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Transcript of interview with Fran Kelly: RN Breakfast with Fran Kelly: 5 February 2019: Banking Royal Commission; Scott Morrison voted 26 times against a Banking Royal Commission

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SUBJECTS: Banking Royal Commission; Scott Morrison voted 26 times against a Banking Royal Commission.

FRAN KELLY, HOST: Shadow Treasurer Chris Bowen joins us from Melbourne Airport. Chris Bowen welcome to Breakfast.

CHRIS BOWEN, SHADOW TREASURER: Good morning Fran. Good to be with you

KELLY: The Royal Commission uncovered systemic unethical behaviour by the financial sector but it doesn't name and shame, it doesn't specifically recommend criminal charges. It asked the regulators to do that. It doesn't recommend limits to CEO pay or bonuses and it doesn't recommend structural separation. Is it tough enough?

BOWEN: Well I think it's a very important report Fran and obviously it's a report the Government never wanted us to see. Never wanted to happen, voted against it 26 times.

KELLY: That only took 20 seconds to get out. I guess you are going to be saying that a lot between now and the next election?

BOWEN: And it happens to be a fact Fran. I mean their heart was never in it and even when they announced it Scott Morrison said it was regrettable. Well it wasn't regrettable. It was absolutely vital.

KELLY: I guess my question was are these recommendations tough enough?

BOWEN: Well look commentators will make their views. We've accepted all the recommendations in principle, we will implement all the recommendations. We will work with people affected about implementation details. But unlike the Government which has got a form of weasel words about ‘taking action’ on all the recommendations which is not accepting or adopting the recommendations I can say to you very clearly we have accepted the recommendations. We have adopted them and we will implement them. Now obviously we'll have a Treasury taskforce working with all affected parties about how they should be implemented and timing but we will implement the recommendations of the Royal Commission. Josh Frydenberg can't say that in his discussions with you and of course we see the recommendations as an important part of the conversation. We think the action recommended is the minimum required and if we feel that we need to say more about what is necessary in the financial services sector we’ll say so well before the election.

KELLY: Well in fact if it's the minimum required that suggests you think that more is needed. What's your thinking? Do you think structural separation is needed? Salary caps on CEOs are needed? What do you think?

BOWEN: Well Fran obviously we've had the report for a day. The Government's had it for four days. We're working through it. I'm simply making the point that if we feel there's more action necessary then we'll be very clear about that before the election.

KELLY: I know but you're the Shadow Treasurer. You've been you know completely engaged I'm sure as has much of the nation actually with the Royal Commission as it played out and evidence was given. Before the Commissioner handed down his response was it your view for instance that structural separation was needed within this industry or caps on executive--on CEOs salaries?

BOWEN: Well Fran I thought they were all matters that the Royal Commission would look at and they have. But for example I mean we announced on the weekend a very comprehensive plan to deal with whistleblowing, not just in the financial services industry but obviously that's where it's very keen and the whistleblowers who called for this inquiry have been vindicated and were insulted by the Government on the weekend by Kelly O'Dwyer statements on the weekend that somehow whistle-blowers are involved in bad conduct. Whistleblowers are an important part of stopping bad conduct. We announced, this is my example for you, a package on the weekend which is based on laws, best practice treatment of whistleblowers. The Government rejected it out of hand immediately. These are the sorts of things that have been on Labor's mind that we've been working on and we'll continue to work on and make further statements and be clearer about it well before the election.

KELLY: Okay so you're talking tough but many of these problems did pre-date the

Coalition coming in to Government in 2013 as the Treasurer keeps pointing out. Labor had ample opportunity to call a Royal Commission when you were in Government. Why didn't you?

BOWEN: Well well I mean Josh Frydenberg, I mean blaming Labor after six years of Government and when he's asked ‘Why did you delay the Royal Commission?’. What's his answer? Labor.

I mean Labor under Bill Shorten and I as the relevant ministers introduced the Future of Financial Advice reforms Fran which were hugely controversial at the time. We were told it would be the end of civilization and the Labor Party didn't understand business. All the sorts of things that we've heard before, utterly vindicated, utterly vindicated the Future of Financial Advice reforms, removing conflicted remuneration from financial planning, ensuring that consumers best interests are put first. When Bill and I as the successive relevant Ministers were doing that we were fighting the Liberal Party every step of the way. They opposed us every step of the way. They attempted to water it down on coming to office. I mean these guys have no credibility when it comes to the regulation of financial services. It's the Labor Party which gets the balance right, which puts consumers’ interests first. It's only the Labor Party that can be trusted to take their recommendations in letter and spirit and see them recommend—and see them implemented.

KELLY: There is one recommendation that the Government is deferring for a couple of years to work on it. It's the call for customers not the banks to pay mortgage broker fees. Now you've just told us again you will adopt all these recommendations including that one. But do you accept that that change could have the effect of limiting competition in terms of home loans and handing big big big costs to homebuyers as well?

BOWEN: Well I don't think you can cherry pick recommendations; either you support the Royal Commission process or you don't.

KELLY: Well that would be silly if they're not good.

