Milton Dick (Oxley, Australian Labor Party) Share this | Hansard source

I rise to speak on the Treasury Laws Amendment (2019 Measures No. 3) Bill 2019 today because I think it is a significant piece of legislation that needs thorough debate, particularly on the way the government has handled this piece of legislation. I want to add my voice to the words of the member for Whitlam and the member for Fenner in how they have articulated Labor's position.

From time to time in this chamber we hear about how the coalition are allegedly better economic and financial managers and that they sometimes appear to be prudent and hold a high attention to detail when it comes to the nation's budget—and all the other talking points that we hear from members of the government—but we know that this simply isn't the case. I want to highlight that directly in this bill that we are debating today. This bill is the government introducing legislation to clean up their own mess.

As we've heard from the shadow minister and the assistant shadow minister, while Labor generally supports the measures contained in this bill, the bill really only emphasises the poor record of those opposite when it comes to managing financial affairs and, indeed, making rushed and, in my opinion, ill-informed decisions that impact on the economy and local businesses. I want to highlight that in terms of a number of local businesses and operators that have contacted me in relation to the specifics of this bill. I'm confident that just about every member of parliament would have had—I hope they've had—the same conversations and the same representations from the financial sector and financial service providers.

To truly grasp the stuff-up by this government in having to introduce this bill, it's worth considering some other facts when it comes to what else they've stuffed up with the economy. I want to talk about private investment, which has shrunk by 20 per cent since the government changed hands—and, by another measure, that hasn't been this weak in the three decades since the recession of the early 1990s.

Private business investment has continued to fall in the most recent quarter and over the past year. Ongoing weakness in business confidence and recent downgrades to the capital expenditure outlook also have economists expecting that this poor performance will continue. Examples of this that I want to relate to the bill today include the latest Deloitte Access Economics Business Outlook. The report found that retail has endured its deepest downturn since 1990, that construction is shrinking at its fastest rate since 1999 and that farmers and finance have had their worst period since the GFC. But in relation to the bill and the impact that this potentially has had on local small businesses, when it comes to the facts and the economy the record is pretty clear. GDP and wages growth have fallen well below budget forecasts. The unemployment rate has increased above what the government said it would and economic growth has deteriorated to its slowest pace since the GFC, and we know that net debt has skyrocketed to the new record highs.

So, what brings us to this bill here today? I want to focus my remarks today particularly on schedule 2 of the bill. I'm sure most members on this side of the House—and I would hope all members of the House—have had firsthand experience of exactly how this sort of bungling from the government has had a direct impact on small businesses, particularly in my local community. Schedule 2 is an unfortunate but necessary amendment following the government's mishandling of the reforms to the professional standards for financial advisers. These reforms were passed, as we know, with bipartisan support in 2017 and set new standards for financial advisers which were to come into effect from 1 January 2019. These new standards are particularly important considering the misconduct identified in the financial advice sector by the banking royal commission. However, the government's independent standard-setting body, the Financial Adviser Standards and Ethics Authority, was extremely slow to set standards. As a result, financial advisers have been placed in the difficult position of being asked to comply with standards and complete exams with very short notice. The government's decision to defer the educational exam requirements is absolutely appropriate given their failures.

I want to take the time to incorporate into my speech today correspondence that I've received from a local financial planner, who introduced himself to me by saying:

I provide advice and service to a range of clients across the age and wealth spectrum, from a lady in her 60s who has been on the Disability Support Pension for many years, to some young clients with young children that are looking at options regarding renovating their current house or moving, to clients that have either retired or about to retire and who in some cases are looking at applying for the age pension through to clients that are multi-millionaires.

This financial planner was quick to point out that he and many other financial advisers had been placed in a difficult position because of the mishandling of this very piece of legislation we are debating today. In his correspondence to me he went on to say:

The Code of Ethics, as it currently stands, needs to be implemented on 1 January 2020, some 4½ weeks away—

This was at the end of last year—

However, the body implementing the Code, the Financial Adviser Standards and Ethics Authority, or FASEA, has not yet provided its final framework, despite the fact that some of the obligations listed in their most recent draft guidance will have a profound impact on myself and a number of my clients. My concern is that due to the wording of the guidance almost every financial planner in the country will be in breach of the Code of Ethics on 1 January.

In this debate today, and as we are debating an important piece of legislation, we've had limited contributions from the members of the government, and at not one stage has anyone had the guts to get up and say: 'We got it wrong. We apologise for the uncertainty. We apologise for the concern.' It is tough out there in the economic climate in this nation. We know that small business is struggling. We know that times are tough. The fact that financial planners have been put into this position is regrettable, and I really wish the government would actually admit that they've stuffed this up and now we are cleaning up what is a pretty large mess by the government's own handling.

