Joe Ludwig (Queensland, Australian Labor Party) Share this | Hansard source

I note the government does not seem to want to participate in this debate. It does not quite surprise me. I did want to also have the opportunity of listening to Senator Cormann's defence of this poor regulatory legislation to then be able to answer. But Senator Cormann, as always, wants the last word in all of this.

Let us start out with the first word because what the first word is that the provisions of chapter 7 of the Corporations Act aim to promote among other things: confidence and informed decision making by consumers of financial products and services while facilitating efficiency, flexibility and innovation in the provision of those services; and fairness, honesty and professionalism by those who provide financial services.

What concerns me most about these regulations is that they have failed on both of those counts. First, they have not sought to ensure that there would be confidence and informed decision making by consumers. In fact, it does the opposite. It rips the guts right out of them. Second, it does not promote fairness, honesty and professionalism by those who provide financial services. It drags us back to the old days where some financial advisers—not all in the industry—created circumstances which led to awful positions of consumers in the Storm Financial debacle. That was but one debacle but one that I think typifies some parts of the industry. Who suffers out of that? Consumers—mums and dads who have been hoodwinked into providing their financial savings into such schemes.

What role should government play in all of this? It should play an important part. Chapter 7 specifies the twin aims of what roles governments should play. In this instance, this government is not playing that role. This government has decided to ensure that it does not meet its commitments of honesty and fairness for consumers or of professionalism for advisers. What this government has sought to do is to unwind the reforms that were put in place in the twin aims of chapter 7.

The basics of the introduction of Labor's reforms were to restore faith in a sector that was rocked by high profiles collapses and ensure that Australians were getting the best advice possible.

The Abbott government is now seeking to make several changes to the reforms through regulation which remove the catch-all provision for providers to act in the best interests of their client; add a loophole for advisers that will make this safeguard ineffective; scrap of the opt-in requirement allowing an adviser to continue to charge fees indefinitely without receiving consent from their client; make changes to annual disclosure so that advisers only have to provide annual disclosure to clients who commence with them after 1 July 2013; and lift the ban on conflicted remuneration that will only apply to commissions on general advice which will open the door for a sales-push culture of products over advice.

All of the government's proposals are about providing, in their words, a certainty for the industry; in fact, it will provide uncertainty. Consumers will be concerned. Consumers will not continue to have the confidence in the market that financial services are in, and that is the sad part of this so-called regulatory reform that Senator Cormann is bringing forward. It does the opposite to what he says it will do: it will not bring stability and confidence to the market; it will bring the exact opposite.

All of the market has now started to examine these proposals—that is why not only consumer advocates such as Choice are decrying the regulation but industry are also adding their voice. They can see that instability will be created by these so-called reforms. I have known Mr Brogden for some time, and he is a person of great integrity. It is not surprising that he would add his voice to the criticism of this regulation when you look at the detail of it.

The government claim that all of their proposals are about certainty for the sector but, ultimately, not for the consumer. That should not surprise us on this side of the chamber when you look at the coalition's response across many of their portfolios. They are not about the worker. They are not about the consumer. They are not about making sure that there is fairness in the market. They are about ensuring in this instance that the big end of town and the banks will benefit. The so-called reforms of the government take the financial services back years and remove Labor's hard-won gains to lift standards and ensure providers walk the path to professionalism in this debate.

What is most concerning about the introduction of these changes is the government's plan to make most of the changes via regulation. That is why we are arguing for a disallowance on these regulations today. The government could have taken the brave way forward and brought through a proper bill to be progressed with a regulatory impact statement—one that Senator Cormann often decries that legislation should have—and submit it to parliament for proper scrutiny. Instead, he did it via regulation. We are not here to talk about the bill, because the circumstances that Senator Cormann has now set up for himself are that he has a bill. The regulations are a stopgap, but he does not know confidently—although, he may want to predict—what the final bill will look like. Therefore uncertainty reigns, because he has wanted to, in his words, act swiftly to deal with this issue.

I think this is a poor way to progress legislation in this parliament and I don't think it speaks very highly of Senator Cormann in this respect. It can create a circumstance where the regulations in this instance largely give effect to amendments that would be made by the bill, but you have the added difficulty of not knowing the outcome of the two houses of parliament yet. You don't know whether there will be amendments that succeed. You don't know what the final shape of the legislation might look like. You may be confident. You may want to predict it, but the Senate is not a chamber I would want to give a lot of predictability and certainty to about some of the outcomes. It may surprise Senator Cormann to find that out eventually.

The Standing Committee on Regulations and Ordinances also belled the cat. Its role exists to report on regulations sought to be introduced by government to ensure sufficient oversight of legislative instruments that they do not undergo the same level of parliamentary scrutiny as bills that pass through parliament. Therein lies Senator Cormann's problem: doing it by regulation omits the scrutiny of parliament. If you do not follow the basic tenet that, if you are going to make substantive changes, you should use parliament to do it rather than try to swiftly use a regulation, you will get tripped up. The regulations and ordinances committee has put up that trip-wire.

