Deborah O'Neill (NSW, Australian Labor Party) Share this | Hansard source

I'll take the interjection from Senator Bragg, who has spent so much of his political life here trying to break down the superannuation sector and take away the security that Australians get not only from having dignity in retirement but in having a say in investments in our own country through the markets and in having access to insurance at a much-reduced rate. Despite all of those things and millions of Australians benefiting, Senator Bragg continues the Liberal-National coalition legacy of smashing the concept of superannuation. That's why it's really important that it's Labor that's leading this reform, and I look to colleagues in this chamber for support in what this bill seeks to achieve.

If we're going to get the best value for the investment of Australians' transactions through the stock exchange, that benefit is going to hinge on the efficiency and viability of the financial system. The Australian stock exchange plays an incredibly important, indeed a crucial, role for both business and the everyday investors across this country. According to a recent AFR article, $874 billion in super fund holdings are invested in the Australian stock exchange, with a projected 41 per cent share of ASX super fund ownership by 2030. Let's be clear: the ASX is truly the lifeblood of the Australian superannuation industry and intimately connected with the financial future of every Australian who is working in this country, has a superannuation balance and is relying on the proper working of the market in the most efficient way.

The fact we face, though, is that the system that was the envy of the world when it was introduced by the Australian stock exchange, which is known as the CHESS system, has been subject to a lot of work in terms of update, replacement and improvement. It's fair to say that there have been incredible failures in the process towards that end. The CHESS replacement program and a lack of success there, aligned with an exposure to the innovative powers of competition, means that the incentive structure of the current monopoly is just not working for Australians. We know that there have been considerable concerns expressed and that in recent times, under the leadership of Mr Joe Longo from ASIC, there has been some change implemented to reshape a committee to observe and understand what's going on with the CHESS replacement system. But the problems are multiple and they are manifesting themselves in ways that are of great concern to those Australians who do intimately engage with the exchange. People who are watching, including the Treasury, know that the CHESS replacement program is overbudget, overtime and underdelivered. This program to replace what was cutting-edge technology has been so mismanaged from the start, and by repeated attempts to improve governance, that it simply has not yet produced adequate results.

We are offering our exchange in competition with other exchanges around the world, and what we're seeing is that other nations around the world are seeing clearing and settlement times reduced to T+1 time frames, and they're doing that with cutting-edge technology. Australia, however, is still reliant on an expensive and antiquated system that just doesn't adequately reflect the sophistication of our economy and our workforce. Australia's ranking on the Global Financial Centres Index has fallen, with Sydney and Melbourne, previously ranked seventh and 18th respectively, now down to 13th and 31st. This is not something we should be proud of, in any shape or form, and it's not something we can allow to continue. It's fair to say that if Australia's financial system is not continuously striving for better services then the superannuation system can't adequately perform, and there is a material impact on the retirement outcomes of everyday Australians for every sticky bit of the system that is not working as efficiently and as productively as it could be.

Schedule 3 of this bill seeks to implement recommendations made by the Council of Financial Regulators to strengthen regulatory powers and facilitate competitive outcomes in the market for clearing and settlement of cash equities traded in Australia. To be clear, the Australian stock exchange is an entity that's unknown to many Australians, and perhaps people in this chamber and people who are listening to this debate today think of it as a piece of public infrastructure. The ASX is not a public infrastructure site. It's privately owned. It seeks to make a profit and it has a monopoly over the services of clearing and settlement.

The reforms that have been proposed in this bill will have significant benefits for businesses that compete with the ASX in other parts of the cash equities market, such as the financial market operators, or rely on the ASX's monopoly clearing and settlement services, such as clearing and settlement participants and share registries. For them, the practical reality is that a delay in being able to access these systems and a lack of transparency around fair prices for these services can increase their costs, and the lack of competition, which is something that was put to us in evidence over the course of our inquiry, is a factor in the stalling of innovation. The argument that's been put is that the monopoly is happy with the profit that it's making and is obfuscating the advance of innovation because it might not see it as being in its interests. That's been disputed, of course, by various leaders of the ASX over time, but nonetheless it is a conversation that is well and truly alive in the sector.

The reforms that are proposed in this piece of legislation will enable ASIC to write rules relating to the governance of clearing and settlement facilities, including rules related to board composition and user input to governance. This will have the additional benefit of allowing ASIC to make rules which apply to the governance of the ASX CHESS replacement project—the delay of which, I might add, has resulted in significant costs to the wider industry. If a competitor does emerge in the provision of cash equities clearing and settlement, ASIC will be able to ensure that that competitor and the competition it provides are safe and effective for the benefit of Australians and those who trade in the Australian stock exchange. For example, this piece of legislation would enable us to make rules with respect to the interoperability between competing clearing and settlement facilities. If a competitor does not emerge, rules will ensure competitive outcomes can still be achieved by allowing ASIC to make rules regarding the activities, conduct and governance of clearing and settlement facility licensees. This is intended to ensure that these services are provided on fair, reasonable, transparent and non-discriminatory terms.

Where clearing and settlement services are provided by an entity which enjoys a monopoly or a significant market power, this piece of legislation will, critically, create the opportunity for arbitration, which will be available to industry participants that rely on access to clearing and settlement services to resolve any disputes about those terms and conditions of access, including the issue of price. This is intended to be a final but efficient backstop when good-faith commercial negotiations break down. It has largely been modelled on national access regime part IIIA of the Competition and Consumer Act 2010, with a few changes embedded in this legislation to improve the efficiency of the arbitration process and to provide timely outcomes for parties.

What we're proposing in this legislation is just a part of the Albanese government's multifaceted approach to securing the financial system as a critical component of the Australian economy. I am absolutely certain that Australians were horrified by the PricewaterhouseCoopers con of the Australian taxation system, which still makes my blood boil and sharpens my mind to uncover every facet of that fraud. The truth is that PwC and its peers in the big four audit industry are crucial firms to establishing the credibility of a set of financial statements, to give confidence that the accounts are true and fair. Further, they provide an important role in alerting firms on their liquidity and solvency from the short to the long term. One needs only to look at the oligopolistic audit market that concentrates as the ASX 300 moves to the top 100 firms. Therefore, it is paramount that they perform this function appropriately and with integrity, but that is not what is occurring.

What is happening instead is instances of light-touch approaches; unproductive cosy relationships; rushed jobs; and firms that have a pyramid-scheme approach to their workforce, forcing their graduates to work long hours for low pay, luring them in with a distant shot at potentially one day making partner level. These things also impact on a market. It needs to be properly functioning, and I commend TLAB3 to this chamber. It deserves support.