DAVID KOCH: Well, when it comes to share trading, big is beautiful. European forces are all linking together, and Wall Street is even looking for alliances. But it also means non-Japan, Asia, which includes us, is under threat of losing its position on the international financial totem pole.
Federal Financial Services and Regulation Minister, Joe Hockey, has just returned from Hong Kong. The aim is to establish a regional financial alliance, based on common corporate regulation.
JOE HOCKEY: Hong Kong has a very similar market regulation regime to Australia, and if we can have some constructive discussions with Hong Kong over the next few months, then there is a chance that we can bring our markets much closer together, and also importantly bring our regulation much closer together.
I can't see why, for example, a financial adviser in Australia shouldn't be able to provide the same sort of advice to a resident in Hong Kong.
DAVID KOCH: Okay, Corporations Law, set for introduction on 1 January. Nothing's gone through Parliament yet. You really can't get it up in that time, can you?
JOE HOCKEY: Well, we are held up by uncertainty surrounding the Corporations Law itself at the moment, and that's come about because of a number of High Court decisions that have cast some doubt over the Corporations Law. I'm working with the Attorney-General to resolve that. Unfortunately, some states are recalcitrant in their attitude, think that even going back to state-based Corporations Law and regulation is a good idea.
At the same time we're trying to forge links with other jurisdictions like Hong Kong, and some states are trying to go back to the '80s. And so we're trying to resolve the fundamental Corporations Law first, and then we can get on with the further reform of the Corporations Law.
DAVID KOCH: Who are the recalcitrants?
JOE HOCKEY: Well, the people that have expressed some serious doubt are mainly Western Australia, and to a lesser degree South Australia. But, unfortunately, the issue is being caught in a legal minefield, involving a whole lot of technical, legal technicians who are applying some rhetoric and not much common sense to the problem.
The bottom line is we've got to give business certainty. We've got to take a business-friendly approach, and we've got to recognise that you should have a national Corporations Law regime.
DAVID KOCH: So how are you going to bring Western Australia into line? How can you force them to do it?
JOE HOCKEY: Well, we will go it alone, or with a few other states, if we have to. We'll go without the recalcitrant states.
DAVID KOCH: What will that do to them?
JOE HOCKEY: Well, that's up to them. I mean, those states have to be answerable to the business communities in those states. We are trying to adopt a common sense approach, saying we've got a national Corporations Law scheme. It has been in place for more than ten years. It has essentially worked well. The Commonwealth wants to preserve that scheme as it stands. We don't want extra powers, we don't want fewer powers. We just want to continue with the existing Corporations Law regime. And common sense would suggest that every state would want to be a part of that.
DAVID KOCH: Can you just fathom why WA is fighting this?
JOE HOCKEY: No. They're it's not just Western Australia. I mean, some other states are playing some games, but I find it very hard to fathom in the 21st century where the entire Australian economy is about the same size as that of Iowa, the state of Iowa in the United States. When markets are so global, when capital is mobile, how you could contemplate going back to an old state-based regime is beyond me.
DAVID KOCH: So 1 January, for a whole new set of Corporations Laws is unrealistic, you can't possibly meet it?
JOE HOCKEY: Well, there are some provisions which we are yet to announce in relation to the Corporations Law changes that can start 1 January, if we can get them through Parliament in time. Now, there's already been a parliamentary inquiry into the Corporations Law changes, so there's no reason why roadblocks should be put in place, either by the Senate or by the House of Representatives.
DAVID KOCH: So what do you reckon you can get up by 1 January?
JOE HOCKEY: We believe we can get the market provisions of the new Corporations Law regime in place. Naturally enough, the most significant issues relating to corporate law reform, or CLEP-6 as it's known, would probably start 1 July with transitional measures in place over a two year period.
DAVID KOCH: So in a nutshell, markets first, and the rest all follows?
JOE HOCKEY: Correct.
DAVID KOCH: Next week we have yet another inquiry into bank fees. What sort of importance do you put on these inquiries?
JOE HOCKEY: Well, it seems to be the case that banks are fair game, and to be fair, they cause themselves to be fair game at times. I understand this is about the 14th inquiry currently being undertaken into some form of banking in Australia. And the more inquiries you have and the less significant the outcomes, then the less important the inquiries become. And I don't think it serves any great purpose to continue to have constant inquiries into banking in Australia.
DAVID KOCH: Because the last one 15 months ago, you haven't done much on that, have you?
JOE HOCKEY: Well, many of the recommendations of the Hawker Inquiry have been adopted, but most of the recommendations were, in fact, for the banks themselves, that they have a look at their code of practice, which they are doing, that they improve their community relations, particularly when facing branch closures, in particularly small and remote and regional communities. And the Government has its regional transaction centre scheme in place, but the best response is when you have an entity like Elders Rural Bank set up, didn't exist as a bank 12 months ago, now exists and has 120 branches, with continued growth in rural Australia. That's the good news that comes out of some of these reports.
DAVID KOCH: So what about this issue of social obligations on banks? Nat. Australia Bank's subsidiary in the US, in Michigan, they have social responsibilities. Why can't you impose them here?
JOE HOCKEY: Well, imposing social obligations on banks comes at a cost, and it comes at a cost to the consumers themselves. A good corporate citizen should adhere to the social obligations that it sets itself, and so what we say to the banks is, "You will suffer the pain of public criticism if you don't take into account the values of the community you're serving." And so for the Government to be prescriptive about social obligations is really going back to the bad old days.
DAVID KOCH: But they don't seem to care. They're not doing anything about it.
JOE HOCKEY: Well, I think the banks are having trouble selling the story that they have that is good in many cases. I mean, Australian retail banking is the most sophisticated probably the most sophisticated in the world. It is actually probably the most accessible in the world, and it is probably the most consumer-friendly in the world. Anyone who has travelled would note that how difficult it is in many countries to open a bank account, and how they still run the old passbooks, and technology is not a part of banking.
Today you can access your money 24 hours a day, seven days a week in most countries in the local currency as a result of the Australian banking system. So the banking system is strong in Australia, it's consumer-friendly, but the banks themselves are not consumer-friendly and they've got bad image problems that they need to address.
DAVID KOCH: Thanks for joining us.
JOE HOCKEY: Thank you, David.