Radio Interview: Royal Commission into Financial Services

08 April 2016


SUBJECT/S: Royal Commission into Financial Services; Labor’s Electoral Prospects

RAFAEL EPSTEIN: Jim Chalmers is part of Bill Shorten's financial team, Treasury team. He is Shadow Minister for Financial Services and Superannuation. Thanks for joining us.


EPSTEIN: Why now and not a year ago, when we had just as many issues going on with the banks and when you voted against it?

CHALMERS: Well this isn't a decision that's been taken likely. It has been taken after a lot of discussion and deliberation among the colleagues on the Labor side in the Shadow Cabinet in particular. There has been a series of compounding cases and compounding instances and allegations where we think now that while the other processes that are in train around ASIC and the like, they are worthy processes but they are insufficient to get to the bottom of some of these issues and so we think a Royal Commission is appropriate.

EPSTEIN: But explain to me what's materially different. When in June last year, Labor voted against a Royal Commission, there were issues with people basically getting dodgy advice from the Commonwealth [Bank], from the NAB, from Macquarie Private Wealth. There were issues with the whistle-blower at IOOF and other things. You voted against a Royal Commission then. What is different now about what's emerged in the last few months?

CHALMERS: It is true that there has been a steady stream of incidents and a steady stream of allegations. Even in the last few months, we have seen stories come out of the life insurance industry and particularly CommInsure. We've seen allegations around the rigging of bank bill swap rates by some of the major banks. So we think that these issues have been compounding for some time. We did think about it, we did properly consider whether this is the right course of action and we have come to the conclusion that enough is enough. There are too many stories out there and too many victims out there --

EPSTEIN: So it's just that there are more and more incidences? I'm just wondering if what's going on now is different to what was going on twelve months ago or if it's just happening, and there are more allegations and that's the spark?

CHALMERS: Well certainly more allegations have come to light.

EPSTEIN: How much would it cost?

CHALMERS: It would cost $53 million. We've had the Parliamentary Budget Office look at the cost. It's approximately $26 million a year and we think it will run over two financial years. So we do have that preliminary costing already sorted from the Parliamentary Budget Office. We think that's money well spent. Every Australian's life is touched in some way by the financial services industry so we think that's a good use of taxpayer money to get to the bottom of these issues. Because we're about strengthening the banking system in this country. We're about restoring confidence, not diminishing it. It's in every Australian's interest that we get to the bottom of these issues so that we can begin to restore confidence in what is otherwise a strong, profitable part of our economy.

EPSTEIN: Just explain to me why the Treasurer Scott Morrison says that the problem with a Royal Commission is that it implies widespread corruption -- they're his words -- widespread corruption. Is that what you think is happening, widespread corruption?

CHALMERS: Well what we want to see is the powers of a Royal Commission applied to that question. We want to know whether there is systemic problems in the banking and financial services industry more broadly--

EPSTEIN: Forgive me, but there's a different between problems and widespread corruption, isn't there?

CHALMERS: Well those were Scott Morrison's words. We have put out there today what we think should happen with a Royal Commission. We have put out in some detail the sorts of things that we wanted to address including whether or not banks are properly exercising their duty of care over customers, whether or not the regulatory systems and bodies have what they need to do their jobs -- all of these things are very important considerations for the Royal Commission. When we get to the bottom of these issues we can make the kind of conclusions that Scott Morrison is making now.

EPSTEIN: Would you include looking at offshore tax havens? Would it examine whether banks can do more or should do more to stop that from happening?

CHALMERS: We think that is a very important issue, but an issue that's separate to the confines of this Royal Commission that we've announced today. We do monitor very closely and we do have a deep and long-standing interest in trying to close some of the loopholes that see some of the big companies in this country escape their tax obligations. So we do intend to continue to put policy out there in that space, but this is a very separate, from our point of view, a separate Royal Commission into the conduct of the financial services industry.

EPSTEIN: 1300 222 774 is the phone number. Labor if elected would have a Royal Commission into financial institutions. In fact, they want the Government to get going on it before an election. 1300 222 774. Jim Chalmers, the Shadow Minister for Financial Services. Jim Chalmers, the Greens say you're robbing their policy bank. They came up with this Royal Commission idea before you did, they came up with action on negative gearing before Labor did. Are they correct?

CHALMERS: We come up with our own policies in our own way. We do have careful and deliberative processes, as I said before. You were right to point out a moment ago that we are inviting all parties, especially the Turnbull Government, to work on this in a bipartisan way. We think that this is a more fundamental issue than elections or politics or parties. This goes to the very core of the type of economy that we want and the type of strong and resilient financial sector that we want. So ideally, all parties would get behind this including the Turnbull Government. If that doesn't happen and we win the election, then we'll act on it immediately afterwards.

EPSTEIN: But arguably this and negative gearing are the two boldest things you've come up with in the lead up to the election. Would you concede the proposed them first?

CHALMERS: Well the Greens propose all kind of things as you know. We work on our policy program separately to them. We're very careful when it comes to economic policy to put the time and effort and thought into it. We've been thinking about and working on both of these for some time now. It's up to them when they announce their policies and the amount of thought they put into them. But this is our policy, it's a Labor policy. We invite everybody to get on board.

EPSTEIN: It feels like things have turned this week, doesn't it? The momentum is with you, not the Government.

CHALMERS: It does feel like that and I'll tell you why. If there's one thing that defines Bill Shorten and the Labor Party that he leads is that we want to put people first. We want to put people back at the very centre of our policies. I think people are appreciating that. They don't think that the Government is doing that. They think that the Government is all talk and no action. They do appreciate that we are sitting down and carefully and deliberately working through a set of policies that put people first again. And that's what this Royal Commission is all about. Because ultimately in an economy that puts people first, we want to have financial institutions that support people's aspirations not cruel and curtail those aspirations.

EPSTEIN: You don't want to appear too cocky though do you about your electoral fortunes?

CHALMERS: No, there's a long way to go. Even if the election is on the second of July, there's a long way to go until the election. Most people would consider us to still be the underdog. But I think you are right in your assessment that people are listening to Labor. The Government is sizzling out, Malcolm Turnbull is sizzling out and so we do have a real chance.

EPSTEIN: Jim Chalmers, Shadow Minister for Financial Services and Superannuation. Thanks so much for your time.

CHALMERS: Many thanks.