JON FAINE:
Josh Frydenberg is the Treasurer in Scott Morrison’s Federal Coalition Government. He has his hands full with the handing down of a report about the future of the prudential regulator off the back of the Hayne Royal Commission into banks. He joins us from Queensland where he’s been touring around those voters in particular who delivered such a stunning win for his Party at the last election. Mr Frydenberg, good morning to you.
JOSH FRYDENBERG:
Good morning John and I’ve been touring around with local Members in those areas devastated by flood and drought as well, and it’s great to see how resilient these Queenslanders have been.
JON FAINE:
Happy Birthday for yesterday. Are you going to give APRA some more money so they can do their job properly, as is one of the recommendations of this report?
JOSH FRYDENBERG:
John, we’ll give them the resources they need…
JON FAINE:
How much extra?
JOSH FRYDENBERG:
Well that will be considered in the context of the Budget, and I have spoken yesterday to Wayne Byres, the head of APRA, and he will be working with Treasury on a proposal for exactly that. And I want to point out…
JON FAINE:
Well are we talking about an extra $1.50 or an extra five per cent, 10 per cent, 50 percent? What have you got in mind?
JOSH FRYDENBERG:
Well I’m not going to pre-empt that announcement or indeed that work, but what I will say is that we’ve put $200 million since late last year into APRA, and we’re going to see the staffing of APRA go from just over 600 today to over 700 through the year, and we’ll obviously do what’s necessary.
JON FAINE:
But that doesn’t restore the numbers that they’ve lost and this is the result of cut backs over the last decade.
JOSH FRYDENBERG:
Actually, we are seeing APRA funding now at a record level and like I said, we will do what’s necessary to ensure they have the right resources. But what the Report did highlight…
JON FAINE:
I’m sorry to press you on this though, Treasurer, what, the amount necessary could mean anything. That could be defined by every single listener differently. How much extra money are you prepared to kick in so they can do the job the taxpayers, the citizens, the consumers, require of them?
JOSH FRYDENBERG:
Well, with the greatest respect, John, it will be defined by APRA and Treasury working together to look at the detail of what will be needed. I mean, we can’t actually highlight what that exact number will be until that further work will be done by APRA. But I can assure your listeners APRA will have the resourcing that it needs. We have significantly upped already the resourcing, but what the report pointed to was not just a resourcing issue, but was more a cultural issue where APRA was too slow to react to new technologies like the cyber threat, it was too bureaucratic in its decisions, too much of its negotiations with the companies that it prudentially regulated were conducted in secret, rather than in public and it didn’t have a sufficient focus on superannuation and the outcomes in terms of getting the best possible result for members.
JON FAINE:
It has a culture of appeasement and it’s timid internally, but I suggest to you that that’s a direct result of having had a lot of its money withdrawn, its staff withdrawn, its best people poached, and that’s what you therefore end up with. The two are directly connected.
JOSH FRYDENBERG:
I’d actually say it’s different to that, and because we’ve both seen with ASIC and with APRA, that they didn’t necessarily use all the tools at their disposal including court action. You see, the last court action that APRA had conducted in relation to super was more than a decade ago, and now they’ve got another one underway but that is since the Royal Commission. And I think they fully understand what does need to be done in relation to that, but I also want to point out, John, that the report by Graeme Samuel did say that APRA had been impressive in relation to managing prudential risk. Namely, the financial stability of our system, and that is vitally important because at the time the GFC hit, our four banks were in the top ten prudentially regulated banks and I think that’s really important.
JON FAINE:
Do you really think APRA should have the power of veto over who’s a Director?
JOSH FRYDENBERG:
I do think they should have the power where there are people being put up for these various positions who either do not have the skillset or who have a track record that is inappropriate for that role. I think they should be able to get involved in that process, but again…
JON FAINE:
What do you mean by ‘inappropriate’? People who have views that you don’t agree with? Or….? Already you’re disqualified if you’ve committed serious crimes or frauds or you’ve been disqualified as a company director. So what other safe guards have you got in mind?
JOSH FRYDENBERG:
Well, again, Wayne Byres is very conscious that this needs to be worked out following this report, the detail of which will be done with Treasury, and obviously this would require legislation, but we don’t want to see too much of a heavy hand conducted here. What we want to do is ensure that APRA has all the required tools at their disposal where appropriate to use.
JON FAINE:
But sort of again, that doesn’t really tell us awfully much at all. “All of the tools”, “appropriate at the time”, you know, “depending on”. You’re targeting over and over again, and your predecessors have also targeted in particular trade union officials as directors of superannuation funds. Industry funds, it just so happens, overnight have been identified as the best performing funds. So do you intend to continue to try and get trade union officials off the boards of super funds?
JOSH FRYDENBERG:
No. There is a role to be played obviously for those employee representatives. What we’re focused on is more transparency in relation to the superannuation system and more governance. And when you do point out the better performance of industry funds, the Productivity Commission did look at this, and they identified that there were 42 underperforming funds and the majority of them actually were industry funds by number, but actually by value the majority were retail funds. So there is underperforming funds at both the industry and retail level.
JON FAINE:
And what do you say about the top super funds, the best performing super funds are all industry funds?
JOSH FRYDENBERG:
Well, like I said, there were underperforming funds both at the industry level and retail, but it’s up to people to vote with their feet and they can put their money where they think they’re going to get the best possible return and obviously the best possible governance.
