Slade Brockman (WA, Liberal Party) Share this | Hansard source

I, too, rise to speak on this bill. Before I start, I will just pick up on a couple of things that Senator O'Neill said. She talked about retirees having their savings gutted in the GFC. I will point out that Labor's current policy on double taxation is to gut the retirement incomes of pensioners—self-funded retirees on very modest earnings. One particular example that comes to my mind is of a chap I know well down in Albany in Western Australia. He is a self-funded retiree—a schoolteacher all his life—with a very modest superannuation balance, and he will have his take-home income slashed by 30 per cent under Labor's double taxation policy.

When Senator O'Neill stands up and talks about retirement savings being gutted, I think she should look behind her and look to her own side on what Labor's current policy is going to do to the retirement incomes of people who have done the right thing and done exactly what society asked them to do—work and strive to put money away to fund their own retirement. They don't look to the taxpayer in terms of funding a pension. Instead, they have enabled themselves to have a very small, modest income. In the case I'm thinking of, an income of around $30,000 per annum will be slashed by $10,000 to $20,000 per annum. This is apparently the Labor Party's idea of fairness. That's a very sad reflection on those opposite.

I do rise to speak on the Treasury Laws Amendment (Enhancing ASIC's Capabilities) Bill 2018. This bill builds on a very strong track record in this space by this government. The bill implements a series of enhancements to the capabilities of the Australian Securities and Investment Commission, ASIC. It enables key recommendations from the Financial System Inquiry and the ASIC capability review. It is further evidence of the government's commitment to strengthening ASIC and commitment to ensure our financial system does deliver for all Australians—delivers fair outcomes for all Australians. That's the key to what we're trying to see here. The regulators are a very important part of that, and it builds on key steps taken by this government to improve ASIC's performance. They are steps such as providing ASIC with a stronger funding base through the introduction of an industry funding model to ensure the cost of regulation is borne by those that have created the need for it rather than the Australian public, who too often bear the cost of financial sector misconduct.

Other changes by this government would be the implementation of other recommendations from the Financial System Inquiry to provide new tools and powers to ASIC, including the power to intervene in the sale and distribution of financial products where there is a risk of significant consumer detriment. A third example is reviewing the recommendations of the ASIC Enforcement Review Taskforce, established by the Liberal government in October 2016 to assess the suitability of the existing regulatory tools available to ASIC. I will later go through some of the other changes made by this government in the recent past, but firstly I'll deal with this bill.

The bill contains two schedules. Schedule 1 relates to the changes to competition in the financial system, and schedule 2 contains amendments relating to the engagement of ASIC staff. Dealing with schedule 1 first, this is related to competition in the financial system. The government considers that competition, not regulation, is the best means of ensuring consumers get value for money in the financial services. Schedule 1 of this bill amends the Australian Securities and Investment Commission Act 2001, the ASIC Act, to maintain that the Australian Securities and Investment Commission must 'consider the effects that the performance of its functions and the exercise of its powers will have on competition in the Australian financial system'.

The explicit reference to take competitions issues into account will require ASIC to consciously consider how its regulatory decisions will impact on competition in the financial system. Both consumers and financial services firms, particularly new entrants, will benefit from a more competitive financial system. This measure fulfils the government's commitment to implement recommendation 30 of the Financial System Inquiry. This recommendation stated that the government should include consideration of competition in ASIC's mandate. It is in response to the FSI that the government committed to develop legislation to introduce an explicit reference to consider competition in ASIC's mandate. This measure complements other key initiatives undertaken by the government to support competition, including tasking the Productivity Commission with a review of competition for Australia's financial system and funding to the ACCC to undertake in-depth inquiries into specific financial system competition issues.

This schedule in particular has undertaken significant consultation. The Financial System Inquiry itself received over 6,800 submissions and took hundreds of stakeholder meetings, including with financial institutions of course but also with markets, participants and the regulators themselves. The government undertook significant consultation on this measure following the receipt of the final report. Stakeholders, including people like the Financial Services Council of course but also CHOICE, the Customer Owned Banking Association and obviously the Australian Banking Association. They were all generally supportive of the stronger focus on competition in the financial system, including amending ASIC's mandate to include consideration of competition. In addition, there has obviously been significant consultation with ASIC as part of the finalisation of this amendment.