As part of its role, it is also a function of the committee to consider whether an instrument contains matters more appropriate for the traditional process of parliamentary enactment. The explanatory statement provided by the government on this regulation states the reasons for the change being introduced via regulation rather than legislation as 'it provides certainly to industry and allows industry to benefit from the cost savings of the changes as soon as possible'.

It has been reported by the committee that enabling a regulated industry to benefit from legislative change as soon as possible is not a sufficient justification to achieve policy change through regulation as this justification can be claimed with respect to any proposal. That means you could always argue: 'I need to change something quickly; therefore, I will do it by regulation.' That is not an argument, not a reason, to bring a regulation in or to underpin it.

It has been reported by the committee that the most concerning thing—to the committee and to me—is that the key element of the regulation involved fundamental change to the primary legislative scheme developed by the Labor government in order to protect consumers during a time of economic uncertainty. In response to the committee's concerns the minister cited the need for—and again we hear this—'swift action'. However, he failed to address the issue that such imperatives may not amount to sufficient justification for effecting significant policy change via regulation.

So Senator Cormann simply argues in the round: 'I need to do this swiftly; therefore, that is the justification that I need to do it swiftly.' The committee says that is not a justification. You can do it by an enactment. The government has regarded it as preferable and convenient to effect policy change via delegated legislation without consideration of the consequences that these changes have on the Australian people. The regulation then is an attempt by the government to rush through its changes in order to favour—Senator Cormann can tell us who it aims to favour. We have already looked at the consumer; it does not benefit the consumer. It leaves us with maybe the big banks, maybe the big end of town, maybe the financial planning industry and the advisers themselves. But that argument was never made to the regulations and ordinances committee. The arguments for bringing in the regulation had nothing to do with the removal of red tape; although, I know that Senator Cormann is wont to argue often that it is about the removal of red tape. But the underpinning of his argument to the regulations and ordinances committee is all about swiftness.

It is a further function of this committee to consider whether an instrument is in accordance with the statute—in this case, the Corporations Act 2001. In response to the committee's concerns on this point, the Minister for Finance and acting Assistant Treasurer informed the committee that the Australian Government Solicitor advised that the regulation has been made in accordance with the specific regulation-making powers in the Corporations Act; however, the government has conveniently neglected to provide the committee with this advice. This is a government asking the Australian people to place their trust in its hands, only to skimp on the details that show how these changes protect ordinary consumers. I do not think it is deserving of this trust. To demonstrate this point, the regulation is made under a provision of the act which provides that regulations may be made prescribing matters necessary or convenient for carrying out or giving effect to the act.

But let's go back to the reason the regulation was made. Given that the regulations are an 'interim measure'—that is, swiftly done as a stop-gap until such time as we can deal with the bill—a serious question arises as to whether the regulations are permitted by the act. Given that they are clearly not necessary or convenient for carrying out or giving effect to the act, there are no grounds. We would all like to see the Solicitor General's advice. I suspect that Senator Cormann is not going to table that today. I will be interested to see whether the government decides to give them to the regulations and ordinances committee. If they do not do that, I think it makes the case that they have plenty to hide and they have been caught short on this; because, without that advice, Senator Cormann is again asking the chamber to trust him. I do not trust this government at all. They ought to put up or pull out.

The government indicated in its explanatory statement that the regulation is intended to give effect to 'interim changes' until the bill passes the parliament, and the interim changes will then be repealed, following the commencement of the bill. If this isn't a clear warning sign that the government is trying to push through these changes in the quickest way possible and undermine parliamentary process, I don't know what is.

Obviously the government has relied on the 'required or permitted' limb of the general regulation-making power, rather than on the 'necessary or convenient' limb of the power. A serious question arises as to whether the regulations are permitted and, given that the government has not provided the legal advice to underpin the making of the regulation, one can only reasonably conclude that it is outside the power. But this is not all that is wrong with this regulation. In truth the government's legal argument is defective. It is not as bad as what they seek to do in relation to the best interests duty in favour of vulnerable consumers; nonetheless, it is a shocking state of affairs.

The regulation removes the catch-all provision from the list of steps an advice provider may take to satisfy their best interests obligation. Given that removing the catch-all provision is not required by the act, the regulation is again relying on the inapplicable 'permitted' element of the power. That is one example which highlights that it is an impermissible step this government has taken with this regulation in trying to replace what is and should be proper scrutiny by parliament of legislation. Once again, we can see the government's twisted priorities in action; how they want to treat not only the Australian people but their representatives and the parliament here. This regulation and the way it has come forward is an abuse of power. It should fail.

I think those who support Senator Cormann in his actions should at least demand to see the legal advice before making any decision to support him. The impact of this regulation is massive. It is about big banks, big fees, big money and removing protections for ordinary consumers. What this means for mums and dads is that they will again be subjected to poor practices in financial advice and financial services. Senator Cormann wants to hide behind all of that and only deal with it because the government wants to hoodwink the Australian public. Labor will be firm in upholding the protections Australian consumers deserve. Those who want to sit with Senator Cormann ought to make sure that they are familiar with the advice that he holds to ensure that they do consider this in a proper way. But I think Senator Cormann thinks he has got a deal done.