Matt Keogh (Burt, Australian Labor Party) Share this | Hansard source

I'd like to thank the member for coal—I mean, the member for Hughes—for being able to make nearly all of his speech about coal while discussing a report from the economics committee's inquiry into banking, and in particular for introducing us to the term 'eco-populist voodoo' economics. That's the quote of the day right there, member for Hughes.

Mr Craig Kelly interjecting—

Coming back to the main point about the banking inquiry, which our committee has been dealing with, the genesis of this inquiry—and we have now handed down our third report—was the work of the banks in managing to increase interest rates on Australian consumers out of cycle with the rates being set by the Reserve Bank. One of the critical things that have come out through the work of the economics committee to date has been the high degree of profitability of our banking sector and how much money our banks are making out of the Australian consumer. While many of us are paying for this, critically it is not all of us. In fact, many parts of Australian society do not benefit in superannuation that may flow from those profits in our banks; some of us have but many people haven't. In the meantime, nearly all members of Australian society are paying for those profits through their use of banking. Of course, in the 21st century, it is almost impossible to maintain an existence in Australian society without paying banks interest rates or fees.

At the same time, the committee has had to grapple with a litany of historical and sometimes current scandals in the banking sector. We have the AUSTRAC scandal with the Commonwealth Bank. We've had the subsequent removal of ATM fees by major banks. It would appear they only did that once one moved. They were quite happy to continue to gouge Australian consumers for as long as possible. We've had the ongoing bank bill swap rate saga, where a number of banks have settled but there was litigation recently commenced by ASIC against the Commonwealth Bank. And of course we now have the government's announcement of the clayton's royal commission into banking.

The Commonwealth Bank, which seems to have been the focus of so much of this scandal, is not alone. Westpac have been accused of having the highest interest rates on their liar loans, which is not surprising after the ABC's Four Corners program found that lending staff were expected to complete between six and nine home loan requests per week. If targets were exceeded, staff could earn bonuses of $6,000 a quarter, but current and former bank staff said that if they didn't meet the lending targets, they were performance-managed out of the bank.

Last year ANZ paid over $43 million of an estimated total of over $52 million in compensation for failing to provide general or personal financial advice to customers whilst charging them ongoing advice fees regardless. ASIC has also banned a number of financial advisers, including from millennium3 Financial Services, after it was discovered it that it was ultimately owned by ANZ Bank. The NAB has also paid $25 million in compensation to victims of dodgy financial advice. A number of NAB advisers have also been banned by ASIC, including former financial planner Patrick Mitchell, who was later sentenced to eight years in jail.

The member for Hughes has referred to the government's proposal, now with legislation going through the parliament, for a financial complaints tribunal, trying to bring together some of the disparate tribunals in this sector. But it is not in any way a panacea to the issues we are seeing in the banking sector, nor is it able to help consumers. At the end of the day, 'tribunal' is a misnomer for this body. It is not in any way going to have independence from the sector. It's paid for by the sector, it's set up by the sector and it doesn't have force of law. It is effectively a contractual body, and that is a fundamental failing in the regulatory regime that we have in Australia.

As the Productivity Commission has very recently pointed out, there are also significant gaps in the regulation of the Australian financial services sector. You can't fix the banks, in particular the culture of the banking sector, without making sure our regulatory regime creates the proper environment. This is particularly important when we realise that the financial service regulator and the financial regulation environment in Australia have been expressly excluded from the terms of reference of the banking royal commission. In that regard, as in so many ways, the government's response to the issues we're finding in the banking sector through the inquiries being conducted by the economics committee and many other bodies is entirely inadequate.

The government has proceeded with the Banking Executive Accountability Regime, the BEAR, which I should point out was actually a Labor recommendation from this committee. However, what the government has put forward is much more teddy bear than grizzly bear, because, unlike the UK scheme which it is based on, the Australian regime only looks at the issue of prudential regulation, having vested administration of this regime with APRA. Of course, all of the scandals I mentioned before and many others have primarily been consumer facing. The consumer regulator, ASIC, is not going to be involved in the BEAR regime at all. If you think about it, the mantra 'profit at any cost' that we've seen from the banks is hardly going to cause a prudential problem, so one really wonders what it is that the government was thinking. Or is this again just a bit of paint over the top to make it look like the government is doing something?

In every report that this committee has handed down, the Labor members of the committee have said to the government: 'We must see the establishment of a banking royal commission.' This has been Labor's position for quite some time. The government has resisted this for years, but, finally, having been instructed by the banks that they would like a royal commission and being provided by the banks with terms of reference that they could live with, the government acceded to the calls that the Australian public have made for so long and announced that it will hold a royal commission. Of course, it has announced a royal commission that has a great deal of breadth in its terms of reference yet manages to exclude things like the regulatory environment, but it has also provided the royal commission with only 12 months in which to do its job of covering all of these matters that need to be investigated. We'll have an interim report handed down in September and a final report in December. The royal commission will cover matters which have seen over a dozen inquiries run in this parliament alone into different aspects of the banking sector over a large number of years and yet, remarkably, the government thinks it can wrap all of this up in a royal commission lasting 12 months. My hope is that as this economics committee continues its inquiry into the banking sector we can look at some of the areas that the royal commission is seemingly excluded from going into, areas such as the regulatory regime.

The other big failure of this royal commission so far, which I hope to see it rectify, is that whilst the banks have said that they will allow their employees to breach their contractual confidentiality requirements in providing evidence, which is only fair, given that the law requires that, there is at the moment no method for confidential submissions to be provided to the royal commission. Confidential submissions are quite different from anonymous submissions. Confidential submissions would allow the royal commission to know who has made the submission and to follow up on the information that has been provided to it. We have a large number of players in the banking sector that are not employees of the banks. In particular, there are a large number of consultants, whether they are the big four banking accounting firms or other specialist advisers to the banks. They have information and have positive ideas about how we can improve the banking sector in Australia, but because of the work that they do there is no way that they can put themselves on the record to the royal commission by name. There needs to be a way for them to be able to provide that inside knowledge, that expertise, to this royal commission so that it can look at how we can improve the banking sector here in Australia.

I suppose one thing at least has been achieved out of the inquiries that have been conducted by the economics committee to date. After I pointed out that the CommBank CEO was paid double that of Westpac's, the new CommBank CEO is starting on a much reduced remuneration package. Maybe that reflects that the banks are starting to listen to what the Australian public are telling them: 'You're doing a bad job; you can't keep ripping us off.'

Debate adjourned.

Sitting suspended from 12:59 to 16 : 02

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