know Labor are very upset because they don't have a plan to make insurance more affordable in northern Queensland themselves.

Senator McALLISTER : It's unclear that you do.

Senator Hume: What I can say is that this plan, the legislation which has already been introduced into the parliament, has been welcomed by all stakeholders, including the Real Estate Institute of Australia, who said it's a win for homeowners and for renters; IAG, who said the reinsurance pool will make insurance more affordable for home, strata and small-business policyholders; and the Insurance Council of Australia, who welcomed the reinsurance pool's design.

Senator WATT: Have you seen what RACQ had to say about this? They sent an email to every one of their members in Queensland saying, 'RACQ is currently unable to validate the premium reductions that have been reported in the media.' I understand Suncorp has also had a bit to say, questioning whether these figures can be believed. It's not quite right to say that all stakeholders say this is a great thing, is it?

Senato r Hume: Have you found a stakeholder that's said it's a bad thing?

Senator WATT: I've certainly found stakeholders, like the two biggest insurers in Queensland, who say they can't see how people are going to get the premium reductions that the government's claiming.

Senator McDONALD : The insurers who are operating a monopoly in North Queensland.

Senator Hume: The reinsurance pool is expected to increase competition, and it's supposed to put pressure on premiums.

Senator WATT: Does your modelling show that?

Senator Hume: There's around $2.9 billion in premium reductions that are anticipated for eligible households, strata properties and small businesses.

Senator WATT: Is that what your modelling says?

Senator Hume: Correct.

Senator WATT: So you can tell us about the modelling?

Senator Hume: No. I can tell you the information that's in the public domain, but I can't show you the modelling.

Senator WATT: So you won't tell us what the average householder in North Queensland can expect by way of premium reductions under this pool, Minister?

Senator Hume: It's estimated that for those living in northern Australia and particularly those with the most acute cost pressures they can expect to benefit from premium discounts of up to, as you said, 46 per cent for homeowners, 58 per cent for strata properties and 34 per cent for small and medium enterprises.

Senator WATT: That's all through your press release. I get that. Mr Kelly, can you give us a rough percentage of the number of homeowners in North Queensland who would be considered high risk? Are we talking five per cent, 10 per cent—I'm assuming it's not 50 per cent, if they're high risk. They must be a relatively small group.

Mr Kelly : You're going to the details of the modelling again that was done for these purposes. If I can just take the opportunity to come back to the question I wasn't fully able to answer before on the final report with Finity: we saw a near final copy on 2 November. It was finalised and formally handed over on 29 November last year.

Senator WATT: What we actually now know is that it's only high-risk property owners who might receive premium reductions of up to 48 per cent, or whatever the figure is, but it's not true to say that the average homeowner in North Queensland will get a premium reduction of up to 48 per cent—it's only high-risk, isn't it?

Senator Hume: That's pure speculation, Senator Watt. I don't know where you've pulled that—

Senator WATT: You can put me out of my misery if you tell me what the average homeowner is going to see. That's what people in North Queensland actually want to know.

Senator Hume: For those living in northern Australia with the most acute cost pressures—

Senator WATT: Yep, got it.

Senator Hume: they can expect to benefit from premium discounts of up to 46 per cent for homeowners, 58 per cent for strata properties and 34 per cent for small and medium enterprises.

Senator WATT: The other issue I've heard about this is that what the government's proposing is that the reinsurance—essentially, the damage will only be covered if it occurs within 48 hours of a cyclonic event. Is that how it works? I probably haven't expressed that particularly well.

Mr K elly : It's 48 hours after the end of the cyclonic event.

Senator WATT: Cyclones tend to be, especially when they cross the coast—it's a relatively quick 24 to 48 hours that it's wreaking havoc before it either dissipates, blows out to sea or blows further inland. So any damage that occurs because of, say, floodwaters that happen beyond 48 hours after the cyclone won't be covered by the pool—is that right?

Mr Kelly : There are elements and wording around this, but my understanding is it relates to damage that commences within the 48-hour period. It commences and some of it can extend out. 48 hours is the baseline.

Senator WATT: To give you an example: Cyclone Debbie, which happened in North Queensland a few years ago, came over the coast, with lots of damage within the first 24 hours in some parts, but it triggered very large flooding across a substantial part of Queensland, and I think even northern New South Wales. Any of that flooding that occurred after the initial 48 hours would not be covered by the reinsurance pool—is that correct?

Mr Kelly : As I said, it's after the cyclone ends that the 48 hours applies. It's whatever the event of the cyclone period is and then you have another 48 hours.

Senator WATT: So if it goes from being a category 4 Cyclone and, say, within two days—I forgot the technical term—stopped being a cyclone—

Senator CHISHOLM: A rain event.

Senator WATT: became a rain event rather than a cyclone, any damage after that initial 48 hours won't be covered?

Mr Kelly : Subject to the caveat I made about the damage commencing, yes.

Senator WATT: If you look back at some of the major cyclones that have happened in Queensland in recent years, a substantial amount of the damage has flowed from flooding that happened days after the cyclone ceased being a cyclone. This reinsurance pool actually won't offer any assistance to people in that situation—is that right?

Mr Kel ly : I can't verify the factual statement you've made. I don't have that information with me.

Senator WATT: Does anyone at the table know something of recent cyclones in Queensland and can talk to that?

