Matt Thistlethwaite (Kingsford Smith, Australian Labor Party, Shadow Assistant Minister for Treasury) Share this | Link to this | Hansard source

Labor supports these bills, the Corporations Amendment (Asia Region Funds Passport) Bill 2018 and the Corporations (Review Fees) Bill 2018. Labor believes that our financial services sector should be innovative, profitable, responsive and well regulated, and financial services should support Australians and businesses in critical areas such as banking, borrowing, insurance and superannuation. It's a sector that provides important job opportunities for Australians. In fact, it's Australia's largest employer in terms of raw numbers of people working in this industry.

The Asia Region Funds Passport will allow for eligible funds to be offered across Australia, Japan, Korea, New Zealand, Thailand and future signatory economies. It does this with limited additional regulatory requirements and a common set of rules. The Asia Region Funds Passport had its origins in the Johnson report, which was actually commissioned by the previous Labor government in 2008. The Johnson report recognised the opportunities for growing financial services exports to our region with benefits in jobs and growth. The report noted the comparative advantages of Australia's financial services sector, including our sophisticated funds management industry, and it recognised that, noting the significance and size of the financial services sector domestically, more could be done to promote financial services exports.

Australia has one of the largest pools of investment funds of any nation in the world. That is thanks to the innovation and the foresight of the Hawke and Keating governments, which of course established our compulsory superannuation system. It's led to the development of the third-largest investment fund in the world, which provides great opportunities for investment in the domestic economy but also internationally.

In 2010, the Labor government announced its support for the concept of an Asia Region Funds Passport. We introduced it as an exploratory policy initiative within the Asia-Pacific Economic Cooperation Finance Ministers' Process. This started a process that culminated in the signing of a memorandum of cooperation for the passport in 2016. Australia, Japan, Korea, New Zealand and Thailand are currently signatories. Under the MOC, further economies may join the passport at a later stage.

We should not miss opportunities to harness our expertise in financial services and wealth management to grow our economy and to provide more job opportunities in the sector. It's something that Labor is very proud to have initiated as a means of policy development that we are debating here today to ensure greater connectivity between Australia and our Asian partners, who are growing at rapid rates and who have large numbers of their population moving out of poverty and into the middle classes. When people and nations do that, they tend to grow in terms of their need for, particularly, quality agricultural products but also services, particularly health, education and financial services. Given Australia's maturity as an economy in opening up in the 1980s and allowing competition into our domestic market around the provision of such services, particularly in financial services, we have quite a mature, well-organised, well-regulated, efficient and highly effective financial services sector. That's something that we should not be afraid to promote within our region, and we should use it to seek greater opportunities of engagement with other nations.

Something that this Labor opposition is acutely aware of at the moment is the opportunities that may come to our nation through the development of a greater middle class in the Asian area. That's why, in 2017, we announced our FutureAsia policy framework, one of the most comprehensive policies for engagement with Asia on the economic front in recent years. It's unfortunate that really the Turnbull government is simply relying on good luck when it comes to our engagement with Asia. There's no plan. There's no actual road map for greater engagement with Asia, particularly in those economies that are growing at rapid rates, the emerging economies. We all know the strength of China, but there are also the emerging economies of Indonesia, India, Malaysia Singapore and some of those other nations in South-East Asia that are growing at rapid rates and are seeing quite a large number of people move from poverty into the middle classes. Australia doesn't have an actual economic plan to engage with these nations and to improve investment opportunities and export markets in many of these countries. A Shorten Labor government will fix this. We've outlined two stages to our FutureAsia policy framework that was initially announced by the shadow Treasurer back in September 2017, when he said:

A Shorten Labor Government will embrace a new, comprehensive and holistic policy approach to a deeper Asian engagement called 'FutureAsia', a policy framework for Australia which will build Asia relevant capabilities and foster greater regional collaboration.

