TREASURER:
I'm pleased to be joined by the Assistant Treasurer Kelly O'Dwyer today to make a series of announcements. The Australian banking and financial system touches every Australian every day, sometimes that is for the better and sometimes that is for the worse; sometimes it can be positive, sometimes, regretfully, it can be negative.
The system is critical to our Australian economy. Its strength is critical to our Australian economy. The trust that Australians and the broader financial community and investors can put in the system is critical to our Australian economy. When you address matters in your banking and financial system, you do it in a disciplined way, you do it in an ordered, way; you don't do it in a reckless way, you don't do it in a populist way. You do it in a way that addresses the very real issues that have to be considered in these matters.
It is vital that we have practical and effective policies and protections in place to ensure consumers and businesses are protected and supported and that our financial system has integrity and is as strong as it possibly can be. Australian jobs – the growth of the Australian economy – depends on that.
When other banks collapsed around the word – our banks did not. That was, in large part, due to the very strong and effective regulatory system that was put in place by the Howard-Costello Government which ensured that those banks remained in place and that businesses could continue to function and that our economy was able to move through that very difficult time.
As a Coalition, we have always been focused on these issues. As I said it was the Howard-Costello Government that put in place those strong financial protections and regulations in our banking and financial system and as a Coalition we've continued that tradition when we were in Opposition it was the Coalition that put forward a terms of reference, a very clear proposal to put in place a financial system inquiry which was opposed then by the Government, by the Labor Party, but when we came to Government we implemented that inquiry. This was the Murray Financial System Inquiry Report. The Government has responded to that financial system inquiry and its recommendations and we're in the process of putting those recommendations in to place. This is what a serious review of the financial system looks like. We proposed it in Opposition it was opposed by Labor. We implemented it in government and we have been working on implementing its recommendations.
Secondly, in July of last year we initiated, because we knew how important it was to have a tough cop on the beat in ASIC and we're aware of the weaknesses that existed within ASIC, we initiated a capability review in July of last year. This is that capability review that has been completed and was passed on to the Government. That report is critical to ensuring that the cop on the beat we have in our banking and financial system and in corporations more generally has the strength and the focus and integrity it needs to do its job and that Australians can rely on. That is how you deal with effective action when it comes to getting the right answers to address real issues in the banking and financial system; a very serious review which, for those of you who have seen it and are receiving it, will know that it is a very candid report. It doesn't pull any punches and it says very clearly what needs to be done when it comes to getting ASIC on the right track to do the job that Australians, and in particular the Government and the Assistant Treasurer and I and the Prime Minister, expect ASIC to do.
Today, we make our response to that review. Today, I announce that the banks will pay an additional $121 million to increase the resources of ASIC, to be a stronger cop on the beat, to implement the actions which are recommended in the ASIC capability review. This will be in addition to the implementation of one of the other recommendations that is in that review to move ASIC to a full user-pays funding model. No longer will it be the case that taxpayers will be hit to fund this regulator, this enforcement authority, this cop on the beat, those whom it's enforcing the regulations and rules on will pay the price for that. They will fund the continued resourcing of ASIC as a tough regulator on the beat. That will ensure that there is a security and certainty of funding for that regulator going forward.
That funding includes some actions in some key areas and the Assistant Treasurer will go into further details about this; $61 million for enhanced data analytics and surveillance capabilities. In the 21st century economy, you need a tech cop on the beat and what this report recommends is ensuring that they have the data analytics capability and the people who enable them to be effective in these areas.
Secondly, $57 million for increased surveillance and investigation and prosecution capacities to pursue these matters. There is additional support in what we announced today to ensure we accelerate the implementation of the Murray Review, the Financial System Inquiry, to ensure matters like increased penalties and increased product intervention powers and other things that have been recommended by the FSI can be put in place to protect consumers. In addition to that, I announce today that the term of the existing chairman Greg Medcraft, will be extended for a further 18 months. This is not a reappointment – this is an extension of his term. His term has been extended to implement the recommendations that are contained in the ASIC Review - Capability Review – and in the statements we've released today we have circulated a full description of ASIC's implementation plan in respect to the ASIC Capability Review.
