Penny Wong (SA, Australian Labor Party, Minister for Finance and Deregulation) Share this | Link to this | Hansard source

I present three government responses to committee reports as listed on today's Order of Business. In accordance with the usual practice, I seek leave to have the documents incorporated in Hansard.

Leave granted.

The documents read as follows—

AUSTRALIAN GOVERNMENT RESPONSE TO THE REPORT ON IRAQI WHEAT DEBT – REPAYMENTS FOR WHEAT GROWERS BY THE SENATE RURAL AND REGIONAL AFFAIRS AND TRANSPORT REFERENCES COMMITTEE

Introduction

The Government welcomes the Committee’s report on compensation arrangements for wheat growers following the writing off of Iraq wheat debt in the Paris Club.

The Government supports the Committee’s conclusion that, although the Export Finance and Insurance Corporation (EFIC) is a government entity, the insurance policies they provide to exporters are commercial agreements and, as such, should be free from governmental intervention. In addition, the Government supports the Committee’s judgment that to interfere to amend retrospectively EFIC contracts could possibly affect the future viability of National Interest Account (NIA) insurance arrangements and reflect a short-sighted approach to export insurance arrangements. The Government, however, does not accept the Committee’s recommendations.

Recommendation 1

The Committee recommends that the Export Finance and Insurance Corporation and AWB Ltd agree to a distribution of Paris Club scheduled repayments that enables growers, through AWB Ltd, to receive the first 20 per cent of repayments from Iraq, beginning in 2011.

Response

The Government does not accept this recommendation.

Agreement by EFIC (the Government) to pay the growers the first 20 per cent of repayments from Iraq would contradict the terms of the original insurance contracts between EFIC and the former Australian Wheat Board1 and would be inconsistent with the principle of risk sharing implicit in not only these, but all, insurance contracts. Such an agreement would also be inequitable for other exporters who had sales defaults in Iraq covered under insurance arrangements with EFIC.

Under this recommendation, AWB Ltd’s share of the debt, payable to wheat growers, could be paid by 2014. The taxpayer portion would not commence repayment until 2014 and would not be fully repaid until 2028. In the event that Iraq did not honour its obligations to Paris Club creditors part-way through the repayment schedule, the Government, and therefore the taxpayer, would be left with all the remaining liquidity.

Market practice within the insurance industry is that claims and recoveries are made on the basis of the conditions agreed at the time an insurance policy is established, and before the risks covered are realised. Recoveries are shared between the insured and insurer, in proportion to the loss borne, at the time of the recovery. The precedent set by departing from this practice in the case of Iraq debt may create an expectation that Government might be willing to waive this basic contractual principal for other recovery situations.

The Government notes that previous debt reschedulings, such as Russia and Egypt, have followed market practice, but any precedent set with regard to Iraq debt could then be applied to other situations and to Australian non-government creditors of rescheduled debt, in addition to other Australian exporters to Iraq. The situation which the committee describes, in which individual growers will be required to wait very long periods to receive remaining funds, may also apply to many other exporters whose debt has been subject to rescheduling, such as creditors of Russia.

An additional implication of government agreement to repay growers first, and consequently depart from market practice, would be that it may make it more difficult for EFIC to source reinsurance for exposures on the NIA in the commercial market. Commercial reinsurers, who would also have a contractual right to recoveries in proportion to their level of reinsurance, would take into account the prospect of the Australian Government departing from contractual obligations after claims have been paid, in favour of insured exporters and to the possible detriment of reinsurers, in their consideration of whether to reinsure NIA exposures.

Recommendation 2

AWB Ltd immediately commences the process of identifying and locating every grower entitled to receive payments made by Iraq under the Paris Club agreement. Further, prior to the commencement of Iraq’s scheduled debt repayments in 2011, AWB Ltd undertakes to establish a payment mechanism whereby those receiving Iraqi payments are responsible for meeting the costs of their distribution.

Response

The Government notes this recommendation. This is a matter for AWB Ltd to consider.

Dissenting Report by Senator Bob Brown

In preparing its response to the report, the Government has also taken into account the dissenting report by Senator Bob Brown. The dissenting report’s recommendations are:

1. The government should within 12 months undertake to repay growers the outstanding Iraq wheat debt and to cover the cost of this redistribution.

2. That the Export Finance and Insurance Corporation and AWB Ltd ensure that the first 20 per cent of Paris Club scheduled payments, beginning in 2011, are returned to the government.

3. That, to assist the government, the AWB Ltd immediately commence the process of identifying and locating every grower entitled to receive payments made by Iraq under the Paris Club agreement.

