ABC 7:30 - Royal Commission into Financial Services

08 April 2016

ABC 7:30

SUBJECT/S: Royal Commission into Financial Services

MATT WORDSWORTH, PRESENTER: To discuss this new front, I was joined by the Shadow Minister for Financial Services and Superannuation, Jim Chalmers, a short time ago. Jim Chalmers, there was a motion in the Senate 10 months ago to hold a royal commission into the financial services industry. Labor voted against it then. Why? 

JIM CHALMERS, SHADOW MINISTER FOR FINANCIAL SERVICES & SUPERANNUATION: Well, this decision, Matt, has been taken with some consideration and deliberation. We didn't rush to judgement on some of these issues. But since that Senate motion was defeated, a number of additional issues have come to light including, of course, the issues in life insurance. So we haven't come to this in a rush. We haven't come to this without serious consideration and deliberation. But we think that a royal commission into the finance sector is the right way to - right way ahead for this country right now because too many times, too many instances of people being let down, have come to light. 

WORDSWORTH: So something quite dramatic happened in the meantime?

CHALMERS: Well, there have been compounding instances. There has been a series of allegations, a series of reports, as you know, about customers not being treated as they should in the financial services industry in Australia. We do have other processes under way including ASIC and other processes, but it's very clear to us that those processes are insufficient to get to the bottom of some of these issues. 

WORDSWORTH: Well in 2014, a Senate inquiry into the corporate regulator, ASIC, was damning. It recommended a royal commission with Labor Senator Mark Bishop, who chaired the inquiry, saying "It really is warranted." So, how can you want a royal commission in 2014, not want one in 2015, and now in 2016, it's so pressing that you need one? 

CHALMERS: I'm aware of the history, Matt. There's been a long and detailed process into some of these issues. But I think it's abundantly clear, certainly to our side of politics and around the country as we move around the country talking to people, that the time has come for a royal commission into the financial services industry. 

There have been too many instances come to light. And really, what this is all about, Matt, is not about diminishing the financial services industry. It's about strengthening it. It's about restoring confidence so that people in this country know, and everybody's touched in some way by the finance sector in this country so that people know that they have the confidence in the products that they are purchasing and the accounts that they're participating, and all of those sorts of things. This is fundamentally important. 

And why we say to the Turnbull Government that we want this to be bipartisan, we say to all the parties in the parliament that we want to work together to put this royal commission into place because it is about something more fundamental than politics, more fundamental than elections. It's about the type of economy that we have in this country, and the financial system that sits at the core of it. 

WORDSWORTH: If it's so pressing that you need to have this royal commission now, then why launch a two year royal commission so that any action doesn't happen until after that? 

CHALMERS: Well that's not true, Matt. There'll still be the ASIC - ASIC processes under way. There'll still be the capacity right throughout. Nothing about the royal commission will prevent people from being prosecuted, if that is necessary. Nothing about the royal commission will prevent any of the other processes taking place.

But what it will mean is some additional powers and some additional resourcing to get to the bottom of these issues. Because if we're serious about having a people powered economy, if we're serious about putting people first, we need a financial services industry that supports people's aspirations and doesn't curtail those aspirations.

WORDSWORTH: Does this change in position from 2014 to 2015 to 2016, and the fact this is a two year examination, just like the trade union royal commission was, explain that this is a tit for tat political manoeuvre?

CHALMERS: I don't accept that characterisation at all, Matt. Other people have made the link between the two things. I think this is more fundamental than political game-playing or political judgements that some people have made including the Government.

This is really about one of the most important sectors in the Australian economy, and even more important than that, the way that Australians are treated within that part of the economy. I think it should be above politics. We want to work with all the parties. We want to get this done because it's such an important thing. And since 2014, we have had even more allegations come to light including in insurance, that make a royal commission even more pressing.

WORDSWORTH: Okay, latest allegations are now multinational tax avoidance, big banks involved, will that form part of your royal commission?

CHALMERS: The terms of reference for the royal commission will be developed by government. If the Turnbull Government doesn't pick them up before the election and we win, we'll develop them after the election.

But we do consider that some of very, very serious issues when it comes to multinational tax evasion separate to the specific issues that we're dealing here about the customer experience in the financial services industry. But we will separately, intensely, be monitoring the Panama Papers and all of the other revelations that are coming to light about multinational tax avoidance. We've got a serious policy already on the table. The Government has gone soft on tax avoidance. We will take to the election our very serious policy on multinational tax evasion.

WORDSWORTH: It's not the first inquiry into the financial industry in recent years. The Abbott Government had the Murray report handed down where it said "The regulators' funding arrangements and enforcement tools have some significant weaknesses, particularly in the case of ASIC."

So ASIC also had its budget cut by the Abbott Government. So we know the problem, why not just take this $53 million you're budgeting for this royal commission, put it into the cop?

CHALMERS: Well you're quite right, the Abbott and Turnbull governments cut $120 million out of ASIC, which did severely compromise their ability to look into some of these issues. The Murray Inquiry was a very important inquiry and came up with some very important conclusions, but different conclusions than a royal commission would look at. Murray -

WORDSWORTH: But will you put more money into ASIC, or wait until another report says, two years down the track, you need the money?

CHALMERS: We've got an open mind about ASIC resourcing, but we have said today very clearly that part of the royal commission's remit would be to look at whether the regulators have the appropriate powers and the appropriate resources to do their job, so we've got an open mind about more funds for ASIC, and we do note, as you have, that it has been severely diminished by Abbott and Turnbull Government cuts. 

WORDSWORTH: Alright, Dr Chalmers, thank you very much for your time.

CHALMERS: Thank you, Matt.