In addition, we'll be appointing an additional commissioner to ASIC who has special expertise in prosecutions. We want an ASIC that leans forward and we want an ASIC that actually prosecutes and takes those matters up. There's no doubt that ASIC has been active in these areas and we want to increase its capability and its resources and its expertise to do just that. One of the other recommendations is that we will be exempting ASIC from the Public Service Act when it comes to their employment practices. This is important to ensure that ASIC, like other regulatory authorities have the ability to recruit from the market people who have the experience and knowledge of practices in that sector to make them an even more effective regulator.
Thirdly, we will be recommending that the financial services ombudsman changes its thresholds to provide greater access for treatment of claims and complaints and this is something that needs to be taken up by the financial services ombudsman and that would require legislative support from the Government which they will receive and we will await their advice on how they seek to change those thresholds. That will be supported by a more broad review which the Assistant Treasurer will speak to which will seek to look at broader ranging tribunal-like models that could be considered by the Government within a reasonable period of time to ensure that people's complaints and issues can get to a point of mediation and consideration without having to always lawyer up and turn up in courts.
We want there to be a better system for people to be able to get access to the hearing and the consideration of their issues.
What I have outlined today is a serious action plan. It's the basis of years of work, of considered detailed work that looks carefully into the issues and gives a real response. Backed up by the resources that are necessary to get the job done. This is what practical, effective targeted Government looks like and that's how we are responding to these issues of real concern to Australians but there's no point talking about the concerns of Australians unless you're prepared to put in place the actions that will address their concerns which is what we've done today.
Assistant Treasurer, Kelly.
MINISTER O'DWYER:
Thank you very much, Treasurer. We want an ASIC that is as effective as it can be. We want to make sure that ASIC is fit for purpose in today's day and age. As part of our extensive response to the Financial System Inquiry, we conducted an independent capability review of ASIC. The Government is today releasing the response to this capability review. We are also releasing the Government response to the 34 recommendations that have been made in this review, five of which relate directly to the Government and which we will be progressing. The rest of which relate to ASIC and ASIC is also releasing its implementation plan. We know that some of ASIC's capabilities are at the forefront of the best global practices but we also acknowledge that there are additional measures that are required to support ASIC in delivering on its mandate and ensuring that it is fit for the future. The panel found that there were issues to do with strategy, governance, IT, data infrastructure, management information systems and ASIC's approach to stakeholder engagement, that these were aspects that did require improvement. The Government acknowledges this, as does ASIC, and we are committed to making sure that it has the capability and the resources required to ensure that it does its job and it is the tough cop on the beat. As the Treasurer has mentioned, we want ASIC to be able to get the very best in staffing. We want them to have the very best experts available to them and one of the key recommendations in the capability review is to take ASIC outside of the Public Services Act so that they have the capacity to fund that staffing and to get the very, very best in experts that is required. We also want to make sure that ASIC can be far more proactive rather than simply reactive. We want to make sure that ASIC can have the capacity to conduct very sophisticated data analytics. This is something that has been utilised very extensively in other organisations like the Australian Taxation Office. It means it will give ASIC the capability to intervene before serious harm is done rather than simply cleaning up the mess after the event. Now, we know that that requires funding and today as the Treasurer has mentioned, we have given ASIC an additional $61 million in order to equip them with the very latest in technology and additional technical staff so that they can do this sophisticated data matching and this data surveillance. It is important to note that we do need very sophisticated surveillance activities on an ongoing basis and we're providing an additional $57 million to ensure that we cannot only detect problems in the system but we can then prosecute the problems in the system. As the Treasurer has mentioned, we will be appointing a new ASIC commissioner that has special experience in the prosecution of financial crimes, which will boost the capability, that ASIC has.
