TOM CONNELL:
Arthur Sinodinos thanks for your time today, just going through a few of these proposed changes, removing the annual fee disclosure arrangements you say it could save significant amounts for companies, how much could that be? It seems to be a pretty small task, and one that does provide that valuable information of how much people are paying.
ARTHUR SINODINOS:
We're not removing fee disclosure going forward but we were removing the requirement to provide a history of fee disclosure and some of the companies indicated to us, for example, it would be a significant cost to go back and re-create some of this history, in the sort of detail that was being prescribed. In broad terms this package will save industries on the whole about 90 million in implantation costs and over 190 million or so in ongoing costs. So for us, this is about preserving the spirit of the reforms under future financial advice, while reducing the cost of complying with them so that we make the cost of the advice as accessible and affordable as possible.
TOM CONNELL:
You also want to allow for scaled advice again. This is essentially specific one off advice, if you like, tailored advice. Now this seems to ignore some of the evidence we heard from a senate committee that this very kind of advice led to those large losses seen in the Storm Financial crisis.
ARTHUR SINODINOS:
What we are doing there is removing some ambiguity that was in the legislation which provided for scaled advice. The explanatory memorandum spoke about this so what we're doing is making it clear, it is possible to have scaled advice, and what we are saying there is we believe, subject to all the other reforms we're making that that particular tweak or change won't lead to a sudden proliferation of the sort of issues that you're referring to.
TOM CONNELL:
A lot of people though do make large financial commitments when they are going in to get this advice, it can affect the rest of their lives. Isn't it better for them to get a complete picture, if you like, a holistic view, rather than seeking this tailored advice they might have seen on an ad or heard from a friend perhaps.
ARTHUR SINODINOS:
I don't have a financial services licence but my advice to people is that it is best at the start when you're contemplating your finances as a family or as an individual, if you're say starting your working life, sit down and sketch out a bit of a plan about your aspirations and then sit down with the relevant advisers to work out how you can realise those aspirations. And then a lot of the other decisions you make along the way sort of fall into place because you've got the overall framework clear of your plan about what you're wanting to do, and the milestones by which you want to achieve certain outcomes.
TOM CONNELL:
You also want to remove a general provision where advisers always need to act in the best interest of their clients. That seems counter intuitive really to improving conditions to consumers.
ARTHUR SINODINOS:
What we've done is, we have a fair bit of specific material in there about what constitutes advisers doing their best to provide advice to their clients. The problem with the catch-all was, it was a bit like providing such a blanket duty that it would create uncertainty in the minds of advisers and possibly even some risk aversion in providing advice and making them perhaps even overly conservative at a time when they have got to be able to provide robust advice which appropriately balances the risk and returns of different ways of doing things. And can I add, what this package is also about is saying to our fellow Australians that it's the onus on us as consumers to also understand that we are charge of our financial destiny and we take the final responsibility for our decisions so it's not just a matter of blindly following the advice of anybody, it is about us also balancing that advice when we receive it.
TOM CONNELL:
You spoke about those conditions making some financial advisers risk averse overly conservative but having just been through a Global Financial Crisis is that always a bad thing with people's life savings?
ARTHUR SINODINOS:
In relation to matters like the Global Financial Crises you don't want to get to a situation where you are effectively saying to people, that they should provide advice that there could be a GFC around the corner. Now these are events which happen from time to time, they can have a low probability but the point is that you need advisers that have historical perspective go back a number of years, don't get caught up in the ebbs and tides of things. Sometimes, before the GFC people became over-optimistic, since the GFC some people have become over-pessimistic, it's important to have a historical balance and not be overly just be influenced by the most recent turn of events.
TOM CONNELL:
Another area the Government is looking to make changes in is electricity. We heard this week we know the plan of course for getting rid of the Carbon Tax but we heard this week the Prime Minister take aim at the Renewal Energy Target, he said about that that it was causing pretty significant price pressure in the system, what sort of price pressure are talking about and what evidence is that based on?
ARTHUR SINODINOS:
What the Prime Minister and the Industry Minister were talking about was the fact that, the way the RET operates, it effectively does involve increase costs of electricity onto consumers which adds further to the cost impost that they have through the Carbon Tax and also importantly because of the wave of investment in modernising plant equipment and upgrading plant equipment in electricity that we've had in recent years which has led to very severe impacts on demand for electricity. And what the Prime Minister and the Industry Minister were saying, that in the context of looking at competitiveness we've got to make sure that the signals we are sending through the energy sector are supportive of our competiveness. Now this is all separate to the debate around how we tackle climate change, we have a direct action agenda to tackle climate change so this is in no way an attempt to try and derogate from that agenda.
TOM CONNELL:
Right, it is related though, renewable energy, most people would agree it is going to bring down emissions and the Australian Energy Market Commission says it makes up about 1 per cent of the average households electricity bill, that doesn't seem to be a major price pressure.
