CHRIS SMITH:
As I said earlier the Federal Government had today announced help for home loan customers who are doing it tough in the current economic climate. Now, the Government will be strengthening the regulation of consumer credit contracts. Now, just to explain that, in essence they're making it easier for people to request changes to their credit contracts if they can demonstrate they're in financial hardship.
Now, under the changes people with loans of up to half a million dollars will be able to ask their lenders for assistance and that's up from the current cap of $312,400. Assistance could take the form of extending a loan contract or granting a so-called repayment holiday.
Senator Nick Sherry is the Minister for Superannuation and Corporate Law and he's on the line.
Senator, good morning.
NICK SHERRY:
Good morning, Chris, good morning to your listeners.
CHRIS SMITH:
Okay, to these changes in a second and some questions we have about how they would possibly play out and how you can actually force the banks to adhere to them, have you caught up with Friday's decision by the Remuneration Tribunal, an increase of almost $5000 to federal MPs for an electorate allowance? Have you caught that?
NICK SHERRY:
Yes, I had. I heard about it earlier this morning, actually.
CHRIS SMITH:
And?
NICK SHERRY:
Well, the electoral…
CHRIS SMITH:
The greatest case of hypocrisy we've heard, isn't it?
NICK SHERRY:
Well, the electoral allowance isn't a pay rise. Personally what I do with my electoral allowance, and this is what it's for, is I pay for local raffles, donations to charities, to sporting organisations. That's what the money is used for.
CHRIS SMITH:
But why do you need more money to do that?
NICK SHERRY:
My understanding is, and this was an assessment made by the independent Remuneration Tribunal, the quantum hasn't increased since 2000 so it's some nine years.
CHRIS SMITH:
Can I just give you a little lesson, Nick Sherry? There are people in this building who haven't had a pay rise for about five to six years, they walk into the boss's office and they're told, don't you understand we're in an economic climate that is going down the toilet rather quickly, you're going to have to come back to me in 18 months.
That is the fact of life out there.
NICK SHERRY:
Yes, and I understand that, Chris. As I've said, it's not a pay rise, it's not to go into our pocket.
CHRIS SMITH:
It looks that way.
NICK SHERRY:
Well, it doesn't go into our pocket, Chris. As I've said, personally I spend all my money every year of my electoral allowance on what it's meant to be spent on, and that is things like raffles, going to shows, donations to sporting organisations. They're all the sorts of expenditures I incur.
CHRIS SMITH:
Okay. I don't have time to pursue that any further but I want to talk about these changes announced today, or to be announced today. In simple terms, how do they work?
NICK SHERRY:
Well, the current threshold for hardship on a consumer credit contract applies up to just over $312,000. We're lifting that threshold significantly to half a million. If you have a credit contract, you have hardship, you go to the financial institution and they can - they may waive payments for a period of time, depending on your circumstances. If they say no you can go to an independent, low cost dispute tribunal. That's one of the changes we'll be announcing today.
CHRIS SMITH:
How do you enforce this though?
NICK SHERRY:
Well, it will…
CHRIS SMITH:
The banks could simply say no, no, no, no, you don't qualify, we're not coming to rescue of your family, thank you very much, bye bye.
NICK SHERRY:
If you're not happy with a decision of the bank you can go to the - to what we call a low cost independent dispute tribunal, away from the financial institution and part of the laws we'll be announcing today, or changes in the law, are what we call new responsible lending provisions. Providers and advisors for the first time will have to assess the suitability of the credit product as well as the capacity of an individual to repay the proposed credit debt and that's a very important new change to law…
CHRIS SMITH:
Okay, so when it reaches this tribunal, can the tribunal force the banks to do the right thing?
NICK SHERRY:
Yes, the - what happens under these new laws that we're introducing is the financial institution has to sign up to and agree to be bound by the decision of the independent tribunal.
CHRIS SMITH:
Right. Can I just go back to politicians' pay? One last question.
NICK SHERRY:
Yes?
CHRIS SMITH:
Do you welcome what's been mooted today which is a further pay rise in politicians' base salary on July 1?
NICK SHERRY:
Well, it's not a pay rise, it's an electoral allowance meant to be…
CHRIS SMITH:
No, no, no, not the electoral allowance. What's happening in two months' time…
NICK SHERRY:
Oh.
CHRIS SMITH:
…on July 1.
NICK SHERRY:
Well, the Remuneration Tribunal determines that. They're independent.
CHRIS SMITH:
Yes, but there's got to be an application from those representing federal MPs, Senator.
NICK SHERRY:
They're independent, Chris, and the tribunal determines that just as it determines - independent tribunals determine wages and conditions for other people.
CHRIS SMITH:
Yes, but you've got to look at it in terms of what we're being told and, you know, we're being preached about pulling our - tightening our belts, et cetera - they don't make decisions based on that kind of preaching, that kind of lesson that we're getting from the Treasurer. It's up to politicians to refuse this, isn't it?
NICK SHERRY:
Well, it's up to the independent tribunal to take into account those decisions.
CHRIS SMITH:
Okay, all right, I've run out of time but thank you very much for your time and I think well done on this other point too, by the way.
NICK SHERRY:
Thanks, Chris.
CHRIS SMITH:
Okay, Senator Nick Sherry.