Matt Thistlethwaite (Kingsford Smith, Australian Labor Party, Shadow Assistant Minister for Treasury) Share this | Hansard source

Labor supports the Treasury Laws Amendment (Enhancing ASIC’s Capabilities) Bill 2018. There are two parts to the bill. Schedule 1 sees the inclusion of consideration of competition in ASIC's mandate. This comes from a number of reports, including the Financial System Inquiry some years ago. Schedule 2 amends the ASIC Act to allow the regulator to employ staff outside of the Public Service Act.

Of course, when it comes to ASIC, history has shown that Labor has a much better record of supporting our regulators to ensure that they are a tough cop on the beat and that they have the necessary resources to regulate and keep an eye on what's going on with financial services and banks in this country. When we're backing ASIC, we're really backing the protection of all consumers and not just looking after the top end of town. Compare and contrast this with what the Turnbull and Abbott governments have done when it comes to ASIC and our financial service regulators. They have been slow to make amends for their inaction, they've cut funding to ASIC and to the other regulators and only after Labor shone a spotlight on what was actually going on in the financial services industry and some of the rip-offs that were occurring did they reverse some of that funding cut. But they did not completely restore the amount of funding that was initially in the Labor budget before we left office. When the Abbott government initially cut funding, that resulted in a loss of people, a loss of personnel from the regulators that are tasked with the responsibility of looking at what is going on in banking and financial services, the area where we've had a large number of rip-offs and scandals. Just today and over the coming week we will see what's going on in the banking royal commission with the banks in this country.

The inclusion of a consideration of competition in ASIC's mandate, as required by this legislation, was originally supposed to be introduced by the end of 2016 as part of the government's response to the Financial System Inquiry. It's a relatively small but important change to the law, and yet it's taken the government a long time before this has been brought to the parliament, and that's no surprise. Historians will record this as yet another poor effort by this government to ensure that we have a strong and well-resourced financial regulator in our country.

Looking at schedule 1 of the bill in more detail, including the consideration of the competition aspect of ASIC's mandate, the ASIC Act includes key objectives that ASIC needs to focus on when performing its functions and exercising its powers. These include promoting the confident and informed participation of investors and consumers in Australia's financial system. ASIC must maintain, facilitate and improve the performance of the financial system and the entities within that system. That is to help promote commercial certainty, to reduce business costs and to boost the efficiency and development of the national economy. Finally, as part of ASIC's mandate under the ASIC Act, the regulator is required to take whatever action it can take and is necessary in order to enforce and give effect to the laws of the Commonwealth that confer functions and powers upon it. If passed, this bill will mean that, without limiting these existing elements, ASIC must then also consider the effects that the performance of its functions and the exercise of its powers will have on competition in the financial system. In action, this means that ASIC would need to take into account new considerations when making its decisions. This includes whether a decision will create a regulatory advantage for some companies over others competing in the same sector or generally across the industry as a whole.

ASIC would also need to consider if a decision will improve consumers' ability to exert demand-side competition pressure in a market. I think a good example of this in more recent times was a decision of the Australian Prudential Regulation Authority. They looked at strengthening the macroprudential standards that exist in lending, particularly around the housing market in Australia, and restrictions on interest-only loans to Australians. Going back to 2014, they introduced a set of new rules which initially imposed a growth limit of no more than 10 per cent on their interest-only loan book. That's been reformed to 30 per cent in more recent times. There's some disquiet amongst some of the smaller lenders in this particular market about that decision locking in market share for some of the bigger players and actually stifling competition within that market. The jury is still out on whether or not that has occurred and, depending on who you speak to, you'll get a different view. But this is an example of a particular decision by a regulator that potentially affects financial markets in Australia that ASIC may be required to look at under this new competition mandate, if it were required to do so by a government.