Of course, Australia's economic relationship with Asia has been a key part of our growth trajectory, particularly in the years following the global financial crisis. We all know that Australia benefited from that closeness with Asia in terms of our ability to withstand some of the external shocks that buffeted our economy in the wake of the global financial crisis. But, while Asian economies are changing, Australia simply isn't keeping up. We're not keeping up with other nations—particularly some of the European nations, led by Germany, I might add—in our approach to and our engagement with Asia and seeing it as an opportunity for greater economic benefits and for deeper engagement that will grow our economy and create jobs. If we're serious about maintaining our nation's track record of economic growth, and if we still want a place for Australia in the G20 in decades to come, then it's crucial that we significantly improve our trade, investment, education and cultural links with Asia. The FutureAsia framework will support a significant change in our nation's engagement within our region. It's not about tinkering at the edges or a gradual approach to change; it's an approach that looks to bring about a fundamental whole-of-government—indeed a whole-of-nation—change in our efforts of deepening and broadening our overall engagement with Asia.

One example of our policies under the framework that is relevant to the export of financial services is a program to help empower an Australian diaspora in Asia by working with the Australian Institute of Company Directors to facilitate more Australians with Asian business experience onto our boards. There's a woefully low number of Australians who are in decision-making positions, in top companies in Australia, who actually have any on-the-ground experience in doing business in Asia—let alone any of the communication skills such as a background in an Asian language. One of our major potential advantages in Australia is the significant Asian diaspora that we have and that have made Australia home. China and India are now Australia's largest source of permanent migrants. This provides our nation with an invaluable pool of people with an understanding, with links and with language skills that can help deepen our ties in the Asian economic framework.

As part of our FutureAsia framework, such an approach will help to address the significant shortfall in the current levels of Asian business literacy in the senior ranks of Australian businesses. We need more board members and executives of Australia's leading companies to have a knowledge of, and experience in, Asian markets. Of course, while this is primarily for the private sector to fix, the government can still play an important role. Indeed, the government can set the tone, set the framework and influence our education system when it comes to developing a greater understanding at a cultural and linguistic level and a business level of doing business within Asia, and some of the advantages that can come from that. Just as government and the private sector have worked together to try and address the gender imbalance on company boards, we should also look to work together to get more people with Asian literacy and experience onto our boards.

The Australian financial services sector has undergone a rigorous and wholehearted process of review in recent times. It's clear that the financial services industry touches the lives of nearly every Australian and every business. We're currently seeing this in the evidence that's coming out of the royal commission into financial services in Australia. Labor's vision for a strong financial services sector includes recognising the importance of trust and confidence in the sector. The sector supports the economic and financial transactions of millions of Australians on a daily basis, both in their personal lives and in their business dealings. This includes ensuring that, where misconduct has occurred, we get to the bottom of it. That's why Labor led the way in calling for a royal commission into the banking and financial services in this country. It wasn't a knee-jerk reaction. It was something Labor thought thoroughly and carefully about before we decided that we would publicly advocate for a royal commission. It should never be forgotten by the Australian public that for 600 days the Turnbull government opposed a royal commission into banking and finance in Australia. Led by the Prime Minister, who comes from a banking background, they withstood the calls of industry and the calls of the victims—most predominantly Australian small businesses, farmers, industry groups and financial service providers and their advocacy groups, in particular those who advocate on behalf of victims of financial fraud—for a royal commission into banking and financial services. It was only because the banks finally rolled over and agreed that they would have a royal commission that they wrote to the Prime Minister and said: 'You know what? It's okay. You can now agree.' That's exactly what the Prime Minister did. After the big four banks wrote to the Prime Minister, he finally relented and agreed to a royal commission. And hasn't the Labor Party been vindicated in the evidence that has come forward from the royal commission?

There are shocking cases of manipulation by financial advisers, of predatory lending by the big four banks and of practices that really represent frauds on a lot of small businesses and Australian families that have been practised by many in this industry for too long. And they have been able to get away with it. A lot of the evidence that's come forward in the royal commission, unfortunately, would not have been illegal if this government had its way, because we all know that they opposed the Future of Financial Advice reforms when Labor proposed them—the insertion of section 961B into the Corporations Act, which, of course, outlines a best-interest duty, the interest that a financial adviser has to act in the best interests of their customer.

