David Coleman (Banks, Liberal Party) Share this | Link to this | Hansard source

On behalf of the Standing Committee on Economics, I present the committee's report entitled Review of the Reserve Bank of Australia annual report 2015 (first report), together with the minutes of proceedings. On 2 February this year the RBA decided to leave official interest rates on hold at two per cent, following the most recent rate cut in May 2015. In making this decision, the governor commented that the current circumstances called for an accomodative monetary policy, with inflation continuing to remain close to target and reasonable projections for continued economic growth. At the public hearing on 12 February, the governor stated that the Australian economy is continuing to progress through significant adjustment challenges, with current growth being driven most strongly by the non-mining sectors of the economy, particularly the services sector. The RBA forecasts that year-end GDP growth will be 2½ to 3½ per cent over the year to December 2016, increasing to three to four per cent over the year to June 2018. The governor remarked that the modest growth of the economy has been producing more employment growth and lower unemployment than anticipated, while inflation remains low with the CPI rising by 1.7 per cent over calendar 2015.

Given that current labour conditions have been better than expected, unemployment is likely to reduce further, while the participation rate is expected to increase over the coming years. Wage growth is expected to be moderate over the next few years due to spare capacity in the labour market. The RBA reports that household consumption growth has increased, which has been supported by lower interest rates and increasing employment. House prices, particularly in Sydney and Melbourne, have eased since their peak in September 2015. Substantial increases in higher density housing in recent years have led to slower growth in apartment prices, which has been linked to a rise in rental vacancy rates, while rental yields remain low.

At the time of the hearing, while the Australian dollar had appreciated a little against the US dollar and on a trade-weighted basis from its lowest level in September 2015, the effects of the dollar's long-run depreciation were still coming through. The RBA anticipates the effects of the exchange rate depreciation will continue to put some upward pressure on CPI inflation over the course of the next few years. The governor noted at the February hearing that, at its current level, the Australian dollar was supporting demand for locally produced goods and services, which has been reflected by strong growth in the services sector.

On behalf of the committee, I thank the Governor of the Reserve Bank, Mr Glenn Stevens, and all of other representatives of the RBA for appearing at the hearing on 12 February 2016. I commend the report to the House.

Report made a parliamentary paper in accordance with standing order 39(e).

Russell Broadbent (McMillan, Liberal Party) Share this | Link to this | Hansard source

The time allotted for statements on this report has expired. Does the member for Banks wish to move a motion in connection with the report to enable it to be debated on a future occasion?

David Coleman (Banks, Liberal Party) Share this | Link to this | Hansard source

I move:

That the House take note of the report.

Russell Broadbent (McMillan, Liberal Party) Share this | Link to this | Hansard source

In accordance with standing order 39, the debate is adjourned. The resumption of the debate will be made an order of the day for the next sitting.

David Coleman (Banks, Liberal Party) Share this | Link to this | Hansard source

On behalf of the Standing Committee on Economics I present the committee's report entitled Review of the Australian Competition and Consumer Commission annual report 2015 (first report) together with the minutes of proceedings.

The committee held its first public hearing with the Australian Competition and Consumer Commission last February and examined its role, recent activities and priorities for the coming year. The committee also queried the ACCC on the implementation of recommendations of the competition policy review, commonly known as the Harper review, which were released in March 2015. At the hearing, the ACCC outlined its principal roles under the Competition and Consumer Act 2010 as a competition, consumer and safety regulator and its additional functions in regulating monopoly infrastructure and analysing the petrol market, among others.

The committee was particularly interested in the ACCC's views on the apparent disconnect between the lowering of global oil prices and Australian petrol prices. The ACCC advised that, whereas fixed taxes and levies account for some of this disparity, there had clearly been some profit taking by both refiners and retailers. The committee notes the ACCC has engaged with the industry on this issue and that these higher margins do appear to be returning to usual levels. The ACCC must remain vigilant in this matter. The committee notes that the ACCC successfully concluded proceedings against petrol retailers in 2015 for sharing information for the purpose of keeping prices higher. The committee expects the ACCC to ensure that such anticompetitive behaviour in the petrol market, and indeed in any market, is quickly identified.

