Dean Smith (WA, Liberal Party) Share this | Hansard source

I rise this evening to make a brief contribution to the Treasury Laws Amendment (Enhancing ASIC's Capabilities) Bill 2018. The government considers that competition, not regulation, is the best means of ensuring consumers get value for money in financial services. A primary purpose of this bill is to amend the Australian Securities and Investments Commission Act 2001 to mandate that the Australian Securities and Investments Commission must consider the effects the performance of its functions and the exercise of its powers will have on competition in the Australian financial system. An explicit reference to take competition issues into account will require ASIC to consciously consider how its regulatory decisions will impact on competition in the financial system.

It's the view of the coalition government that both consumers and financial services firms, particularly new entrants, will benefit from a more competitive, more robust financial system. Importantly, this measure fulfils the coalition government's commitment to implement recommendation 30 of the financial system inquiry, or the FSI. Recommendation 30 stated the government should include consideration of competition in ASIC's mandate. The measure also complements other key initiatives undertaken by this government to support competition, including initiatives such as tasking the Productivity Commission with a review of competition in Australia's financial system and funding the ACCC to undertake in-depth inquiries into specific financial system competition issues.

In supporting this recommendation, the government is conscious this measure was consulted on quite extensively through the financial services inquiry. The Senate will recall this inquiry made recommendations on five specific themes including: strengthening the economy by making the financial system more resilient, lifting the value of the superannuation system and retirement incomes, driving economic growth and productivity through settings that promote innovation, enhancing confidence and trust by creating an environment in which financial firms treat customers fairly, and enhancing regulatory independence and accountability and hopefully minimising the need for regulation over the medium and longer terms.

The inquiry received more than 6,800 submissions and undertook hundreds of stakeholder meetings, including with financial institutions, market participants and regulators. The government undertook consultation on this measure following receipt of the final report. Stakeholders, including the Financial Services Council, CHOICE, Customer Owned Banking Association and the Australian Banking Association, are generally supportive of a stronger focus on competition in our financial system. This includes, of course, amending ASIC's mandate to include consideration of competition issues. In addition, there's been a significant discussion with ASIC as part of the finalisation of this particular amendment.

Giving legislative effect to this recommendation by way of 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 a decision will create regulatory advantages for some firms over others, competing in the same sector or across the whole industry, and whether the decision disproportionately impacts small entities—for example, by imposing obligations that do not appropriately scale the regulatory risks presented by such entities and the impact this would have on competition; and, finally, whether alternative competitive neutral approaches can be identified. It's worth noting this amendment is not intended to limit the scope of ASIC's regulatory responsibilities, nor expand its powers by making it a competition regulator. The ACCC would remain the competition regulator across the Australian economy.

A second important element of this bill is to amend the ASIC act to remove the requirement for the ASIC to engage staff under the Public Service Act 1999. This bill also contains consequential amendments to be 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 such as the Australian Prudential Regulation Authority and the Reserve Bank of Australia. To be able to perform their roles effectively in accordance with legislative mandate, financial regulators need to be able to attract and retain reliably skilled and experienced staff. In the particular case of ASIC, 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 suitable and professional staff.

Removing the obligation for ASIC to engage staff under the Public Service Act means ASIC will be able to compete more effectively for suitable staff. Attracting suitable professional staff will also allow ASIC to tailor-make its staffing arrangements to suit its needs, ensuring it is fit for purpose to deliver effectively on its mandate. This measure fulfils the government's commitment to implement recommendation 24 of the ASIC capability review report. Recommendation 24 stated the government should remove ASIC from the Public Service Act as a matter of priority to support more effective recruitment and retention strategies. A similar finding was also found in the context of the financial systems inquiry. This measure has also been the subject of intensive consultation. As part of the government's own consultation, the Financial Services Council and the government's Institute of Australia have indicated support for ASIC staff to be employed outside the Public Service Act. There was also stakeholder engagement on this measure as part of the ASIC capability review, of course. This included engagement with ASIC itself, private sector businesses regulated by ASIC, peak bodies and consumer representatives. Unlike ASIC, neither APRA nor the RBA are subject to the requirements of the Public Service Act. The objective of removing the requirement for ASIC to employ people under the PSA is to achieve greater operational flexibility, bringing ASIC in line with APRA and the Reserve Bank of Australia.

The inflexibilities involved in Australia Public Service employment under the PSA can make it difficult for ASIC to shape the workforce and the culture that it requires to meet the organisation's priorities. These include 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.

In conclusion, it's worth reiterating why competition in the financial sector is important. This coalition government believes competition in the financial system puts strong discipline on businesses to lower costs associated with the delivery of products and services. And the experience of competition more than adequately demonstrates that it further encourages innovation and deployment of new technologies and delivers more choices for consumers at lower prices. The effects of stronger competition in the financial system are felt well beyond financial markets and into other parts of the Australian and indeed the global economy. Increased competition can benefit the economy as a whole via improvements to productivity and economic growth. These initiatives build on a strong record of achievement by this coalition government in promoting competition in the financial system. Competition, not regulation, is the best means of ensuring consumers get value for money in our financial services system.

To support competition, the coalition's already tasked the Productivity Commission to review competition in Australia's financial system and report to the government on its findings by the middle of this year. The Productivity Commission released its draft report on the competition in Australia's financial system on 7 February 2017, making 25 draft recommendations focusing on retail banking, mortgage brokers, new entrants and innovation, general insurance and regulatory responsibilities for promoting competition. In addition to this review, the coalition's tasked the Australian Competition and Consumer Commission to undertake regular in-depth inquiries into specific financial system competition issues through a new dedicated unit. This coalition government is also mandating comprehensive credit reporting, which will open up the lending market to new players by enabling them to better assess the credit risk of customers and, at the same time, reduce their exposure to defaults. And the coalition is implementing the open-banking regime to empower Australian customers to seek out banking products better suited to their individual or business needs. This is a bill that makes a timely and important contribution to the evolution of Australia's financial system and deserves the support of the Senate.