KARVELAS:
I'm joined in the studio by Assistant Minister for Superannuation, Financial Services and Financial Technology, Jane Hume. Jane Hume, welcome.
HUME:
Thanks, Patricia.
KARVELAS:
The Government has committed to a significant shake up now. What do you want APRA to look like at the end of this process?
HUME:
Well, I think it's important to take a step back. You know, this APRA capability review came out of the Banking Royal Commission. It was a Commissioner Hayne recommendation that all our regulators were reassessed for their abilities and capabilities in the face of a new financial services sector and that's exactly what the APRA capability review has done. It's come back with 24 recommendations, 19 to APRA, and five to Government. APRA have accepted all five of those recommendations as have the Government and our position is that if APRA behave ‑ act on those recommendations promptly, and carefully, then we think APRA will have the teeth and the grunt to be able to do its job across the entire financial services sector and not just its core competencies of the traditional banks and financial services organisation.
KARVELAS:
How quickly will the Government act to enact these five recommendations directed at you?
HUME:
Look, we will act as soon as we possibly can. Obviously we have a very large legislative agenda ahead of us over the next few years, particularly because we want to be able to act on all of the recommendations of the banking royal commission as well. But it forms part of the same suite of the legislative agenda and we'll make sure that APRA is appropriately resourced and positioned to be able to respond to the needs of the broader financial services.
KARVELAS:
So will it happen by the end of the year?
HUME:
Yes, the intention is to have it happen as soon as possible.
KARVELAS:
So by the end of the year this will be ‑
HUME:
I can't guarantee ‑ look, there is so much on the financial services legislative agenda that I can't guarantee that everything will be done and passed before the end of the year but certainly our intention would be to make sure that APRA is appropriately funded, resourced and positioned so that it can do its job properly.
KARVELAS:
The review found that even in the wake of the royal commission, senior management believed APRA's behind closed‑doors‑approach, which was really well reported on and well known, was a good thing. How can you force transparency?
HUME:
I think that there's been a lot in the review about organisational change and cultural change and that transparency piece is a really important part of that as is, as you've mentioned earlier, a sense of being able ‑ management being able to contest management and make issues more debatable within the organisation.
KARVELAS:
There are calls for the chairman, Wayne Byers, to go, including from Rex Patrick. Why are you standing by him? Because this is quite ‑ really they've repudiated the management here of APRA. He's at the top. How can his job be sustainable?
HUME:
Well, there's already been significant organisational change under way and a lot of the recommendations that were made by the capability review reflect things that are already happening in APRA and that's terrific. More importantly, though, I think it's important to recognise that APRA has been a very successful regulator in the past. It's been around since 1998, there have been very few, you know, financial failures in Australia and certainly no systemic failures. So in its core competencies, APRA has actually been quite successful. What the issue is, now is how do we position the organisation so that it can face a future financial services landscape.
KARVELAS:
So is Wayne Byers on notice? Does he have to lift APRA's game in a timeframe to see whether his position is tenable?
HUME:
I think that Wayne Byers has made it very clear that he too agrees and supports the capability review recommendations and the Government believes that if those recommendations are acted upon promptly and very carefully, then APRA will be well positioned to face any problems that it needs to, any issues that it needs to and follow its mandate in the future.
KARVELAS:
The review criticised APRA's unwillingness to name and shame. Do you think it should be naming and shaming as a strategy to deal with the problems it identifies?
HUME:
Well, only if naming and shaming is an effective tool.
KARVELAS:
If it is, because it's a criticism?
HUME:
It really depends on the particular issue. I know that it did say ‑ the report said that more CBA‑style inquiries would be useful and I think that there is some merit in that. But I think it's horses for courses. We want to make sure that APRA is positioned now so that it has an organisation that is siloed. It has insurance focus, superannuation focus, as well as traditional banking and that it has a new focus on the competitive environment of those organisations, too.
KARVELAS:
You've accepted the recommendations to give APRA the power to stop financial institutions from hiring inappropriate directors or executives. Why does APRA need that power?
HUME:
That's an interesting one, isn't it? Now, that's a power that the equivalent regulator has in New Zealand, for instance, and it supports the banking executive accountability regime that the Government has already implemented, some time ago and is extending out according to the recommendations of the banking royal commission. The banking executive accountability regime is something that's already been implemented in the UK and has been very successful and we think that the extension of that and giving APRA these new powers can give the regulator a little bit more teeth.
KARVELAS:
What would be the basis for a vetoing then? Would it just be criminal conviction? Would that be sufficient?
HUME:
Well, I think nutting out that level of detail would have to be something considered for the future but it's really making sure that our most important institutions that we rely on for financial stability and safety have the right people at the helm.
KARVELAS:
Okay, so that has to be nutted out but is that ‑ what do you make of what the parameters should be? Criminal convictions? Should it just be at that level or should there be more consideration?
HUME:
I don't want to go into exactly what those considerations should well be. I would imagine criminal convictions would be a very likely one but there might be more to it than that, whether they're appropriately qualified or experienced as well.
KARVELAS:
Who will ultimately make the decision?
HUME:
On what?
KARVELAS:
On the vetoing, on that process.
HUME:
Well, that would be APRA's decision. That's the powers that we're hoping that APRA will have.
KARVELAS:
Will the Minister have a say or a role at all in that process?
