13 December 2000

Launch of the Self-Regulation Taskforce Report, Sydney

Ladies and gentlemen, it's a pleasure to be here today in the offices of Clayton Utz to launch the report of the Taskforce on Industry Self‑Regulation in Consumer Markets.

It is a topic that sits at the heart of the liberal ideals in which this Government believes.

As you know, the Government went to the last election with a commitment to encourage industry to develop effective approaches to self‑regulation.

Our commitment is to promote efficient and competitive markets.

In an increasingly competitive global market, we think the businesses that will thrive are those that take the initiative by embracing customer service and promoting fast and efficient ways of resolving disputes when they arise.

Everyone benefits when industry is proactive in its approach to self‑regulation, rather than adopting a 'do nothing' policy that may invite an unwanted legislative response.

It was the Prime Minister, in the Government's 'More Time for Business' Statement in 1997, who said the Commonwealth was keen for industry to take ownership for developing self‑regulatory mechanisms.

Consistent with the Prime Minister's approach, I have been developing our strategy of self regulation around the principle of consumer sovereignty. There are four key elements to consumer sovereignty.

First, consumers must have sufficient information to choose between those products in an informed way.

Second, consumers must enjoy a wide range of choice of products and services.

Third, consumers must feel sure the Government has in place a legal system that will protect them. Protection is crucial.

And finally, in cases when protection is necessary and standards are not met, consumers need access to quick and affordable redress.

So self regulation must benefit Australia's consumers.

Self regulation works very well across a broad range of areas. For example, it works well when it comes to good corporate governance or the regulation of markets where integrity is directly measured in shareholder value.

In other areas that are developing fly‑by‑night reputations, like the gymnasium industry, self regulation may be missing.

For example, new gymnasiums seem to spring up from time to time – like Vigor and Healthland. They take long‑term money from customers and leave consumers standing unsure about their valuable investment.

Perhaps in those cases, self regulation may not be enough to rescue consumer confidence.

The Government's position on self‑regulation emphasises tripartite relations between industry, customers and government.

As part of the Government's consumer sovereignty model, I set up in August last year the Taskforce on Industry Self‑Regulation.

Its brief was simple: to work out how well self‑regulation worked in Australia and to identify situations in which it's most appropriate.

The nine Taskforce members worked hard to complete this inquiry which involved two rounds of consultation right across Australia, including a number of regional centres.

I want to thank all Taskforce members for their diligence. They are: Peter Daly of the Insurance Enquiries and Complaints Board; Marina Darling from the Caponero Group; the Australian Direct Marketing Association' s chief Rob Edwards; Ella Keenan from the Business and Professional Women of Australia; Mark Paterson from the Australian Chamber of Commerce and Industry; Johanna Plante of the Australian Communications Industry Forum; the Federal Treasury's Gary Potts and Louise Sylvan of the Australian Consumers' Association.

I particularly want to thank the Chair of the Taskforce, Professor Berna Collier, from the Queensland University of Technology, who performed an outstanding job and traveled across Australia for hearings in places like Mildura, Rockhampton, Tamworth and Bunbury.

Ladies and gentlemen, the work of this Taskforce has provided the most comprehensive inquiry into self‑regulation ever completed in Australia.

It will certainly influence the Government on the regulatory choices it has to make and help us handle the inevitable different market problems we have to overcome.

It will also guide business and consumers on how to make self‑regulation work better in the future.

And, it will help shape consumer protection in the frontiers of business, such as electronic commerce, where self‑regulation is recognised around the world as a way of achieving effective results across national borders.

I am pleased to announce the Government will be agreeing to both of the Taskforce's suggested implementation proposals.

These two suggestions dealt with how the Government can implement the 43 Taskforce findings. These findings establish principles on self‑regulation for everyone involved – industry, consumers and government.

In response, the Government will provide industries with practical guidelines based on the principles flagged in the report, to help develop self regulation schemes.

Second, the Government will highlight the Taskforce's findings to policy makers to encourage government agencies to give serious consideration to self‑regulatory options as an alternative to regulation.

As part of its response, the Government is developing a specialist web site – as a satellite site to the Government's one‑stop‑shop for consumer information www.consumersonline.gov.au .

This new site will act as a gateway to self‑regulatory schemes in Australia and will also provide ready access to policy guidelines and useful information on self‑regulation.

The Taskforce concluded that good self‑regulation simply means better market outcomes for consumers while at the same time, coming at the lowest cost to businesses.

