TREASURER:
I’m here this morning with Nick Sherry because we’re going to release the Government’s Green Paper on Financial Services and Credit Reform. That’s all about protecting mums and dads who are consuming financial services. It’s also about better regulation, and Nick will say a few words about that in a moment.
But this morning I just want to talk a little bit about a trip that I’m taking overseas to the OECD, to Great Britain, to Beijing in China, and to Osaka to discuss global economic challenges. Now, these meetings are necessary because there are countervailing forces impacting on the Australian economy. There are very significant global economic challenges. Global economic challenges like climate change, rising oil prices, rising food prices, and of course, the whole issue of international financial market stability. These are critical issues for the world economy and critical issues for the Australian economy. And I’ll certainly be discussing all of these, particularly at the G8 in Japan at the end of the trip, but also in Britain, at the OECD, and in China.
I’ll also take the opportunity to promote Australia’s stability and competitiveness, the strength of our economy and the decisions that the Government has taken to further strengthen the economy in terms of the fight against inflation and also our investment in skills and education, and our determination to tackle the enduring issue of climate change.
So, that’s the scope of the trip. Before I take questions, over to Nick to talk about the Green Paper.
SHERRY:
Thanks, Wayne. This morning I’m releasing the Rudd Labor Government’s Green Paper on financial services regulation. What it does is set out Labor’s proposals to transfer and modernise, bringing Australia’s financial regulatory system into the 21st century. We’ll be transferring some areas of currently State regulation – six States and two Territories – into a single national jurisdiction. And those areas are mortgage broking, margin lending, non-bank lending and trustee companies. They’ll move into the federal level. So, we’ll have single, standard, national financial services regulation for the overwhelming majority of financial products in this country.
The paper will also invite comment on debentures, what are known as property spruikers, and a range of other credit products such as credit cards and personal loans.
This is an action plan and it will be implemented. It will be implemented; it’s about modernising and bringing Australia’s financial services regulation into the 21st century.
Report after report over the last decade has recommended single, standard, national regulation in financial services. We’ve had the Productivity Commission reports; we’ve had the House of Representatives inquiry into Home Lending. So, we’ve had report after report in the last decade recommending single, national financial services regulation in this country and the Rudd Labor Government is determined to implement that. We’ve listened and we’re acting with urgency to ensure we have a modern 21st century financial regulatory system.
As I’ve indicated, financial services is part of a national economy. The days of six States and two Territories being able to successfully regulate in financial services with products being sold across State and Territory borders and increasingly internationally, it is very difficult for States and Territories to regulate national regulations. Standard regulation is very, very important in a modern economy.
It brings two sets of benefits. Obviously it will be easier and simpler for business and financial services with a single, standard set of regulatory oversight and it also brings benefits to consumers.
The current regulatory framework in the States and Territories is patchy, it’s confusing, it’s very difficult, practically, to change, and in many areas it’s non-existent. Margin lending, for example; States still have some responsibilities for margin lending and that’s been a significant area of comment, given the recent sub-prime.
So, this is an action plan. It’s about a Rudd Labor Government bringing financial services – modernising it, bringing it into the 21st century.
Very briefly and to conclude and compare; in the United States the States and the national government share, in a very confused way, financial regulation. It’s the same difficulties in Canada and it’s the same set of difficulties in most of the Western European countries who share jurisdiction in financial services with the European Community. So, once these reforms are implemented, Australia will lead the world in single financial national regulation of financial services.
The next steps: the paper is released, there will be a 30-day consultation period with the community and financial services sector, the principles will then go to the July COAG meeting and the final framework, we believe, will be agreed upon at COAG in October, the powers transfers will occur and then the details of regulation will be concluded in the next calendar year. Thanks.
TREASURER:
Mr Swan, just on your trip. How long are you away and who’s Acting Treasurer?
TREASURER:
Lindsay Tanner will be Acting Treasurer and I’ll be back Sunday week.
JOURNALIST:
Treasurer, the Prime Minister made an interesting comment yesterday, describing the inflation monster that seems to be wreaking havoc across the community. Is there a concern of talking up the threat of a (inaudible) from a genie to a dragon to a monster (inaudible), next beast we’re going to be coming up against, and is there a problem in talking up such an issue?
