Angus Taylor (Hume, Liberal Party, Shadow Treasurer) Share this | Hansard source

Australia has a strong financial services sector. It's one of the bedrocks of our economy, and we want it to remain that way. It's been remarkably strong over the past decade. In fact, it served us extremely well through the financial crisis. When many financial services sectors suffered badly, around the world, ours was very much amongst the strongest. It's important that it stays that way. It's also important that legislation that builds on the coalition's work on implementing the banking royal commission recommendations be followed through.

We will not delay the progress of these bills through the parliament; however, I should say it is disappointing that the government has sought to expand the scope of these bills from what was introduced before the election, without further consultation. It's extremely disappointing. For these reasons, we will support the bills going to committee to truly examine the impact of these new provisions. We think that's the right way to deal with the fact that there hasn't been consultation on the changes along the way.

Let me start with the banking royal commission. Whilst our financial services system has served us well, we cannot ignore that the royal commission was necessary. We called it, we committed to implement its recommendations, and we committed to taking action on all 76 recommendations and additional commitments contained in the final report of the banking, superannuation and financial services royal commission. Significant progress has been made and the long road to implement these changes is now reaching its conclusion.

On 11 March this year our former government released the Quality of Advice Review's terms of reference and announced the appointment of Michelle Levy as the reviewer. That review has now been delivered, in its draft form at least, and it's expected to finalise its report by the end of the year.

With the reintroduction of these bills, the last of the legislative commitments to implement the royal commission's recommendations will be completed. But with the final pieces of legislation being introduced in the last sitting week, we now have an opportunity to look at what is next for the banking sector. We won't impede the bills coming through the parliament. We do welcome the introduction and the government's decision to retain the primary financial accountability regime and compensation of last resort legislation largely in its same shape and form.

However, it's important to note that the decision to staple consumer credit reform onto the Financial Sector Reform Bill means that more scrutiny is required. It's particularly necessary as these reforms, unlike the primary banking commission legislation, have been substantially revised from the legislation that was before the previous parliament. We won't wave through reforms that could have material impacts on consumers and small business. We will ask for this to move to committee.

There are a couple of other comments I would like to make about this legislation. The Financial Accountability Regime Bill, which is part of the package here, took action to implement five recommendations to the financial services royal commission. In response to the commission, the coalition made a further commitment to extend the executive accountability regime to entities regulated solely by ASIC, particularly in the insurance industry and the broader financial services industry. We will progress this further commitment following the initial implementation of the regime to all APRA regulated entities as well. Those BEAR standards that were established for the banking industry are absolutely appropriate for this extension.

I have a couple of comments to make on the financial services compensation of last resort scheme. We introduced this legislation to facilitate the payment of compensation to eligible consumers who have received a determination from the Australian Financial Complaints Authority, AFCA, which remains unpaid. This forms part of the first tranche of the legislation to implement the government response to the Hayne royal commission.

It will facilitate the payment of compensation to eligible consumers who have received a determination from AFCA. Consumers who have an unpaid AFCA determination relating to personal advice, credit intermediation, securities dealing or credit provision will be eligible to receive up to $150,000 in compensation. That's broadly equivalent to the 85,000-pound limit on compensation that's available under the UK Financial Services Compensation Scheme. In fact, with the recent movements in the pound I suspect it's very generous, relative to the UK scheme. We provided in MYEFO $45 million in new funding under the measure 'Compensation Scheme of Last Resort—establishment' to support that proceeding. We do note that a broad based scheme risks exposing the financial system to significant costs, and we've certainly seen that in the UK. But, like the Financial Accountability Regime Bill, the bills are largely identical to the legislation we introduced when we were in government.

The same applies to the Financial Sector Reform Bill: the components are very close to what we proposed. However, it is important to get the balance right in this area—it's hugely important to get it right. Getting it wrong can have some very unexpected and untoward impacts. We did take action to implement reforms to enhance financial inclusion and to ensure Australian consumers accessing small-amount credit contracts and consumer leases are better protected.

We are disappointed with the alterations we've seen on the initial legislation. Under the legislation we brought forward, new consumer protections would have reduced the risk of consumers being overcommitted to small-amount credit contracts and consumer leases by limiting the proportion of income which can be attributed to these products. Under the coalition's bill those SACC—small-amount credit contract—providers and consumer lessors would be inhibited from providing a SACC or release that would result in a person who receives 50 per cent or more of their net income from Centrelink from devoting more than 20 percentage of their income to SACC and consumer lease repayments, with no more than 10 per cent of this being allocated towards SACC payments. We had established what we think is an appropriate balance.

But under the government's reforms as currently drafted, there are likely to be substantial impacts to loan terms and access to consumer credit. That is a matter of concern to us. While consumers do need to be protected, particularly with rising interest rates and cost of living, it's important to make sure that those customers and lenders who do utilise small-amount credit contracts responsibly are not shut out from the credit that can help them manage their cash flow and deal with unexpected life events. This is not a time when we want to shut down credit provision to consumers; we want to make sure that that credit is available.

I think that as we go into a period where interest rates are pushing their way up, for mortgagees, towards seven per cent, or approaching that kind of level, and with bond rates for May already expected to reach more like 4.3 per cent, this is a time when access to credit is going to be absolutely crucial to people across our regions and across our suburbs. We don't want to see people who most need access to credit for a short-term reason to get through some of life's contingencies locked out of those credit opportunities.

So whilst we won't deny the bill a second reading, it is important that the parliament assess and monitor the impacts of this change on consumers. Subject to those caveats, we commend the bill to the House.

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