Nick Sherry (Tasmania, Australian Labor Party, Shadow Minister for Banking and Financial Services) Share this | Link to this | Hansard source

I move:

That the Senate take note of the answer given by the Minister for Finance and Administration (Senator Minchin) to a question without notice asked by Senator Sherry today relating to the collapse of the property development company, Westpoint.

What is Westpoint? By way of background, Westpoint was a group of property investment companies involving a financial instrument known as promissory notes. There has been considerable media coverage of the Westpoint financial collapse. It is the largest financial collapse since the collapse of HIH—up to $400 million. Thousands of Australians have been hurt because of the Westpoint financial scandal. Many of those thousands of Australians who have been hurt are elderly and retired. I have seen quite a number of letters and emails about this and have spoken to many people on the telephone who have been badly hurt by the collapse of Westpoint. As I said, many of them are elderly and retired. They had invested all or a substantial part of their superannuation savings in the Westpoint entity.

The question I posed to the minister today went to the financial instrument that Westpoint investors were placing their moneys in. The financial instrument was known as a promissory note. In the Australian financial system, almost all financial products and institutions are regulated by the federal government. That is as it should be. However, the Westpoint financial entities, these promissory notes, were not regulated by the federal government. This had very serious adverse consequences for the thousands of people who had invested in the Westpoint entities. The Commonwealth government and the regulatory agency—in this case ASIC—could not regulate the promissory notes. They could not regulate in that area.

What concerns the Labor Party is that the Western Australian government, the minister and the Office of Fair Trading, wrote to the federal Treasurer, Mr Costello, in mid-2002 and outlined the regulatory gap—the fact that the federal regulator, ASIC, could not take action in respect of promissory notes. Also, the Western Australian government urgently warned the Treasurer about the activities of Westpoint. They drew to the attention of the Treasurer the fact that this regulatory gap did not allow the regulator, ASIC, to intervene in order to protect consumers. This was in mid-2002. So we had the Western Australian government warning the Treasurer in writing in mid-2002 of the activities of Westpoint and the fact that there was a regulatory gap—that the Commonwealth and its regulator, ASIC, could not directly regulate Westpoint and these promissory notes. That was in mid-2002, when many thousands of people had not yet put money into Westpoint.

The question I asked today of the Minister for Finance and Administration, representing the Treasurer, was: why didn’t the federal Liberal government and the Treasurer act on the warnings the Western Australian government gave in mid-2002? Why didn’t they act on the warnings and regulate this particular financial product as almost every other financial product in Australia is regulated—through ASIC? Three-and-a-half years later, after thousands of Australians have been burnt—many of them elderly and retired—with many having lost their entire life savings, the federal Liberal government has still not acted legislatively to regulate this particular financial product. And this despite the warnings from the WA government 3½ years ago.

That is not the only aspect of maladministration and bad regulation in respect of Westpoint, but it is quite a critical aspect of it. The Commonwealth and the Treasurer, Mr Costello, should have paid closer attention to the warning 3½ years ago. They should have heeded the warnings of the Western Australian government and regulated this area. If the federal Liberal government had done so, there would have been far fewer people burnt as a consequence of the Westpoint financial collapse.

Question agreed to.