TREASURER:
Not at all. We have inflation at a 16-year high, a 16-year high. That inflation at a 16-year high has produced eight interest rate rises in three years. Inflation is the enemy of growth, it saps confidence, and in the end, it restrains and strangles growth. So, we’ve got to deal with the inflationary challenge – and the Government has been talking about that from day one.
I don’t know how many press conferences that I’ve attended in this room, either with the Prime Minister or with other Ministers, where we’ve talked about the imperative of tackling inflation. I talked about it in my first major speech in Sydney before Christmas. The Prime Minister and I launched our Five-Point Plan in January in Perth. We simply do need to tackle the inflation challenge so we can have strong growth and we can put downward pressure on interest rates in the long term. It is absolutely imperative to tackle inflation.
But the economy is now subject to countervailing forces. In addition to high domestic inflation, we now have the impacts of high oil prices and the impact of high food prices internationally and the added impact of the high terms of trade. On the other hand, we have a slowing world growth and the impact of the credit crisis on borrowing costs internationally. All of these things are impacting on the Australian economy.
That’s why I’m heading overseas to discuss these matters in the international context. That’s why I gave a major statement to the House last night on financial stability, and it’s why the central theme of the Budget was to tackle the inflationary challenge, to take some pressure off the Reserve Bank, to make fiscal policy do some of the work. That’s what the recent Budget did and that’s why the Prime Minister and I and the Government is dedicated to tackling the inflation challenge.
TREASURER:
Treasurer, given the inflationary pressures, what’s your view of the five per cent wage push by the Qantas aircraft engineers?
TREASURER:
We need an industrial relations system where any wage rises are linked to productivity, absolutely.
TREASURER:
Is five per cent justified?
TREASURER:
I don’t buy into an instant commentary on individual claims by unions. What I want to see is the outcomes that are consistent where wage rises are matched by productivity growth. That’s what we must have if we are to tackle the inflationary challenge. And our industrial relations arrangements are designed to ensure just that.
TREASURER:
Treasurer, the Federal Government has made available a lot of money to people to help them pay their childcare bills. How worried are you that the money won’t be absorbed by childcare centres simply increasing their prices, and specifically, what mechanism will the Commonwealth use to ensure that that doesn’t happen?
TREASURER:
Well, we’ll want to see that the rises that may be in the system are justified. We have put in place significant new assistance for families to assist them with their out-of-pocket childcare costs, and we don’t want to see that gobbled up by inflationary rises in the childcare sector. So, we will use whatever means is available to us.
JOURNALIST:
Well, what means are available?
TREASURER:
Well, I don’t think that there are a large number of means that are automatically available to us, but the Government will certainly be scrutinising what operators are doing in the context of our new arrangement for a 50 per cent rebate on out-of-pocket childcare costs.
JOURNALIST:
Will this be a name and shame? Specifically, do you have any power or ability to do this, or is it beyond your control at the prospect of watching all this dough go out the door in people’s pockets?
TREASURER:
We won’t be watching all the dough go out the door and not into people’s pockets but into the profits of childcare companies. We’ll take what action we can to ensure that increases in prices are reasonable. But there are limits to Commonwealth power in this area.
JOURNALIST:
Can you take any action at all? Can you name anything that you could do?
TREASURER:
These are matters for the spokeswoman, Julia Gillard. These are matters that are before the Government at the moment, and as I’ve just indicated, we will be not only watching it very closely, we will use whatever levers we have available to ensure that there is a reasonable outcome and that the taxpayer gets value for dollar and that the individual gets value for money.
JOURNALIST:
But you don’t have any levers, do you?
TREASURER:
That’s not quite true. But I’m not going to speculate on what we may or may not do at all.
JOURNALIST:
Mr Swan, you’ve mentioned climate change. In designing an emissions trading scheme, is it your view that it should be as encompassing of the entire economy as it possibly can be, and do you support the inclusion of transport in an emissions trading scheme?
TREASURER:
Well, these are matters which will be canvassed in the Green Paper, which we [will be] releasing. But we have said that the reach of the scheme should be as broad as possible. The previous government said that it should encompass transport. In fact, the current Shadow Treasurer said emphatically on the record that it should, and the previous Prime Minister had acknowledged there would be impacts on energy prices. All of these matters will be discussed and put before the Australian people as we go through the Green Paper process, and the Government will take its final decisions towards year’s end.
JOURNALIST:
Given transport, I think you calculate it around about 15 per cent of national emissions, wouldn’t it be environmental vandalism not to include petrol in an emissions trading scheme?