The financial planner went on to say:

It would be both wise and practical for new legislation to be applied to all parties providing financial advice (self-employed financial advisors and financial institutions and the banks); there should be a 6 to 12 month transition and implementation period; and the absurd anomalies in the current proposed changes be reviewed with consultation with the practitioners it directly affects.

The hundreds, if not thousands, of emails like this received by government members show just how poorly thought out this process has been.

In researching this speech today I thought that surely there must have been some mistake and the government could not have dropped the ball like they have. But, as we heard from the shadow minister, sadly, we were both wrong. In a media release on 11 October 2019, the Treasurer said:

A Code of Ethics will be applied by law from 1 January 2020, and financial advisers will be expected to meet the code's high ethical standards.

The Treasurer also thanked the professional associations and acknowledged the considerable amount of time and resources taken towards implementing code monitoring by the end of the year. I'm sure that these associations have done their best in a timely manner to help support the industry, but, as we've seen from correspondence from my local residents, the government certainly has not. At this current juncture the government really more resembles The Hunger Games movie. They are ripping each other apart and are more worried about their own jobs rather than the impact that this is having on small businesses across Australia.

Their independent standard-setting body, the Financial Adviser Standards and Ethics Authority, has been under-resourced, slow to consult and slower yet to release standards and set exams. These failures have placed impossible pressures on financial advisers to comply with the new standards. But rather than take the proper time needed to get this right, ASIC said:

… the Government announced it will accelerate the establishment of a new disciplinary system and single disciplinary body for financial advisers …

This will replace the role of monitoring bodies that were due to be established by industry associations under the professional standard reforms for financial advisers. Then, just over a month later, after realising the magnitude of this problem and this stuff-up, a follow-up media release on the ASIC website stated:

As announced on 14 November 2019, ASIC has taken action to provide certainty to Australian financial services (AFS) licensees that they will not be in breach of the law because their financial advisers were not able to register with an ASIC-approved compliance scheme by 1 January 2020, as originally required.

ASIC's action follows a Government announcement that it would accelerate the establishment of a single disciplinary body for financial advisers and the withdrawal of applications for ASIC approval of a compliance scheme.

You can clearly see the confusion and chaos in this chamber on most days, as we witnessed yesterday, and the back-and-forth that the government has had with businesses and local residents who have contacted me. New dates, old dates, compliance dates, accelerating, decelerating—what a mess. Yet, as I said in my opening remarks, these are the same members of parliament who form government in this country and who say: 'Trust us. We've got the right settings for the economy.' Those opposite come in here and trumpet themselves as the party of stable government. They are either falling apart on the floor of parliament or completely causing disruption and chaos in the financial sector.

They are not content with letting the economy just grind to a halt. They are now adding barriers and confusing red tape for those people, as the Prime Minister so kindly says, who have a go. But not when you look at the mess of legislation that they are bringing in. They are not having a go and they are not getting a go under this government. There is chaos and confusion in this sector. Rather than confuse businesses, they should be setting clear, transparent and considered time lines that will not throw more uncertainty into the economy than what the government has already created.

I should also touch on the amendments proposed by Labor for this bill. As we heard from the shadow minister, these amendments would remove the current legislative exemption from conflicted remuneration rules for financial advisers in relation to selling of units or shares in listed investment trusts and listed investment companies. So let's be very clear on why this is the case. We know that, since 2015, the market has doubled in size to $45 billion. This is despite regular underperformance, high management fees and the delisting of two LITs and LICs due to fraud in the last four years. ASIC has conducted research on the performance of the 48 LICs and LITs listed since 2015. They've produced negative returns on average, with worse returns for those entities that pay higher commissions. So it's clear that growth in this market has been driven by a legislative exemption to conflicted remuneration rules, created by the coalition in 2014, where financial advisers can receive stamping fees, a form of commission, when they sell LITs and LICs to their clients.

Mr Bowen interjecting—

As I take the interjection from the shadow minister—do not get me started on pay day lending. If you get me started on that, I will not finish, and we will have extension of time after extension of time. And I'm glad that the relevant minister is at the table because, while he hasn't overseen this specific mess or this botched piece of legislation, he has taken five years to actually deliver reforms.

Nonetheless, it's clear that the evidence has stacked up to show that this is not a government which makes decisions in the best interests of business. Despite all the rhetoric and all the claims of looking after small business, this legislation proves that it's a mess. You cannot trust the coalition to look after the financial sector, whether it be because of its slow action on the banking royal commission or because of its inaction on pay day lending and loan sharks in this country. When it comes to financial investors and planners, you cannot trust this government. This government's only concern is doing as little as possible. The bill today shows that: it has to clean up a terrible mess. Day by day it becomes clearer that, when it comes to managing the economy and looking after small business, this government cannot be trusted.

Whilst Labor will be supporting this bill today, we have moved substantive amendments to it. I look forward to members of parliament supporting them in the interests of openness and transparency and to give small businesses and the financial sector a fair go.

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