Response

The Government does not accept recommendations one and two, and notes recommendation three.

As noted in the response to the Committee’s first recommendation, implementing these recommendations would require EFIC to deviate from market practice, and set a damaging precedent for the future provision of insurance on the NIA. In addition, repaying the growers within 12 months would require an additional outlay from taxpayers which would shift all the risk of non-repayment by Iraq onto the taxpayer. This is considered untenable given the outlays already provided by taxpayers under the original insurance contract.

The second and third recommendations would be relevant only if the first recommendation was accepted.

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1 Agrium Asia Pacific International (AAPI) is the new name for AWB (International) Ltd. Although the broader AWB Commodity management business was sold by Agrium Asia Pacific to Cargill in 2011, responsibility for historical issues, such as the Iraq wheat debt, remained with Agrium.

Parliamentary Joint Committee on Corporations and Financial Services (PJCCFS)

Statutory Oversight of the Australian Securities and Investments Commission (ASIC)

March 2012

Government Response

Recommendation 1

The committee recommends that ASIC acquire empirical evidence of its resource allocation to its educative activities and outcomes of these activities. This information should be more fully publicised in ASIC's regular reports and other media accessed by investors especially retail investors.

The Government supports the recommendation in principle and notes that ASIC, as the Government's financial literacy educator through its National Financial Literacy Strategy (NFLS), provides a coherent framework to improve consumer financial literacy nation-wide.

ASIC has indicated that it accepts the recommendation and it will provide more detail of the resources it devotes to the NFLS, including making this material available to retail investors.

The Government commends ASIC's decision to adopt the Committee's recommendation, and also its continued approach to consumer and investor education.

Recommendation 2

The committee recommends that ASIC take steps to use available information to collate and analyse definitions of, and approaches to, financial crime, with a view to developing standard definitions and classifications that can be used across the Commonwealth.

Recommendation 3

The committee further recommends that ASIC give particular attention to ways of distinguishing between criminal fraud and market failure, and the interventions available to ASIC in each case.

The Government supports these recommendations in principle.

The Government considers that the extent to which it would be beneficial for this work to be undertaken would need to be determined by ASIC, subject to its resourcing priorities.

The Government notes that should these recommendations be carried forward, ASIC would consult with the Attorney-General's Department which has responsibility for criminal law on a whole of government basis.

The Government's in principle support for recommendation 3 should not be taken to imply any deficiency on the part of ASIC in its current approach to determining the causes of losses to investors.

Recommendation 4

The committee recommends that the government provide the basis on which company registration fees are set and an explanation as to the process of determining late fees.

Government response

The Government provides the following response to Recommendation 4, on the understanding that the question, while referring to 'company registration fees', is seeking the basis for the setting of both registration fees and annual review fees.

Background

Following registration, companies receive annual invoices from ASIC for payment of the annual review fee pursuant to the Corporations Act 2001, Corporations (Review Fees) Act 2003, and related regulations. The purpose of the annual review process is both to collect fees to fund the national corporations scheme, and to ensure the currency of information held by ASIC by providing a clear and regular opportunity for companies to check all details held by ASIC's register, and notify ASIC of any changes.

Section 1351 of the Corporations Act specifies that payment of the annual review fee is required within two months of the company's review date. If a company fails to make payment within the specified period, then a late fee arises under the regulations. The fee is $69 for payments which are up to one month overdue, and $287 for payments which are more than one month overdue.

ASIC has the ability to waive a company's obligation to pay a fee in certain circumstances, from a power delegated to it under the Financial Management and Accountability Act 1997, and is restricted to situations where circumstances exist that are outside the control of the applicant company or its representatives (including agents).

Company office holders have a legal responsibility to ensure they are aware of their obligation to pay prescribed fees within the specified time limits. Details of these requirements are provided with the annual statement package.

Rationale for Company fees and late fees

Successive governments have supported the view that corporations fees should be set to ensure that over time, total revenue from the fees approximates the total outlays associated with the national corporations scheme ('the scheme'). The rationale for this is that as the scheme provides general benefits to market participants, including companies, the cost should be borne by them rather than by all taxpayers.

Following the establishment of the national corporations scheme in 1991, the Commonwealth Government initially set fees at a level that would cover the costs of the regulator (then the Australian Securities Commission (ASC), now ASIC) and make a contribution towards other outlays and compensation payments associated with the scheme. These other outlays include the costs of providing policy advice (formerly by the Attorney-General's Department and now by the Australian Treasury), and of various bodies involved in the administration of the scheme which operate independently of ASIC. Today these include the Corporations and Markets Advisory Committee, the Takeovers Panel, the Financial Reporting Council, the Australian Accounting Standards Board, the Auditing and Assurance Standards Board, the Companies Auditors and Liquidators Disciplinary Board, and the Financial Reporting Panel. Fees are also meant to contribute to the costs of various related law enforcement, court and tribunal activities.

