27 August 2019

Address to the Financial Services Council Summit, Sydney


Check against delivery


Thank you for that warm welcome - it's a pleasure to be here.

I'd like to thank the Financial Services Council for the opportunity to address the Summit - an important event for the financial services industry to take stock and talk about the future.

The financial services sector has long been at the forefront of Australia's growth story - and we all want it to keep there.

Financial services is the largest sector in Australia - it contributed $163 billion to the Australian economy in 2017-18, employs around 440,000 people and impacts the lives of every Australian.

Therefore, restoring trust in the financial system and delivering better consumer outcomes is an integral part of our plan for a stronger economy.

I don't need to tell this audience that there is a lot happening in the area of financial services. But today I want to take the opportunity to provide you with some certainty about our approach to the most comprehensive financial services law reforms we've seen since the 90s.

Reforms that build on our Financial System Inquiry, reforms that methodically respond to the Royal Commission, and reforms that prepare the sector for the next decade.

Royal Commission

Firstly, it's been over six months since the Royal Commission's Final Report was handed down. And today I would like to share the Government's approach in acting on Commissioner Hayne's recommendations.

The Royal Commission shone a spotlight on the extent of misconduct and conduct falling below community standards and expectations across the financial sector.

Above all, the Royal Commission highlighted the effect this bad behaviour had on individuals and families - the effect it has on Australian people.

For our part, we are committed to implementing our response to the Royal Commission to make the necessary changes to the financial system.  

Of the 76 recommendations for reform, 54 were directed to the Government, 12 to regulators and 10 to industry.

We agreed to act on all 76 recommendations, and in some instances, we're going further.

Let me be clear: as Commissioner Hayne directed, we're working to implement the reforms carefully and simply.

The reforms will:

  • strengthen and expand protections for consumers, small businesses and those in rural and remote communities;
  • ensure we have strong, effective regulators;
  • enhance the accountability of financial firms, their senior executives and boards; and
  • further improve remediation and redress for consumers and small businesses harmed by misconduct.

Australians who have suffered from financial sector misconduct expect - and deserve - nothing less.

Since our re-election, the Government has made significant progress in implementing its response and we've recently released a roadmap to provide you with a better picture of our timetable.

We've already made significant progress in the meantime including preventing superannuation trustees from inducing employers with side benefits to select a fund for their employee and ensuring that trustees and directors of superannuation funds face civil penalties for breaching their best interests obligations.

We've introduced legislation to end legacy commissions paid to financial advisers that can trap consumers into worse products and we've funded the payment of unpaid determinations from the Financial Ombudsman Service and Credit and Investment Ombudsman. In fact, we've already established the program and begun contacting the eligible individuals and small businesses.

We also acted swiftly on the recommendation to conduct an APRA Capability Review - resulting in the landmark review chaired by Professor Graeme Samuel AC that we released on 17 July.

The Capability Review made 24 recommendations, of which 19 were directed to APRA and the remaining five to the Government.

We're certainly not underestimating the work ahead of us. The Royal Commission reforms are the largest and most comprehensive corporate and financial services law reforms since the 90s.

Over the next 18 months, these reforms will dominate Treasury's legislative program, with the work required equivalent to almost three-quarters of its current program. For comparison, the Budget this year was equivalent to 15 per cent of Treasury's legislative program.

It's worth noting that Treasury's legislative program is the largest across Government, and has consistently represented a quarter of the Government's overall legislative agenda.


We're also moving forward with previously announced superannuation reforms for the benefit of members.

For most Australian households superannuation is their largest financial asset and their second biggest asset after the family home.

So the significance of Australia's superannuation industry cannot be overstated.

The Productivity Commission report on the superannuation system said the system as a whole has served Australians reasonably well.

However, a number of structural problems have eroded both trust in the system and members' balances.

Yet we shouldn't forget that our superannuation system is compulsory, and if the government is going to compel people to quarantine almost one dollar in every ten of their income today to be put away, saved and invested for up to 40 years, then the government has an obligation to ensure that the compulsory system must be efficient and work in its members' interests.

This will be done through higher standards of transparency, ensuring trustees live up to their name and manage funds solely in the best interests of members , and stronger powers for regulators to take action against trustees who breach their obligations to members.

A number of the Government's key superannuation reforms were endorsed by the Productivity Commission, including the Protecting Your Super and Member Outcomes legislation.

Through these laws the Government has increased APRA's powers and strengthened protections to enhance outcomes for members.

And we are committed to implementing further protections from balance erosion due to unnecessary insurance through the Putting Members Interests First Bill.

These measures prohibit trustees from automatically charging insurance premiums to new members under the age of 25 and to members with account balances below $6,000 - unless the member has opted for insurance.

Young workers deserve a fair go. If they want insurance within super, they should be free to choose it, but, in many cases, the arguments for automatic cover — mainly coming from those with vested interests — are weak.

Treasury analysis tells us that 96 per cent of people aged between 18 and 25 do not have a dependent.  We know that young people cross subsidise others with larger accounts - Rice Warner estimates that the  premiums paid by women under 25 are more than 330 per cent of the true cost of insuring them.