BOWEN: Well but the Royal Commission has not brought down recommendations for fun. Now I accept that some people will have concerns about this, just as financial planners Fran had arguments with the Labor Party when we removed conflicted remuneration and commissions from financial planning. I mean we were told it would be terrible for competition, the economy would be worse off, you know it would be the end of the business model. Well we were right. We were right and we implemented that reform sensibly, carefully. We spent a lot of time with the sector talking about the consequences and ensuring we were doing it carefully. We'll do the same with the mortgage broking sector. The recommendation from the Royal Commission is a long lead time to allow people to adjust their business and

to adjust the model. It's not being recommended to be implemented next week or next month or even next year.

KELLY: So people will look carefully about whether would entrench the market position of the big four. That’s the concern. That was the Productivity Commission's concern too.

BOWEN: Well the Productivity Commission said conflicted remuneration should be.

KELLY: No, no I'm talking mortgage brokers.

BOWEN: Yeah I understand. But Productivity Commission looked at that matter as well and talked about conflicted remuneration. Now obviously I'm very focused and very concerned to ensure we have as much competition in the banking sector as necessary. I spend a lot of time with the smaller banks and credit unions on their issues, including the structure of the corporations act, how they raise capital and things that can be done to assist them to ensure enough competitive pressure in the market. But where you’ve got a Royal Commission after all the evidence it has received making a recommendation like this I think it's frankly irresponsible for the Government one day later to come out and say ‘Well actually we're cherry picking. We're not accepting that recommendation’. We've accepted the recommendations. We accept that there's implementation details that need to be worked through and we'll do that in a consultative manner with all affected parties including mortgage brokers. But we accept the recommendation.

KELLY: All right you're listening to RN Breakfast, it’s 17 to 8. Our guest is Shadow Treasurer Chris Bowen. The so-called twin peaks regulators ASIC and APRA are going to be left untouched essentially. In fact the Government is giving ASIC more powers and more money. Do you have confidence in these regulators? Because I think there's plenty, thousands of bank customers who have been in dispute who absolutely don't.

BOWEN: Well of course it's incumbent on the regulators to take the recommendations of the report and the letter and spirit of what's driven those recommendations and implement them and that would be my expectation of the regulators as Treasurer. There's a recommendation there which again we've accepted for an oversight body of the financial regulators which of course is important and we would adopt with some alacrity in Government to ensure regulatory accountability. I think I have no doubt Fran that the people of ASIC and APRA have been reading through the report, taking it very seriously and a Labor Government would expect them within the bounds of the course of appropriate independence from Government to be taking the lessons of the Royal Commission learning from them and building on them.

KELLY: How much time would a Labor Government give them to pick up their game?

BOWEN: Well we'd be starting talking to them from day one about our expectations.

KELLY: And I could see you walking-- I can hear you're walking towards your plane. Have I got you for a couple more minutes?

BOWEN: Yes. You've got my concentration although I am walking through the airport Fran.

KELLY: Okay, despite the widespread problems there's nothing in this report that holds bank boards directly accountable. The NAB chairman Ken Henry has been singled out but have boards got gotten off too lightly in your view?

BOWEN: Well I think again Fran I mean it's not really my place or useful for me as Shadow Treasurer to comment on individuals. I expect NAB in particular to respond to this report as quickly as possible in a detailed fashion in terms of what they are going to do to implement its recommendations and take on board the spirit of what they say. The boards I think from the from the first review of the Commonwealth Bank by John Laker and Graeme Samuel, I think boards have had to take into account the very strong feedback that they have clear responsibilities and I would expect all boards to be responding equally to this report.

KELLY: Yeah okay. Just finally you have offered to sit down with Josh Frydenberg to prioritise recommendations that might be legislated before the May election. What are they? Could they be dealt with in 10 sitting days?

BOWEN: Well that would be ambitious Fran but we should give it a try. It's difficult because we have got a part-time Parliament. Parliament is..

KELLY: We've got 10 sitting days what would you-- what would you say to the Treasurer you could get through?

BOWEN: It's a genuine good faith offer approach Fran. I don't particularly want to conduct that over the radio but I'm happy to engage with the Government to say there are things here which should, you would think, be sensible that you would think that both sides could agree with and which could get through pretty quickly if the Government wanted to. And indeed we're happy for the Parliament to sit longer if that's what it takes, not just be sort of 10 sitting days of a schedule between now and the election but to sit longer because we're happy, always happy to turn up in Parliament and do our job. It's the Government which avoids Parliament at all costs. But there’s recommendations here that shouldn't wait until after the election, should be implemented and if the Parliament needs to sit longer we're available.

KELLY: And just briefly which of those recommendations would you prioritise? Will you send this in a letter to Josh Frydenberg? Which one will you put there?

BOWEN: Well again Fran I don't think that's really appropriate for me to communicate to the Treasurer over the airwaves. I'm happy to…

KELLY: Will you write him a letter?

BOWEN: We've already made the offer that we're happy to facilitate legislation which has the support of both sides through the Parliament as quickly as possible before the election because we don't think it should necessarily be delayed until after

KELLY: I fear you are going to disappear down the airline tunnel at any moment. Chris Bowen thanks very much for joining us.

BOWEN: Always a pleasure Fran. Good on you.