Daniel Mulino (Fraser, Australian Labor Party) Share this | Hansard source

I have pleasure in rising to speak in support of the Treasury Laws Amendment (2023 Law Improvement Package No. 1) Bill. This is a very important bill, in part because it's part of a very important process that the Australian Law Reform Commission is undertaking in relation to the Corporations Law and a number of pieces of legislation regulating financial services. For context, it's important to note that the ALRC is currently undertaking a substantial review of the legislative framework for corporations and financial services regulation. The terms of reference for this review were provided to the ALRC on 11 September 2020, and those terms of reference required the provision of a final report to the Attorney-General by 30 September 2023. Financial services legislation: interim report Bhas been handed to the Attorney-General, and Financial services legislation: interim report Awas handed down sometime before that. Together, the provisions that we see in this bill arise from those two interim reports.

Many of the elements of this bill arise from interim report A, but I also want to talk in my contribution today about interim report B. Together, they foreshadow significant work that this parliament and future parliaments will need to grapple with. It's worth stating at the outset that the terms of reference for this enquiry asked that the ALRC take account of a number of important prior reports, the first of which was the 2019 Final report of the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry. It's very important to note that that report was a precursor to some of the work that the ALRC is currently undertaking. Simplification of the corporations law and a number of other pieces of legislation dealing with financial services legislation has direct impacts on people interacting with the financial services sector. A number of references were made in the royal commission to the need to simplify these laws—to rationalise and improve the operation of these laws. I think it is important to make the connection with that royal commission report to highlight the fact that these reforms are very important in terms of their direct impact on everyday people.

There are a number of other pieces of analysis that this work builds upon and will make reference to, including Treasury's ASIC Enforcement review task force report of 2017; the 2015 Australian government Competition policy review:Final report;the 2014 Financial system inquiry: Final report; and the Productivity Commission's 2014 reportAccess to justice arrangements. This is a very broad-ranging set of reports and they cover a range of important legal principles and drafting principles. That will go to some of the issues I touch on in my contribution relating to the hierarchy of laws, for example, and making sure that laws are designed in a way such that they are more efficient and transparent.

But it also goes to a number of fundamental economic principles in the optimal design of regulations and laws. On a personal note, my first full-time job after leaving university was in the Attorney-General's Department here in Canberra. I was in a division of the Attorney-General's Department which included the international trade law section, which I worked in. But the bulk of the division that I worked in was related to the simplification of the Corporations Act. This is going way back to the mid-1990s. Indeed, what we have seen since that time is a significant expansion in the complexity of the corporations law.

What that shows me is that this isn't a project where there is going to be a destination where we finish this task. The task of simplifying and rationalising the corporations law and a range of pieces of legislation dealing with the financial services sector is an ongoing task. It has been a priority of governments going back decades, and many of the pieces of work that are alluded to in interim report A and interim report B it will take a number of years to fully give effect to.

The terms of reference of this ALRC project relate directly to a number of provisions in the bill which we are considering today. They come in two parts. Part A deals with the use of definitions in corporations and financial services legislation. Specifically, terms should be defined consistent with appropriate regulatory boundaries, there should be appropriate design of legislative definitions and there should be consistent use of terminology. Tidying up definitions often ends up being quite technical. The use of the term 'tidying up', which people often use in relation to bills like this, often underestimates the importance of this. Again, referring back to some of my own experience in improving the operations of legislation in the financial services sector, a piece of reform that I worked on a decade or so ago now, was to implement a standard definition of 'flood' when it came to insurance products.

That was a piece of legislation that was long overdue when it was implemented in the Gillard government, a piece of legislation that actually ended up being very pro-consumer. It was far more than tidying up; it was a piece of reform that made insurance products much more intelligible for consumers but also led to a process by which products provided much more standardised coverage. So I simply make the point that standardising and clarifying definitions is a very important piece of reform in and of itself.

The second piece of the terms of reference is in relation to the coherence of regulatory design and the hierarchy of laws. This is to clarify how to manage legislative complexity over time, how to maintain regulatory flexibility, how to react to unforeseen circumstances and how to use the delegation of powers. This is probably the piece of work that is going to require the most complex changes to pieces of legislation, and that piece of work is going to require actions by not just this parliament but subsequent parliaments. That's really the focus of interim report B.

