Chris Ketter (Queensland, Australian Labor Party) Share this | Hansard source

I rise to support some action in relation to the banking scandals that we have seen over too many years. Before I commence my contribution I just want to make a comment in relation to the contribution by Senator Paterson. He accused Labor, after having changed its position in recent times on the question of a banking royal commission, of being left wing and populist. If he had cared to look over his left shoulder whilst he was making those comments he would have seen a fellow senator on his side of the chamber, a person who is well regarded and respected in this place, who is well-known for his attention to detail in relation to the misbehaviour of banks over a number of years. Senator Williams has formed the view that there is a need for some dramatic intervention in relation to the banking industry and the financial sector, and he, in recent times, has called for a royal commission. I wonder if Senator Williams is a left-wing populist? Mr Entsch, from North Queensland, is a left-wing populist. I also note that Mr Robb, a former senior government minister, has come out and made his view clear: 'We just need to get on with the royal commission. Let's get it done.' Unfortunately, the arguments being advanced by government senators in relation to this matter are really scraping the bottom of the barrel. It is disappointing that we see government senators coming into the chamber with very little in the way of arguments against a royal commission into banking.

Labor believe that a royal commission into Australia's banking and financial services sector is the only way to get to the bottom of the rip-offs, the scandals and the misconduct that we have seen in this sector over many years.

It is true, as both Senator Hume and Senator Paterson have said, that that has not always been the Labor position. Both Senator Hume and Senator Paterson seem to suggest that that is actually a weakness in the opposition's principal position on this matter. Yes, it is true that at one stage we did not have that view that there should be a royal commission. But we continue to see scandal after scandal. We see bank executives coming before various inquiries—20 or so over recent times—apologising and saying all the right things when the cameras are there, but just going back to business-as-usual when they get back to the office. They refuse to learn about how to improve their behaviour. When we continue to see that over a period of time, the only rational response is to change our position and to adopt the view that there is something more dramatic needed other than a run-of-the mill inquiry, something more dramatic other than a slap over the wrist from the House Economics Committee a couple of times a year. That is not achieving the results that the Australian people are crying out for when it comes to our banking sector.

I also acknowledge Senator Whish-Wilson's contribution in this area. I note that he made reference to the contribution by former Labor Senator Mark Bishop, who was the chair of the Senate Economics References Committee, and made reference to the report that was handed down in June 2014 calling for a royal commission. I note that Senator Williams was a part of the committee at that particular time. So Labor have been looking at this issue for some time. There have been ongoing scandals and the fact is these banking institutions refuse to be accountable for what they are doing. They simply consider any fines and legal action as a cost of doing business in the sector. With such deep pockets, they are just going to continue on with business as usual until something dramatic happens. That dramatic intervention that I talk about is a royal commission. That is what is necessary.

In Australia, I believe we have a very proud tradition of facing up to the problems we have in our society. I instance our recent royal commission into institutional abuse of children. That was a very difficult situation and there was a great need for us to shine a light on that very difficult issue. When it comes to facing up to difficult issues, I am sure Australia is robust enough and our democracy is robust enough to grasp the nettle on this particular issue. After all, this is what the Australian people demand. Every Australian uses a bank. We all rely on the integrity of the banking system. It is fundamental to our economy. I note that Senator Paterson made this point, that we need to retain the integrity of our banking system. Unfortunately, the integrity of our banking system has been compromised.

Australian families trust banks with their home loans. Small businesses count on them for capital. Older Australians depend on banks for securing their retirement savings. So we would say that trust and confidence in the banking system is vital for the health of our economy. If you lose that trust then you need to do something to regain it, and that is the situation we are in right now. Unless we have a royal commission into our banking and financial services system, we are going to see ongoing lack of trust and that does have a negative impact on the economy.

We welcome this bill, but we would prefer a royal commission into the banking sector. However, in the absence of leadership from the government to establish one, we are broadly supportive of the commission of inquiry legislation, subject to it going through the normal internal party processes that we have. This bill highlights the lack of leadership on the part of the government to tackle this issue on behalf of thousands of ordinary Australians, who have been the victims of poor practice, misconduct and scandals in the banking and financial services sector.

The message that this bill sends is loud and clear. The Prime Minister needs to take responsibility and call a royal commission. He needs to actually side with ordinary Australians and he needs to stop defending the banks. He has become the chief shop steward for the banks. He is running a protection racket for the banks. In fact, after all of the misbehaviour that we have seen from the banks, the government is proposing, at least at this point in time, to provide to the banks, who are experiencing record levels of profits, a further $7.4 billion tax cut. That is the sort of payback that we see for the misbehaviour of the banking sector.

We do support a strong and profitable banking and financial services sector. Our decision to call for a royal commission has not been taken lightly. It has been taken after a long period of careful consideration. We have seen too many examples of scandals and misconduct come to light, and we need to get to the bottom of the systematic and cultural issues in an independent manner through a transparent means. We need Australians to once again have confidence in their banks and financial institutions to uncover and deal with the unethical behaviour that compromises that confidence.

On many occasions as chair of the Senate Economics References Committee I have heard Mr Medcraft, the head of ASIC, talk about the culture that exists within the industry which is driving this poor behaviour. Try as ASIC might to address these issues of culture, and ASIC itself is not immune from criticism, the issues persist.