A significant component of the fees raised was to provide compensation payments to be remitted by the Commonwealth to the States to make up for the loss of companies and securities fees payable under the various State-based company registration schemes.

In 1992-93, for example, the scheme raised revenue of $190 million. The ASC's outlays were $124 million, the outlays for the other administrative bodies were $10 million, and compensation to the States and Territories were $118 million. Consequently, the scheme deficit was $62 million.

Fee levels were reviewed by a cross-departmental steering committee in 1994, with input from the business community and the ASC. A major principle guiding the review was the preference for cost recovery – that is, for the scheme to run at an approximate fiscal balance. The other key principles were equity between fee-payers, and the efficiency and simplicity of the scheme. The characteristics of the scheme consequently adopted included:

Fee levels were considered again in 2000 as part of the Simplified Lodgements and Compliance paper issued under the Corporate Law Economic Reform Program. The principles guiding this review broadly accorded with those of the 1994 review, with an additional emphasis on the need to facilitate the administration of the Corporations Law, and to provide flexibility to facilitate future regulatory reforms.

It was noted in this review that whereas a cost recovery objective may exist at an aggregate level, as an objective for setting fees, this did not mean that individual fees for specific regulatory activities needed to represent full cost recovery for that activity. For example, the annual return fee was set at a level significantly higher than the direct cost of receiving and processing annual returns, because the fees were also designed to cover the costs of other activities relevant to the scheme, such as surveillance, enforcement and prosecution.

The outcomes of the review in 2000 did not diverge significantly from those of the 1994 review in terms of the principles upon which fees were to be set, other than adjusting the levels to reflect Consumer Price Index (CPI) increases.

The last wide-ranging change in fees took place in June 2003, which again adjusted fees in line with CPI increases. Subsequently, only ad hoc fee changes took place.

By 2007-08, the scheme raised $545 million. ASIC's outlays were $292 million, payments for services to the scheme by other bodies amounted to around $31 million, and compensation to the States and Territories was $173 million. Payments to the States and Territories pursuant to the National Corporations Scheme were discontinued after 2007-08 in the 2008-09 Budget. This is the primary reason for the current annual surplus of scheme revenues over expenses.

A review of cost recovery under the national corporations scheme was originally scheduled for completion in time for any implementation to occur as part of the 2008-09 Budget. The review was deferred following the decision to discontinue payments to the States and Territories. It was subsequently abandoned when the Government decided to automatically indexed in line with the CPI from 1 July 2010.

It should be noted that automatic fee increases in line with the CPI at the start of each financial year had been recommended by both of the reviews undertaken in 1994 and 2000.

Late fees

The review of fees in 1994 recommended a significant increase in late fees, to encourage the timely lodgement of documents and information onto the regulator's databases. The recommendation was for a late fee of $50 for the first month, followed by a $200 fee after one month. The review noted at the time that the behavioural impact of this late fee structure was uncertain, and foreshadowed potential criticism that this structure was aimed at raising revenue rather than ensuring the integrity of the information held by the regulator.

By the time of the review in 2000, a late fee of $60 applied for lodgements within one month of the specified period, and a fee of $230 for lodgement more than one month late. The review reiterated the objective of late fees to encourage the timely lodgement of documents so that ASIC's corporate database is accurate and up to date, and that the late fees regime remained an effective mechanism for encouraging the timely lodgement of documents.

The current fee is $69 for lodgements up to one month overdue, and $287, for lodgements more than one month overdue.

Summary

The imposition of fees for company registration and annual returns, including penalties for late lodgement, is a practice common across many jurisdictions. In Australia, fee levels were set in the 1990s to recover costs in line with the expenses of the national corporations scheme. As the scheme has evolved, fee levels have been raised so as to approximately maintain this equity between revenues with expenses. The most significant structural change in recent years has been the automatic indexation of fees in line with the CPI from 2010, this proposal having been recommended twice earlier by reviews of the scheme. A surplus of revenue over expenses has opened up since the abolition of compensation payments to the States and Territories under the scheme at the end of 2007-08. The imposition of a substantial late fee in respect of annual reviews, to encourage prompt lodgement, has been an important component of the scheme since its inception.

