Gerard Rennick (Queensland, Independent) Share this | Hansard source

I rise today to speak about the banking and financial sector in this country. Events in the last week have shown why we need systemic structural reform in our banking and insurance sectors. Earlier this week, we saw the great town of Ingham in North Queensland suffer from extensive flooding, as did Townsville. There will be many people there who don't have insurance, and those that do have insurance, in the rest state and the rest of the country, will end up paying much higher insurance premiums as a result of the insurance payouts that I expect to see happen.

Yesterday we found out that the Heritage Bank, a small regional bank in Queensland, which has just merged with South Australia's People's Choice—funnily enough, to become the People First Bank—has shut down about 13 branches in regional and metropolitan Queensland. Heritage Bank was founded in the great town of Toowoomba and was originally known as the Toowoomba Permanent Building Society.

Our banking and insurance sectors are suffering because of privatisation a number of decades ago. Insurance in this country is made up of about 50 per cent reinsurance costs purchased from overseas when insurance companies have to actually reinsure their insurance. If we had a proper government insurance office in this country that was run federally, we could reinsure ourselves. What that would do is to stop all Australians, when they take out insurance, from paying half their insurance costs overseas in order to get reinsurance. There was a proposal for a $10 billion reinsurance fund; I'm sure the foreign reinsurance companies would have just clipped the ticket on that anyway. I believe we also have a $4 billion emergency management fund. Much of that money is actually paid out to people who don't have insurance and have suffered from a natural disaster.

I believe that privatisation, despite everyone saying it was going to lead to greater competition, has actually led to less competition. I think we need ethical competition in banking and insurance. Had we not privatised our SGIOs, or our government insurance offices, at the state level, and had we not privatised CBA at the federal level, I think you'd have found that we wouldn't have had to have the royal commission into misconduct in the financial services sector.

The same applies to banking as well. I think we need a public bank. We've seen too many branches being closed across regional and metropolitan Australia over the last two decades. Yet again, increased competition has actually led to reduced competition—we've had reduced services on offer.

Regional towns need their banks. Small businesses need their banks. They need to be able to access cash. Older people need to be able to get face-to-face services. We need somewhere to go to if we've been scammed out of money.

But there's another benefit of having a government owned bank—and many people would not be aware of this. Once upon a time in Australia, you could actually get fixed home loans for up to 25 years. The reason was that, through your government bank, the Australian government would issue bonds to the bank for an extended period of time. When Paul Keating decided to deregulate the financial market in 1985 and allow the private banks to access offshore capital, that meant that we had the extra risk of FX or foreign currency risk. As a result of that, banks had to take out cross-currency swaps, the longest duration of which is five years. As a result of that, banks can't offer home loans for more than five years. A contract can go for 30 years, but they won't offer home loans for more than five years because they have to roll over their FX currency swaps every five years, as well as the interest rate swaps, which generally go for about five years as well. If the Australian government, through a publicly owned bank, could issue an Australian-denominated bond that was already fixed, these risks could be removed and it could go for much longer.

One of the pushbacks I get on having a public bank is that people will say, 'What about the Victorian State Bank?' The State Bank of Victoria went broke in the late eighties because it was allowed to buy the Tricontinental investment bank. In other words, it went broke, as did the South Australian public bank, because the state banks were allowed to engage in reckless financial behaviour in the late eighties, and, if the financial deregulation had not been allowed to occur under Paul Keating, the State Bank would not have gone broke. We desperately need to reform financial services in this country.