I am going to talk about another recent example of this toxic culture within the banks that reinforces, in my mind, the need for a royal commission. We will never support practices, systems and cultures that allow consumers to be ripped off, allow small business owners doing the right thing to lose their livelihoods and allow retirees to lose their life savings. One of the things that the government has introduced to fend off a royal commission into the banking sector is the Small Business and Family Enterprise Ombudsman, who has certain powers to seek to provide access to justice for small business owners who are the victims of malpractices by the banks and, in particular, the major banks. I note the frustration of the ombudsman, Ms Carnell. The report that she recently authored into banking practices found that lenders are not being fair when they enter into contracts with small and medium-sized businesses. She said that the big four banks are the main culprits and that they refuse to improve their practices. This is the government's own mechanism for seeking to improve the situation identifying that there is an ongoing problem. In fact, Ms Carnell, who appeared before us recently, told us that she was fed up with the behaviour of the banks. She pointed to the fact that she had looked at 17 inquiries over quite a number of years where the banks had made promises that they were going to change and then did not. They then kicked the can down the road, as she said, to find another reason not to change.

This is a government that pretends to stand up for small business. It pretends to be interested in small business as the engine room of our economy. But we know that, as Ms Carnell has found, banks have a power under the contracts that are currently in place to revalue assets and do a range of things that mean that loans can be defaulted, even when borrowers are paying back the money that was stipulated under the contract. Senator Williams is well aware of this particular issue. The ombudsman looked at 23 of the worst examples of banking practices, but she made the point that the problem goes well beyond the small number of cases that she investigated. I reiterate that she believes that the big four banks are the main culprits. Ms Carnell has said:

I think though what we've got is a banking industry in Australia, particularly the big four banks, that believe for whatever reason that they can continue with business as usual and they don't have to change

This is the government's own small business ombudsman, in frustration, identifying that what has been happening up till now is not working. It just is not working. Let's face the facts, let's look at the empirical evidence of what is going on and let's form the view that something more dramatic is required to drive the change of attitude and culture that is absolutely necessary.

We know that over the years since Labor first called for a royal commission we have seen 20 inquiries launched into the banking and financial services sector. These have included inquiries set up by the government. The Australian Bankers' Association has set up its own internal processes to try to improve the behaviour of the banks. My response to that is: it is too little and it is too late. The most instructive comment that was made by the head of the Bankers' Association was when he admitted that the banks had been galvanised, to use his word, to do something after Labor's calls for a royal commission. The threat of a royal commission is what it took for the banks to finally admit that they have a problem and to get together to try to address this issue. If it is the threat of a royal commission that prompts them to do that, it is the reality of a royal commission that will be necessary if any positive change is going to take place. We do not believe that the banks themselves are capable of getting together and fixing this issue. I think that you would have to be very naive to believe that that can happen. They have appointed former Queensland Premier Anna Bligh to head the Bankers' Association. We congratulate Ms Bligh and we hope that she will be successful in her endeavours to reform the practices within the banking sector. We wish her all the best in that regard, but that does not deflect us from our position on the need for a royal commission. All of the efforts up till now do not have the powers of a royal commission to investigate and to get to the bottom of what has gone on, and they do not have the scope of a royal commission.

It is just astonishing to me that the Prime Minister, who many would say is an intelligent person, is refusing to look at the facts of the situation. He is refusing to look at the empirical evidence and refusing to take the advice of Mr Andrew Robb, a former senior minister within the government who has come out and said that there is a need to launch a royal commission. Senator Gallagher has already talked about the other government solution, which is a manifest failure: the House Economics Committee hearings. These are just friendly chats with the banks a couple of times a year. We have seen CEO after CEO appear before the committee. They appear, they refuse to answer direct questions or to release important reports or to take any genuine responsibility for the failings of their banks. We see nothing actually happening. As respected journalist Adele Ferguson said after the first hearings:

… complex questions were impossible to raise and answer, allowing many specific questions to be glossed over, evaded, put on notice or given enough spin to render them meaningless.

So, with all due respect to our friends in the other place and to their attempts to get to the bottom of these banking malpractices, this is not the appropriate way to do that. It is a flawed process. It is entirely inadequate to the task of dealing with this systemic problem that we have. The MPs have a limited time. The CEOs duck and weave. And the Australian people are left completely unenlightened about what the banks are going to do to fix up their issues.

I mentioned that there was another recent event that has reinforced and fortified me in the view that only a banking royal commission can deal with this issue, and it concerns the work of our Senate economics committee in relation to the issue of unpaid super. If there is any financial institution which should understand the rules about paying superannuation to its workers, it should be a major bank. Yet recently we saw the Commonwealth Bank being caught out by the Finance Sector Union for not paying its part-time staff members their full 9½ per cent superannuation guarantee entitlements, going back as far as 2009. I commend the Finance Sector Union for raising this issue.

We took the opportunity, as part of our inquiry into the issue of unpaid super, to call the Commonwealth Bank before us to provide us with an explanation as to why they had got themselves into this situation, and, lo and behold, a very short time before the Commonwealth Bank was due to appear before our committee, the bank advised the FSU that they had changed the view that they had held previously and that they were going to pay and to back-pay the 9½ per cent or relevant superannuation amount, over the years, back to 2009, for these part-time staff members. There were about 7,000 part-time staff in the Commonwealth Bank who were working beyond their contract hours, and not at overtime rates; there was no argument about that. These were low-paid workers—probably the lowest paid workers within the Commonwealth Bank structure—who were being denied superannuation. So, as far as I am concerned, this is a sector which refuses to learn from its mistakes and will continue to do so until a royal commission is imposed upon them.