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Wednesday, 24 October 2018
Page: 11008

Mr TIM WILSON (Goldstein) (18:48): I appreciate the opportunity to make a contribution in support of this legislation. I pick up from where the previous speaker, from the neighbouring electorate of Hotham, spoke. The Treasury Laws Amendment (Design and Distribution Obligations and Product Intervention Powers) Bill 2018 is not some grand experiment; it is simply a recognition of a power that ASIC has asked for to try to make sure we strengthen the financial products in the marketplace that consumers should be able to comfortably rely upon, knowing full well that financial products are geared and orientated towards them.

I recently had the privilege of serving as the chair of the House of Representatives Standing Committee on Economics, including grilling some of the bank CEOs in the previous fortnight about some of the worrisome cases that have emerged out of the royal commission into banks and financial services organisations. When you go through the royal commission's report, it highlights a number of themes, including, of course, explicit examples of where financial institutions have done wrong. I don't think there's anybody in this chamber who thinks that, where there is wrong, there shouldn't be recompense and a pathway through to remediation and redress. People have what, in the end, are numbers on pieces of paper but it's their livelihoods that are taken away from them because of misconduct or misjudgement or inappropriate conduct by banks. Yes, there are dollars and cents that disappear, but, really, it's lives and the hard work and earnings of people that disappear. In fact, it is their accumulated effort, often over many years—particularly when people put their private homes down as a basis of security to be able to do things like grow their own business or try to secure a greater sense of opportunity for themselves and their family for generations to come.

But there are other themes that came out of this report from the royal commissioner, including challenges and competition. I know during the hearings last week, in particular, the member for Mackellar outlined concerns about what the royal commission raised and about whether there needs to be a greater injection of competition between the big banks as part of securing a more consumer orientated financial services system in this country. There were also big questions about the alignment of incentives. So, when people within financial services organisations go out into the marketplace and provide products for people, are they acting in the best interests of the consumer—meaning, are they offering them a product that they want but, more critically, that they may need and that then goes on to meet their need? Or are people incentivised to provide products in the marketplace and to sell those products on to consumers based on what delivers them—the brokers—profits, bonuses and a better financial outcome for themselves at the expense of the consumers?

I'm a great believer in the free market. I always have been. It's not because of some grand ideological obsession, though some people have accused me of that in the past. I see a South Australian member—the member for Wakefield; is that right?

Mr Champion: That's it.

Mr TIM WILSON: That's the one—who taunts me from the other side, but when I'm making a serious point. I'm a great believer in the free market. I think it delivers better for people. In the end, when incentives are aligned to deliver an outcome for people, the capital will flow because, ultimately, the greatest incentive that any business can meet is consumer demand through goods and services. But, when you have malinvestment or misalignment of incentives, you will get a distortion against people. And the great task of the people in this chamber, this building, is to make sure that there is an alignment incentive for business and enterprise to grow and prosper, because they're delivering the best outcomes for people. That's why the recommendations out of this royal commission will be critical. It actually gives us a pathway for what we seek to redress. But, as part of the task of doing that, as the royal commissioner outlined, in getting the incentives right, in having financial products that meet consumer need—the task that's necessary to make sure that we have a banking system that does grease the wheels of our economy; that does build confidence; that does mean that people, for the first time, are able to go off and buy their own home; that does mean that people are able to go off and get the investment finance they need to grow their pie, to create greater opportunity for others, to get the capital that people need to be able to grow their business so that they can take it from an idea to something that may then go on to flourish and blossom, to take the capital they need to go on and employ more people and create greater opportunities for the rest of their fellow citizens—you need a system that has, as its anchor and at its heart, confidence. You need confidence from people in this chamber, confidence because we think they're doing the right thing, but also confidence of the Australian people. The only way you're going to deliver that is that it be well but lightly regulated, appropriately regulated, and that it be targeted in regulation. But also, as the royal commissioner has outlined, rather than going through a discussion around adding in new burdens, it's actually removing complexity so that banks and financial institutions know what they have to do but, equally, that there is no excuse.

One of the great outcomes of the hearings from last week—and I see the deputy chair of the economics committee here now, and I hope he would agree with me—is that, if we are to go down the pathway of simplifying regulation in the financial services sector, there must then also be a complementary discussion about the punitive measures. I know the Treasurer has taken steps in this area recently as well. If you want to build the confidence of the Australian people in the system, that's how you do it: by recognising that, firstly, there are trade-offs, but also that these companies have to understand that the weight and the eyes of the nation are upon them, and that we trust them to do a critical and important role. Great power—and great concentration of market power, as exists in the banking sector—comes with a great responsibility. And I don't think that's unreasonable. I don't want to see people doing the wrong thing, and I would hope that the culture within these organisations is not geared towards doing the wrong thing either.

We have a bill before us that focuses on what we can do to make sure that financial service instruments and products are more consumer oriented. It enables the regulator to take appropriate action to make sure that there is transparency in the marketplace so that financial products deliver what consumers reasonably expect. It's not a particularly radical proposition, but it's clearly a timely one. The question for us now is where we go from here. I know there's a lot of partisan politics around—different views of things like the banking royal commission. Let's just accept it. Occasionally you'll get howls and crows from the members on the other side saying, 'Why weren't you this? or, 'Why weren't you that?' And one day, I'm sure that will be comfortably returned—

Mr Champion: They're good questions. You should answer your own questions.

Mr TIM WILSON: Don't worry, we're not done with you yet—sorry, Deputy Speaker; when I say 'you', I don't mean you; I mean the member for Wakefield. But the question now is: how do we as a parliament rebuild a sense of confidence at the heart of our economic system? That's what this legislation is seeking to address. Not in isolation, but as a critical part of rebuilding the confidence in the regulatory system so that ASIC can do its job.

I know that the royal commission also highlighted question marks about how ASIC were doing their role. There are differences of opinion amongst members about whether the burden and the obligation, and the volume of work that ASIC have—and, yes, sometimes there are debates around resources as well—raise a question about whether regulators can do their task. But when regulators come to us and say, 'We need a power to be able to do our job better,' we don't take it at face value—because I'm not a big fan of independent regulators, is the truth. But our task, then, is to at least seriously consider the consequences, the benefits, and whether we should go through it.

That's what we're doing in this piece of simple legislation today, as a result of the Financial System Inquiry. It recommended the introduction of design and distribution obligations and a product intervention power so that improved design and distribution practices would allow interventions to be made where there is a significant consumer detriment. So this is a bill that should be welcomed. It should be a bill that's a standard, or the foundation of, potentially, more to come. It should be part of a package of what we do in this place—absent the concerns of partisan politics—to focus on what we need to do to have the financial service system that this country needs to build and to grease the next stage of economic development of our nation's future.