Preventing the use of substantial market power by larger businesses to engage in anticompetitive activities is a central plank of competition law. In this regard, the proposed introduction of an effects test into the Competition and Consumer Act, as recommended by the Harper review, was an important topic of discussion at the hearing. The effects test will enable the ACCC to prosecute businesses for activities that have the effect of substantially lessening competition. The committee will explore the impacts of this and other Harper review recommendations with the ACCC at future hearings. On behalf of the committee, I would like to thank the chairman of the ACCC, Mr Rod Sims, and other representatives of the ACCC for appearing at the hearing on 24 February. I commend the report to the House.

Report made a parliamentary paper in accordance with standing order 39(e).

Russell Broadbent (McMillan, Liberal Party) Share this | Link to this | Hansard source

The time allotted for statements on this report has expired. Does the member for Banks wish to move a motion in connection with the report to enable it to be debated on a future occasion?

David Coleman (Banks, Liberal Party) Share this | Link to this | Hansard source

I move:

That the House take note of the report.

Russell Broadbent (McMillan, Liberal Party) Share this | Link to this | Hansard source

In accordance with standing order 39, the debate is adjourned. The resumption of the debate will be made an order of the day for the next sitting.

David Coleman (Banks, Liberal Party) Share this | Link to this | Hansard source

On behalf of the Standing Committee on Economics I present the committee's report entitled Review of the Australian Prudential Regulation Authority annual report 2015 (first report), together with the minutes of proceedings.

At the recent public hearing held by the committee with APRA in March, the committee was updated on the state of the Australian financial sector and on APRA's recent activities and priorities for 2016. It is certainly pleasing that Australia's financial system remains sound in the face of recent volatility. The committee agrees with APRA's view that complacency must be avoided, and it will continue to monitor any future changes in subsequent APRA responses.

In the banking sector, APRA states that its activities will continue to be strongly influenced by the financial system inquiry recommendation for unquestionably strong capital ratios. We will monitor and scrutinise APRA's planned framework to achieve this over the next few years.

APRA's measures to reinforce sound residential mortgage-lending practices, announced in its letter to all authorised deposit-taking institutions in December 2014, are of particular interest to the committee. We will continue to scrutinise whether the objectives of these measures are being achieved and their impact on the housing market. The committee will also examine at future hearings the outcomes of the higher mortgage risk weights for larger banks that APRA is implementing from July of this year.

The governance of APRA-regulated institutions is a major focus for APRA, and is of course of continuing interest to the committee. APRA informed the committee that a good corporate culture within the entities that it supervises protects against poor outcomes, and is therefore a key area of its focus. APRA also stated that this emphasis reflects its prudential mandate.

In the superannuation sector, APRA advised that board appointments, strategic planning, performance assessment processes and conflict management were priorities in 2016. APRA also indicated that it is consulting on changes designed to improve governance standards for superannuation funds, which it intends to introduce at a future date. The committee looks forward to future updates from APRA on the implementation of these standards and their impact.

The committee was also advised that it has been engaging with the directors of authorised deposit-taking institutions and insurers to make certain that they understand their obligations under the prudential framework. APRA indicated that it would also release a road map later this year for its new prudential oversight of the private health insurance industry. The committee will seek advice from APRA on the progress of this framework at future hearings.

On behalf of the committee I would like to thank the chairman of APRA, Mr Wayne Byers, and all the representatives of APRA who appeared at our hearing on 18 March of this year. I commend the report to the House.

Report made a parliamentary paper in accordance with standing order 39(e).

Russell Broadbent (McMillan, Liberal Party) Share this | Link to this | Hansard source

Does the member for Banks wish to move a motion in connection with the report to enable it to be debated on a future occasion?

David Coleman (Banks, Liberal Party) Share this | Link to this | Hansard source

I move:

That the House take note of the report.

Russell Broadbent (McMillan, Liberal Party) Share this | Link to this | Hansard source

In accordance with standing order 39(c), the debate is adjourned. The resumption of the debate will be made an order of the day for the next sitting.