Ms Quinn : Not in detail. These were matters that were considered as part of the design features in terms of the analysis that was provided, the input from insurance companies and stakeholders. There was comprehensive engagement with the community and with experts on these things. It is a design feature and a decision for government to allow the 48 hours after the finalisation of the cyclone. They're matters of policy taking on board all the information provided to them in the more than 100 submissions.

CHAIR: Senator Watt, I have been giving you quite a bit of latitude.

Senator WATT: Yes.

CHAIR: I want to draw your attention to the estimates rules—the secretary drew my attention to them. There are issues where we do need to be careful in asking questions about the meaning, and I'm quoting from the estimate rules: '… it is not considered appropriate to ask questions about the meaning, purpose, intention or effect of clauses in bills that are the subject of a separate inquiry.' This bill is, of course, the subject of an inquiry by this committee, so I think we do need to tread a bit carefully. I was happy to let your questions go in terms of the modelling.

Senator WATT: Sure.

CHAIR: But in terms of the effect of particular clauses, I think we need to be mindful that the bill itself is the subject of inquiry.

Senator WATT: Understood, and we're going to ask more detailed questions through that inquiry. To keep it general, Minister, don't you think it would have been more honest for the government to advise North Queenslanders of what premium reductions the average householder could expect? Why did you only focus on those at high risk?

Senator Hume: I don't want to speculate on what may or may not be in that modelling. What I can say, though, is that the government listened very carefully to feedback that was received throughout the consultation and design process. It made key changes to ensure that the reinsurance pool delivers on its objectives and that 96 per cent of business property policies in northern Australia will be covered by that reinsurance pool under the $5 million sum insured threshold. We also expanded the coverage for strata buildings, including for commercial strata properties, which means that the pool will now cover over 6,000 additional strata policies. Coverage will also be expanded to small business marine property insurance. Policyholders will also continue to have freedom to choose their own insurer, and insurers will manage their own claims. Premium savings will then become available as insurers transition to the pool from 1 July 2022. The only thing that would stop the pool from starting on 1 July 2022, precisely when we said it would, is the opposition.

Senator WATT: Can you confirm that the average householder in North Queensland will receive a premium reduction of up to 46 per cent?

Senator Hume: That's not what I said.

Senator WATT: I know. It's a separate question. I'm inviting you to confirm that the average householder in North Queensland will receive a premium reduction of up to 46 per cent.

Senator Hume: Those with the most acute cost pressures can expect to benefit from premium discounts of up to 46 per cent for homeowners.

Senator WATT: Yes, that's high risk, so the average householder cannot expect a premium reduction of up to 46 per cent. You're limiting your statement to high-risk homeowners.

Senator Hume: Insurance normally is for high-risk homeowners, is it not? You'd want the high-risk homeowners to be insured.

Senator CHISHOLM: If you lower premiums then everyone would be insured.

Senator WATT: Exactly. I'm currently renewing my home insurance policy and would quite like to have it paid out but I'm not in a high-risk property. You are saying that high-risk homeowners will get up to a 46 per cent reduction.

Senator Hume: No, I said those with the most acute cost pressures will get up to 46 per cent.

Senator WATT: Let's go with your language: those with the most acute cost pressures will get up to 46 per cent, but that does not mean that the average householder in North Queensland will get up to 46 per cent, does it, Ms Quinn?

Ms Quinn : Depending on the level of risk and how much in premiums they currently pay, they will get different percentage reductions going forward.

Senator WATT: So some will get less.

Ms Quinn : Some will get less than 46 per cent. That's why the statement says 'up to 46 per cent'.

Senator WATT: And the statement is limited to those at the most acute risk.

Ms Quinn : That's the statement, yes.

Senator WATT: Minister, can you guarantee that the average homeowner in North Queensland will get a premium reduction of up to 46 per cent?

Senator Hume : The government has made no statement about the average homeowner, and I will make no comments that refer to the modelling, for which we have taken a public interest immunity claim.

Senator WATT: So you can't give that guarantee.

Senator Hume: It's in the modelling; I cannot talk about it because it's a public interest immunity claim. It is part of cabinet deliberations.

Senator WATT: Can you guarantee that no policy—

Senator Hume: I'm not ruling in and I'm not ruling out. You know I'm not going to play that game.

Senator WATT: Can you guarantee that no policyholder in North Queensland will see their premiums go up?

Senator Hume: No, I'm not going to play that game.

Senator WATT: You've made a lot of claims about premiums going down—

Senator Hume: This is an excellent piece of policy which we know the people of northern Queensland have been crying out for for a long period of time.

Senator WATT: You just won't show them the modelling.

CHAIR: Senator Watt, I have given you some time. Senator McDonald has some questions on this topic, so I would like to give her the call.

Senator WATT: Maybe she can get the modelling!

CHAIR: Let's give Senator McDonald the opportunity to ask some questions.

Senator McDONALD : As probably the only person here who lives in northern Australia, let me tell you how very, very pleased we are by this announcement, because what Senator Watt is failing to acknowledge is the number of people who are not insured at all anymore. They're not insured at all. This policy will stand behind the premium providers of northern Australia.

What I want to ask you is: do you have any data on the number of people who are uninsured, or do they just not show up because they're not a policyholder?

Ms Quinn : I don't have the number in front of me, but I have given evidence before at this committee that there is a sizeable proportion of people who are underinsured. This was canvassed in the ACCC's analysis of the insurance market. And you're correct: it's significantly higher than the underinsurance rate elsewhere in Australia, indicating that the price and the risk that's borne by households is reduced insurance coverage in northern Australia.

