612 ABC BRISBANE DRIVE WITH EMMA GRIFFITHS
MONDAY, 11 APRIL 2016
SUBJECT/S: Royal Commission into Financial Services
EMMA GRIFFITHS: ... Malcolm Turnbull there. Labor's Financial Services Spokesman is the Member for Rankin, Jim Chalmers. Jim Chalmers, what would the focus of a Royal Commission be?
JIM CHALMERS, SHADOW MINISTER FOR FINANCIAL SERVICES AND SUPERANNUATION: Well doesn't it just say it all about the Liberal Party under Malcolm Turnbull that he and Scott Morrison don't think that anything needs to be done to get to the bottom of these issues? What we've said--
GRIFFITHS: They're not saying that. They're saying enough is already being done. But I'm asking you about a Royal Commission. Labor has promised one. What would the focus be?
CHALMERS: Well the focus, as Bill Shorten and Chris Bowen and I said on Friday, is to look at how widespread some of this unethical behaviour that has been uncovered in recent months and years is, whether or not the financial institutions are taking seriously their duty of care to their customers, the culture and ethical standards and the business structures and whether there is something that needs to be done there, also whether or not our regulators have the powers and the resources they need to properly police this part of the economy, as well as best practice internationally and other issues like that.
GRIFFITHS: A year ago, Labor voted against a Greens proposal for a Royal Commission. What's changed?
CHALMERS: Well, I think what we said on Friday and what we continue to say is that we thought it was important not to rush to judgement on a Royal Commission. We wanted to be very careful, very cautious about it. We wanted to deliberate and discuss it. And that's what we've done. And since that vote was taken in the Senate a year or so ago, there have been a whole range of additional scandals uncovered including in life insurance, including the allegations about the manipulation of the interest rates in the bank bill swap rate. And so we think that these compounding events and compounding instances do warrant a proper evaluation, a proper investigation and a Royal Commission to get to the bottom of these issues so that people can have confidence that our banks, which are already very strong and very profitable are behaving in an ethical manner as well.
GRIFFITHS: Jim Chalmers, the Government's argument is that ASIC, the Australian Securities and Investment Commission, APRA, the Prudential Regulation Authority, the Reserve Bank, they are all in place looking at the financial services sector. What is wrong with them?
CHALMERS: Well this goes back to the initial point I made, Emma. I mean, it would be news to people like your caller Gino and the people right around the country that the Treasurer and Prime Minister think everything is fine as it is. We do have good regulators and they are doing a good job, but it's clearly insufficient to prevent some of the behaviour that has been uncovered in the last couple of years. And so what we need to do is we need to make sure that we use the broadest possible powers that are available to us via a Royal Commission to look at this whole sector of the economy to make sure that the financial institutions are treating people the right way and part of that is asking the Royal Commission to look at the role of the regulators and the resources of the regulators so that they can be doing the best job that they can.
GRIFFITHS: The Prime Minister says that ASIC has all the powers of a Royal Commission.
CHALMERS: Well that's flat-out wrong. That's factually wrong and it's very disturbing that the Prime Minister and Treasurer don't even know what the powers of agencies within the Treasury are. There are some very substantial differences between the powers of a Royal Commission and ASIC. For example, a Royal Commission has broader reach and powers -- it is the most powerful body to look at systemic misconduct rather than individual cases. It's got more substantial powers when it comes to public hearings, search warrants, production of documents, the witnesses that it can call from a wider pool of people -- all kinds of key differences which make a Royal Commission more substantial. And the Treasurer and the Prime Minister really ought to know that.
GRIFFITHS: What about some actual legislation to better protect consumers rather than essentially another review, albeit a big one, a Royal Commission? But what about changes to the law?
CHALMERS: Well nothing about a Royal Commission prevents legislative change in the meantime. There have been some key changes made including Labor's Future of Financial Advice reforms which clamp down on some of the dodgy practices in the financial advice industry. So having a Royal Commission doesn't delay or defer or get in the way of any other legislative change that might be contemplated by the Government or the Opposition. But it does give us the ability to get right to the bottom, to sweep away all the doubt that has grown in our financial sector about the behaviour of some of the institutions.