JON FAINE:
But that suggests that you think that every worker in Australia is as well informed that you are, Treasurer, and the simple fact is that, and everyone knows it is, that they’re not and that’s why the system is set up to help people who are not as financially literate as you.
JOSH FRYDENBERG:
Well certainly, but also the Productivity Commission said, in their most recent report into super, there should be a way of ensuring that underperforming funds are held to account and indeed are rooted out of the system more effectively than they currently are.
JON FAINE:
On the bigger picture, if we can step back a little bit, Treasurer. Your first great political success once you got into the Parliament was as the person who was getting rid of red tape, and we’ve seen the consequences of deregulation now with the cladding crisis, with the aged care crisis, with the financial industry problems, the very fact that we needed a Royal Commission into the banks was the removal of so-called red tape, of deregulation. Are you prepared to accept that perhaps the mania for deregulation has gone too far?
JOSH FRYDENBERG:
No. What I would suggest is that it’s always important to get a balanced approach, and you’re right. One person’s deregulation may be the removal of what another person considers to be a consumer safety provisions, or an environmental protection provision. So you need to proceed carefully. But for example with environmental approvals, you see a lot of overlap and duplication between State and Federal Governments, and what we want to see is one stop shops for assessment and approval of projects where both State and Federal Governments work together rather than duplicating what they do, which increases the cost and also the delays.
JON FAINE:
Have consumers been disadvantaged by the obsession, the determination, the ideological driven push to cut regulation?
JOSH FRYDENBERG:
I don’t think so.
JON FAINE:
We’re seeing seen the evidence that they have been every day at the moment.
JOSH FRYDENBERG:
No. In relation to the cladding, one of the issues has been compliance and enforcement, and that’s where the State Government has a case to answer, as opposed to the rules not being there for people to abide by. They have been there…
JON FAINE:
No, at the Federal level also, you were supposed to, and in the old days you did have, as a Federal Government, people who inspected materials being imported from overseas to see if they were compliant, to see if they met standards rather than just documents being forged, or assurances being given without being checked.
JOSH FRYDENBERG:
Well look, I think this issue in relation to cladding and to its enforcement and compliance does rest with the State Government. When it comes to importing, yes there’s a Federal responsibility there, but when it comes to what is actually put into the buildings and who’s going to pay for the remediation, these are issues for the State Governments, not Federal.
JON FAINE:
Our time is not endless, so moving on. The Financial Review today reports that the Government’s decided to prioritise their union reforms, the anti-union industrial relations changes, as a higher priority than implementing the recommendations of the Hayne Royal Commission into Banking. Why have you chosen to go with union busting rather than protecting consumers of the banks?
JOSH FRYDENBERG:
Well that’s actually not an accurate reflection of that report. What we’re doing is focussing on both pieces, both sets of legislation, the Ensuring Integrity Bill is important, but so too is the legislation to implement the recommendations from Commissioner Hayne. Now, I do want to point out that we’ve already ensured the regulations have changed for the Financial Complaints Authority to consider complaints back to 2008, we’ve also passed legislation to ban superannuation funds from inducing employers, and we’ve increased the penalties, both civil and criminal, for corporate and financial sector misconduct, and we have other actions that we want to do, like ensuring that people under the age of 25 opt in to insurance in their super. These are things that we want to get on with in the Parliament, or that we’ve already achieved since the handing down of the Royal Commission.
JON FAINE:
Alright. Very briefly, have you had a chance to read Niki Savva’s book which is a searing and sometimes savage account of what happened when, in fact, the current Government was put together from the wreckage of the previous one?
JOSH FRYDENBERG:
Yes, I have read a lot of that book, but as you would expect me to say, John, they were matters of the past and we’re now focussed on matters of the future.
JON FAINE:
Well it suggests that no one should ever trust Mathias Cormann ever again.
JOSH FRYDENBERG:
Well that’s ridiculous. He’s a valued colleague, a good friend, and for those who doubt his ability to negotiate effectively with his Senate colleagues on the crossbench, he proved them wrong when we were able to get our tax legislation through in the first week back.
JON FAINE:
Alright, well maybe that’s another topic for another day. Just very finally, finally, finally. The people who think you should not be in the Parliament are considering launching a petition to, an application to the High Court over your eligibility under Section 44 are saying that you’ve failed to produce the necessary documents to satisfy the citizenship requirements. Are you prepared to provide those documents or is it all over as far as you’re concerned?
JOSH FRYDENBERG:
Well look, I have comprehensively dealt with those issues in the previous Parliament and we’ve just had an election just weeks ago where I was returned by the people of Kooyong and I thank them for their support and will continue to work hard for them. And I have seen those reports in the press and the person who has been pushing those, that particular case, seems to have a pretty checked history when it comes to recognising the hurt and the destruction of the Holocaust, and I’ve got no time for those people or for their motives.
JON FAINE:
So do you think that’s all driven by Holocaust denialism?
JOSH FRYDENBERG:
Well I think that person in particular has a particular grudge and, you know, good luck to him, but I think he should be exposed and anyone who gets behind his particular push, I think they should be exposed for the real motives behind what they did, and the people of Kooyong spoke just a matter of weeks ago and I think that should be the end of the matter.
JON FAINE:
Thank you, I’m way over time and I’m intruding well into someone else’s interview time for which I apologise. Thank you this morning.
JOSH FRYDENBERG:
Good to be with you.