Finally, ASIC would also need to take into account whether a decision would disproportionately affect small entities and the impact that that would have on competition. Yet, given the existing objects of the ASIC Act, competition would not be considered in isolation. That's very important to point out. The regulator would consider competition in conjunction with elements of subsection 1(2) of the ASIC Act. For example, ASIC may still decide to proceed with an intervention that has a negative effect or impact on competition where the intervention is likely to significantly improve market confidence or investor participation. An example of that may be the case where a particular authorised deposit-taking institution was in trouble and looking like falling over and there was a takeover offer or an offer to merge with one of the existing ADIs. I'm reminded of the decision in recent times by Westpac to acquire St George. There have been other financial institution examples. Commonwealth Bank and Bankwest is another example. In the latter case, there was certainly evidence in the wake of the global financial crisis that Bankwest was in serious trouble. The decision was taken by the Commonwealth Bank to acquire that entity. It could be argued that that lessened competition within that market, but, in balancing that aspect of it, I dare say that there are reasonable grounds, in that you're facing the prospect of one of those financial institutions falling over and perhaps some of those who have deposits with that institution losing some or all of their deposits in the process. That's an example of where ASIC would have a competition mandate but that mandate would have to be read in accordance with the other mandate that it has, around stability in financial markets.

The Productivity Commission's February 2018 draft report Competition in the Australian financial system recommended that an existing regulator be designated as a competition champion for the financial sector. It proposed that either the ACCC or ASIC should be such a designated body. It should be noted that the change in this bill is relatively small; it simply requires ASIC to take competition into account amongst a number of other elements in performing its functions and exercising its powers.

Schedule 2 of the bill will remove the requirement for ASIC staff to be engaged under the Public Service Act 1999. This change will align ASIC with the prudential regulator, APRA, and the Reserve Bank of Australia. It implements a recommendation of the ASIC capability review. Labor encourages the government and ASIC to ensure that appropriate transitional arrangements are in place for existing staff. In that respect, the CPSU, the Public Service union, have mentioned to the government and the opposition that they have some concerns about this particular change, most notably the application of the APSC's workplace bargaining policy to future ASIC employees and enterprise agreements. ASIC have advised the CPSU that they will likely still have to bargain under the current framework for the next round of enterprise agreement negotiations and of course, importantly, superannuation entitlements. ASIC have advised the CPSU that they have in-principle agreement from the finance minister that ASIC employees will remain in their current super fund. However, the CPSU is seeking further information about the entitlement of future ASIC employees to access these funds. In seeking these answers, the opposition will make sure that we keep the government on its toes with respect to these important changes and that these commitments that have been given to the CPSU on behalf of their members who work at ASIC are met.

In conclusion, this is a bill that delivers, finally, on some of the recommendations of the Financial System Inquiry in terms of the competition mandate and other inquiries relating to ASIC's capability and staff. But yet again we note that it comes in the wake of cuts that this government has made in the past to ASIC's budget that have resulted in reductions in the number of people with certain capabilities in these regulators having a look at what's been going on in financial services and banking in this country. We all now know that what has been uncovered in the royal commission—a royal commission that was opposed by this government for 600 days—has been quite shocking. We've seen the rip-offs and scandals that have occurred for Australians from all walks of life. We've heard from small businesses. We're seeing farmers this week railing against what the banks have done in rural and regional Australia and some of the decisions that have been made that have affected their livelihoods and their families. We've seen small businesses, households and individuals that have been the victims of financial fraud, rip-offs and scandals. For too long this government held out, did the bidding of the big banks and would not agree to a royal commission. It was only after Labor's persistence shone a light on what was actually going on in this industry that we finally got a royal commission. We welcome it, and we await both the interim report in September and the final report early next year. But we again say to the government that it's important that our financial system regulators be properly resourced to do their jobs. Although the government has—only partially—restored some of that funding, there is still a deficit in terms of the expertise that was lost over recent years because, in particular, of the 2014 Abbott budget and the effects that that had on financial service regulation in this country.

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