Mr Kelly : I can give you the numbers from the ACCC report. About 20 per cent of properties in northern Australia have no building insurance compared with 11 per cent in the rest of Australia.

Senator McDONALD : Wow. The ACCC report talked about premiums in northern Australia being 2½ times the amount that they are in southern Australia. I know that I pay three times per $100,000 what I would have been quoted in northern Australia. I understand the reason for insurance being so much higher in northern Australia is a collection of factors. Could you talk me through what you understand are the factors affecting higher insurance in northern Australia?

Ms Quinn : This was part of the ACCC's investigation into the insurance market. It found that the main driver was higher natural hazard risk, primarily driven by cyclones and, in some cases, flood risk.

Senator McDONALD : Did they mention the different building codes in Queensland? The Insurance Council of Australia tells me that Queensland building codes are not as high as they are, for example, in Darwin, and that they haven't been policed by the Queensland building authority.

Ms Quinn : The quality of buildings definitely impacts on the assessment of risk and that goes to the underlying standards that are in place. Many households, of course, build above minimum standards and as a result would get a reduction in their insurance premiums.

Senator McDONALD : I understand the federal government has done a strata title unit trial of $40 million—is that correct? It's to trial improvements to building structures to try and assist them with a reduction in their premiums.

Ms Quinn : There has been a trial, but I'd have to take on notice the $40 million number. The trial was looking at what mitigations could be done and how they would reduce premiums. It has resulted in clear reductions in premiums when households—strata title—invest in known mitigants.

Senator McDONALD : Are you aware of the amount of stamp duty that's been charged by the Queensland state Labor government on premiums in North Queensland as premiums have escalated?

Ms Quinn : I haven't got the fixed amount, but it is as a percentage, so as premiums go up the dollar amount received goes up as well.

Senator McDONALD : I understand $65 million was collected the year before last. The Labor government has been putting $10 million in that same period into resilience projects. It seems strange to have the government putting forward a reinsurance pool to stand behind insurers, to actively try and find a way forward on this catastrophe of insurance in northern Australia, yet the opposition minister doesn't have a plan. They don't have a plan in Queensland; they don't have a plan federally. Are you aware of any plan that the opposition has put forward to address the reinsurance crisis in northern Australia?

Senator Hume: I'm not aware of another plan. I didn't realise that the state Labor government in Queensland was creaming off the top either.

Senator McDONALD : Creaming it.

Senator WATT: I refer you to our disaster emergency plan. There's a lot of interest in mitigation out there.

Senator McDONALD : It's very difficult to hear criticism of a positive, proactive plan that everybody, apart from the two insurance companies who have a monopoly in North Queensland, is critical of, and I look forward to seeing the implementation on 1 July.

CHAIR: Thank you. Senator McKim.

Senator McKIM : I know Senator McAllister was asking some questions about the development of the proxy advice regulations. I've got a few questions on that as well. They're in a slightly different area to Senator McAllister's. Firstly, can I ask Treasury whether any external consultants were engaged to assist in the development or the drafting of the greater transparency of proxy advice regulations?

Ms Quinn : No.

Senator McKIM : Was ASIC shown the final version of the regulations before they were tabled?

Ms Quinn : I will pass to my colleague on that precise point.

Mr Dickson : My involvement at certain stages was more towards the beginning of the process. I don't have information in relation to consultation with ASIC, but I can take that on notice.

Senator McKIM : ASIC is obviously the regulator. It's ASIC's responsibility to issue licences to proxy advisers. I'd expected that they were consulted through this process. I certainly hope they were. Perhaps I could just extend my question out, given you're taking it on notice, and ask for details of consultation with ASIC right through the process of developing and drafting these regulations. Specifically, as I previously asked, were they shown the final version of the regulations before they were tabled. So you're happy to take that on notice?

Mr Dickson : Yes.

Ms Quinn : There definitely were conversations with ASIC through the process. I just don't have whether they saw the very, very final version as released. But they certainly were consulted through the process, as you say, given their implementation role.

Senator McKIM : Thank you. To Treasury's knowledge, did anyone outside Treasury or the Treasurer's office get to see the final version of these regulations before they were tabled?

Ms Quinn : All regulations are a matter for government and are approved for release by a minister. The usual process is that that goes to the minister responsible, and the minister approves them for release. So they would have been signed off by the Treasurer, yes.

Senator McKIM : I understand that. I'm asking whether, to Treasury's knowledge, the final version of these regulations was seen by anyone outside Treasury or the Treasurer's office.

Ms Quinn : I'm happy to take that on notice. Certainly we liaise with regulators, on the basis of them implementing regulation. We have various elements in our processes to consult with them. We acted on behalf of the government. I can't speak to whether the ministers share information with others. I could take that on notice for you, though.

Senator McKIM : I appreciate that. I also want to ask on what basis 7 February was set as the commencement date. Is there anything particularly special about that date? Whose idea was it that 7 February was set as the commencement date?

Ms Quinn : I'm not aware, other than the usual process of considering how long it would take for various parties to adjust—the passing of legislation, the time that it would take for regulators to have arrangements in place et cetera. I'm not aware of any specific considerations other than the usual set of considerations, but I'm happy to take it on notice.

Senator McKIM : Did Treasury consult with a law firm called Arnold Bloch Leibler at any stage during the development and drafting of the regulations?

Mr Dick son : They provided a submission to the process, but we did not have any engagement outside of that submission process.

