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Thursday, 30 August 2001
Page: 30619


Mr McARTHUR (10:11 AM) —My remarks on the Royal Commissions and Other Legislation Amendment Bill 2001 were interrupted last night, and I note from the Hansard record that I had particularly strong support from the Prime Minister in relation to the industrial relations matters which the shadow minister raised during this debate on the establishment of royal commissions. I note the Prime Minister's particular interest in industrial relations and record my pleasure from his visit to the Alcoa plant in Geelong, where the Prime Minister looked at the particularly forward looking management, which had put in place annualised salaries of their work force and which had divided the work force into working groups. The plant, even though it is an older plant, is now operating at very efficient levels.

While the Prime Minister was particularly impressed with that operation in Geelong, the building industry has a different position, which the shadow minister alluded to in his remarks. In Geelong the building industry is running riot, buildings are not being completed on time, there is coercion and intimidation of management on various sites, there is a Geelong agreement where particular local rules apply and, generally speaking, it is very difficult for anyone in the construction industry in Geelong to achieve their targets in getting a building constructed on budget and on time—so much so that some of the local building contractors have gone broke in recent times. One well-known builder owes creditors up to $7 million, and it would be fair to say that the aggressive attitude of union members in the local area would be a factor involved in that.

Two royal commissions have now been appointed, and the bill before the House is to allow these royal commissions to reach a genuine conclusion, unfettered by restrictions of the exchange of information. As I said last night, a royal commission will be held into the HIH debacle in the insurance industry and also ASIC will be investigating the operations of HIH in terms of the directors' responsibilities and in terms of their ability to comply with the Corporations Law. We have the unusual situation, as you would understand, Mr Deputy Speaker, of having a royal commission and of having ASIC look at the aspects of commercial law.

Basically, this bill will allow the exchange of information, both in the building industry inquiry and in the HIH inquiry, so that the information that these other bodies have in their possession will be able to be exchanged in a legal sense—so that, in the case of the construction commission, they will be able to look at financial dealings through AUSTRAC, which is able to identify transactions over $10,000, suspicious cash transactions and international funds. So we will be able to identify in the building industry— which the shadow minister was so adamant about in terms of some of the other industries—exactly what is taking place. Are some of the contractors taking money illegally or in strange and suspicious circumstances? With the passing of this bill, in a legal sense the commission will be able to observe these matters so that there will be no contraventions or civil difficulties that may have restrained the two royal commissions.

The bill allows communication with the Attorney-General in the ACT, which will allow both these commissions to operate more effectively. We see also a development of protocols to ensure that these federal government agencies can operate in a cooperative way with the royal commission.

We saw this debacle of HIH and the insurance industry, and that gives me an opportunity to raise another matter of insurance which has been drawn to my attention over a number of years and which I think is almost something that should be looked at by a royal commission: it is the matter of the tax on fire insurance policies. We have a situation in Victoria and New South Wales where the CFA levy, as it is called, is so huge that we have a remarkable position. I will quote from a report from Deloitte Touche Tohmatsu talking about this remarkable position. In their press release, they say:

New Tax Hikes to Take Insurance Policyholders into Unchartered Waters

Perhaps for the first time in Australia's history taxes on a product or service could exceed the cost of the product or service.

In the case they present in Victoria—and this is related to fire levies, Mr Deputy Speaker Causley, and you would be interested in that, representing a country electorate—where the premium in Victoria might be $100, the fire service levy is $69 and, if you add the GST—which is comparatively small—of $16, we now have a figure of $185, plus stamp duty of 10 per cent, or $18, which gives a total figure of $204. I know those figures sound quite complicated, but there is a premium of $100 for the insurance paid and yet the extra levy, particularly this fire service levy and other taxes, tally $104.

Mr Walter Spratt, who is a good friend of mine, has been advising me of these matters. He is the national media relations person for this firm and he has been drawing this matter to my attention for a number of years. So we have this remarkable situation of this amazing extra premium that is paid for the fire insurance levy. If we compare these levies nationally and on an international basis, the fire insurance for land-holders is 84 per cent in country Victoria, 71 per cent in Melbourne and 65 per cent in New South Wales; but if you go to the UK it is only five per cent, in Canada it is only three per cent, in USA it is two per cent and in Singapore two per cent.

What has been identified here is that this might be a matter for the royal commission to look at: this outrageous impost on those people who take out fire insurance, both rural and domestic, who are being hit to leg because of the add-on of their domestic insurance premiums. Mr Hill, who is a spokesman for the industry, makes the comment that:

The collapse of private health insurance membership led to Federal government intervention in the introduction of tax and other incentives for those who insured.

He is saying that unless something is done in this area of insurance then those sensible people who take out insurance are really paying for the service on behalf of those people who do not take out insurance.

I am particularly worried about this. The add-on cost of people taking out normal insurance is a problem facing country people, particularly in Victoria, and it is the state governments who have added this fire levy. It has been a matter that I think you, Mr Deputy Speaker, would be aware of. It has been a matter of contention for people over a number of years that insurance holders are paying the fire levy, as I say, on behalf of those who do not take out insurance.

I will conclude my remarks by saying that the HIH debacle is a lesson to all regulators in Australia that people take out insurance in good faith. I raised at another time in this parliament how the underwriting and the rearrangement of insurance can go wrong. I hope that the royal commission will identify these areas and that future generations who take out insurance policies, be they public liability or household insurance, will do so knowing that governments of both political persuasions have put in place a regime of prudential control that will ensure they get paid when some unfortunate catastrophic event occurs.

I commend the legislation of the two royal commissions. I anticipate that the royal commission into HIH will be a long and enduring affair, probably taking four or five years, and maybe some of us will not be in this parliament when the conclusions are reached. Likewise, there is yet another royal commission into the building industry and I alluded to that. I hope that, as in the Gyles royal commission, further evidence will be put on the table about the activities of unions, employers and people involved in the industry in a fair and equitable manner and that the Australian people can see for themselves what is actually happening in that industry.

I commend the legislation. I seek the support of members opposite in making sure that these two royal commissions can reach sensible conclusions and that they are assisted by these other authorities in a legal and transparent sense.