SUBJECTS: Stronger and Fairer Superannuation reforms, Abbott's interview on the 7:30 Report, Coalition's great big new tax on business, Future of Financial Advice reforms, ETS.
CHRIS BOWEN:
Well, I've just given a speech where I've outlined the importance of improving the retirement incomes of Australians to financial advisers, who understand the importance of improving retirement incomes of Australians.
This is another opportunity for Tony Abbott to come clean and support our reforms to superannuation for Australians. He's indicated that he doesn't support them.
What we're not sure about is whether it's one of those moments of 'gospel truth', where a deep and considered position is engaged on, or whether it's something that he's said under the heat of the moment, and I suspect that he needs to clear that up. He needs to be able to say to the Australian people whether or not he supports an improvement in the retirement income for a 30-year-old today of $108,000 by the time they retire and adding half a trillion dollars to the funds under management, retirement incomes of Australians.
Mr Abbott's been out there again today, all over the place. He said today that he's allergic to new taxes. This is the man who's proposing a 1.75 per cent increase on the taxes of Australian companies, which now means there's a four per cent gap between the position of the Labor Party and the Opposition. The Labor Party believes in reducing corporate taxes by two per cent; the Liberal Party believes in increasing them by almost two per cent: a gap of four per cent between the Opposition and the Government.
I'm more than happy to take your questions.
JOURNALIST:
Minister, last time Tony Abbott spoke to me on this, he said that he wouldn't agree to the reforms until the Government released the full costings. What's the Government's current intention on that?
BOWEN:
Well, I'm not sure what he's referring to. We released the full costings on the day we responded to the Henry Report. We released the projections over the forward estimates and the Budget papers show the costings of the increase in the superannuation guarantee out to 2019. I'm not sure what more Mr Abbott would want.
JOURNALIST:
On the financial advice commissions issue that you were speaking about earlier, you foreshadowed that some small businesses would be forced out of the industry. What will you do to help them?
BOWEN:
I don't think I foreshadowed that at all. I foreshadowed that I accept that some people would change and some people wouldn't like the reforms, and some people, particularly people who have been financial planners for a long time, would rather not work in the industry than work under these arrangements. I've accepted that; I don't think I would accept your characterisation of my comments.
I accept that structural change in the financial planning industry is going to occur. I'd also make the point it would occur with or without these reforms. The average age of a financial planner in Australia, I think, is 58. That means there's going to be some significant structural reform. A number of financial planning practices have been for sale before these reforms were announced.
As I say, I think there will be people who say, 'I don't want to work without a commission approach'. There'll be other people – and I've been surprised, frankly, by the number of people who have said this to me – who will say, 'I wasn't interested in becoming a financial planner but now I'm seriously considering it because I want to work in a profession, I want to work in a sector which is trusted, and I don't feel confident in going into financial planning at the moment because of those perceptions but I may now well seriously consider it'. I think we are going to see that structural change, and that's not necessarily something which should be feared.
JOURNALIST:
Do you accept that some small businesses will be pushed out of the industry?
BOWEN:
No, I don't accept that.
JOURNALIST:
Minister, still on the subject of commissions and insurance, you mentioned that there could be unintended consequences if the ban on commissions were to be introduced. Can you explain a little about that? What are the Government's concerns specifically?
BOWEN:
Well, my concern is to make sure we don't exacerbate the problem of under-insurance in Australia, in particular. As I said in my remarks, there are good arguments validly made on both sides of this discussion about whether risk insurance should have its commissions banned. Firstly, we have to identify the size of the problem, the sixe of the mischief that we're trying to fix. That is something the review process will do. Whether the size of the problem is outweighed by the benefits of reform in this area, that's how we approach all our regulatory reforms and it needs to also be applied to this particular area.
We also need to ensure that were we to exempt risk insurance in the ban on commissions, we didn't allow some sort of back door mechanism to allow commissions to continue to exist for financial advice more generally, so that, if you like, large commissions might be placed on risk insurance to counteract the loss of income from the banning of commissions on more general products.
So I have a genuinely open mind about this. As I say, I think both points are valid; both points are well made, and made with good intention. We'll need to act in the national interest. I don't feel yet I have enough information to make that decision. That is what that consultation process is about.
JOURNALIST:
Minister Bowen, how long do you think it will take to consolidate some of the changes? You've said there'll be a long period of consolidation after the reforms. Do you have any idea how long you think that will take for the industry to get comfortable?
BOWEN:
Well, what I was talking about there is the need to avoid annual changes to our superannuation system on Budget night or elsewhere, and these have been an element of the superannuation system for as long as I can remember, for at least the last 12 or 13 years, very regular changes to the laws in relation to tax and other laws in relation to superannuation.
I was making the point that having gone through this very significant reform package, when you put a combination of all three of the elements of reform, that it would then be appropriate to have a long period – five years, ten years – where those types of changes are minimised and the policy settings that we have in place are the ones that we've outlined in our response to the Henry, Ripoll and Cooper Reports.
JOURNALIST:
Minister, specifically on Tony Abbott's comments last night, we've all said things in the heat of the moment that perhaps we didn't mean. Are you saying you've never had them?
BOWEN:
Well, Tony Abbott's credibility is the issue here. He has said consistently a range of things which he has then very quickly walked away from; whether it be that the Coalition would not introduce new taxes and within a matter of weeks announcing a very significant new tax on corporate Australia; whether it's saying that paid parental leave would be introduced over his dead body and then becoming the champion of it; arguing for an ETS one day and against it the next.
And Kerry O'Brien was very legitimately, last night, asking Tony Abbott to explain those contradictions, and the best he could do is to say, 'Well, things I say in the heat of the moment aren't the gospel truth'. Well, do we now need to ask every time he says something, 'Is that something you're saying in the heat of the moment or is that the gospel truth?' Are the Australian people entitled to take him at his word or not? That is the question that he has opened up last night in what was one of the most extraordinary interviews in living memory in Australian politics, where he effectively conceded that things he says which aren't part of a scripted media event, which are not checked by the Liberal Party spin doctors, aren't necessarily correct.
JOURNALIST:
But isn't he just admitting something that perhaps all politicians do? It may not have been savvy, but your Government itself has been guilty of several backflips, on the ETS, for example.
BOWEN:
I don't accept that characterisation. Where we have not been able to deliver on something that we set out to deliver on, we've been upfront about that. The Prime Minister and other Ministers have made it clear that we stand by our intentions, but we accept that we haven't been able to deliver on some things. We accept that, we understand that, and we understand that's frustrated and disappointed some people.
But it's completely different – setting out a plan and not being able to see it through, partly because the Senate has blocked you – the difference between that and saying one things and then meaning another, and doing something completely different a matter of weeks later, is black and white.
JOURNALIST:
You mentioned that you're thinking, behind the scenes you're doing work on regulation of the use of the word 'financial adviser'. Can you expand on that?
BOWEN:
No, I pointed out that the reforms that we announced a few weeks ago relate to financial advisers, and that if you have a financial services licence in Australia and call yourself a financial adviser you will need to meet the requirements as they're laid out: fiduciary duty, the ban on commissions, et cetera.
Other people aren't licensed to give financial advice. Now, some people try to give advice for which they're not licensed. That's a separate regulatory matter. So I wasn't, with respect, outlining more reforms in relation to the use of the term 'financial adviser'; that was covered by the reforms I announced a few weeks ago. But I was pointing out that we have other processes in train – the matter of credit brokers was raised, and mortgage brokers, we have a national credit regulation process going in two phases dealing with that – I was pointing out that this wasn't the only regulatory review of people in this space.