Today we are pleased to release the Turnbull Coalition Government’s response to the Financial System Inquiry (FSI).
The final report of the FSI, led by David Murray AO and released on December 7 last year, satisfied an election promise.
The financial system affects all Australians. It plays a vital role across the Australian economy, contributing to productivity and growth.
The biggest decisions Australians make in life - buying a home, providing for our retirement, or starting a business - are all supported by our financial system.
The Government has accepted the overwhelming majority of the Inquiry’s recommendations. The response also includes six additional measures that will help to deliver a financial system that is efficient, resilient and fair.
The Government’s response improves our financial system and builds on existing policy. The Government’s financial system agenda will be implemented in stages over the coming years, helping Australia respond to the challenges and opportunities that the future brings.
Card surcharging
We will legislate to ban merchants from imposing unfair card surcharges that are greater than the cost to them of accepting payment by card. The Government will work with stakeholders on the legislative response and phasing of the implementation.
We will make the Australian Competition and Consumer Commission responsible for enforcing these surcharging regulations, to ensure consumers are treated fairly and not over‑charged when they pay using a card. We also endorse the Payments System Board’s ongoing review of interchange fees.
Superannuation
The financial system agenda includes a number of measures that will improve the level of competition, efficiency and transparency in the superannuation system. This will improve after-fee returns for fund members.
The Productivity Commission will develop criteria and then assess how efficient and competitive the superannuation system is and develop alternative models for allocating default fund members to products.
We will also work closely with industry to provide retirees with more flexible and reliable retirement income products and move to extend the choice of fund arrangements to more employees as recommended by the Inquiry.
We have introduced legislation to enhance superannuation governance arrangements and require that at least one third of all Australian Prudential Regulation Authority-regulated superannuation fund trustee boards are comprised of independent directors, including the chair.
Innovation
Innovation is a driver of productivity and growth in the financial system.
The Government has consulted stakeholders on a regulatory regime for crowd-sourced equity funding and will negotiate draft legislation to implement before the end of 2015. We will soon begin consultations to facilitate crowd-sourced debt funding.
Financial advisers
Measures will also ensure that consumers receive professional and fair treatment from advisers and financial product and service providers.
More needs to be done to make the issuers and distributors of financial products accountable for their offerings. We will consult extensively about product design and distribution obligation and a new product intervention power for Australian Securities and Investments Commission.
The Government will raise professional, ethical and education standards for financial advisers. Subject to transitional arrangements, advisers will be required to hold a degree, pass an exam, undertake continuous professional development, subscribe to a code of ethics and undertake a professional year before they can advise clients.
These higher standards will, for the first time, place financial advising on a similar footing to other professions and in doing so increase consumer trust and confidence in the sector.
The Coalition Government will soon hold a roundtable with key stakeholders to discuss the implementation details of this important reform.
Life insurance
In June, Minister Frydenberg announced reforms to improve remuneration practices in the life insurance industry and the Government will adopt the industry’s proposals.
Banks
Australia’s banks are at the core of our stable financial system and fundamental to the broader economy. The Government endorses APRA and the steps it is taking on capital requirements to ensure our banks are unquestionably strong.
Financial regulators
Our agenda will strengthen the accountability and capabilities of APRA, ASIC and the Payments System Board. Strong and accountable regulators underpin the smooth operation of the financial system. We will be further informed by the findings of the ASIC capability review.
Implementation
On 1 September we announced the Government won’t proceed with the previous Labor Government’s Financial Stability Fund levy.
On 9 September 2015, the Government passed legislation to fix unclaimed moneys. The change meant bank accounts could be inactive for seven years instead of three, before they are transferred to the government. This reversed the previous Labor Government’s decision and protects Australian savings accounts.
The Government has agreed to Senate amendments to extend unfair contract term protections to small business. These changes will cover standard form contracts where at least one of the parties employs less than 20 people and where the upfront price of the contract does not exceed $300,000, or $1 million for contracts longer than 12 months.
The Government sets out a blueprint for an efficient and resilient financial system, characterised by fair treatment of users.
Australians can now be confident that our financial system remains the best in the world.
The Government response to the Financial System Inquiry can be found at treasury.gov.au/fsi.