Jenny McAllister (NSW, Australian Labor Party, Shadow Cabinet Secretary) Share this | Hansard source

The Banking Amendment (Deposits) Bill 2020 amends the Banking Act to ensure that bank deposits cannot be converted to shares by the holding bank—a process that has become known as a bail-in. It would further prevent Commonwealth laws from authorising bail-ins of deposit accounts. It's quite a technical bill and it's unusual for technical amendments to banking legislation to become matters of public interest. It's true that both this bill and the issue that it seeks to deal with are probably not on the radar of most ordinary Australians. But it's impossible to speak about this bill without noting the extraordinary interest in it by a section of the Australian community. Like most of my colleagues, my office has received a significant volume of calls about bail-ins from people who are highly motivated an engaged about this issue. We have sometimes heard from individuals four or five times over the course of the past few years. Regardless of the issue, it is always great to see community members engaging with the work of the parliament—whether it is signing a petition, calling their MP or making a submission to an inquiry. I would encourage anyone who has taken an interest in this issue to continue to engage with these and the other issues that come before this place. We benefit from an engaged and interested citizenry.

But, as I began by noting, it is unusual for a technical banking issue to receive this much attention. I think it is due in large part to the Morrison government's failure to reassure people about the safety of their retirement savings. The government's mishandling of its own communications about this and other banking related matters has given Australians unnecessary concern about the safety of their savings. It's worth considering the history of this issue. Concerns about bail-ins came to prominence during the global financial crisis. The events in Greece deeply unsettled many people, and Australians wanted to know that their life savings would not be used to underwrite mistakes made by financial institutions.

Australia's financial system made it through the GFC largely unscathed, thanks in no small part to the efforts of the Rudd-Gillard government, efforts that often were not supported by those opposite. And there were no bail-ins in Australia. So why are we talking about it now, more than a decade later? The current set of concerns about bail-ins seems to have come following the introduction of the Financial Sector Legislation Amendment (Crisis Resolution Powers and Other Measures) Bill 2017. That legislation gave APRA the power to allow financial instruments known as hybrid securities.

I think the government mishandled its own legislation in the debate about this legislation. It failed to properly engage with the concerns that many Australians had about the operation of that bill, and I think that was a mistake. People are of course justified in wanting to have confidence in the banking system and in the security of their deposits. The callers to my office about this issue are not wealthy people. Many are Australians with modest backgrounds who have worked hard and lived careful lives so they can enjoy some measure of economic security as they get older. They are entitled to expect that the government provide them with that confidence. Unfortunately, the government's own actions mean that many Australians do not trust them to do the right thing when it comes to the banking sector and retirement income policy.

People can be forgiven for being suspicious of the Morrison government's approach to the banking sector given its history on the issue. The government voted against the establishment of a banking royal commission not just once but a staggering 26 times. This was while Mr Morrison was the Treasurer and nominally responsible for Australia's banking and financial system. There has still not been a compelling or credible explanation proffered by those opposite for their opposition to the establishment of this royal commission, and it is certainly not justifiable in light of what came out during the course of the commission. People across the country told devastating stories about mistreatment by the banks causing physical, psychological, social and economic harm. The evidence provided to the commission was overwhelming and Commissioner Hayne noted that members of the public submitted more than 10,000 complaints about financial services entities by using the committee's webform. In addition, there were many thousands of telephone calls and emails to the office of the royal commission. It's understandable, then, that people may be suspicious of this government's bona fides on banking policy given the length they went to in this parliament to prevent this commission from being established.

What have they done since the royal commission ended and handed down its report? After receiving the banking royal commission's final report the Prime Minister and Treasurer Frydenberg took six months to release an implementation timetable. One year after the report was on their desk, the government had completed just six of the 76 recommendations made by Commissioner Hayne. Labor was disappointed by the government's decision to further delay implementation of the banking royal commission's recommendations. These are important reforms and they should have been prioritised by this government.

Not only has the government dragged its feet in implementing the recommendations of the royal commission; it has now broken a promise. Responsible lending laws are a key part of the protection for consumers in our financial system. They help ensure that people are not taken advantage of by predatory lenders and saddled with debt they cannot possibly repay. Retaining responsible lending laws in their current form was the royal commission's first recommendation. The government agreed to this recommendation, and Commissioner Hayne himself described them in his report as critical in ensuring good-faith negotiations on loan products between banks and customers.