The Liberal Party, then in opposition, opposed that. When they got to government, they actually tried to water that legislation down and remove the catch-all provision that exists as the final step in the best-interest duty that a financial adviser is obliged to undertake when they're dealing with a client. In fact, a lot of the behaviour would not have been illegal if it weren't for the Labor Party; that behaviour would simply be a bad look if the Liberal Party had their way. They've even shut down calls for action amongst their own backbench. That's how out of touch they've been on this issue of financial services regulation.

Millions of Australians have been let down by this government, none more so than the victims of those financial scandals. The royal commission is an important part of helping restore trust and confidence in Australia's financial sector, where things have been going wrong for some years now.

The Corporations (Review Fees) Amendment Bill 2018 would make consequential amendments to the Corporations (Review Fees) Act which are required due to the eventual operation of the Corporations Amendment (Asia Region Funds Passport) Act. Labor will support this bill. The amendments allow regulation to prescribe fees in relation to the review dates for notified foreign passport funds.

Finally, in terms of the Corporations Amendment (Asia Region Funds Passport) Bill and the government's amendments, Labor will support these amendments. We understand they make minor and consequential technical amendments to various acts to ensure that the provisions of the regional funds passport operate effectively. They also make consequential amendments relating to the review fees for notified foreign passport funds to provide that the review fees imposed are due two months after the review date. In light of those amendments and my comments in particular, Labor is very proud to see this initiative brought to fruition after it was started by a Labor government when in office some years ago.

Jason Falinski (Mackellar, Liberal Party) Share this | Link to this | Hansard source

I rise today to offer my support to the Corporations Amendment (Asia Region Funds Passport) Bill 2018, centred upon improving the Australian economy and our ties with Asia. We live in a global world, which requires us to have a global outlook. Gone are the days of insular economic policy and protectionism. Gone are the days of narrow-minded policy and the focus on purely domestic matters. We as Australians must look to sustain our future by encouraging economic growth through sensible policy. The bill will allow for eligible managed funds to be marketed across the economies of nations participating in the Asia region funds passport with limited additional regulatory requirements. Australian fund managers will be able to offer interest in qualifying funds to investors, while Asian fund managers will be able to market their qualifying funds to Australian investors without cumbersome red tape and regulatory requirements. Japan, Korea, New Zealand and Thailand have all signed up alongside Australia to implement the passport, and more are due to follow.

The bill also implements the Turnbull government's commitment to the Asia region passport memorandum of cooperation and will improve economic cooperation and relations between our nations. History has shown us that better connections between financial markets in the Asian region and global trading economies will benefit us all.

Let us turn our minds to the Asian growth miracles of the 20th century. Following the Korean War, South Korea was one of the world's poorest nations, with a per capita income of only $64. The country had been ravaged by war, and its people were in dire straits. It was following this that the miracle on the Han River took place—a remarkable period of growth and economic prosperity on the back of economic reform, with a hardworking population and ever-increasingly open markets and investments opportunities. Economists will rightly point to the impact of foreign loans and investment from America and Japan as helping to prop up this miracle. However, it was the freeing up of markets and engagement in the global economy that proved to be the engine room behind Korea's remarkable economic turnaround.

It is simply a fact that more people have been lifted out of back-breaking poverty in the history of humanity by free trade—not by UN sanctioned government programs, not by foreign aid, but by free trade and the open market. One just needs to look at the difference in living standards and wages between North Korea and South Korea to see the difference that free markets and encouraging investment can make to the fortunes of a nation.