ARTHUR SINODINOS:
The advice I've received is that, and the energy companies can verify this, that it had had a significant cost impact as had as I've said before the investment in upgraded plant equipment and in that regard in recent years some state Governments have indicated they want to revise those investments plans because they feel they may have been overly ambitious and the Industry Minister has made the same point - we need to be able to look at the cost of providing electricity. And as I said before, that is a separate matter to what we are doing on climate change through policies such as direct action.
TOM CONNELL:
Well looking at the provision of electricity Tony Abbott has also said we need to be in an affordable energy super power, now one of the things that springs to mind straight away is the recent boom in natural gas that Australia has and is beginning to ramp up production of, it's also though ramping up exporting and that is going to increase gas prices. So wouldn't a pretty simple solution to be that affordable energy super power be to quarantine some of that for domestic use. That would be a pretty simple way wouldn't it to :drive down electricity prices? :
ARTHUR SINODINOS:
That would be a pretty simple way to also reduce the incentives to find increasing sources of gas and other important fuels, the best way to maximise availability is to encourage the price mechanism to bring forward the necessary investment in finding additional capacity. The resources super cycle we've just been through with very high mining investment in now bringing forward a big increase in export volumes and that export supply, that analogy if you like can also play out in the gas sector in terms of the availability of gas for both domestic and export.
TOM CONNELL:
You think the balance is right then, because gas prices are set to increase because of our ramping up of exports…
ARTHUR SINODINOS:
Well what happens Tom is that high prices bring forward supply and that supply then reduces prices.
TOM CONNELL:
So you think the balance is right?
ARTHUR SINODINOS:
What I am saying is the balance will be right if we let supply and demand operate in the normal way.
TOM CONNELL:
Ok and also you have said today that you don't believe the Renewable Energy Target is a link to reducing carbon emissions. We have heard though the PM say he will consult closely on that with the Business Advisory Council chaired of course by Morris Newman. He said that the climate change science is somewhat in tatters. Is there a readying of the ground here to reduce that Renewable Energy Target? Would you like to see it kept at 10 per cent or not?
ARTHUR SINODINOS:
No, no, we will proceed with our climate change initiative including importantly the suite of initiatives called Direct Action. That was one of our election commitments and we are in the business of meeting all our election commitments.
TOM CONNELL:
So you don't think that that figure of 20 per cent necessarily needs to stay?
ARTHUR SINODINOS:
Look as I said before, we are in the business of meeting our election commitments and while there will be a review of the Renewable Energy Target it will of course also take into account the broader implications that we've discussed.
TOM CONNELL:
All right, I will just touch finally, if I can, on MYEFO. We saw some pretty scary figures I'd say in there, everything is on the table we are hearing. We know there are quite a few election promises that won't be included on that, but the Paid Parental Leave might be scaled back to get through the Senate, is that something that's you'd like to see happen back to a cap of perhaps a 100,000 per annum in terms of salaries paid out?
ARTHUR SINODINOS:
What I'd like to see happen Tom is for all our election commitments to go through the Senate including the Carbon Tax repeal, the Mining Tax repeal and also the Paid Parental Leave plan so I'm not going to speculate on what may or may not happen in the Senate - except that when the Government has a mandate to do things and Tony Abbott is very closely identified with the Paid Parental Leave Plan, I think the Parliament should do him the courtesy of respecting that mandate.
TOM CONNELL:
When it comes to the Carbon Tax for example obviously the Prime Minister is being very firm saying he wants to repeal it, repeal all related measures he said he would, including as well the Clean Energy Finance Corporation. So him saying that well, we might need to just get this through the Senate, perhaps do a deal with the Green's, an indication it might be somewhat scaled back?
ARTHUR SINODINOS:
Look I'm not going to speculate on what deals may or may not be done. All I am saying is that the first best approach is for our promises to be respected and for the senate to pass the legislation we've spoken about.
TOM CONNELL:
Just finally, all options on the table we heard as I've said, we know some areas are quarantined already. Are there any areas that you would be particularly fearful of major cuts in when it does come to that May Budget?
ARTHUR SINODINOS:
We've got the Commission of Audit doing a pretty thorough review of all areas of Government spending and subject to our election commitments, we'll look at what the Commission of Audit is saying, and I think the overriding priority in doing that, will be what is the appropriate size of Government for Australia at this stage of our development? And how most efficiently do we deliver Government services and what role the private sector, the non-profit sector and others can play in the delivery of important Government services, where that can be efficient and cost effective in the public interest.
TOM CONNELL:
All right well I'm sure there will be some pretty robust discussions behind closed doors but Arthur Sinodinos thanks very much for your time here on Sky news today.
ARTHUR SINODINOS:
Thanks a lot Tom.