For some people, stopping the insurance fee drain can be the difference between hitting 25 with some savings for retirement, or starting with nothing. 

Some funds have already taken action.  Australian Super was the first to recognise that young people were being given a bad deal.  They have already made insurance for under 25s opt-in.   But other funds have been slow to act.   

This brings me to a broader point.  I've had a lot of meetings with stakeholders in the superannuation sector since taking up the portfolio.  And of course I'd taken a strong interest in the sector in the previous parliament. 

But it's only now - with the writing on the wall, where it looks like the numbers are there to pass this reform to eliminate unnecessary insurance - that I have a whole bunch of industry players acknowledging "oh yeah, we agree something has to be done about this." 

To which I say "well where were you?" 

If there's one thing that adds fuel to the perception that the superannuation sector, for all its talk about putting members first, is in reality beset with complacency and inertia, it's this. 

Why isn't the industry taking action itself on long-standing problems we all know are there, instead of waiting to be dragged kicking and screaming by Government towards a solution?

  • Like curbing unnecessary insurance in super;
  • Like eliminating multiple accounts;
  • Like trustees proactively deciding they need to merge the fund and let someone else manage their members' money, if they've persistently delivered sub-par performance;
  • Like ensuring boards have excellent governance which includes the right skills and experience; and 
  • Like funds coming up with their own solutions for income products in retirement beyond account based pensions.

As I've said, if we are requiring people to defer almost one dollar in ten - and soon to be more - of their wages for retirement, then the system must do better.  It has to earn that trust.  It has to earn that right.

The Royal Commission showed that superannuation funds were not outside the misconduct that plagued the financial sector. The Royal Commission's final report included 15 recommendations, and one additional measure, specifically relating to the superannuation sector.

The Government agreed to all of these, and as I mentioned earlier, has already swiftly acted to implement a number.

Other superannuation recommendations coming out of Hayne's report include important reforms to ensure members only have one default account; and establish greater accountability obligations on trustees by extending the Banking Executive Accountability Regime - or BEAR - to superannuation. 

The Government has made it clear; we are going to implement these changes, because for a government to do anything less is a failure of its obligation to Australian workers and retirees. 

We are going to reframe the superannuation system so that it works for members - not just first and foremost - but solely.  Superannuation, for all its achievements, is not perfect.  Commission Hayne said it.  The Productivity Commission said it. 

It's a system that has grown exponentially but not efficiently, because for too long it has relied upon opacity, complexity and disengagement, and the sacred cows of its origins in industrial relations.  

If trustees are meeting the presumption of their title and the expectations of members, they will be at the forefront of these changes, leading the way, and will not have to be dragged kicking and screaming to member's best interests.


This leads me on to the Government's professional standards legislation, which, as you know, establishes a series of professional, ethical and educational requirements that apply to financial advisers.

It is essential that financial advisers have the skills necessary to provide high-quality advice to consumers, elevating the industry to the highest level of professionalism.

Financial advisers will be required to:

  • meet approved educational qualifications (FASEA-approved qualifications equivalent to, or higher than, a bachelor's degree);
  • complete a FASEA-approved exam; and
  • comply with a Code of Ethics.

We've introduced transitional provisions because we want to ensure that existing financial advisers have sufficient time to meet the new requirements.

And the Government continues to consult with industry on the implementation of these new requirements.

But in saying that, I'm well aware that financial advisers and industry representatives have concerns about their capacity to meet these requirements, even within the current transitional arrangements.

We understand that change is never easy, and many advisers who have always done the right thing by their clients are now caught up in the maelstrom of reforms, regulations and requirements that have been forced upon an industry whose reputation has been tarnished by the unprofessional behaviour of others. We also know that that there is great value in good advice, and that more Australians would benefit from seeking the services of a trusted professional financial adviser. 

We have also heard from advisers that they themselves place great value in their professionalism and pride in their practices, many of which are family businesses.  I thank you for your cooperation your patience and your fortitude as these important changes to your industry are implemented.   

We know it is important to strike the right balance between the need to improve the professional standards of advisers operating in the industry, but also recognising that many of these advisers need to balance work, study and family commitments. 
The Government is listening to your concerns and is carefully considering how to proceed. 


I want to speak briefly on a part of my portfolio which I believe is the dark horse of the financial services sector.  Australia has entered a new era of financial technology — of FinTech — which is transformative.  It will promote innovation - new ways of doing business - and drive competition across the sector.

There has never been a greater supporter of Australian FinTech than the Coalition and particularly this Prime Minister.  The fact that it has been carved out of Industry, Innovation and Science and specifically identified in a Treasury portfolio should speak volumes of the value and potential this government sees in FinTech.   

A strong FinTech sector means a more competitive financial market landscape: one that is consumer-driven, cost- and time-efficient and world-leading.

And as Australia's first minister for FinTech, I am committed to supporting an Australian FinTech sector that is internationally competitive; that helps Australians to be more engaged with the financial products and services they use; enhances financial literacy and capability and that helps us all spend less time and less money managing our own affairs.