However, there is no single 'best practice' model for self‑regulation. That is because a successful model needs to address different problems across differing situations.

This is the real advantage of self‑regulation – an industry can develop a code of practice and ways to resolve disputes that best suits its needs.

In other words, it is better to have bottom‑up regulation rather have a "one‑size‑fits‑all" structure imposed by government.

The report did, however, identify a few principles that underpin where self regulation works best.

First, there has to be consultation between industry, consumers and government.

It also identified that the broader the coverage within an industry, the easier it is for consumers to identify self‑regulatory schemes.

A good scheme also had an effective procedure for resolving disputes with proper sanctions for businesses that breached the scheme. If consumers were to get proper redress, then this was essential.

And to make sure this happens, the Taskforce also said a scheme needed to be regularly reviewed, ideally by an independent body.

However, the Taskforce has also recognised that self‑regulation is not the best response to all market problems.

That is, it cannot be all things to all people all the time.

Indeed, the Taskforce conducted rigorous analysis – with the help of expert economic consultants – on the market circumstances conducive to effective self‑regulation.

This analysis aimed to prevent the waste of industry resources and also help policy‑makers pinpoint areas where regulation might work best.

In the long run, I think self‑regulation is the best approach. It empowers both consumers and businesses, and in most situations is a better alternative to onerous and expensive government regulation.

It allows for a dynamic and an interactive process where an industry, its customers and the government can work to establish the best regulatory model.

Self‑regulation has many advantages, not the least being its flexibility and its adaptability to changing market circumstances –– without stifling innovation.

It encourages 'best practice', not minimal compliance with the law.

Self‑regulation also offers inexpensive solutions to market failure that can save time and save money for businesses and consumers.

These advantages help to make it an effective way of addressing problems found, for example, in the financial services industry.

The Australian Bankers' Association set up the Australian Banking Industry Ombudsman in 1990, and increased usage figures from its latest annual report show it's performing a valuable role.

This role has already expanded to include complaints from small businesses and, in the future, it intends to offer its services to a wider range of small businesses and to remove the existing service charge applying to small business complaints.

The Ombudsmen recently opened new premises alongside two other finance sector Alternative Dispute Resolution Schemes – the Financial Industry Complaints Service and the Insurance Enquiries and Complaints Limited.

This is an important development in the convergence of finance sector ADR schemes.

It will strengthen existing co‑operation between the three schemes and allow them to share back‑office functions.

The Government supports this involvement and appreciates that future legislative, regulatory and industry‑based developments are likely to result in more convergence between the three ADR schemes.

The ABA's Code of Banking Practice, which came into full effect in 1996, is also under review with an Issues Paper expected to be released early next year.

The future shape of the Code will reflect the introduction of the Government's Financial Services Reform Bill, which itself, will introduce a common licensing and disclosure framework for a range of financial products and intermediaries.

The Code is being reviewed at a time of heightened public sensitivity to the banking sector.

The review provides an excellent opportunity for the banks to improve the areas identified in the Banking Industry Ombudsmen's Annual Report, released last week.

It also allows bank customers have their say and for the Government to give a clear idea of its thinking.

The Commonwealth's submission to the Review emphasised the Government's increasing concern that country communities, in particular, have difficulty accessing banking services.

It provided a forum for me to express my concern that financial institutions that neglect their branch networks risk customer attrition, and that it is in their own interests to maintain adequate face‑to‑face services.

In my submission, I also emphasised that it is important for each financial service organisation to spell out to customers their fee and charge structures.

I remain convinced that an industry‑based initiative like the Code of Banking Practice – rather than black‑letter regulation – is usually the best way to ensure the market delivers what the community wants.

I read today in the Financial Review that Kim Beazley would like a voluntary social charter for banks, complete with voluntary penalties and whose terms of reference would be worked out between the banks, customers and the government.

But these are all suggestions, I understand, the banks are already working on, and suggestions which could all easily fit into a revised Code of Banking Conduct.

Once again, this is another example of Labor plagiarising the Government's policy and passing it off as its own original thinking.

Once again, it is another 'mutton‑dressed‑as‑lamb' policy from the ALP.

Ladies and gentlemen, today's report is another step in assessing the pros and the cons of industry self regulation.

Self regulation is a model I wholeheartedly support.

This is because it is a model that delivers cheap and reliable ways to solve disputes.

It is a model that can mean cheaper costs for business.

But above all self regulation is better for consumers.

And if consumers are better off then we have achieved our goals.

The report is available on www.joehockey.com.