Note: Where available, the PDF/Word icon below is provided to view the complete and fully formatted document
 Download Current HansardDownload Current Hansard    View Or Save XMLView/Save XML

Previous Fragment    Next Fragment
Monday, 20 August 2018
Page: 7799


Ms O'NEIL (Hotham) (18:22): It is a great pleasure to make a contribution on behalf of the opposition on the Treasury Laws Amendment (Financial Sector Regulation) Bill 2018. The opposition will be supporting the bill that's before the parliament. Of course we're going to support the bill, because the bill before us is one that is designed to increase competition in our banking sector, and you're not going to find a political party in this parliament, in this House or the other, that is more committed to making sure that we have more competition in banking and that we have better services for Australians through that crucial sector in our economy.

It's important that we don't see the bill come into the House today with too much fanfare. This is a bill that covers off an important area of law, but I don't think we can get too excited about any seismic shifts in competition. That's because the changes that are being proposed by the government are small ones.

I've got the member for Chifley next to me here. There's probably no-one in this parliament who knows more about fin-techs—about this exciting explosion of growth that we can see in financial services.

The bill is going to make a small impact on the ability of fin-techs to come into financial services and to compete against the major banks. But I'm going to go through the changes, for the purposes of the House, but also so that I can explain why this is going to make a small but somewhat positive difference and that's why Labor's happy to support this bill.

The first major change that's being made in this bill is that it will increase the ownership threshold applying to companies that want to provide life insurance or general insurance or to become authorised deposit-taking institutions or relevant holding companies in Australia, from 15 per cent to 20 per cent. What that really means is that, today, we have limitations on how much one person or company or related set of companies can own a financial institution. That's because we don't want to tie the stability of our financial system to one individual or to one group of companies.

The bill before us recognises that when we're looking at start-ups or when we're looking at companies that are early in their life, it's quite common to have a ownership structure that's more closed than more evolved companies. This bill will do something to support new entrants into the financial services market. I think that any layman listening to this would acknowledge that 20 per cent is a bit bigger than 15 per cent, but not that much bigger. We're making a change here; it's a small change. It's a positive change, but it's relatively minor.

There are other changes in the bill that are going to make some movement for start-ups coming into financial services. The bill creates a streamlined pathway for owners of qualifying domestically incorporated companies with assets that are less than the relevant threshold applying to become a financial sector company. In plain English, that means that a company that's owned and operated here in Australia is going to face a slightly more streamlined process to become a provider of financial services in Australia.

The bill also makes some changes that will allow start-up banks to enter the market at an earlier stage than is currently possible by allowing APRA to impose a time limit on licences that are granted to new applicants. What that means, in plain English, is that when a company wants to provide financial services in Australia, we're allowing APRA, the prudential regulator, to give them a licence, but to give them a licence for a shorter period of time. It's not a permanent licence to offer financial services but one that might be time limited to something around two years. Again, this is, as always, trying to manage the risk to our financial services sector of new entrants coming into the market with the crucial need for more competition in this sector. We're seeing that every day in the banking royal commission that Labor fought so hard for—this urgent need for us to have more accountability and more competition in financial services.

Let's just summarise what's happening in the bill here. It sounds a little bit like merchant banker gobbledygook—dare I suggest!—but today we're really talking about providing more opportunities for newer companies, companies which are doing exciting things, communicating with their customers in different ways and trying to offer competition in financial services. Of course, that's something that Labor would support.

The measures that are before the parliament right now are consistent with a recent Productivity Commission report that I want to speak about a little. As I mentioned, for the last 600 days Labor has been pushing and pushing the government to agree to a royal commission. Throughout the process, in the lead-up to the royal commission, the government got very creative about different ways that it would avoid having to call a royal commission. One of those was by asking the Productivity Commission to do an investigation into banking. The Productivity Commission finished that report recently, and it was pretty damning reading.

I want to quote a little from what the Productivity Commission found in its draft report. It said:

APRA should finalise and implement its phased approach for licensing authorised deposit-taking institutions (ADIs) and revise its policies and guidelines for removing restrictions on the use of the term 'bank'.

The Australian Government should determine revised ownership rules (including a higher threshold on ownership) under the Financial Sector (Shareholdings) Act 1998 (Cth) to improve access to capital for both new entrants and existing banks.

That pertains to the bill before us.

I said that the Productivity Commission made some commentary about some of the issues within financial services. What the Productivity Commission's final report described as 'competition' in the current context is:

… more accurately described as persistent marketing and brand activity designed to promote a blizzard of barely differentiated products and 'white labels'.

What the Productivity Commission found is that competition in financial services faces enormous challenges. What that means for Australians who are watching or listening to this broadcast is that there is a reason for why you feel that you're not getting good services when you go to your bank. That is a very common experience; it's something that I'm sure all the Labor members here find when they knock on doors around their electorates. Just about everyone in this country has a story to tell about getting poor services through their financial institutions. We hear it from people who are farmers, who have had their land taken away in circumstances that they feel are incredibly unfair, right down to people who have had some type of credit card fraud and can't get fees back from their bank. So there's a huge spectrum of issues here.