I won't talk about the industry funding because the Treasurer has covered that but I think it is important to talk about how we handle consumer complaints. We currently have a system where we have a number of different complaints, tribunals and ombudsmen that deal with issues that consumers have in the financial services industry. We have the Financial Ombudsman service, we have the Superannuation Complaints Tribunal and we have the Credit and Investment Ombudsman. Each of them have slightly different mandates, each of them has slightly different powers and each of them have slightly different ways that they can deal with consumer complaints. We want to put the consumer at the centre of our system. We want to make sure that they don't have to navigate a complex path in order to get the results that they need so that they can then move on with their lives. We are going to do a couple of things right up straight away. The Treasurer has mentioned the Financial Ombudsman service, we are looking at including small businesses within that service - small business loans for the first time, we're also looking at the monetary thresholds and the compensation payments that can be made with the financial ombudsman service. We know that there have been issues with the sheer amount of time it takes for consumer complaints to be dealt with by the Superannuation Complaints Tribunal, in fact we know of examples of people who have been waiting since 2012 for their issues to be resolved. That is why the Government is announcing today $5.2 million to deal with the legacy cases that the Superannuation Complaints Tribunal has and to have a more sophisticated data system that can more expeditiously, and efficiently, deal with those complaints. So, as I said before, people who have a complaint can have it dealt with and can then get on with their lives. But, looking forward, we know that there could in fact be an even better way. We know that consumers don't want to navigate different tribunals and ombudsmen but they would like to have a one-stop shop so in the next six months, before the end of 2016, an eminent panel will be looking at how we can potentially bring together all of those different ombudsmen and tribunals to have a one-stop shop for consumers. We'll obviously have to work through issues to do with powers and thresholds and limits and compensation but that's why we are taking the considered path to work through that in the second half of this year but that is the path forward - that is the path forward to make sure that no one slips through the cracks and that anyone who has an issue in the financial services industry can be dealt with.
TREASURER:
Thank you very much, Kelly. I want to particularly commend Kelly O'Dwyer for the work that she's done working together on bringing this package together. It is a strong team, together with the Prime Minister and I'm happy to take questions.
QUESTION:
There are three reviews announced here. There is a review into ASIC's enforcement regime, there is a review into the Financial Ombudsman Service and its small business remit and there is an eminent persons review into dispute resolution. Why do you need more time to review? Why wouldn't you know now what changes are needed to ASIC's enforcement regime in particular? How long do you think these reviews are going to take?
TREASURER:
The work of improving your cop on the beat never stops and you're always working on it and you're always seeking to improve it. As the son of a police officer, I know that to be the case in normal law enforcement areas. You are always working on how you can do the job better and that is what this Government will always do. We have announced a whole series of actions today and funded them and the banks will be funding them. The banks will be funding these additional measures. Bill Shorten wants to spend your money to fund his political exercise, which will not get outcomes for people; it will just get a political outcome for Bill Shorten. What we're saying is we'll be having the banks pay to ensure that ASIC has the teeth and has the resources needed to move on all of these recommendations but the job doesn't stop there. The job will continue. There are other issues to be addressed. The Assistant Treasurer has already outlined that six months is the timetable to ensure that we get that report back when it comes to the tribunal and where we proceed on the basis of a tribunal but there is already a handsome set of issues that ASIC will have to deliver on now so that work commences right now and it happens now. The alternative is that someone might do something in two or three years after an unterms of referenced Royal Commission finishes a report in several years' time. That isn't getting any outcomes for anyone. All that is getting is a cynical political outcome for Bill Shorten before an election.
QUESTION:
I notice in the press release you've extended Greg Medcraft's tenure for 18 months. Correct me if I am wrong but that is not the full term is it?
TREASURER:
Well I said it wasn't a reappointment, I said it was an extension of his term.
QUESTION:
[Inaudible]
TREASURER:
It is an extension of his term to ensure that we can follow through on the work of the implementation of the ASIC review. There will be a normal process to consider what happens on the other side of that 18 months and that will be a decision for that time but we obviously have the support for him to get in and do the job of implementing the recommendations of this report. He is the one who has been at the head of this organisation. He is the one right now best placed to go and implement these reforms and we don't want to waste time with any transition or otherwise.
QUESTION:
Why not give him another 5 years?
TREASURER:
Because this is the job we want him to do now, Phil. And he's well tasked and I expect him to get it done.
MINISTER O'DWYER:
Can I follow up on that point? I think it is also important to note that the ASIC capability review itself actually says we need to go through a significant process in looking at appointments of Chairs of ASIC. We will be embarking on that process as a result of accepting the recommendations in this review but it is entirely appropriate that the current Chairman be extended in his term so that we can implement the measures that have been outlined so that ASIC can respond to this capability review, so that we have a very, very smooth transition into the new arrangements that will increase the resourcing and capability of ASIC today.
QUESTION:
Can I just clarify, $127 million extra going to ASIC, $121 million from the banks, so the net cost to the Budget bottom line is about 6 million?