CHAIR: Sorry to interrupt, Senator McKim; I just want to clarify this. That was a submission in response to the Treasury consultation process that issued a paper for calling for submissions?

Mr Dickson : Yes, that's right.

Senator McKIM : And I think you've just given evidence that, outside the provision by Arnold Bloch Leibler of that submission, there was no further engagement with them on the development of the regulations?

Mr Dickson : That's correct.

Senator McKIM : Thank you.

CHAIR: Mr Dickson, Senator McAllister had a series of questions in relation to process. Did you have the opportunity to find the information you needed to fulsomely address that issue?

Mr Dickson : Not fulsomely; I can answer partially. Unfortunately, I haven't been able to get every detail and date.

CHAIR: We'll see how we go.

Mr Dickson : I can give you a characterisation that might suffice for the time being, and we can take the question on notice and give you more precise dates. In terms of our engagement, we engaged with the issue over a number of months. That culminated in a request that we received on 13 April 2021 to produce and finalise a consultation paper, but leading up to that there would have been conversations and engagement over a lengthy period of time.

Senator McALLISTER : You said 'a number of months'. Does 'a number of months' refer to two or three?

Mr Dickson : To be precise, I don't have a strong recollection dating back that far, but I would say it would be several months. In fact, the issue pre-dates my involvement in it. I think the issues relating to proxy advisers may have even been canvassed by my predecessors.

Senator McALLIST ER : When did you commence in the role, Mr Dickson?

Mr Dickson : It's a bit hazy because I was working on a lot of coronavirus things. We were working on a lot of pandemic things, so there was a transition period. My commencement in the role would have been in 2020 sometime.

Senator McALLISTER : However, in the months leading up to the formal request on 13 April for a final consultation paper, you'd been having discussions with the Treasurer or with his staff, I assume?

Mr Dickson : Yes.

Senator McA LLISTER : Did the Treasurer initiate these discussions before or after the Australian Council of Superannuation Investors publicly criticised Rio Tinto for their destruction of Juukan Gorge?

Mr Dickson : I haven't drawn a connection between those two things in my work on the issue of proxy advisers, but I can look up the date when that occurred and provide an answer to that.

Senator McALLISTER : Was the request from the Treasurer's office made before or after Ownership Matters released embarrassing information about the JobKeeper rorts caused by the Treasurer's failures?

Mr Dickson : In relation to dates, I'm happy to take on notice those questions about the precise dates that those events occurred and how they related to any work that we did on proxy advice. As I said before, in the work that I've done, I haven't drawn a connection between those things.

Senator McALLISTER : There was a formal request to prepare this consultation paper. When did the Treasurer instruct Treasury to prepare the regulations?

Mr Dickson : In terms of the instruction to prepare regulations, I'm not sure if there was a formal date as such, because we would have had conversations where we would have been anticipating the likely direction of reform in the area. So I'm not sure if there's a clear-cut date, but I could get a date for you.

Senator McALLISTER : Why did Treasury not issue an exposure draft of the regulations for consultation prior to putting them into the parliament?

Ms Quinn : The release of documents for consultation are a matter for the government as opposed to the Treasury per se, so you'd have to put that question to the government.

Senator McALLISTER : In the Westminster system, you're all the same branch of government, so normally I would expect you to answer the question. But perhaps the minister could enlighten us, if you don't know Ms Quinn. Why was there no public consultation on the regulations, Minister?

Senator Hume: There was significant consultation on the regulations ahead of the final package.

Senator McALLISTER : There was no public—there was no exposure draft.

Senator Hume: The final package of regulations differed from the option in the consultation paper, but those changes were made on the basis of stakeholder feedback.

Senator McALLISTER : You're aware that the Office of Best Practice Regulation evaluated their RIS and found them to be not consistent with best practice. Is it common for major pieces of financial regulation to receive a finding from the OBPR as not being consistent with best practice?

Senator Hume: I couldn't answer that.

Senator McALLISTER : You don't know or you don't—

Senator Hume: No.

Senator McALLISTER : Is it common in your policy areas? Do your RISs usually get a big black mark from the OBPR?

Senator Hume: I know that these particular regulations have raised your ire, but they were only there to strengthen transparency and accountability—

Senator McALLISTER : They were there to stifle transparency and accountability, actually, Minister.

Senator Hume: in an industry that is highly concentrated and yet has enormous influence and a significant impact on the way companies operate and the way they're governed. I would imagine that the opposition would be in favour of transparency and accountability in all aspects of governance.

Senator McALLISTER : It's been described as an undergraduate exercise from a Treasurer pursuing the grievances of others.

Ms Quinn : I just want to be clear that the Office of Best Practice Regulation's assessment is that the quality of the regulatory impact analysis in the RIS is adequate and therefore sufficient to inform a decision. That's the formal declaration of the OBPR on the RIS.

Senator McALLISTER : And yet not consistent with best practice. Did Treasury prepare a response for the Treasurer in relation to the letter issued by Senator Fierravanti-Wells on 27 January this year which outlined serious scrutiny concerns with the legislation?

Ms Quinn : We provide advice on all matters that are put to the Treasurer from that committee. This wouldn't have been any different to others.

Senator McALLISTER : I'm not really looking for an explanation of your general protocol; I'm asking a specific question of fact. Did Treasury prepare a response for the Treasurer to sign, or a piece of advice for the Treasurer, in relation to the letter from Senator Fierravanti-Wells?

Ms Quinn : We did provide advice, yes.

Senator McALLISTER : Advice, but no letter?