Similarly, China had seen decades of poverty, starvation and low living standards under a closed market economic system. It was Deng Xiaoping in 1978 who initiated a period of reform and opening up with the famous phrase: 'White cat or black cat—it doesn't matter, as long as it hunts for mice.' That has underpinned China's remarkable rise to the second-largest economy in the world. Adam Smith wrote, in The Wealth of Nations, that throughout history China had been one of the most prosperous, powerful and richest nations in the world but that economic growth had subsequently stalled and gone backwards due to the emergence of a closed economy in the 16th century. It was the decision to open up the country to foreign investment and to engage with global markets that brought about an era of growth and success. The removal of restrictions and the establishment of a more simplified investment scheme heralded an era where investors and businesses flocked to China. Finally, the world's largest nation by population was not only opening up for business and trade but empowering its own people and dragging them out of poverty. Since then, it has been something of a fairytale, economically speaking. Hundreds of millions of Chinese have been pulled out of poverty, with the creation of the world's largest manufacturing base.

The benefits of free markets and the prosperity that they bring are there for all to see. It is incontestable. As the Minister for Revenue and Financial Services stated:

The Funds Passport is an important step to further Australia’s economic integration with the Asia region. It will provide Australian fund managers with access to Asia's expanding middle class and high net worth individuals, by allowing them to offer their products into the region without having to go through duplicative approval processes in each economy.

We in government must seek to make the lives of individuals and businesses easier by facilitating the conditions in which they can operate. Government must enable and support investment, not restrict it. It is the unwavering belief of the Liberal Party that working towards a lean government that minimises interference in our daily lives will, in turn, maximise individual and private sector initiative and benefit all Australians.

Australia, too, has grown to be a prosperous and stable nation through increased global engagement and liberal investment schemes. Our record of continuous years of economic growth has been built on a commitment to free market principles and a willingness to open our markets to competition and investment. It is often said that our nation is built on trade and foreign investment, and I am sure that this will continue to be the case. The Turnbull government has a tremendous record of supporting and encouraging investment, with our commitment to reducing red tape, completing free trade agreements and supporting business part of the national plan to create a prosperous and wealthy Australia. This is a noble goal that we should all get behind, regardless of political persuasion.

The bill will play an important role in minimising regulatory requirements and making processes more straightforward for investors. Allowing eligible funds to be offered across multiple participating economies under a common set of rules will drive investor security and confidence while encouraging investment through ease of access. Historically, Australia has not been a strong exporter of funds management services, given that there are a plethora of ways in which foreign funds are taxed as well as regulatory barriers restricting trade and financial services. Thus reductions in compliance costs for investors and fund managers will result in regulatory savings and a stronger funds management industry. We will see an increase in jobs, the government revenue base and aggregate gross domestic product, not to mention improvements for customers and consumers alike. Increased competition through regional engagement will also result in improved services and access to foreign funds, meaning a better deal for the many Australians who use funds management services.

However, our counterparts in the Labor Party will stop at nothing in their quest to impose their big government agenda on all Australians and to disrupt our growth and prosperity. At the behest of their union bosses, they seek to close off our economy and increase red tape. Labor's track record of being antibusiness and anti-investment threatens to undermine the pillars that have made Australia prosperous and allowed its people to enjoy living standards that are amongst the highest in the world. The decline from the more economically rational times of Labor under Hawke and Keating to the high-taxing and protectionist agenda of the Leader of the Opposition, Bill Shorten, makes a stark contrast. For all our sakes, we simply cannot allow this to happen.

This is why it is so important that the Turnbull government continues to support free trade and economic engagement through the likes of this bill. We in the Liberal Party are committed to growing our economy and to providing opportunities for all. This can only be done through fully supporting free market economics and serious engagement with our region. The history of our Asian neighbours in particular showcases the benefits that free trade can bring to all. Asia comprises more than 4½ billion people, making up 60 per cent of the world's population. The regional economic outlook for Asia and the Pacific estimates growth to remain strong at 5.4 per cent in 2018 as the region continues to be the leader of global growth. Australia is extraordinarily well placed, both geographically and economically, to continue to engage in the region and to benefit. The majority of our top export markets are in the Asian region. Engagement represents an incredible opportunity to grow our economy and industries, including funds management. Looking at the countries that have signed up to implement the passport that this bill facilitates, the likes of Japan, Korea and Thailand have performed well economically in recent years and are well placed to continue growing. Australia must ensure that it is well placed and prepared to move forward in what some call the Asian century.