TREASURER:
Yes, that's for policy work that is being done within the Treasury Department. That is policy support to implement the FSI recommendations and to accelerate that process.
QUESTION:
Just a follow-up, doesn't this suite of measures, doesn't this amount to an admission that ASIC hasn't been up to the task in the last couple of years?
TREASURER:
What it amounts to is that we have always been conscious of the need to strengthyen and improve what is happening at ASIC. That is why you initiate a capability review and I note that we did that last July. Last July that was one month after Bill Shorten's Senate in the Labor Party voted against a Royal Commission last June, and as recently as March the Labor Party once again did not support a recommendation of the Greens to have a Royal Commission in to the banking industry. That was just last month. Now Malcolm Turnbull goes and speaks to the banks about their culture and he was absolutely right, a few days later Bill Shorten pops up and starts talking about a Royal Commission into the banks – which is a blank sheet of paper – and I think what you can draw from that is what has been motivating the Government has been over years to ensure that we have a financial system that supports our economy and protects consumers and gets the right outcomes but we have ASIC where we don't have rose-coloured glasses about what its capabilities are but we look at it critically and when we look at it critically, we support the measures that are needed to strengthen it.
QUESTION:
When you get this report and was it an opportunity in fact to act earlier before this latest round of debate about the Royal Commission?
TREASURER:
On that, Michelle, you would be aware that there is a normal Budget process that is followed. So we had the ASIC capability review and we have been working through the normal Cabinet and Budget processes to bring this matter to a resolution. The Budget is on May 3 and this matter has been something that has been the subject of ERC and Cabinet submissions for some time because we have been working to that process. That, I think, demonstrates very clearly the timetable of the Government's actions in this area. Mark.
QUESTION:
Treasurer, you say the banks will pay but won't the banks just pass this on in higher fees and charges so it ends up being the customers, the people you're trying to protect, who end up paying?
TREASURER:
No I don't believe that will be the case, Mark, because these levies as a proportion of what the banks – even their income tax payments are let alone what their more general revenue is – I think is easily digestible by the banks and must be and should be and I would be furious if I thought this was being sought to be passed onto the banks and you can be absolutely assured they will be getting that message from me and in fact would already have got that message from me.
QUESTION:
Treasurer, have you consulted with the banks on these changes and are they supportive?
TREASURER:
The ASIC Capability Review – and I'll ask the Assistant Treasurer to comment on this – the ASIC Capability Review has been a very consultative process. You go out, and you listen and talk to people who interact with ASIC and they're obviously one significant group and sector which does engage with ASIC so this has been a very exhaustive process and it is commonplace, I think, and the right thing to do to engage all the stakeholders whether it's consumers or other regulators or indeed the financial institutions themselves. Kelly.
MINISTER O'DWYER:
Indeed. If I can just further follow up on that. The panel chair of this review, Karen Chester, along with the other two panel members, Mark Gray and David Galbally have spoken with all of the stakeholders in the financial services industry and they have had extensive consultations. Now that obviously includes the banks but that has been done as part of their independent process, as part of this ASIC Capability Review. They have had numerous engagements. I sat down with the panel on two separate occasions in advance of the report being presented to Government to continue to get updates so that if there were things we could do now that we could start the processes in order to do that but as the Treasurer has said, in order to have a very extensive and proper and thorough look at ASIC's capability, you need to go through a proper consultation process. You need to go through a methodical process and that's what we have done. That's why we're confident the solutions that we have come up with are fit for purpose for ASIC, are fit for purpose for our financial system and will make sure that consumers are placed front and centre of our financial system going forward into the future.
TREASURER:
David.
QUESTION:
Can I get a practical explanation of how the new surveillance technology and staff that you're announcing today would operate – would do what's not being done already and would they have prevented the CommInsure and financial planning scandals that so upset people?
