KARVELAS:
Now the National Australia Bank has agreed in principle to lift a gag on former clients who lost money because of poor or fraudulent bank advice. NAB Chief Executive Andrew Thorburn made the pledge as he fronted a Senate Inquiry into financial advice in Canberra Today. The Bank has paid millions of dollars to more than 700 customers who lost money due to bad advice. NAB is just one of the banks in the spotlight with the Commonwealth Bank, ANZ, Macquarie also appearing before the Senate Committee. Joining us to discuss the latest is Federal MP Kelly O’Dwyer, she’s the Parliamentary Secretary to the Treasurer. Welcome back to the program Kelly.
O’DWYER:
Great to be with you Patricia.
KARVELAS:
Now given the evidence we’re seeing in this Senate Inquiry—today for instance that Macquarie Group financial advisors sacked for mismanagement, are actually continuing to work in the industry with their new employers touting their appointments—isn’t it time for a Royal Commission into the industry?
O’DWYER:
Well look Patricia, we are hearing some disturbing evidence being made before the Committee that has a number of hearings right across the country. But the key point to make here is that the financial services sector has never been under closer scrutiny, and we take very, very seriously the job that we have to do in terms of the inquiries into the sector. So for instance over the last twelve months alone we’ve had five inquiries into the sector, ranging from the Financial Systems Inquiry through to the Senate Inquiry that’s happening right now, and another Inquiry into the performance of ASIC. We think it’s important that all of the information be out there on the table so we can properly evaluate it. But we’re not waiting to act. There have been other reports that have been done by the Parliamentary Joint Committee. We have responded to that Report. That Report says that we need to lift the standards in the financial services industry and we are already engaged in putting together a Register, which was announced in March, and making sure that those who act in this space, those who are financial advisers, receive ongoing professional development, that they have to adhere to certain standards, that there is a code of ethics, that there’s a mandatory membership of their professional association. And, that where people don’t do as they should do, according to the law, that they are struck off and that action is taken by ASIC.
KARVELAS:
You’ve had Royal Commissions into other issues where there have been numerous inquiries before, and Royal Commissions certainly have more teeth, more power, than any of these inquiries that we’re seeing, much more power than a Senate inquiry could ever have. Isn’t it getting to the level now, the things we’re seeing revealed, doesn’t it reveal that we need a much higher level Inquiry into this to get some real action to actually stamp these practices out?
O’DWYER:
Well as I said, never before have we actually had the industry under so much scrutiny and I think the very fact that all of this information has come out in a variety of different forums is an indication that the information is there, and we do need to act, and there has been action that has been taken—although it’s not always been at the right time. I do think that we need to think of the victims, particularly of those who have committed fraud. They are obviously innocent victims of unscrupulous practices and we need to make sure those who have engaged in those unscrupulous practices are punished. Now over the past five years the Australian Security and Investment Commission has in fact banned a number of financial planners—156. There have been four matters before the court, 21 criminal outcomes, there are 17 criminal matters being investigated right now that are not yet before the courts but we expect to potentially come before the courts. Putting this register of financial advisors together is critically important. We did that on the 31st of March and as I said before we need to make sure that financial advisers are engaging in the highest possible ethical standards because they are dealing with people’s money and their futures.
KARVELAS:
… Kelly O’Dwyer, Senator John Williams today asked banks for support of an Advisor Register to provide consumers with the warts and all record of their financial planners, do you agree with that kind of approach?
O’DWYER:
Well that’s in fact what we’ve done with the Register of Financial Advisers, it does list whether or not there has been any action taken against the financial adviser. It will increase transparency and accountability for the financial services sector because it will also list what training they also have, and how long they have been involved in the sector. This is a tool that has not previously been available to people to take advantage of and we think that it is very good because it will demonstrate upfront if somebody has been disqualified or had enforceable undertakings made against them in the past.
KARVELAS:
What about Nick Xenophon’s idea for an industry compensation scheme to operate as an insurer of last resort for customers who lose their fortune to dodgy advisers?
O’DWYER:
Well look I think we’re going to await the outcomes of the Committee and its findings and we’ll certainly consider any recommendations that are put forward by the Committee. But what I would say is that those banks or those organizations that have engaged in unscrupulous practices that are contrary to the law, they need to be held accountable for that. And we have already seen some significant compensation payouts by those banks that have engaged in practices that are contrary to our laws and it would be for them to make good to people who have lost money and their savings.
KARVELAS:
Now to another matter—you Chaired a Parliamentary Committee and Report on the role of foreign buyers in Australia’s property market. And a new survey today shows that one- in-five Sydney and Melbourne properties is being sold to overseas buyers, is that something you’re worried about?
O’DWYER:
We had a look at this issue last year—the Economics Committee had a look at it—and made a number of key recommendations. We certainly know that foreign investment over the years has gone up and down in the residential property market but in recent years it has most significantly increased. Over the last twelve months we’ve seen residential real estate approvals more than double, from around $17 billion heading up now to around $34 billion. People often associate this with the question of housing affordability—housing affordability though is far more complex than this one issue alone. It has everything to do with low interest rates, with planning laws, whether supply is released, and how much property is being built. And the Committee found that where foreign investment can be channeled into the building of new property—whether they be units, or houses, or apartments—where it can increase the supply for people to purchase or rent, this is a very good thing and it can keep a downward pressure on prices. But where that foreign investment is channeled into a more restricted market, such as the established property market, it can have the impact as the Reserve Bank said, of pushing up the price in certain segments of the market. And that’s why we have a framework that distinguishes between new properties and existing properties. We say that non-resident foreign investors under our laws cannot purchase existing homes…
KARVELAS:
But I think overseas buyers account for one-in-three buyers sold in the December quarter. I suppose the question is what kind of impact is this demand having on residential prices in your view?
O’DWYER:
Well looking at the survey, I mean it breaks it down into new and existing properties, and it doesn’t delineate in terms of the foreign investment between temporary residents and permanent residents or non-residential foreign investors—and we have different rules that apply to each. But what is clear is that we simply don’t have enough data available to us to be able to clearly articulate what is going on in the residential property market. That’s why the Government has announced a National Register of land where we will know whether or not property has been purchased, and how much property has been purchased, in the residential and agricultural property market in this country. Now surveys like this are very good, the screening by the Foreign Investment Review Board provides figures which are also important, but we couldn’t say that it’s comprehensive. And that’s where this National Register and this new data will be so incredibly important.
KARVELAS:
Kelly O’Dwyer thanks for joining us on RN Drive.
O’DWYER:
My pleasure.
KARVELAS:
That’s Federal MP Kelly O’Dwyer she’s the Parliamentary Secretary to the Treasurer.