HUME:
Again, I think we're getting into details that simply haven't been considered yet. The report was only released yesterday and there are still some more details that have got to be worked out.
KARVELAS:
You mentioned resourcing in your own answer, actually, saying you were expected to have that resourcing. How much will the levy on financial institution that pays for APRA increase by?
HUME:
Well, that's another question. Can I tell you, though, that APRA have already had $150 million allocated to them in the 2019/2020 budget and that's on top of $58.7 million that was allocated to them at the end of last year in November, to allow them to appoint more frontline supervisory staff. Now any additional funding that's required would be considered in the next round of the budget.
KARVELAS:
Okay, so that's what's already provided. But clearly there's a dire need for more money for this organisation to be able to do its work. You're the Minister, do you think this organisation needs more resourcing?
HUME:
Well, I think the $150 million that was allocated just in the most recent budget will go a long way to resourcing this organisation appropriately. A lot of it, too, is going to be to do with flexibility, making sure that APRA have the ability to hire and retain the right staff with the right skill sets.
KARVELAS:
Well, let's go to that because that's actually quite a contentious issue that you've just raised. There's been a call to exempt APRA from the 2% cap on public sector wage increases because essentially they can't attract and retain staff, good staff, should they get an exemption so that they can get the best people in these roles?
HUME:
That's something the Government will seriously consider. We want to be able to support APRA to, as you said, hire and retain exactly the right staff in the same way that we've done with ASIC. It's really important that we have the right people in those roles, in the regulators to make sure that they can do their job effectively.
KARVELAS:
Just to get some clarity, you are prepared to at least look at the exemption on that 2%?
HUME:
We're prepared to consider anything that APRA thinks that they need to ensure that they can hire and retain the right staff.
KARVELAS:
So APRA has to tell you no, we need this 2% lifted, is that what you're waiting for?
HUME:
Well, we said we're going to take action on all the recommendations in the capability review but if APRA believe they need something that's something we'll consider too. We want to make sure that all the regulators, whether it be APRA, whether it be ASIC, whether it be the ACCC, have the resources and also the right people in place to be able to do the jobs that we want them to do.
KARVELAS:
Okay, the unions have said that you haven't actually really said yes to this. So you're saying that you are prepared to lift this exemption?
HUME:
No, I'm not saying that we're going to. I'm not saying that we're going to keep the exemption, I'm not saying that we're going to lift the exemption. I'm saying that we will consider anything that APRA need in order to make sure that they have the right staff in place to do the job that we're going to require them to do.
KARVELAS:
So you're prepared to do that. What's the benchmark for making that decision?
HUME:
I can't go into that at this stage, Patricia. It's too early. As I said, the review came out last night. APRA's responses have been released very, very recently. There's still a few details that need to be hammered out on this. I think the most important thing, though, is to know the Government is supporting APRA to make sure that it is the regulator that can do what it sets out to do. Its core capabilities are very strong and the report said that it's been an impressive and a forceful regulator in its traditional areas. What we want to do now is make sure the regulator is positioned for the future.
KARVELAS:
Just on another issue but very much in your portfolio area of superannuation, there's been a surge in Australians accessing their super to pay for medical expenses and it's quite a significant increase, they're using it for all sorts of things but even, I think, IVF and, you know, dealing with infertility issues. The rules are being reviewed. Do you support the current rules or do you think that this needs to be looked at given more and more Australians are trying to access this?
HUME:
Yes, you're right. I mean, there are strict rules around accessing superannuation. We have to remember that the purpose of superannuation is to generate an income that will, you know, generate savings that will provide an income in retirement. So early access to superannuation should only be under very specific circumstances and one of those is financial hardship. Some of them ‑ another one is for medical treatment, quite specific medical treatment. Now those rules seem to have been moving into a grey area in the last few years. The Government has put out a consultation paper, it did so at the end of last year and is taking submissions on that now and will come back with a response. But some of the issues that were considered there are things like if medical treatment is required and it is expensive medical treatment, perhaps two doctors might be needed to ensure that the treatment that is being prescribed, that is so expensive, that requires access to superannuation, is appropriate for dealing with the medical issue.
KARVELAS:
Okay, so what's your personal instinct on this? You are the Minister, do you think ‑ were you alarmed when you saw the reports that there is ‑ there had been this big jump in Australians accessing their super for these kinds of needs?
HUME:
I think we need to be very sympathetic and open‑minded but at the same time we need to ensure that the system isn't open to abuse. We want to make sure that superannuation is used for its purpose and that is to create savings for an income in retirement.
KARVELAS:
Okay, so are you concerned that it may be being abused at the moment?
HUME:
I think simply the number of increased ‑ the increased number of cases of access, of early access, is reason for our antenna to be raised but we want to make sure that at the same time we're open‑minded, that we're not being unreasonable in this. If there's cases of financial hardship, if there's cases of terminal illness or permanent incapacity, well, then we are releasing superannuation but there is some sort of circumstances where it is a grey area and that's what we've taken a consultation on.
KARVELAS:
Jane Hume, thank you so much for coming in.
HUME:
Great to be with you, Patricia.
KARVELAS:
And that, of course, is Financial Services Minister Jane Hume who has been tasked with responding to this report on APRA today and a big shake up of APRA on the cards and really interestingly, on that issue of staffing and this cap on what you can get paid essentially to work for APRA, the Government prepared to look at that issue to ensure the best people are working for APRA.