The Financial System Inquiry found that competition is generally adequate in the financial system, but there needs to be a stronger focus on competition in the financial sector. In particular, the FSI was concerned that regulators' mandates adopted an inconsistent approach to competition, with ASIC lacking an explicit competition mandate. Accordingly, the FSI did recommend that the ASIC mandate should include a specific requirement to take competition issues into account as part of its decision-making process. Particularly in light of current events coming out of the royal commission, I think it is very clear that we need to introduce more competition into our banking and financial services sector. We don't want to see any winnowing away of competition in that sector, because that will only lead to a further concentration and further potential for problems when they do arise to cause significant harm to a greater number of people. A broad and diverse financial sector is of course going to deliver the best outcome in terms of protecting the most people possible when these sorts of incidents do occur.

What outcome do we hope for from this legislative change? An explicit reference in ASIC's mandate to take competition issues into account would oblige ASIC to more consciously consider how its regulatory decisions may impact on competition in the financial system. Some of the specific aspects of competition that ASIC may have regard to include: whether a decision will create a barrier to entry, making it more difficult or impossible for new firms to enter the industry, whether the decision will create regulatory advantages for some firms over others competing in the same sector or across the whole industry; whether the decision disproportionately impacts small entities, for example by imposing obligations on them that do not appropriately scale the regulatory risk presented by such entities, and the impact that this will have on competition; and whether alternative competitive-neutral approaches can be identified. This amendment is not intended to limit the scope of ASIC's regulatory responsibility, nor expand its powers by making it a competition regulator. The ACCC would remain the competition regulator across the economy.

Once again, particularly on this side, we want a competitive, open economy. We want as many players in the economy as possible, players that are doing the right thing, playing by the rules and following the law. Having as many players as possible in the sector will protect most people by giving them as many options as possible—for our business sector and for individuals—to gain access to the financial services products they require.

The schedule 2 amendments relate to the engagement of ASIC staff. Schedule 2 of the bill amends the ASIC Act to remove the requirement for ASIC to engage staff under the Public Service Act. Consequential amendments are also made to the Business Names Registration Act 2011, the Corporations Act 2001 and the Mutual Assistance in Business Regulation Act 1992. Removing the requirement for ASIC to employ people under the Public Service Act will promote greater operational flexibility, bringing ASIC into line with Australia's other financial regulators, the Australian Prudential Regulation Authority and the Reserve Bank of Australia. To be able to perform their roles effectively in accordance with their legislative mandate, financial regulators need to be able to attract and retain suitably skilled and experienced staff. In ASIC's case, this means recruiting staff with knowledge of financial markets and financial services. ASIC is therefore often competing against the private sector, as opposed to other public sector agencies, when recruiting staff. Regulators face challenges in recruiting and retaining staff, given that regulatory staff remuneration falls short of salaries in the industry they regulate and against whom they compete for personnel.

Unlike ASIC, neither APRA nor the RBA are subject to the PSA. The objective of removing the requirement for ASIC to employ people under the Public Service Act is to achieve greater operational flexibility, bringing ASIC into line with those other two regulators. The inflexibility involved in Australian Public Service employment under the PSA can make it difficult for ASIC to shape the workforce and culture that it requires to meet the organisation's priorities. These include such things as: classification and remuneration of staff; the length of employment of temporary staff; management decisions affecting staff; and the terms and conditions of any enterprise agreement.

Removing the obligations for ASIC to engage staff under the Public Service Act means that ASIC will be able to compete more effectively for suitable staff. It will also allow ASIC to tailor management and staffing arrangements to suit its needs, ensuring it is fit for purpose to deliver effectively on its mandate. This measurement fulfils the government's commitment to implement recommendation 24 of the ASIC capability review report. This recommendation stated that the government should remove ASIC from the Public Service Act as a matter of priority to enable them to have more effective recruitment and retention strategies.