Government Response to the Parliamentary Joint Select Committee on Gambling Reform - Second Report: Interactive and Online Gambling and Gambling Advertising and Interactive Gambling and Broadcasting Amendment (Online Transactions and Other Measures) Bill 2011

Recommendation 1

2.109 The committee supports the need for national research on online gambling to acquire data on which to base appropriate policy responses. As recommended in its previous report, the committee reiterates its call for a national independent research institute on gambling.

Response: Matter for Jurisdictional Consultation. The Productivity Commission recommended in their 2010 report on gambling that jurisdictions work together to improve the usefulness of gambling survey evidence. This issue will be discussed through the COAG Select Council on Gambling Reform.

Additionally, in 2009 the Australian Government renewed their memorandum of understanding with the states and territories for the national research body Gambling Research Australia until 2014. Future research arrangements are a matter to be discussed with states and territories through the COAG Select Council.

Recommendation 2

2.111 The committee recommends that the review of the Interactive Gambling Act 2001 being conducted by the Department of Broadband, Communications and the Digital Economy commission relevant research on the local online gambling environment.

Response: Agreed. Work is being done on this as part of the department's review of Interactive Gambling Act 2001, through the commissioning of research by Allen Consulting Group and KPMG.

Recommendation 3

7.87 The committee recommends that the Interactive Gambling Act 2001 (IGA) be amended to address the inconsistencies and ambiguities identified to the committee regarding prohibited interactive gambling services and any others that are identified through the review being conducted by the Department of Broadband, Communications and the Digital Economy. Specifically the IGA should be amended to capture methods of avoidance such as websites which provide links to facilitate access to prohibited interactive gambling services.

Response: Agreed. The following ambiguities have been identified and will be addressed in the Review Report of the Interactive Gambling Act 2001:

Recommendation 4

7.89 The committee recommends that following the review of the Interactive Gambling Act 2001 by the Department of Broadband, Communications and the

Digital Economy, an education campaign be developed for consumers to provide clarification of online gambling regulation and highlight the risks of harm.

Response: Any education campaigns should be highly targeted. Initiatives will be identified as part of the review of the Interactive Gambling Act 2001.

Recommendation 5

8.32 The committee supports the recommendation of the Productivity Commission that the COAG Select Council on Gambling Reform should review new gambling opportunities, particularly those which appear to target youth, with a view to developing a national regulatory approach.

Response: Matter for jurisdictional consultation. New opportunities such as use of social networking sites are being considered in the review of the Interactive Gambling Act 2001. The Consultative Working Group on Cybersafety is also considering the issue of gambling services being made available through social networking sites.

The Government will discuss this issue further with state and territory governments through the COAG Select Council on Gambling Reform.

Recommendation 6

9.50 The committee recommends that the Interactive Gambling Act 2001 be amended to address the inconsistencies and ambiguities identified to the committee regarding the advertising of prohibited interactive gambling services, and any others that are identified through the review being conducted by the Department of Broadband, Communications and the Digital Economy. Specifically it should be amended to capture methods of avoidance such as advertisements that do not mention gambling linked to gambling websites.

Response: Agreed, refer to response to Recommendation 3.

Recommendation 7

11.30 The committee recommends that the current prohibition on online 'in-play' betting should remain in place.

Response: Noted. This issue will be considered in the review of the Interactive Gambling Act 2001.

Recommendation 8

11.31 The committee recommends that the attractions, risks and potential harms of online 'in-play' betting be the subject of appropriate research commissioned by the current IGA review being undertaken by the Department of Broadband, Communications and the Digital Economy.

Response: Noted. This issue will be considered in the review of the Interactive Gambling Act 2001, and research being conducted by the Allen Consulting Group.

Recommendation 9

11.41 The committee recommends that through the COAG Select Council on Gambling Reform, governments, in consultation with industry, review the 90-day timeframe to verify identity when opening a betting account, with a view to reducing it to 72 hours, in order to diminish the risk of minors using the current timeframe to gamble illegally.

Response: Greater harm minimisation and consumer protection measures will be considered in the Review of the Interactive Gambling Act 2001.

The Government will also discuss this issue further with state and territory governments through the COAG Select Council on Gambling Reform.

Recommendation 10

11.119 The committee recommends that the COAG Select Council on Gambling Reform, in consultation with the COAG Legislative and Governance Forum on Consumer Affairs, develop nationally consistent consumer protection standards for tighter controls on the practice of credit betting.

Response: Noted. The Government announced on 21 January that it will increase consumer protections including tightening rules on the provision of lines of credit, restrictions on betting inducements, and protection of consumer funds. The issue will also be considered in the review of the Interactive Gambling Act 2001.