History has shown us many times that those who stop and pause ultimately get left behind. We have always been a forward-looking nation and we must continue to be so. Some may question the merits of free market investment and seek to exploit any discontent for political gain. For those of you who choose to pursue such a path, I warn you to remember your history and the fate of those who have spouted similar protectionist arguments in the past. Ludwig von Mises, the esteemed Austrian-American economist, once wrote that:

The philosophy of protectionism is a philosophy of war.

This serves as an important reminder of the dangers of abandoning free trade and pursuing the dark path of protectionism.

Since the end of World War II in 1945 and the widespread emergence of free trade and the global economy, the level of trade interdependence between nations has seen a significant decrease in the number of armed conflicts and war related debts, making the current day one of the most peaceful eras in history. The so-called capitalist peace theory has contributed not only to peace but also to lifting hundreds of millions of people out of poverty and to improving living standards around the world. I'm proud to be a member of a government and a political party that understands such principles and history and is committed to facilitating such benefits in Australia.

It is clear that this bill will go a long way towards improving trade relations and the economic wellbeing of all nations involved and, in particular, the people living in those nations. Australia's funds management sector has the potential to improve. We have a powerful mix of high-performing domestic and international funds management firms that will help to drive revenue and create jobs. I'm confident that this bill will help to encourage even more funds management firms to view Australia as both a viable destination for investment and a nation where they can set up operations and contribute to our economy. Australia's economic future and prosperity are essential to our continued wellbeing and quality of life. So I urge all here today to take a stand for our industries, our jobs and our future and to support this bill.

Julian Hill (Bruce, Australian Labor Party) Share this | Link to this | Hansard source

I was just inspired to say a few words on this. I was going to speak on this—I read the bill's digest a few days—but I was distracted over the weekend and didn't have time to prepare considered comments with quotes from history, like a whole undergraduate political or economic lecture, such as someone wrote for the member for Mackellar, which was lovely. I would just remind the House of a few key points. Firstly, this was a Labor initiative. Despite the rhetoric we have just heard, this was actually initiated by the member for McMahon when he was a minister in the Labor government. I was listening, but I didn't hear the previous speaker thank the Labor Party for this sensible, modest reform. It's exactly the kind of reform you do if you want to grow investment in the country and see more funds flow into Australia for our fast-growing and well-managed funds management sector.

I can't help but reflect on some of the nonsense we heard from the Prime Minister at question time. He is a little obsessed with Paul Keating. He's a little jealous, of course. We know what Paul Keating said about him. Keating said, 'He's a fizzer,' like a big red firecracker that goes off and then there's nothing. We heard in question time that little lecture from the Prime Minister, where somehow Labor had abandoned its history of company tax cuts when Paul Keating cut the company tax rate from 49 to 39 and then some years later again from 39 to 33—I haven't got the exact figures in front of me. What the Prime Minister and the government neglect to tell us is that those cuts, particularly the big one from 49 to 39, were not just put on the nation's debt. They didn't just back the truck up to the ATM and hand out cash to big business. The Labor Party made a sensible taxation and economic reform, because they slashed the headline rate by expanding the base.

I'm not an economist, as I would be the first here to admit, but I do know enough about economic reform and the concepts of efficiency to say that any sensible economist would say, 'You're much better off to reduce the taxation rate through reforming an existing tax.' The Labor Party didn't lose revenue and didn't give away billions of dollars to the big end of town. They reformed the taxation system. This, as we've heard, is one of the factors—

Steve Georganas (Hindmarsh, Australian Labor Party) Share this | Link to this | Hansard source

The minister, on a point of order?