Ms Quinn : I'd have to check. I don't have in my mind whether there was a letter attached or not, but I know we did provide advice.

Senator McALLISTER : I have a couple of other questions on the reinsurance pool. This is just a question of fact, although so few questions of fact have been able to be answered about this particular proposition. How many insurers will participate in the pool on 1 July 2022?

Ms Quinn : You're asking about a forecast going forward, so it is going to depend a little bit on how the insurers respond. But, given that there's a mandated coverage—I don't have the exact number. Do you have it, James?

Mr Kelly : This is getting to questions about the legislation, which raises the issues that the chair raised. There is a transition period in. You've got a 1 July 2022 start date, but the larger insurers have 18 months to join, and then there's an initial 12-month period for the others.

Senator McALLISTER : Thanks. You're misunderstanding my question. I'm sorry. I'll ask it more clearly. I'm not asking about the terms of the legislation. I will ask it in a different way. How many insurers have advised you that they will join on 1 July 2022?

Mr Kelly : I'd have to take that question on notice.

Senator McALLISTER : Do you not know, Mr Kelly?

Mr Kelly : No.

Senator McALLISTER : Have any?

Ms Quinn : It's going to depend on the legislation passing and final design of the scheme being in place. It would be unusual for people to tell us something that isn't yet passed by parliament, but certainly the insurers have been actively involved in the process. The legislation put before parliament has a mandated entry with the phasing in, as Mr Kelly said. It would be a little strange for them to declare or not declare their actual participation at this point in the process.

Senator McALLISTER : It's just, Minister Hume, you've been very enthusiastic about how marvellous this is going to be for people in Queensland. I'm just wondering whether any insurers at all will be participating on 1 July 2022.

Senator Hume: I think Ms Quinn made it very clear that the legislation needs to be passed before we can assess that.

Senator McALLISTER : I see, so you just don't know. You have got no idea?

Senator Hume: I can take it on notice and ask the Assistant Treasurer, but I think Ms Quinn answered your question adequately.

Senator McALLISTER : Alright then.

CHAIR: Do we have any more questions for the Markets Group? Senator Chisholm?

Senator CHISHOLM: I just want to focus on the SME Loan Recovery Scheme, which was extended I think for another six months till the end of July this year. When the SME loan guarantee was introduced in March 2020 it was budgeted to deliver $40 billion in loans. How many businesses were expected to take up these loans at the time?

Ms Quinn : We didn't make an assessment of how many would take it up. The provisioning was based on a very conservative assessment. We were quite unsure what the pandemic was going to do and what the arrangements were going to be for small- and medium-sized enterprises, so we took a conservative analysis, but we didn't make an estimate of the number of people who would take it up. It was a demand-driven scheme. It's a different way of accounting for it. Given that it's a guarantee, as opposed to an expenditure, we weren't required to try to make a forecast.

Senator CHISHOLM: So how did you reach the $40 billion figure?

Ms Quinn : We looked at how much lending there was in this sector and the possible different scenarios and we made an assessment on a very conservative number. What happened from that assessment until the final outcome was that a large number of other policies were put in place, including JobKeeper and the deferral arrangements from the banks, so it's not at all surprising that the number is less than that conservative number that was originally put in place.

Senator CHISHOLM: So how much of that $40 billion that had been budgeted for was delivered by September 2020?

Ms Quinn : I don't have the numbers for September 2020, but we do know that as at 31 December 2021 across both the SME Guarantee Scheme and the SME Recovery Loan Scheme there were 86,000 loans worth around $9.3 billion provided. How many of those will call on the guarantee will be a function of how they fare over the life of their loan.

Mr Kelly : Senator, I think the September 2020 date you're referring to is the end of the first phase of the SMEG. That number is $1.847 billion.

Senator CHISHOLM: Do you know how many businesses there were?

Mr Kelly : The number of loans approved was 20,500.

Senator CHISHOLM: What about for the second period, which I think ended on 3 June 2021?

Mr Kelly : There, the value is $4.721 billion and 57,000 loans.

Senator CHISHOLM: And December 2021?

Ms Quinn : We have categorisation by the different types of schemes. The next scheme was the recovery loan scheme, and, as at the end of December, there were 9,000 approved loans at $2.839 billion. Those, plus a few others, add up to the chose data, and then some refinancing adds up to the $2.3 billion number that I give you at the start.

Senator CHISHOLM: How much is expected to be delivered by 1 July 2022?

Ms Quinn : It is a demand-driven program that depends on the demand for the guarantee through the banking system, so we don't have a forecast.

Senator CHISHOLM: No forecast on the number of businesses that would be expected to take it up, either?

Ms Quinn : No. It would depend on how they are going and what options they assess for themselves in talking to their bank.

Senator CHISHOLM: So, when you were proposing it, you had no sense of the total number of loans that would be budgeted?

Ms Quinn : Not at the time. It was at the height of the peak uncertainty as to what the pandemic was going to do to the Australian economy, and it was before other policies were put in place; it was in the first phase. It was highly uncertain what the outlook was.

Senator CHISHOLM: Have you got any state breakdowns per state for those categories?

Ms Quinn : I don't with me, and I'm not sure that we request that information from the banks. I'm happy to take that on notice.

Senator CHISHOLM: I'd be interested to see what details you've got. I presume there was no work done on whether different states would have a better uptake of these than other states?