Recommendation 11

11.120 The committee recommends that the COAG Select Council on Gambling Reform, in consultation with the COAG Legislative and Governance Forum on Consumer Affairs, develop nationally consistent consumer protection standards for greater transparency around the practice of paying third party commissions by betting agencies.

Response: Noted. The Government announced on 21 January that it will introduce stricter limits on betting inducements. This issue will also be considered in the review of the Interactive Gambling Act 2001.

Recommendation 12

12.62 The committee recommends that the COAG Select Council on Gambling Reform commission further research on the longer-term effects of gambling advertising on children, particularly in relation to the 'normalisation' of gambling during sport.

Response: Matter for jurisdictional consultation. The impact of advertising on gambling behaviours is a priority issue for the COAG Select Council. Specific research into the impact of advertising on children will be discussed with state and territory governments through the COAG Select Council on Gambling Reform.

Recommendation 13

12.77 The committee recommends that the COAG Select Council on Gambling Reform work towards nationally consistent requirements for responsible gambling messages to ensure they work effectively as harm minimisation measures to counter-balance the promotion of gambling.

Response: Agreed, matter for jurisdictional consultation. The Government will discuss this issue further with state and territory governments through the COAG Select Council on Gambling Reform.

This issue will also be considered in the review of the Interactive Gambling Act 2001.

In relation to messages for individual players on poker machines, the Government is also currently undertaking a trial of dynamic warning parameters that is being facilitated by the Queensland Government. COAG Select Council Ministers have agreed to further consider the implementation of dynamic warnings and cost of play displayers for poker machines once results of the trial become available.

Recommendation 14

12.101 The committee recommends that the government legislate a total ban of the promotion of live odds both at venues and during the broadcast of a sporting event.

Response: Government announced on 21 January that it is working with the sporting and betting industries to reduce and control the promotion of live odds during sports coverage through amendments to their existing industry codes.

If satisfactory amendments have not been put in place by broadcasters by the end of June 2012, the Australian Government will introduce legislation to ban the promotion of live odds in sporting broadcasts.

The promotion of live odds at venues is a matter for the states and territories and the Government will continue to work with states and territories through the COAG Select Council on Gambling to address this issue.

Recommendation 15

12.103 The committee recommends that the work to legislate a total ban on live odds promotion also ensures that responsible gambling messages are retained as a harm minimisation measure and continue to appear as a counterpoint to other instances of gambling advertising, both in venues and during sporting broadcasts.

Response: Noted, matter for jurisdictional consultation. The Government agrees that responsible gambling messages should be retained, the requirements for responsible gambling messages to accompany advertising or promotion of gambling at venues is a matter for states and territories. However, this issue will be considered in the event the government decides to introduce legislation to ban the promotion of live odds in sports broadcasts.

The Government will discuss this issue further through the COAG Select Council on Gambling Reform.

Recommendation 16

12.139 The committee recommends that the COAG Select Council on Gambling

Reform, in consultation with Australasian Racing Ministers and the wagering industry, develop a mandatory national code of conduct for advertising by wagering providers covering:

Response: Matter for jurisdictional consultation. The Government will discuss this issue further with state and territory governments through the COAG Select Council on Gambling Reform. Further, the Government announced on 21 January that it will increase consumer protections including tightening rules on the provision of lines of credit, and restrictions on betting inducements.

These issues will also be considered in the review of the Interactive Gambling Act 2001.

Recommendation 17

12.143 The committee recommends that, following the outcome of the Federal Court 'betbox' case, the COAG Select Council on Gambling Reform, in conjunction with regulators, investigate the potential for the growth of betting opportunities in a range of venues which have not previously offered gambling services and develop appropriate nationally consistent regulations to address it.

Response: Matter for jurisdictional consultation. The Government will discuss this issue further with state and territory governments through the COAG Select Council on Gambling Reform.

Recommendation 18

15.60 The committee majority recommends that consideration of the amendment to the Interactive Gambling Act 2001 (IGA) in relation to inducements be deferred until the review of the IGA being undertaken by the Department of Broadband, Communications and the Digital Economy is completed. This would allow the amendment to be considered along with any further amendments proposed by the government arising from the review.

Response: Noted.

Recommendation 19

16.50 The committee majority recommends that the Broadcasting Services Act 1992 be amended to prohibit gambling advertising during times when children are likely to be watching.

Response: Noted. As indicated in the response to Recommendation 14, the government priority is to address the promotion of live odds dur