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

r MULINO () (): I rise today in support of the Treasury Laws Amendment (2023 Measures No. 3) Bill 2023, which contains a number of important economic measures both in terms of microeconomic reform but also consumer protection. I'll speak to several of the key measures contained in this bill.

Schedule 1 of this bill contains measures in relation to the avoidance of certain product intervention orders. As we all know, safe and well-regulated consumer markets for credit products are of vital importance to our economy. Credit to so important to so many people in our economy in a number of ways. It's through credit that we are able to purchase our homes. It's through credit, in many cases, that we are able to go on holidays or purchase a car or get through difficult patches. Credit is obviously of vital importance. But credit can often be sought by people who are at a low point, who are vulnerable. Credit contracts can often be very complicated. Access to credit is essential to people in order for them to live their lives to the fullest, and credit transactions need to be regulated in an appropriate way because there is so much potential for harm.

That's why the Albanese government introduced long overdue reforms to the regulation of payday lending and consumer leases through the Financial Sector Reform Act 2022. This act implemented the government's response to the 2016 review of small amount credit contract laws, SACCs, as they're known; one obviously has to reduce everything to an acronym in public policy. These were laws to protect people dealing with small credit transactions. As I mentioned earlier, these small credit transactions are often ones which are nonetheless of vital importance to people, but people can be very vulnerable because they can often be caught by terms in transactions which they're not well aware of. One important aspect of the 2016 review was a recommendation to address avoidance behaviours by entities using business models not regulated by the Credit Act. To provide a bit of context for what's in this bill, I thought it would be useful to go back to that particular recommendation from the 2016 report. Recommendation 24 of the review's report dealt with avoidance, and specifically said:

The Government should amend the Credit Act to regulate indefinite term leases, address avoidance through entities using business models that are not regulated by the Credit Act, and address conduct by licensees adopting practices to avoid the restrictions on the maximum amount that can be charged under a consumer lease of household goods or a SACC …

We saw in that recommendation that in the laws that cover small amount credit transactions, or SACCs, there need to be measures to protect consumers; in particular, vulnerable consumers.

The 2016 report talked about two different types of avoidance. The first is 'business model avoidance', where providers can structure financial products so that they are not regulated by the Credit Act. For example, that could be a lessor offering an indefinite-term lease instead of consumer leases of household goods regulated by the Credit Act. The second is internal avoidance of the Credit Act, where the provider offers a regulated credit contract or a consumer lease of household goods but structures the contract or includes certain terms in the contract to avoid the requirements of the act. An example of that might be lessors deliberately providing finance through leases, rather than as a credit contract, to avoid the caps that apply to credit contracts—or 'front loading'. A number of stakeholders, including the Consumer Action Law Centre, talked about a whole range of situations in which consumers were put at risk or, often, harmed by avoidance mechanisms.

The provisions of the Financial Sector Reform Act 2022 extended these anti-avoidance mechanisms to product intervention orders made under the National Consumer Credit Protection Act 2009. What this bill does is to further extend the protections. Schedule 1 of this bill ensures that the anti-avoidance provisions also apply to ASIC product intervention orders relating to credit products made under the Corporations Act 2001. Importantly, ASIC has identified credit products that cause considerable consumer harm, particularly for vulnerable consumers.

This is a good example of a situation where we have credit products where there is potential benefit for consumers—obviously, consumers need the advantages, need access to credit—but, particularly where we are talking about vulnerable consumers, there are many situations where there is potential for harm or actual harm. This bill is very important in extending the scope of the anti-avoidance protections recommended in the 2016 report to an additional class of products, so I strongly support schedule 1 of this bill as an important consumer protection mechanism. Again, I say that as somebody whose electorate covers many people who struggle to deal with the complexity of consumer products, particularly credit products that are designed in such a way as to avoid certain regulatory mechanisms.

Schedule 2 deals with financial advice. Financial advice is absolutely critical to people's long-term welfare. Financial advice relates to some of the most important and complex decisions that we make. It relates to decisions as to how we save over the long run and how we allocate our savings and assets across different classes: do we use our savings to pay off our home, do we put them into super, do we put them into investment products? These kinds of decisions have a critically important impact on our post-retirement standard of living, on the amount of risk that we bear in accumulating assets and on our security in retirement.