TREASURER:
I’ve said to you that the Government’s preference, and the previous government’s preference, was to have the scheme as wide as possible. But we will discuss all of these issues and put them before the Australian people through the Green Paper process.
JOURNALIST:
Senator Sherry, can I ask, why are we doing another Green Paper? Isn’t it just another review? You call it an action plan, it’s consultive. What’s your response to criticism that it’s just another review?
SHERRY:
Well, if you look at the Green Paper you’ll see we’ve taken the time and trouble to outline, in considerable detail, the developments, the size and the various issues that we’ve identified in respect to margin lending, mortgage broking, non-bank lending and trustee companies; a 30-day turnaround period for consultation; such issues as who would regulate these centres, those types of issues. But at the end of the day, I remain very confident that these powers will be transferred. COAG has already signed off. But it is important to set out the details of each industry sector – how it’s grown, what the issues are, what the regulatory challenges are – and to consult for that period.
TREASURER:
I just want to add to that. This Government is tackling the big challenges, whether it is climate change or this area that Nick’s talking about now, where it’s all been in the too hard basket for 12 years. We are moving very quickly across Federal-State relations reform, Federal-State financial relations, climate change, education, tax. All of these issues are before the Government with an action agenda for this term. We can’t undo what the previous government didn’t do in 12 years, but we can sure as hell make a very good start. And what Nick’s talking about today is some fundamental reform that will bring real benefits for mums and dads out there who are consuming financial services. And they do expect to be consulted about it before we do it.
JOURNALIST:
How do you respond to complaints by the Opposition that the Government is ramming too much legislation through Parliament? I think I saw yesterday in Question Time when Joe Hockey was complaining (inaudible).
TREASURER:
They were absolutely shameless the way they treated the Parliament with contempt in the 12 years that I was in Opposition, when we now have a new Government which has got a very substantial legislative agenda to do all the things that I was just talking to Clinton about. I mean, if we weren’t putting them through the Parliament they’d be saying we’re doing nothing.
JOURNALIST:
What’s happened to the alcopops legislation? Is that in the package or not?
TREASURER:
I’d have to go and check, Michelle.
JOURNALIST:
Treasurer, the Prime Minister on Friday predicted a whacking for the Government in the polls after last week. Do you think we’ve seen that today?
TREASURER:
Well, we’re not about short-term popularity, we’re about long-term prosperity, and that’s what we’ve just been talking about.
JOURNALIST:
Treasurer, you mentioned that you’re going to China. What will be your message to the Chinese about investment in Australia, and in particular, in the resource sector?
TREASURER:
Well, I’d hope to enhance the relationship with China. We have a very strong economic relationship with China. I’ll take the opportunity to go through the guidelines that I published in February as they affect investment from any country in the world, including the Chinese.
JOURNALIST:
Senator Sherry, other COAG reforms includes compensation for the States if they give up powers. Is that an option with this reform? Is there going to be of significant national benefit? Will the States gain some incentive payment?
SHERRY:
Well, I don’t believe so. We’re talking here about national regulation by the Commonwealth. There will be a cost to do that for the Commonwealth. This Green Paper will obviously go to the regulators, APRA and ASIC, for their assessment as to what that cost will be. There effectively will be a saving for the States because they will not be regulating in a number of areas of consumer credit that they currently pay a cost for.
JOURNALIST:
Senator Sherry, you mentioned in your press release you had some concerns about reverse mortgages. Can you elaborate on what your concerns are in that area?
SHERRY:
Well, ASIC recently released a paper, an analysis, on reverse mortgages. Reverse mortgages are growing in popularity, I think probably driven largely by the fact that many individuals, when they reach retirement, have very modest levels of superannuation. Their most substantial asset is their home. Therefore, it is tempting for many to build their retirement income by drawing down. So, ASIC have identified some areas of abuse in the distribution and sale of what are known as reverse mortgages. So, it is a very sensitive area.
One of the reasons for bringing mortgage broking into national federal regulation is that mortgage brokers are the primary distributors of reverse mortgages. They’re the primary distributors, not the only ones. So, we have a situation where a federally regulated product by ASIC, but a State-regulated, very patchy distribution. And I think that just highlights the need to bring together both the product created – in this case, reverse mortgages – and the sellers and distributors of those particular products.