Ms Quinn : No, there is no geographical element to the program. It's available to all businesses. The only geographical element was when the impact of particular floods was added into the recovery loan scheme. In general there is no geographical component. It will depend on the impact of the pandemic on business models in different parts, but you can imagine that those areas that were most affected by restrictions or actual outbreaks would have been more affected.

Senator CHISHOLM: Can I ask for some more detail on notice, if you can provide it, about how many there were per state and how much the dollar value was per state?

Ms Quinn : I am happy to take that on notice and see whether we have that data.

Senator CHISHOLM: Given there was a relatively low take-up of the loans—and I understand you provided the context as to why that was—on what basis was the decision taken to extend the scheme to 30 June this year?

Ms Quinn : I wouldn't characterise it as low take-up. If I was talking to you about 86,000 small businesses supported by a guarantee of over $9 billion in any other time, it would be considered a significant program.

Senator C HISHOLM: It's less than a quarter of the total that was set aside for it, though.

Ms Quinn : As I said, you need to take the package of measures together, and JobKeeper was not in play when we first looked at the number. I really can't emphasise enough how speculative that first number was. It is unfair of the program, in some sense, to characterise it against that element. The extension of the program has occurred as the government has assessed the need for support in the economy in response to the pandemic moving forward. It has changed the parameters of the guarantee to reflect the circumstances. The first phase, for example, was very much focused on cash flow and supporting businesses in the first phase of the pandemic. The recovery loans changed so they could support investments as people came out of lockdowns and into a growing economy. It allowed more investment options with longer terms and higher loans. The scheme has been adapted over time to reflect the economic circumstances and the needs of small business.

Senator CHISHOLM: I'll just move to another subject: small business payment times. The small business ombudsman has observed that the payment time reporting register reveals that more than 30 per cent of invoices are being paid late by big business for what has already been earned by small business. Has Treasury provided advice to the Treasurer or to the minister for small business on the reasons why one in three small businesses are being paid late?

Ms Quinn : As has been said, the government has introduced a mechanism to track what's happening with payment times for small business. There's a reporting scheme which requires big business to report what they're doing. This was a policy outcome from a few years ago and it's taken time to implement in terms of having registrations et cetera. We've provided advice on what's happening in response to the register and the obligations under the scheme going forward.

Mr Cully : I can add to Ms Quinn's answer. In the development of the scheme, a piece of work was done initially which looked at the payment time and small business performance, about the economic impacts of small business being paid late. That work was done with AlphaBeta Advisors, as it then was; it's now part of Accenture. Obviously, that advice was provided to the small business ministers and other ministers in government as a justification for why the scheme was necessary: the economic costs to small business and to the economy of small businesses not being paid on time.

Senator CHISHOLM: How many small businesses have been paid late, according to the register?

Mr Cully : I'm not sure we have that. I might see if Ms Jeffries has that analysis.

Ms Jeffries : I would have to take the specific number on notice and go back through the register to confirm the exact number. What I can tell you, though, based on the first reporting period that we've now published on the register is that, as at 7 February, there were 6,763 reports published for that first reporting period from entities that had a standard or a calendar income year. The average payment terms were just over 37 days.

What we could tell from the reports that were published was that, across all industries, approximately 44 per cent of small business invoices were paid within 20 days. That's based on the number of invoices paid. Based on those figures, we can see that less than three per cent of invoices were paid after 90 days or more.

Senator CHISHOLM: Can you name the top 20 businesses who paid invoices outside the 30-day payment benchmark?

Ms Jeffries : Not off the top of my head, but I can take that on notice and provide that figure for you.

Senator CHISHOLM: Okay.

Ms Quinn : I can tell you that, of the sectors, the manufacturing sector has the longest average and that public administration has the shortest payment times. So there are distinct differences across different sectors in the economy.

Senator CHISHOLM: Yes. Would you be able to provide that list of top 20 businesses relatively soon?

Ms Jeffries : Yes, we can.

Senator CHISHOLM: Just on the 37-day period: what specific mechanisms are in place to ensure payment times are improved?

Mr Cully : The basis of this scheme is to have transparency around the way that big business pays small business and, through that transparency, to drive better performance in payment times. So there's no formal process through that, but the transparency should drive the improvement in those payment times.

Senator CHISHOLM: Okay. Can you provide me with examples of how that has happened—of a business that has made reparations for paying small businesses outside that payment benchmark as a result of the register?

Mr Cully : I don't think we could point to any examples of reparations where a big business may have paid a small business outside of its payment terms. Those payment terms can vary. Thirty-seven is obviously the average, which means there's a number that pay quicker than that and there's a number that pay beyond that. But we can certainly say that what we've observed since the scheme has commenced is some activity by big businesses to look to improve their payment time performance to small business in the knowledge that that will be published and transparent and so wanting to improve their performance in that area.

Ms Jeffries : Many of the businesses that have submitted their reports have indicated in those reports, that are now publicly available, their commitment and intention to improve their payment times to small business. So, an analysis of early trends will be possible following their second reporting period, which is due 31 March this year and will be published after that.

Senator CHISHOLM: Has Treasury provided any advice to the Treasurer or the minister for small business on further measures to make sure small businesses are paid on time in addition to the current reporting scheme?

Mr Cully : During the course of the parliamentary progress of the bill, there was obviously a committee process and debate. There was a range of other measures that were put forward, including methods of mandating payment times. One outcome of that parliamentary debate was that there is now in the legislation a requirement that the payment time scheme be reviewed, and that review will need to commence in the first half of next year. In part of that there are some quite specific terms of reference enshrined in the legislation which includes options looking at whether the scheme has been successful or whether there may need to be other measures taken.