GRIFFITHS: Coming up to a quarter past five on 612 ABC Brisbane. I'm Emma Griffiths and we're talking about Labor's promise to bring on a Royal Commission into the financial services sector if it wins Government. The Prime Minister says it's an over-reaction and a thought bubble. Jim Chalmers, the Banking Association says that a Royal Commission would send alarm signals to international investors. Are you worried about that?
CHALMERS: No, I think international investors will know that what we're doing here is we're trying to boost confidence in the medium and long term. We're trying to restore confidence by getting to the bottom of some of these issues that are causing reputational damage for some of our financial institutions. What we want to do is once we get to the bottom of them and deal with these issues, then people will know that we don't just have strong and profitable banks, but ideally in the medium-term we'll have the most ethical banks in the world as well. That's a good aspiration and I'm sure the Bankers Association would be in favour of that. But more broadly, it's no surprise that the ABA are not particularly keen on a Royal Commission. We listen to them but we don't take our instructions from them.
GRIFFITHS: The Banking Association also says that several of the issues have already been examined and the outcomes are already being implemented or taking effect. So what more would a Royal Commission achieve?
CHALMERS: A Royal Commission will do more than any of the other inquiries that have taken place in the last few years. For example, David Murray did a very good inquiry into the financial system but it was asked to look at very different things. It wasn't asked to look at customer experience, it wasn't asked to look at whether banks were behaving in the most ethical manner. So it's not right to say that these issues have all been canvassed before and the fact that there are ongoing revelations about bad behaviour in some of our institutions really does tell us that whatever has gone before has been insufficient. And if we're serious about getting to the bottom of these issues then we do need to have a Royal Commission with the additional powers that brings.
GRIFFITHS: There's currently a parliamentary inquiry into the financial services industry. It's into impaired loans in particular. It's due to report next month. I'll be speaking shortly to an LNP MP who is on that committee. If it's due to report next month, is Labor jumping the gun?
CHALMERS: That's just one part of the broader financial system. I don't think anyone would objectively conclude that we should wait for that particular parliamentary report before we look at these broader issues in things like insurance or things like the swap rate, all these kinds of issues. I think that would be unwise to hold up all of the other processes just because of this very specific issue that the parliamentary committee is looking at.
GRIFFITHS: Jim Chalmers, I see that the Parliamentary Budget Office, which is an independent body, has looked at this and said it would cost $53 million and take two years. Is that in line with Labor's expectations?
CHALMERS: Yes. We had this independently costed, as you say, by the Parliamentary Budget Office as we do with all of our policies -- we get them to advise us on the full cost of all of our policies, our many detailed policies out there. We expect it to cost about $53 million. We think that's money well spent if it gives the people of Australia the confidence in their financial institutions that the products that they're buying are worth the paper they're written on, that they can trust the financial institutions to support their aspirations and not curtail them.
GRIFFITHS: Where does this sit on a list of priorities for the Federal Opposition because the Prime Minister has said this was a distraction. The Treasurer, more pointedly, has said that it's the Opposition trying to distract from its defense of corruption in the union movement and the construction industry. So is this really priority number one at the moment?
CHALMERS: It's a high priority when you think about how important financial institutions are to the health of our economy and to the opportunities that Australian people have to succeed and get ahead in life. It's a high priority. There are lots of other things that we want to do when we get to Government later this year, and Bill --
GRIFFITHS: That's pretty optimistic, Jim Chalmers, isn't it? Into Government later this year?
CHALMERS: Well, I'm confident about our prospects Emma.
GRIFFITHS: I can hear it. Jim Chalmers, thanks very much for your time today.
CHALMERS: Thank you Emma.
GRIFFITHS: Labor's Financial Services Spokesman and the Member for Rankin, Jim Chalmers there.