A similar finding was also found in the context of the financial systems inquiry. Again, there was significant consultation over schedule 2. It was more targeted, obviously, given the nature of the change. Targeted consultation on the exposure draft legislation occurred from December 2017 to January 2018 with the Department of Finance, the Department of Jobs and Small Business, the Department of the Prime Minister and Cabinet, the Australian Public Service Commission and, of course, ASIC itself. There are also transitional provisions. Transitional provisions are in place to ensure that existing conditions, rights and contracts continue to apply to ASIC staff as they transition out of the PSA to engagement under the ASIC Act. ASIC staff employed under a written agreement immediately prior to the commencement of the bill will continue to be employed under the written agreement. Staff employed under the PSA immediately on and from the commencement of the bill will cease to be engaged under the PSA, will be employed by ASIC under written agreement and will be employed on the same terms and conditions, with the same approved benefits, and will maintain their continuity of service with ASIC. These changes to ASIC's engagement of staff will not affect any promotions, performance management or disciplinary actions commenced before 1 July 2019 and will not give rise to any entitlements or benefits because an ASIC staff member is no longer employed under the PSA.

In conclusion, this bill ensures that Australia's financial services sector stays competitive. We believe that competition in the financial services system puts strong discipline on business to lower costs associated with the delivery of their products and services. Further, it encourages innovation and deployment of new technology and delivers more choice for consumers at lower prices. The effects of stronger competition in the financial system are felt well beyond financial markets. They flow through to all parts of the economy. A strong and effective financial system is a precursor to a strong and efficient economy. We all need to remember that as we look at the potential flow-on impacts from the royal commission.

Importantly, the bill further ensures that Australia has strong and effective regulators governing our financial system. Our financial system has done a good job in meeting the needs of Australia. Those on this side are as shocked and disappointed as anyone in some of the things that have come out at the royal commission, but we need to remember that Australia has been served well by its financial system and we do have a very robust and competitive environment, but it can be improved upon and that is very clear. The measures contained in this bill are part of that.

In the few minutes I have left, I will talk briefly about how the measures in this particular bill play into an ongoing theme of this government about the need for reform in this area and what we have delivered. A few months ago, the then minister, Kelly O'Dwyer, announced a significant package of reforms to make sure that ASIC is fit for purpose. These included such measures as $26 million to accelerate and increase the intensity of ASIC's enforcement activities and enhance its capacity to pursue actions for serious misconduct against well funded litigants through the Enforcement Special Account; $9.4 million to boost supervision of the superannuation sector by strengthening audit and enforcement action to improve transparency and outcomes for superannuation members; $8 million to implement a new supervisory approach with respect to Australia's five largest financial institutions by, for the first time, embedding dedicated staff in these institutions to monitor compliance actions; $6.8 million to establish a dedicated taskforce which will conduct a proactive, targeted and thematic review into corporate governance to identify and pursue failings in large listed companies, including deploying staff to conduct new on-site surveillance and investigations; $6.6 million to implement the government's reforms to whistleblower protection laws so that ASIC can better receive, assess, triage and address whistleblower disclosures about misconduct; and $6 million to promote Australia as a world leader in the development and adoption of regulatory technology solutions in the financial services industry. So we see that this bill under consideration today is not a standalone bill. In fact, the bill we've just passed, the Treasury Laws Amendment (Black Economy Taskforce Measures No. 1) Bill 2018, is also clearly to do with the improvement of the regulatory framework under which all businesses must operate in this space. We have to improve the regulator and we have to improve the regulator's actions. The government has had a long-term commitment to doing that and is following through in this bill today.

The measures that were announced a few months ago build on the measures in this bill and build on the very strong series of actions undertaken by this government to ensure we have strong consumer outcomes and a strong regulatory environment. For example: $121.3 million in additional funding in 2016 to bolster ASIC's investigative and surveillance capacities; strengthening of civil and criminal penalties by increasing terms of imprisonment and fines; increasing the maximum civil penalties to be imposed by court; allowing ASIC to strip wrongdoers of profits illegally obtained, again strengthening the regulatory toolkit; improving search warrant powers and providing access to telecommunications intercepted materials, again improving the regulatory toolkit; and an industry funding model, which we talked about earlier, to ensure that those entities who create the need for further regulation actually pay for it instead of taxpayers, again a very important change undertaken by this government; undertaking consultation on a new product intervention power to enable ASIC to intervene in the sale of harmful products to retail consumers; legislating to improve the employment arrangements, which is part of this bill; and appointing a second deputy chairperson with a focus on enforcement—the person appointed brings significant enforcement experience to that role.

In conclusion, clearly this government has a strong commitment and a strong track record in bolstering ASIC's capacity to play the legitimate role it plays in the economy. This particular bill, which is aimed at improving competition, is a very important step in making sure we have the best regulatory framework possible.