So, when we talk about financial advice, we're talking about a group of people, financial advisers, who provide people with some of the most important advice they are going to receive in their lives. I think this is sometimes not well understood. Of course, there are many other people who we seek advice from—people in the medical professions, such as doctors, allied health experts and nurses, as well as lawyers and accountants. There are many professions which provide us with critically important advice. But I think that sometimes we don't take a moment to think about how critically important financial advice is in terms of how it can set us up over the course of our entire lives with financial stability and security at a point in time post retirement where we might otherwise be very vulnerable.

We know that financial advice has experienced a number of difficulties. We saw this in the Hayne royal commission. We've seen it in other contexts as well. This is related to a number of issues. One of the issues that was raised was conflicts in remuneration that arose in a number of contexts and the way that that impacted on the nature and the quality of advice. That was one of the key pieces of analysis that came out of the Hayne royal commission. Another set of issues that arose in relation to financial advice was what one might call the level of professionalisation of the profession or of the career path—the educational standards and other aspects of the way in which financial advisers worked as professionals. I think that those two issues are obviously interrelated to some degree, but nonetheless they are separate. With both of those issues—the remuneration of financial advisers but also what one might call the professionalisation or the standards of qualifications and so forth of financial advisers—I believe there are some tricky policy tensions.

When it comes to the removal of conflicts, I suspect almost everybody, if not everybody, in this chamber would agree it's necessary and a good thing. But there can be a tension between moving towards less conflicted remuneration mechanisms and yet providing remuneration to financial advisers and costs, which are passed on to those seeking financial advice, that allow for access for ordinary people. We've probably moved towards a system where more of the fees for financial advice are now upfront, and that can provide barriers to some people receiving access to financial advice. So I think it's important to acknowledge upfront that there is a policy tension there—that removing many of the conflicts that I think did need to be addressed has created a bit of a policy tension with access.

There's also a policy tension with this broad and well-founded desire to move towards a more professionalised class of financial advisers and cohort of workers because of the importance of the services that they provide. Again, it's with access and with the number of people in the profession. We want to make sure that, by putting in place minimum educational and training standards and transitioning the financial advice profession to a new set of standards, we don't see a situation where we lose too many people from the profession, which, of course, would have consequences for access. I believe we need to adopt a balanced approach when transitioning to a new framework which will serve the community well and financial advisers well in the longer term, in terms of the educational and professional standards and the codes of conduct moving forward.

We know that, since 2019, a large number of financial advisers have left the industry, and this has consequences for the accessibility of the important services they provide. What we see in schedule 2 of the bill is that we will help to ensure that as many consumers as possible continue to have access to quality of advice by removing a significant disincentive for experienced advisers to stay in the profession. The amendment in schedule 2 will allow experienced advisors with at least 10 years experience and a clear record to remain in the profession without continuing additional education. This, I think, is a pragmatic and sensible way to deal with the need for the community to have access to financial advice—such an important piece of advice for people to manage their assets, their financial security and their quality of life across their entire lifetime.

Finally, I'll make a few brief observations about schedule 3, which implements recommendations from the Council for Financial Regulators to strengthen regulatory powers and to facilitate competitive outcomes in the market for clearing and settlement of cash equities traded in Australia. We know that boosting competition is invariably good for consumers, is good for innovation and is good for productivity. It ticks all the boxes. We know that financial services are the arteries, the lifeblood, of the economy as a whole—a great analogy that Paul Keating drew a number of years ago but that remains very much true to this day. So the innovativeness and efficiency of our financial services system is absolutely critical.

The timeliness, reliability and cost of our payment system is incredibly important for people in the community—not only low-cost transactions but also transactions that occur quickly. If we look at the trading of equities, it's also critical there. We want to see downward pressure on fees, and we also want to see confidence in the transfer of ownership. This is important for everyday people because, if you reduce the fees on the transfer of equities, people who either directly own equities or own them indirectly through a superannuation fund benefit massively over the course of their lives through the accumulated gains of the lower fees on all of those transactions.

We've seen the introduction of competition in the trading of equities through the introduction of Chi-X, back in the Rudd-Gillard government. This is now an important series of amendments in schedule 3, to set up the framework through regulation that would be jointly administered through ASIC and the ACCC for the regulation of potential competition in settlement and clearing—another important part of that ecosystem. That means more competition but in a way that retains the stability of the system, which is so critically important. It's a really important microreform, and I support this bill as a whole.

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