If we go back to interim report A, which focused by and large on the use of definitions, the rationalisation or greater consistency of definitions, we see a lot of the recommendations for immediate action arising from interim report A reflected in this bill. Schedules 1 to 3 arose directly from ALRC recommendations and refer to a number of elements—for example, unfreezing the Acts Interpretation Act 1901 so that the current version applies to the Corporations Act 2001 and to the Australian Securities and Investments Commission Act 2001. As interim report A indicated, there was a freezing of the application of the Acts Interpretation Act 1901 so that it applied as it was at 1 January 2005 to the Corporations Law. Without getting into all the merits or lack of merits as to why that freezing occurred, suffice to say that the ALRC made the point that they didn't believe that there was a strong rationale for continuing that freezing and, moreover, that it added a great deal of complexity. Even the application of that freezing, I think, highlights a number of the challenges that we face when thinking about the simplification of the Corporations Law. There were a number of areas of uncertainty. For example, did that freezing apply to delegated legislation? Did it apply to notional amendments made by ASIC? So the unfreezing makes sense in and of itself, but it also alludes to a number of the complexities that have grown in the system. There are a number of other technical amendments which are incorporated in schedules 1 to 3, all of which arise from recommendations from the ALRC in that interim report A.

Schedule 4 makes a number of amendments to the Insurance Acquisitions and Takeovers Act 1991, the Life Insurance Act 1995 and the Insurance Act 1973. These acts are enabling acts for certain legislative instruments regulating the insurance industry, some of which are due to sunset. Sunsetting is very important in relation to a number of legislative instruments and is widely used when it comes to delegated legislation. The purpose of this bill, and schedule 4 in particular, is to make sure that sunsetting insurance instruments that are still necessary remain up to date when they are remade, that they can be updated.

But, again, this schedule highlights some of the challenges that we are going to face when we think about more systemic change in this area. The ALRC alluded to the challenge of the number of provisions that have crept into delegated legislation, and they made suggestions that, where possible, certain elements should sunset. This raises a number of questions as to the complexity, on occasions, of ensuring that those sunsetting arrangements are managed appropriately.

Schedule 5 deals with the rationalisation of ending ASIC instruments, and schedule 6 contains a number of additional minor and technical amendments.

All of these are sensible and important changes, but I also want to make reference to some of the broader work in the final couple of minutes that I have. We are talking here about a bill that forms part of a very important piece of longer-term reform. The Corporations Act has, as I understand it, increased from 400,000 words to 800,000 words in the last 20 years or so. But it's not just that: there are certain parts of corporations law—such as chapter 7, dealing with financial services and products—which have grown in complexity. On top of that, we don't just have the length of the act itself but also a creeping growth in guidance instruments and a number of individual relief instruments in a number of documents that one might consider to be soft law. Indeed, we have had significant growth in the number of notional amendments made by ASIC, which is possible under the act. All of this has created a great deal of complexity and cost. The ALRC talks about compliance costs for regulated entities, administrative costs for government agencies, all of the advice costs   —but I would add there are also costs associated with uncertainty. It's that much harder, I think, under current arrangements to even understand what the law is that applies in certain circumstances. In the case of the regulation of a number of financial services and products, that's particularly the case. There are a number of individual relief instruments or guidance documents, and a number of notional amendments, that add a great deal of complexity.

I might make reference to the Productivity Commission, which in one of its earlier reports said that good legislative design or good regulation should serve clearly identify policy goals and be effective in reaching those goals, that it should promote innovation through goals-based approaches, and that it should be clear and simple. That is an important set of underlying principles—often harder to implement in practice than theory, but an important set of guiding principles.

The hierarchy of laws section of interim report B is worth noting—not to suggest that I am supporting any particular element of it, but it's worth noting that in a sense this leads to the next stage, post this bill, of some of the reforms this parliament is going to need to consider. Page 58 looks at the current arrangements where, for example, there are 19 regulations and 50 legislative instruments underlying chapter 6D of the Corporations Act, as well as 120 notional amendments. Part 7.9 of the Corporations Act has 228 regulations and 80 legislative instruments, as well as 600 notional amendments. What they are proposing is that there be a common, core set of regimes in an overarching act, that there be a scoping order and that disclosure rules underlie that. I make reference to that hierarchy of laws because, following the passage this bill and the important work that does in relation to a number of recommendations arising from interim report A, there's a significant amount of important policy work that this parliament will grapple with moving forward as part of this broader project.

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