Senator CHISHOLM: Have there been any mechanisms available to governments to ensure small businesses are paid on time other than this transparency regime?

Mr Cully : There is a suite of measures the government has adopted, so the government has a commitment it will pay within 20 business days.

Senator CHISHOLM: I'm more looking for other things that could be under consideration and not what's done. What else could be under consideration?

Mr Cully : What's under consideration would obviously go to advice to government. Clearly, in terms of the debate around when the scheme was being introduced, there was discussion around mandating payment times, having set payment times for that. That is something that has been adopted in some other jurisdictions and has not been overly successful. That's one area that has been part of this discussion about how to improve payment times for small business.

Senator CHISHOLM: Has Treasury received any feedback on whether small businesses have been able to access meaningful information from the data as it's currently published?

Ms Jeffries : Nothing directly from small businesses to the best of my knowledge. But, as I mentioned before, businesses have submitted their reports. We've only just had their first reporting period published, so the reports are available for small businesses to review, but the first report set a benchmark for subsequent reporting periods.

Ms Quinn : We obviously will look at the number of people who are accessing those reports, and, as part of our new review, we would consider how useful people found them.

Senator CHISHOLM: I think the manufacturing industry was identified as having the longest average payment terms?

Ms Jeffries : That's correct.

Senator CHISHOLM: Of 49 days?

Ms Jeffries : More than 47 days.

Senator CHISHOLM: Has Treasury assessed the potential supply chain impacts in key areas of sovereign national capability like manufacturing when small businesses are paid later than most other small businesses in that industry?

Ms Quinn : The policy responsibility for manufacturing rests with the department of industry. So it's probably a question best put to them, but this information is publicly available—not just within government—and so it would be a factor in terms of the operation of the different sectors how the money flows through those sectors.

Senator CHISHOLM: Credit Watch reports that the construction industry payment times have blown out through COVID-19 and are now at record highs, with 12 per cent of building companies more than 60 days behind on debts owed to suppliers and contractors. Does this data show that the payment time register is not equipped to reflect current market conditions in a timely way that can be acted upon?

Ms Quinn : The reporting periods are with a lag at a specific point in time. They will pick up over time—trends—as Ms Jeffries said. It's not a just-in-time registry, though. It does do points in time.

Senator CHISHOLM: Is there anything that could specifically be done in the construction industry? It's just consistently a problem, and across the country, from what I can observe.

Mr Cull y : I know from previous experience this is an issue that's been looked at by other portfolios and particularly around issues around things such as security of payments—ensuring that subcontractors get paid full stop, let alone within time. So I know it is looked at in other parts of government.

Senator CHISHOLM: But there's nothing specifically to do with the construction industry that the government are considering?

Ms Quinn : We're happy to take that on notice and put that to our colleagues that look after the construction industry in detail, which would be in the department of industry.

Senator Hume: Senator Chisholm, if I could just wade into one of my other portfolio responsibilities for a moment: in the Digital Business Plan, which was released in 2020, the government invested $15.3 billion to support the adoption of e-invoicing by businesses. It's estimated that businesses exchange more than $1.2 billion invoices every single year, and around 90 per cent of those are still processed manually. That's one of the things that contributes to late payments, but e-invoicing can save businesses up to $20 per invoice. The government is currently consulting on options to support business adoption of e-invoicing—and that consultation paper was released in December 2021, and it closes at the end of this month—to test a range of potential interventions, including the idea of a 'business e-invoicing right'. And, also, government has really led the way by being an e-invoicer itself.

Senator CHISHOLM: In a recent survey Xero found 24 per cent of small businesses said they delayed payments to themselves, or 23 per cent delayed paying their own creditors or suppliers, because their customers pay them late. Is more action needed from the government to ensure that small businesses are paid on time, than the current reporting regime?

Senator Hume: I think that's exactly the point and purpose of doing consultation on e-invoicing and trying to encourage small and medium-sized enterprises to take up e-invoicing, which can improve payment time so dramatically.

Senator CHISHOLM: Is there anything else the government is considering in this matter with regard to small business?

Senator Hume: I think that officials have said that they'll take that on notice and refer it to the relevant departments.

Ms Quinn : But, more broadly, Senator, in the sequence of events for a company to get paid, as the minister has talked about, there is the issuing of the invoice, in order to get the payment back; and there's also the digital adoption by small business more generally, outside invoicing, to be able to get payments electronically. In the banking space we've got the Consumer Data Right, which extends to small businesses as customers for them to be able to get better deals from the financing system for their business. There are quite a few different components of the financial system regulation. It's all moving towards getting faster transaction. The New Payments Platform, underpinning the entire payments platform, makes it possible for payments to happen more quickly, and you will have experienced that as a customer, I'm sure, Senator, with the ability to do online banking much quicker and real-time payments. So there's a whole sequence of things that are happening to digitise and improve the payments system which will go to helping small business.

Senator CHISHOLM: I'm sure the minister will be able to breeze through these next questions, because it's her favourite subject, which is around the self-managed super fund reforms. I think the government promised to fix up some of those legacy issues in the 2021-22 budget. Is that correct?

Senator Hume: Is this legacy products?

Senator CHISHOLM: Yes, products. I want to check what the current status of the legislative implementation of this measure is.

Senator Hume: I think we're consulting on it right now. Forgive me if I don't have the details of that one in front of me.