The Coalition Government is building on a strong record when it comes to building the FinTech ecosystem.

Over the last four years, the $1.1 billion National Innovation and Science Agenda has laid the groundwork. One of the most important parts of that investment was implementing new tax arrangements for early stage venture capital and angel investments, which have helped multiply the funds going towards building new FinTech businesses.

We also legislated for crowd-sourced equity funding, which is now opening up financing avenues for those start-ups that never existed previously.

We've launched the Australia-UK FinTech Bridge, helping Australian FinTechs enter the UK market, and facilitating UK businesses to bring their capital, their skills and their product offerings here.

We've removed the double taxation on cryptocurrencies, so they can be treated like money for GST purposes. And last year, the New Payments Platform was launched to support instant inter-bank payments.

But we are just getting started. The Morrison Government will be continuing this strong support for the FinTech sector in the year ahead.

Over the last few weeks, I have been holding roundtables and meetings across the FinTech ecosystem - across payments, lending, superannuation, neobanks, the regtech area and more.

I've been spending time with many of the members of FinTech Australia and our fastest growing FinTech communities - Stone & Chalk and YBF among them.

As FinTech minister, I will ensure our policy settings support competition; enhance productivity through new technologies; and improve the financial well-being of Australians. And I will be the FinTech sector's advocate in the ministry - working with my colleagues to ensure access to capital and skills for the businesses driving this change.

The sky is the limit and Australia can lead the way.

The enthusiasm of industry participants is contagious - big ideas, bright minds changing the delivery of financial services as we know it.  

But in the midst of this revolution it's also vital our regulatory settings continue to serve a dual function - promoting innovation and protecting Australian consumers.

In the coming weeks, we will re-introduce legislation for a Comprehensive Credit Reporting regime, which will give lenders access to data to make a more accurate assessment of a borrower's true credit position and their ability to pay a loan.

And we're working to deliver an enhanced regulatory sandbox — when passed by Parliament, it will allow more businesses to test a wider range of new financial products for 24 months, prior to seeking the appropriate licenses from ASIC.

Consumer Data Right

One of the most important policy changes already underway is the introduction of the Consumer Data Right - which passed the Parliament last month.

The initiative will make it easier for consumers and businesses alike to find the provider that best meets their needs - starting with Open Banking, and rolling out to energy and telco services.

The Consumer Data Right will provide individuals and businesses with a right to directly access specified data relating to them.

I would like to express my thanks to those of you who have played a hand in shaping the Consumer Data Right so far — it's an exciting time and we have some major milestones on the horizon.

On 1 July, three of the four big banks voluntarily launched access to product reference data for credit and debit cards, transaction accounts and deposits.

All four banks are scheduled to launch consumer data, including transaction data in February 2020.

Non-major banks will be required to launch access with a 12-month delay for each phase.

What does this improved access to data mean for consumers? Better and more convenient products and services, customised to their needs.

Consider this, we know that two out of five Australians still use the bank account their parents set up for them. That's seven million Australians who have never switched bank accounts.

In 2018, Australians held over 15.3 million personal credit cards. Only 17 per cent of credit card holders switch credit cards over a 5-year period. Yet, half of those who switched credit cards saved over $200 a year. When switching home loans, that saving rises to over $1000 per year.

Our financial system is clearly not as competitive as it should be. Paperwork, costs and lack of information have created an atmosphere of inertia - at the expense of Australian consumers.

With open banking, complex application processes will be reduced to a single click. And consumers will also be able to use comparison apps to gain more accurate personalised information about what their best options are - without compromising their password security through screen-scraping.

Open banking will break down the barriers to switching products - making it easier for all Australians to move into the best deals for them.

Of course, high levels of privacy protection and information security are a core feature of the system. It is not a right for businesses to share consumer's data without their consent. That is why we have ensured the privacy protections provided under the CDR legislation exceed those currently available under the Privacy Act.

I'm pleased to advise that progress to the February launch of Open Banking is well advanced.

The ACCC will shortly issue the 'lock-down' version of the Rules governing the system - and the Data Standards Body has already issued the implementation draft of the technical standards.

There will be more to say on Open Banking in the coming months and I look forward to sharing more updates on the Consumer Data Right with you as the rollout progresses.

I think the CDR is the one of the most transformative and world leading initiatives that the financial services sector has ever seen.  But it isn't the only one; Comprehensive Credit Reporting, the New Payments Platform, these are just some of the building blocks that will be the foundation of the Australian Financial Services landscape of the future.   

Closing remarks

So let me finish by again thanking the Council for inviting me today.

As I said at the outset, a strong financial sector benefits all Australians.

We all want to see an improved financial system - restoring trust in Australia's financial system is a key part of the Morrison Government's economic plan.

As Assistant Minister, I look forward to working with you to ensure we have engaged and confident consumers.

To ensure we have financial institutions providing the products and services that Australians want and need.

And finally, I look forward to working with you towards a system that is supported by an efficient and effective regulatory framework, one that allows for innovation and competition.

I wish you all the best for the rest of the Summit.

Thank you.