Craig Laundy (Reid, Liberal Party, Minister for Small and Family Business, the Workplace and Deregulation) Share this | Link to this | Hansard source

It's not an omnibus bill. Where's the relevance to the bill in question?

Steve Georganas (Hindmarsh, Australian Labor Party) Share this | Link to this | Hansard source

I'm listening carefully. I will determine when it strays.

Julian Hill (Bruce, Australian Labor Party) Share this | Link to this | Hansard source

We've heard from the government and, indeed, the previous government speaker that this is an important thing to facilitate more investment. That's fair enough. I agree that it is a useful step. But, if we're talking about what else we could do—as this bill does contemplate—to improve Australia's funds management sector, then I'd encourage the government to pay some more attention to behind-the-border trade barriers instead of its obsession with just striking any trade deal it can find on the way through. Not every trade deal is a great trade deal. If you go out and have a chat to business, business keeps telling us that these kinds of things would do far more to see investment flow into the country.

I used to work in the economic development department in Victoria. I worked in investment and trade. I spent some time, before I left the Victorian government, actually having a look at the financial services sector strategy. That is sensible government policy. What a grown-up government would do is have a look at a sector that has great potential to do more for Australia and then actually craft a decent industry policy. I have no disagreement with building submarines or ships in Australia, but it does not substitute for an industry policy, as this government pretends.

I applaud the government on actually following through with a piece of legislation, five years later, to implement a good Labor government initiative. I applaud you. It's good and very sensible. But if you want to be taken seriously on all the other stuff you say about this bill, then you'd have a look and be real about the other factors that are far more important than the headline company tax rate, which just about no company actually pays in Australia, as you well know. There are things like the stability of our financial sector, things like our liveability, things like a positive investment climate and things like infrastructure. Those things are far more important—you know it and business knows it—for facilitating more investment.

Craig Laundy (Reid, Liberal Party, Minister for Small and Family Business, the Workplace and Deregulation) Share this | Link to this | Hansard source

Firstly, I'd like to thank those members who have contributed to this debate. The Corporations Amendment (Asia Region Funds Passport) Bill 2018 implements, as we've heard, the regulatory framework for the Asia Region Funds Passport. This passport is similar to a free trade agreement for managed funds in the Asia region. It will harmonise certain regulatory requirements and create a passporting regime that will remove duplicated regulatory barriers for qualifying funds.

As we've heard, Australia has the sixth-largest pool of funds globally and the largest in Asia, with over A$3 trillion in funds under management. The 2009 Johnson report found that Australia has comparative advantages in funds management—a highly skilled and developed workforce, a reputation as a safe investment location, solid financial institutions and strong links with Asia. However, it noted that these advantages have not translated into strong export of funds management services. The regulatory red tape and difficulty in accessing overseas markets has meant that the level of funds Australia manages on behalf of foreign residents is very low when compared to other financial centres in the Asia region. In 2016, only four per cent of total funds managed in Australia were sourced from overseas. This compares to approximately 69 and 80 per cent in Hong Kong and Singapore respectively.

The potential benefits for industry and consumers as well as the wider economic impact of introducing the passport are significant. Through this bill, Australian fund managers will be able to offer their products in other participating economies. The current participating economies are Japan, Korea, New Zealand and Thailand. This offers our fund managers the opportunity to tap into Asia's expanding middle class and increasing numbers of high-net-worth and ultra-high-net-worth individuals. The passport will benefit investors through greater choice of funds. Increased market competition will also lead to better consumer outcomes by ensuring access to more reasonably priced investment products. The passport will be supported by cooperation between the passport regulators, ensuring strong enforcement across the passport region.

The passport also delivers on the government's commitment to build a stronger economy as it transitions to a more service based economy. The wealth management sector has been identified as an area that could assist in this transition. Unlocking this potential is highly dependent on changes in regulatory settings. The passport has been extensively consulted upon and has strong support from the industry, which recognises the potential that the passport could ultimately bring. I commend the bill to the House.

Question agreed to.

Bill read a second time.