The Morrison government has announced its intention to repeal responsible lending provisions. Let's be clear: there is no good evidence that repealing responsible lending provisions will help boost our economy. There is plenty of evidence that this will harm vulnerable consumers. Financial Counselling Australia are on the record as saying that removing responsible lending obligations will free banks up to aggressively push credit onto their customers. And they're not alone in having that concern. Recently, more than 200 community groups and financial experts wrote to parliamentarians arguing against the repeal of responsible lending provisions. So we have Mr Morrison opposing the royal commission as Treasurer, delaying implementation of the recommendations as Prime Minister, and now backflipping and removing key consumer protections, having been re-elected. You can understand why people might be suspicious of the Morrison government's banking policies.

You can also be forgiven for being suspicious about the Morrison government's approach to retirement savings, given its history on the issue. Australia's retirement system is often described as having three pillars: superannuation, the pension and independent savings. What has this government done to each? The coalition has a long track record of undermining Australia's superannuation system. In parliament back in September 1995, then backbencher Mr Abbott described compulsory superannuation as 'one of the biggest con jobs', and the coalition is still at war with the superannuation industry.

Part of the government's response to the coronavirus induced recession was to encourage workers to withdraw from their superannuation. This has come at a real cost to young workers. Workers aged 30 who withdrew $20,000 from their superannuation could be $69,000 worse off in retirement, and the consequences for younger Australians could be much, much greater. And for what? Analysis suggests that large amounts of this super was spent on discretionary spending. At the same time, the government has been suggesting that it may not proceed with the legislated increases to compulsory superannuation. So we have this government telling people to run down their super while at the same time backing away from legislated increases to the super rate that would help restore and rebuild those balances for a secure retirement.

What about the second pillar of the retirement system—the pension? In the 2014 budget, the coalition government announced changes to the pension, with the pension age to be raised to 70. There are also changes and cuts to supplements, and since then pensioners have had to fight for the government to use fair deeming rates to account for the value of their other assets. So we've had this government reducing eligibility for the pension and proposing to cut the rates for those who remain on it.

Given the government's assault on two of the pillars of Australia's retirement system, it is not really surprising that people might be suspicious of their intentions in relation to the third: independent savings. As I said earlier, there are countless Australians who have come from modest backgrounds and worked hard and lived careful lives so that they can enjoy a measure of economic security as they get older, and they do deserve confidence that the banking and financial system will not take advantage of them.

Unfortunately, the bill before us today is not the solution to these concerns. There are real and credible concerns that this bill may undermine existing banking regulations. Australian banks are supported by a strong system of prudential and other regulation that should avoid the need for any such measure outlined in this bill. APRA and Treasury have stated it is not possible, under current legislation, for banks to bail in deposit accounts. The legislative certainty on that question already exists. Every bank deposit in Australia is protected from bank failure by the Financial Claims Scheme, which was established by Labor in 2008. This means that every deposit in a bank, credit union or building society is guaranteed up to a value of $250,000 per account holder. This scheme means that account holders are protected against bank failure, even in the worst-case scenario. APRA regularly conducts stress testing of banks to ensure that they are ready for a potential crisis.

Treasury has also expressed concerns that the bill introduces a definition of 'deposit account' which is not then used consistently in potentially relevant places throughout the Banking Act—for instance, in the depositor priority provisions in section 13A. This would introduce multiple definitions to capture a single concept in the Banking Act, which would risk introducing uncertainty regarding the interpretation of the Banking Act. In addition to this, the measures outlined in the bill have not been a feature of previous responses to financial crises in any major country.

The government does need to do a better job of responding to people's financial concerns. Our financial system depends on confidence, and the measure of interest in this bill shows that a portion of the Australian community does not have confidence that their savings will be protected. It's understandable that people are suspicious, given this government's track record on retirement policy and banking policy, and it's not enough to say that things are just fine. The government needs to show that it has ordinary Australians' financial futures as its core priority.