Ms Kelly : There were a number of announcements in last year's budget. Just to clarify which one you are asking about, Senator, was it around the residency or around legacy products?

Senator CHISHOLM: Legacy retirement products. So, market linked pensions.

Ms Kelly : This is the one to provide consumers with a temporary two-year option to transition from legacy retirement products to more flexible and contemporary retirement products. Legislation to give effect to this measure will be introduced in line with the government's broader legislative priorities.

Senator CHISHOLM: Does legislation exist?

Ms Kelly : Not currently.

Senator CHISHOLM: So nothing's been introduced. The actual legislation doesn't exist.

Ms Kelly : That's correct. There was a suite of changes to the superannuation system that were passed by parliament last week, and this has to be considered in the context of the broader priorities of the government and also the need to consult in relation to these product conversions. They go back quite some way, and so we need to consult on them before we can put together legislation.

Senator CHISHOLM: Just to be clear, there is no draft legislation?

Ms Kelly : No.

Senator CHISHOLM: Are you proposing that you would consult on this before you draft legislation?

Ms Kelly : That would be the normal process, yes.

Ms Quinn : We normally consult, design and then consult on the legislation itself. There's usually consultation at different phases of any reform process.

Senator CHISHOLM: When can we expect the consultation to start?

Ms Kelly : Ultimately, the timing of the consultation will be determined by government in line with the broader priorities in relation to superannuation.

Senator CHISHOLM: I presume nothing will happen this side of the election?

Senator Hume: There are only a few more days left before the election, as you know, Senator Chisholm. The government's made it very clear that cleaning up legacy products is a particular priority. It's not something that any government has ever proposed before. And yet, one of the reasons why financial products can potentially be costly is because financial services providers need to maintain legacy systems that are difficult to maintain. That creates cost pressures across even new systems and new products as well. This is an enormous undertaking, and it has to be done properly. We don't want it to be too costly. At the same time, we want to make sure that we have the most efficient and cost-effective financial services sector that we can possibly have.

Senator CHISHOLM: Just to be clear, the question was: will anything happen this side of the election?

Senator Hume: I think I said there are not very many days left. We would like consultation to get underway as soon as possible.

Senator CHISHOLM: It's pretty simple. Will anything happen this side of the election?

Senator Hume: We can legislate this side of the election, certainly.

Senator CHISHOLM: I'm surprised it hasn't been more of a priority. Is this legislation a low priority for you?

Senator Hume: We've passed more superannuation legislation in this term of parliament than any parliament has passed in the last 20 years. I don't think you could say that superannuation and financial services are a low priority at this point.

Senator CHISHOLM: That's not what I said. I asked if this issue was a low priority for you, given that you've prioritised—

Senator Hume: No.

Senator CHISHOLM: So it's not a low priority—

Senator Hume: It's a personal passion of mine.

Senator CHISHOLM: But you've just chosen to prioritise other—

Senator Hume: I have lots of passions: most importantly, lowering the cost of superannuation and other financial products; making sure that we don't have duplicate accounts; making sure that insurances aren't inappropriately applied to people, so that they're cross-subsidising the rest of the pool when they can't ever claim on that insurance; making sure that people have choice in their superannuation funds; making sure that people have transparency and accountability in their super funds, and that their super funds are acting in their best financial interests; and ensuring that the system operates efficiently and effectively and concentrates on not just the accumulation phase but also the decumulation phase. Most importantly, as you would know, just last week we passed significant tranches of superannuation reform legislation, one of which was to abolish the longstanding 450 rule, which is an outdated relic—an anachronism—of the superannuation system which was highly discriminatory towards women. But the good news is the coalition came to the rescue and we have abolished the 450 rule. That will take place from 1 July 2022.

Senator CHISHOLM: Do we have a sense of how many people would be impacted by this proposed change?

Senator Hume: The legacy?

Senator CHISHOLM: Yes, how many—thousands or—

Senator Hume: I imagine it would be in the thousands. Certainly, it's something that the sector has spoken of and say that it is a priority for them to be able to move people into modern and more efficient products.

Senator CHISHOLM: So, these people are stuck with these legacy financial products that they would probably like to exit. The government has promised to fix the problem but has not actually progressed anything about it. What's your answer to these people who are stuck waiting for your government who've promised action to actually do something about it?

Senator Hume: And this is the only government that would potentially ever tackle the issue of legacy products. I haven't heard a single thing to come out of the Labor Party on what it is that they would do around legacy products.

Senator CHISHOLM: Is that seriously the best you have for those thousands of people who are stuck there that maybe one day you'll get it—

Senator Hume: Perhaps you can enlighten me as to what Labor's policy is.

Senator CHISHOLM: We're the ones asking the questions; you're the ones in government. You've been there for a long time. You're the minister responsible and you've actually done nothing on this.

Senator Hume: That's not true. In fact, we've flagged an intention of government—

Senator CHISHOLM: It's pretty evident you haven't done anything—

Senator Hume: to tackle one of the most difficult and intractable problems in our financial services sector.

Senator CHISHOLM: It just seems like it's another case of this Morrison-Joyce government being all talk and very little action for those people who are impacted by this.

Senator Hume: That's not a question; that's a comment.

Senator CHISHOLM: I'll finish there.

CHAIR: Thank you. It seems an appropriate time for dinner. Thank you very much, Ms Quinn, to you and your team; it was very helpful.

Proceedings suspended from 19:21 to 19:46