Some of the issues that the Productivity Commission talked about in its recent final report were things like opaque pricing. That is a trick that some financial services companies will use, where they'll incorporate lots of different things in the price they're charging you for financial products. What some people in this sector are saying when they look at that is that it is a deliberate tactic to prevent customers from being able to compare financial products. An essential aspect of competition is that consumers can actually see and compare products and make good decisions for themselves. But there is some evidence here to suggest that that's not possible, and it's not possible because the banks don't want it to be possible.

One of the other issues that the Productivity Commission talked about was conflicted advice and remuneration arrangements. This is a practice that has been rife in some aspects of our financial services industry, where we've seen people providing financial advice about selling products where they are getting a commission and not revealing the commission to the customer. They are extraordinary things that are completely out of step with what Australians expect of their financial services institutions. These are just a couple of the issues, but in addition to those there are things like layers of regulatory requirements and, indeed, public policies that seem to support the existence of four, perhaps five, big players in our financial services landscape, when we know that there are lots of other companies that could be providing these products with the right supports.

I was pleased to see the Productivity Commission make a really clear statement about how it saw the state of competition in this sector, but I did see some disappointing noises from the government. We had the Treasurer coming out and doing a press conference, talking about how upset and shocked he was. I think he was probably the only person in Australia who didn't realise that these problems were there in the banks. We all know it, don't we, because we're all bank customers. As I said before, just about every person you will meet in this country has a story about how they've been mistreated by a big financial institution and they've felt they had no recourse. We've seen that right at the public policy end of the discussion, through the Productivity Commission, and I hear it at people's doors when I go doorknocking around my electorate.

I want to make some comments about broader issues in financial services that relate to the type of regulation we're talking about today. The problem is that when we look at this legislation in its context—and I do say we support this bill because it's a step in the right direction, though a very small step—it pales in comparison to the extraordinarily destructive things that the government has done over the last five years when it comes to financial services. One of the first things the government did, when I was first elected to parliament, was attempt to dismantle the Future of Financial Advice reforms. These were crucially important reforms, but I think they probably were implementing what any Australian would regard as common sense—just basic things, like requiring financial advisers to reveal when they've got a commission. That is the minimum that we should be requiring of financial advisers. But it wasn't just the Future of Financial Advice reforms. In that first budget, that shocker 2014 budget, the federal government cut $120 million from ASIC. Now the government's out today and through this week talking about how they're 100 per cent behind the tough cop on the beat. They cut $120 million from this organisation in their very first budget, and now there's shock and awe about all these problems in financial services. It is a pretty predictable outcome, if you ask me.

Then we can't forget the 600 days that the government spent running a protection racket against the idea of having a banking royal commission. I don't think there is a person in this parliament who has been observing that royal commission who would say now that they were right, that all those things that they said about the banks and how they were trying to do the right thing were accurate and correct—because they weren't. And of course we can't forget that after all this, after all of these issues, the government is now trying to give the big banks a $17 billion tax cut. Can you believe it? We wonder why support is falling away from these guys on the other side of the House, but it is pretty obvious to me.

I want to say a couple more things about the royal commission before I close. For 600 days it was Labor's position that we urgently needed a royal commission into our banking sector. It's obvious to just about every Australian that there are issues that go right to the core of the culture inside these big institutions and it is urgent that we fix this problem.

We heard outrageous claims being made on the other side of the House all the while this debate was underway. We heard the Treasurer say:

It is nothing but a populist whinge from Bill Shorten.

What a ridiculous statement. We heard the Prime Minister and the Treasurer, when they eventually got around to announcing the royal commission, some 600 days after Labor first proposed it, saying:

We have got to stop the banks and our financial services sector being used as political football.

…   …   …

… this is essentially a regrettable but necessary action.

So, even after all that, they couldn't admit that it was actually the right thing to do, the right policy, to have a royal commission into banking. It had to be described as though this was in some way a political exercise. For 25 million Australians who rely on these institutions, it's not a political exercise. It's actually about making sure the fundamentals of our economy are operating correctly. That's why we needed a royal commission then, and it's why we need a royal commission now.

We heard the Minister for Revenue and Financial Services say, 'A royal commission is in fact very dangerous.' I highlight that one in particular because, on Friday, the Governor of the Reserve Bank came out and talked about how important this royal commission is for the financial stability of this country. So the Governor of the Reserve Bank doesn't agree with the relevant minister saying that a royal commission is 'dangerous'. Of course it's not dangerous. If we've got widespread misconduct in some of the institutions in which millions of Australians hold their life savings, we want to make sure that those institutions are acting in line with Australian values—that they are not ridden with misconduct.

Labor understands that; the Governor of the Reserve Bank understands that; and I would like to see some people on the other side of politics acknowledge that. And of course we can't forget John Howard, who said:

I would be staggered if the coalition proposes a bank royal commission, that is rank socialism …

We don't hear things like that anymore, do we, Member for Chifley?

Mr Husic: No, we do not.