MINISTER O'DWYER:
In answer to your question David, it will allow for more systemic data collection so, a much broader range of collection. It will allow there to be data matching so in order to detect if there are problems with particular financial advisers, for instance, or particular segments of the industry, so it can look not only at some of the broader systemic issues but it can look at very specific issues to do with individual practitioners as well and what it will mean is that ASIC will then be able to target its resources to those areas of most concern. We have seen how effective this has been able to be with the Australian Taxation Office and we have seen this in practice. We are bringing this in now for ASIC to increase their powers and capabilities in order to be far more proactive rather than simply reactive. We've provided funding as well in response to the Financial System Inquiry to give them more product intervention powers, for instance, if they detected there was a problem with a product, instead of waiting to clean it up at the end, they will be able to intervene and ban it, stop that product being sold to people who it should not be sold to. This is a big change.
TREASURER:
Can I add to that, it also involves capital funding as well to upgrade their systems. My dad was a fingerprint expert. Many years ago he'd turn up with his little brush and all the rest of it and they would have to go through all the photos of all fingerprints and it was a manual process. It certainly wasn't the glitz and glamour of CSI when my dad was doing that and today they have all the devices and all the capital equipment that is needed to do that process which many years ago would have taken many years of work and that's why he didn't get to the odd football game and today they can do that in a heartbeat. That's why you've got to constantly reinvest in the capability of these organisations and in particular their digital capability. I think that is a critical tool for the trade that they need.
QUESTION:
Just on that, is that what the $61 million is for whereas the $57 million is for ongoing?
TREASURER:
The 61 includes the capital I just mentioned.
QUESTION:
So what's the difference between the 61 and the 57?
MINISTER O'DWYER:
So the 61 is to equip it with the latest technology so it's to make sure they've got the technology that's available to them to provide this sort of surveillance. The 57 is for the ongoing surveillance work, to make sure that it can be ongoing operations and that is going to continue year on year.
QUESTION:
Do you think it is in the national interest to sell Kidman and Co. to overseas investors?
TREASURER:
We'll stay on the banks for a moment.
QUESTION:
Did you phone the bank CEOs this week or your office to give them a heads up on exactly what you're announcing today? And Assistant Treasurer, on the idea of this tribunal, one of the problems is currently, and you would be well aware of that, is that many dissatisfied customers say the banks string their complaints out too long, that they effectively hope they run out of money or, quite frankly, die before they solve things. Would you look at giving this tribunal – is that the kind of thing you would like it to have the power to not only remedy situations but enforce penalties on banks that don't come to an agreement?
MINISTER O'DWYER:
I think this is a really critical point. The different ombudsman and tribunals have different powers, some of which are binding, some of which are not binding and different people subscribe to different ombudsman or tribunals and in looking at these issues in detail over the next six months we will be working through all of those elements to make sure that people can't, through their resources, can't string people out, have to respond to legitimate complaints, but that we can do that very efficiently. Part of the problem with consumer complaints has been that people have a legitimate complaint and they are left hanging and when they're left hanging means they cannot get on with their lives, whether it's concerns with their business, whether it might be in their family circumstances, they can't get on with their lives. We want to make it an efficient process. We want to make sure that the consumer is at the heart of that and that is exactly why we are taking the time to work through exactly what powers will be needed and make sure that the entire financial services industry is covered and that there are no people who are falling through the cracks.
TREASURER:
In answer to the other question, it's my job, it's Kelly's job, it's everyone's job to engage with all the stakeholders in the sector and you can be assured I regularly put things to the banks in terms of they need to do. I do think there needs be a better way for consumers to be able to access outcomes and resolve these issues without having to turn up in courts. I think it is incredibly important they do something about whistle blowers. I think it's incredibly important that they pay for the increased support we need to put into ASIC to regulate the conduct that occurs in the banks. I'm doing my job when it comes to doing those things and what this report today and the financial systems inquiry report today shows is a Government that is actually focused on the practical issues that are addressing the real concerns of people who are being affected by what has been happening in particular cases in our banking and financial system. Now the alternative of that is a Leader of the Opposition who is cynically exploiting the concerns and fears of Australians when it comes to how that's been impacting on their daily lives. He's politicising their pain and I think this is a reckless way for a Leader of the Opposition to behave who pretends to think that he can be responsible for a $1.6 trillion economy. The motive of Bill Shorten is clear here. His focus is not about getting outcomes for people affected by what's happening in the banking and financial industry, his motive is about getting a political outcome for one person - Bill Shorten.
