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Thursday, 31 March 2022
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Dr LEIGH (Fenner) (13:03): by leave—I will make remarks on both of the two House Economics Committee reports the member for Mackellar has just presented. The first goes to the issue of common ownership. It is passing strange that the largest two shareholders of Australia's biggest four banks are precisely the same: Vanguard and BlackRock. The rise of index funds in Australia has reduced costs for investors but has also created the potential to reduce the competitive pressure in the Australian economy. An article in the Economic Record by Adam Triggs and myself documented the extent of common ownership in the Australian stock market and showed that it is of a scale which could be potentially concerning.

Common ownership doesn't require active collusion between firms. It is enough that investors put in place management teams who prefer the cushy life, who prefer to maximise industry profits rather than maximising the profits of each individual firm. If the same investor were to fully own two competing firms, we wouldn't think of them as competitors; we would think of them as a single monopoly. Indeed, that's how the term 'anti-trust' got its name—through the trusts that were set up in the United States at the end of the 1800s, which involved investors exchanging shareholdings with one another so that, effectively, so-called competitors could act in concert.

The House Economics Committee considered the extent of common ownership in Australia and concluded that the regulator ought to pay more attention to the problem. We also concluded, in a bipartisan fashion, that it would make sense to have regular disclosures by large investors. In the United States these are known as 13F disclosures and apply to investors with holdings above US$100 million. While the precise requirements in Australia would need to be determined—whether the disclosure was quarterly or annual and what threshold it applied to—we felt, on a bipartisan basis, that that made sense.

The coalition did, though, include a rather bizarre recommendation for another crackdown on proxy advisers. This is particularly bizarre given that the Senate had just knocked off the last crackdown on proxy advisers. We on the Labor side were surprised to see them going back to that, given that virtually no evidence had been given to the committee on the issue of proxy advisers and there's little suggestion that proxy advisers somehow assist superannuation firms to act in concert. Labor members did, though, call for a beneficial share ownership register so that we can know who really owns Australian firms. The coalition supported a beneficial ownership register in 2016 and then backflipped and said they didn't support one in 2019.

The beneficial ownership register is a useful way of keeping tabs on the issue of common ownership, but it's also critical in another sense. We are in bipartisan agreement that it is important for Australia to crack down on dirty Russian money. Indeed, this parliament will hear from Volodymyr Zelenskyy, the president of Ukraine, in merely a matter of hours. But you can't crack down on dirty Russian money if it's possible to hide who really owns Australian firms.

Serena Lillywhite, the head of Transparency International Australia, has described Australia as being behind the curve when it comes to issues of transparency and pointed out the value of a beneficial ownership register in cracking down on dirty money. That's another reason Labor members recommended that a beneficial ownership register be put in place in our common-ownership report.

Turning now to the issue of the report of the Reserve Bank of Australia, the report summarises our hearings over a matter of years. On the House Economics Committee, Labor members have raised with the governor the practice that the Reserve Bank pursued for some period of leaning against the wind—of using interest rates as a way of controlling house prices. The Tinbergen rule makes a very simple point: when you've got only one instrument, you can't be pursuing two objectives. And the economic literature on leaning against the wind—using interest rates to control house prices—suggests that it's a bad idea, that costs exceed benefits by a factor of up to 8:1. Reserve Bank research itself points to that conclusion, which is why it was surprising to see the Reserve Bank pursuing that policy in the 2016 to 2019 period. That has come at an employment cost over that period, according to the economic experts.

Through those hearings we also pursued issues around pay transparency. I asked the governor whether there were pay secrecy clauses at the Reserve Bank that prevented employees from speaking to one another about their remuneration. I was initially told by the governor that he didn't think there were. He then came back and corrected himself and said that in fact such clauses existed but that he was, of that moment, making them unenforceable and issuing a statement to staff that they could freely discuss their pay with others.

This matters, because pay secrecy clauses hurt outsiders and hurt women. They are another way in which the gender pay gap is widened. I'm pleased that the Reserve Bank took that action as a result of our hearings. I'm pleased, too, that this week Westpac announced that it will scrap pay secrecy clauses, and I urge other major banks to do the same.

In preparation for the hearings for the House Economics Committee, I have benefited from the wisdom of a considerable macroeconomics brains trust: Isaac Gross, Matt Cowgill, the thoughtful work of Henry Sherrell and Danielle Wood at the Grattan Institute, the insights of Stephen Kirchner and Stephen Koukoulas, and the wisdom of a range of my former academic colleagues, including Chris Edmond and Richard Holden. They're simply some of those whose wisdom I've benefited from. I should also mention Peter Tulip and recommend his article on macroeconomic policy in Agenda. These people, of course, offer their advice freely to members on all sides of parliament. Simply because they've helped me doesn't make them partisan, but it's appropriate for me to acknowledge them here today.

I want to recognise, too, the staff of the House Economics Committee. Lachlan Wilson and Iva Glisic, among others, have assisted us in the great tradition of committee staff in this parliament. We have been greatly enriched by the work that they have done for the House Economics Committee during a very busy period. I often disagree with my Liberal colleagues on committee, but we are united in our admiration and support for the terrific staff assistance we receive, as too I am grateful for the assistance that I receive from my own staff in this place.