Ms O'NEIL: We don't hear talk of socialism enough in this chamber, frankly. But that was what John Howard had to say. I would be interested to hear John Howard's views now, I really would, because I truly believe that there's not a person in this parliament who could now stand in the chamber and deny the need for this royal commission, because some of the things that have come out are putrid.

What frustrates me the most is not the errant example here and there of some wrongdoing of one particular person in one bank or institution; it is the copious examples we have seen where banks have sat down and made a business decision to rip off their customers. Can you imagine these banks sitting down and saying, 'We are actively going to decide to charge people for services they are not receiving'? It's been very distressing. We've seen a range of responses from people who work in these big institutions to some of the charges that have been laid at their feet. Some of them—'fair cop'—are apologetic, and I think they understand now that that was the wrong thing to do, that they are not licensed to commit what the royal commissioner seems to be suggesting is theft. But there are other people who are appearing before that royal commission who do not take that stance, who continue to sit in the dock and argue that they should be allowed to charge any customer anything because the customer somehow is deeming it to be acceptable by the fact that they have not changed banks or they have not changed super funds.

We know that, try as we might to get Australians to be interested in their financial affairs—and we do ask that of them, and we do want them to be in that situation—we can't rely on people to change banks because they're not getting good services. Every piece of evidence we have is that people are more likely to get a divorce, they're more likely to leave a marriage, than they are to switch banks. There are an extraordinary number of people who are still in the same bank they were in when they were a kid, when they were a teenager and they got their first jobs.

So we are going to have to do a lot better to make sure that we have competition in this sector and that we are demanding and observing good conduct in this sector, because it's not just like any other service. It's not like a pizza delivery shop. The way that these big banks and institutions operate is pivotal to the stability of our financial system. I don't know about you, but I want us to survive the next financial crisis and the one after that and the one after that. What we have here is a once-in-a-generation opportunity to look right into the heart of these institutions and to look right in the heart of the regulators and ask whether this is good enough. I think the member for Chifley would probably agree with me—I think people on my side of politics would agree with me—that a lot of what we are seeing is not good enough.

What I do know is that there is only one side of politics that people can trust to actually deal with this problem, because what we have seen from the Liberals in five years of government is that just about every year there has been some step trying to create an improper regulatory environment for banks and financial services. I'll talk through them. They dismantled the FOFA reforms. Those reforms asked very little more of our financial services industry than that they act in the best interests of their customers—and that was a controversy on the other side of politics. Do you think there is a single person you could stop in the street and ask, 'Hey, do you think banks should be required to act in the best interests of their customers?' and they would say no? But we had a whole side of politics, a whole government, arguing that it was somehow above and beyond that we should require financial advisers to act in the best interests of their customers.

Mr Husic: Or review their performance.

Ms O'NEIL: Or review their performance—exactly. So what we are saying here is that enough is enough. We've got a royal commission on our hands. It is, frankly, fantastic to see this royal commission blowing a breeze through some of the cultural practices and some of the completely suboptimal protections that are being provided to 25 million Australians who rely in one way or another on the services of these institutions. I'm very much looking forward to seeing what the royal commissioner has to say about some things we can do better in this industry. It is my fervent hope that we see more coming through this parliament to arrest what is an extremely serious problem, a very big problem, facing our country, than the sort of thing that is before the House at the moment.

I say again that we are happy to support this bill. It's going to make a small difference to competition in this sector in terms of the ability that it will give APRA to provide time-limited licences. I think there is one fin-tech that's gone through this process with APRA already—one. Moving the ownership restrictions from 15 to 20 per cent is great, sure. We're happy to agree to it. But is this really the best that we can do? We've got a set of institutions here that are experiencing some extraordinary difficulties in their culture and I just think we need to do a little bit better than making some minor tweaks to who can provide financial services in this country. It's quite clear that we are going to need bigger tweaks to make the sort of difference that Labor, on this side of the House, envisages.

What we envisage, just to make it clear, is a financial services sector that people can feel they can trust, where they can make an agreement with a bank and not only will the bank abide by the letter of the agreement but it will be acting in good faith. That's been the issue with a lot of the banks. There are probably a number of people in this chamber who met with some of the bank victims who recently came to Canberra. One of the issues with the way the royal commission has been run is we haven't been able to hear a lot of stories from people. This is because it has been given only a year by those on the other side of the House to look at banking superannuation insurance. We could have probably had three two-year royal commissions on those issues because they are just so serious and substantial. We had a superannuation round in the last couple of weeks and we didn't hear from many victims. That's because of the constraints the royal commissioner is operating under. He is doing a very fine job and I very much respect the work that he is doing. But we did have some victims come to Canberra, and it was extraordinary talking to them. It really was. I'd urge members of parliament to talk to victims in their community because there are so many people who we all represent who have a story. It's through talking to people that you realise that it's often not about the letter of the law in these issues. It's about people who make agreements with the banks and the banks, for one reason or another—they probably have an answer to it—don't always act in the best faith. That's what we have really got to get to the heart of.

So Labor will support the bill before the House. We are pleased to see some microsteps in the direction of providing better competition in financial services. But I think over the coming year, as the royal commission wraps up its work and Labor is able to provide a fulsome response that our heart is really in, we will see something much bigger and better than this.