MINISTER O'DWYER:
Can I just add to that because let's not forget the Leader of the Opposition, Bill Shorten, he was an Assistant Treasurer. During this time that he was the Assistant Treasurer, what did he do about these issues? He did precisely nothing. Chris Bowen was also a former Assistant Treasurer and a former Treasurer of this country and, again, what did they do about these issues during their time in Government? Again, precisely nothing.
QUESTION:
The $121 million from the banks, as I read it says from 2017. Is that $121 million over 4 years and if ASIC requires extra money in the future, do you expect that more money will come from the banks?
TREASURER:
That would be user-paid, yes. That's the whole point of this transition. This puts ASIC on a much more sustainable footing. When Chris Bowen increased the efficiency dividend on ASIC when he was Treasurer, just before the last election, he did that saying that the taxpayers – in taxpayers' interests, the Government also made decisions in that respect. That process needed to be fixed and what we've done here is fix that. We've fixed that by ensuring we move to a user-pays model and particularly to ensure we implement the outcomes of this report. The banks will pay an additional $120 million to ensure that we strengthen the cop on the beat for banking in the financial system. Phil.
QUESTION:
There's lot of people out there who hate the banks because of what has happen to them with scandals, they've been ripped off insurance and so forth. What do you say to those people that – can you give a guarantee that these changes will put an end to this sort of practice? How sure can you be?
MINISTER O'DWYER:
For those people who have been affected by dodgy dealings, by fraudulent conduct, by malpractice and misconduct in the financial services industry, we are putting you front and centre in our response. We are making sure that the consumer is front and centre, that you will be dealt with compassionately and you will be dealt with effectively so that you will be able to move on with your lives. But to be brutally honest, we want to make sure that people are not put in that position. We want to make sure we can actually stop harm occurring. That's why this is a comprehensive response. We're not simply talking about cleaning up the mess after it's happened, although that must be done. We are talking about being far more proactive, being forward leaning, making sure ASIC can be forward leaning, can be an even tougher cop on the beat and that they have all of the capacity and resources to do that.
TREASURER:
I'll just add to that. You cannot eliminate all crime by increasing the resources for the NSW police force but you do it to ensure you go as far as you can to reduce and mitigate crime in any community. It's no different here. The NSW police force, VicPol and anyone else can't say that they can guarantee that they can eliminate all crime but what Government should do is give them, and we must give ASIC, all the resources and power it needs to do the job the Australians expect of them. That's the commitment we give to the Australian people and that's what we're doing here. What Bill Shorten is committing to do is spend $50-odd million, $51 million, of taxpayers' money for something that might write a report and might make recommendations, perhaps even make these recommendations two years from now. That's not going to give anyone an outcome. The person that's going to get an outcome from that is Bill Shorten's cynical manipulation of people's genuine fears and promise them a mirage. That's all he's offering. What this is, is concrete action. Time for one more question on banking and finance.
QUESTION:
Do you regret in retrospect trying to undo the consumer protection laws that Labor put in – unsuccessfully trying to…
MINISTER O'DWYER:
That's simply - with the greatest of respect, Michelle, that's simply not correct. We haven't tried to undo consumer protections. What we are doing today is we are strengthening consumer protections. We are making sure that consumers will be dealt with compassionately and dealt with very efficiently and effectively. We are making sure that those people who have legitimate complaints can get a response to their complaints and in some cases receive compensation where that is appropriate.
TREASURER:
Just on that - this is not a one-on-one Michelle so we can take the issues up off line if you like. I would like to make a final statement in relation to matters on the Kidman sale. I signed on Friday an interim order which prohibits the Kidman transaction from proceeding for a period of 90 days from the gazetted date. This provides further time for me to consider the national interest implications of this complex and sensitive acquisition. My obligation is to make careful and detailed assessments of foreign investment proposals against the national interest and that is exactly what I intend to do this on the Kidman matter as I did on the previous consideration of that transaction. National interest considerations of proposed transactions should not and will not, on my watch, be rushed on an important matter such as this. I have today instructed Treasury to put in place an independent and external review of the sale and tender process in relation to Kidman because I want to be absolutely confident when I finally consider this matter that Australians have had every opportunity to be participating in that process and so we'll continue to work through that process. I will not be rushed into this. I will make a careful consideration on these matters. Many of you who follow these things closely, know this is what I do and it is a very big transaction and it is important we do the right thing by the national interest and that's what I intend to do.