SKY News AM Agenda

12 April 2016


SUBJECT/S: Labor’s plan to fund health & education – and balance the Budget; Royal Commission into financial services industry; Superannuation adequacy; Trade with China

TOM CONNELL: Welcome back to the program and joining me now is the Shadow Minister for Financial Services and Superannuation, Jim Chalmers. Jim, thanks for your time today. I might pick up where I left off with Josh Frydenberg and give you a bit of a right of reply, if you like, on this BIS Shrapnel Report. It would make sense, wouldn't it, if you were told that there was some modelling going on and you were considering this policy, maybe someone in the office thought 'let's do our own modelling on this'?

JIM CHALMERS, SHADOW MINISTER FOR FINANCIAL SERVICES AND SUPERANNUATION: Look, the report's own authors have conceded that the report is riddled with errors and it doesn't even model Labor's policy. I think it says everything about Scott Morrison and Josh Frydenberg that they are the only ones who still seem to be clinging to this discredited report. Some of our best independent thinkers on this issue, including the Grattan Institute, have said that the report doesn't even pass the giggle test. So I think it is very disappointing but not entirely surprising to see that the Government and some of its supporters are still pushing it around when it has been so thoroughly discredited already.

CONNELL: No temptation for Labor to go out and do its own modelling and to have its own numbers to point at every time they talk about this policy? 

CHALMERS: Well, this issue has been modelled to death by respected, independent experts. People like Richard Holden and Saul Eslake and the Grattan Institute have had something to say about this BIS Shrapnel report, as I said. So I think the issues are out there on the table. We've put our policy out there. The Government spends all of their time criticising our policies because they don't have any policies of their own.

CONNELL: Okay, well on to your portfolio and, obviously, when we're talking about financial services, this Royal Commission - proposed one - is front of mind. I'm interested though, the Government appeared to be quite open to this prospect of ASIC funding, tipping money back into it. I know it was taken out during the Abbott Government's first Budget. About $120 million was taken out then, forty million or so in efficiency dividends. Is Labor going to put this money back in, considering that's the best short-term way to get more scrutiny on the industry?

CHALMERS: Well the head of ASIC was today out there saying those substantial cuts, the $120 dollars in cuts that you referred to, have done real damage to their ability to be pro-active when it comes to policing this part of the economy and he also said, Greg Medcraft also said, that confidence in the sector has been severely compromised. And so I think it is important that we have a Royal Commission. The Prime Minister has got himself into all sorts of trouble, he's got another backbench revolt now over his baffling decision not to consider a Royal Commission into our financial institutions. He's got a hopelessly divided Government. He promised there would be an end to the captain's calls of the Abbott era and now he's made a captain's call over this Royal Commission and he's got himself in all sorts of trouble over it.

CONNELL: Right, well this Royal Commission is going to take a couple of years. We've got to wait until the election and if Labor wins for that to be set up. We're talking until actual action will be taken maybe two or three years. You can put money straight into ASIC and beef up their powers. Bill Shorten said the time has come, enough people have been ripped off. Won't more get ripped off, if this is such a bad problem, if you don't put money straight back into ASIC?

CHALMERS: All we're getting right now is these weasel words about restoring some of the funding, the $120 million that was cut, that's the most important point. But to your broader point about the Royal Commission, there's nothing about the Royal Commission that would prevent governments of either persuasion putting more money into ASIC. There's nothing about a Royal Commission that would prevent prosecutions happening in the meantime.  All kinds of measures could be taken in the meantime. But what we're asking the Royal Commission to do among other things is to look at the powers and resources of our regulators to make sure that they do have the capacity to get to the bottom of these scandals which have compromised Australians' confidence in our financial institutions.

CONNELL: But just to where Labor is on this right now. You want to go ahead with a Royal Commission. You said there was nothing to stop people putting money back into ASIC and beefing up their powers in the interim. Will Labor commit to that, given you're saying this is a pressing issue?

CHALMERS: We've got an open mind about it, Tom. We think it should be part of the conversation. But we've got a concrete plan out there, a costed plan, to have a Royal Commission. We think that's money well-spent to give Australians the confidence in their institutions, to sweep away all of this doubt that has accumulated so that we can have strong and profitable banks but also ethical banks that behave in the interests of their customers.

CONNELL: Would you think then, this is your area, that there might be some sort of announcement, possibly in the lead-up to the election that Labor would put a figure on it? You said the Government had weasel words on ASIC funding, put some concrete ones in there.

CHALMERS: Well the point I'm making about the Government and ASIC funding is that they pulled out $120 million and now they say, ‘look we might consider putting some of that back in’ and they think that constitutes a substantial plan. We've got a substantial plan to get to the bottom of it. We've got an open mind about increasing ASIC funding. We'll make any announcements about that if we're ready. But we think the most comprehensive way to look at these issues, all of these ways that Australians have been let down by their financial institutions is to have a Royal Commission which does have extra, more substantial powers than ASIC has right now and which will look at the whole system including the regulation of the sector. We think that's the best way to go.

CONNELL: Okay, another area in your portfolio, superannuation. Report today that suggests about a quarter of Australians now looking to work beyond the ages of seventy -- the main reason: financial security. Now you've got superannuation changes which will trim some of the benefits going to wealthier Australians. What about the ones at the lower end. Could you consider putting that money back into the lower end of superannuation so that you can alleviate what's clearly an increasing financial pressure for retirees?

CHALMERS:  Tom, we want people to have access to the resources for a decent and dignified retirement. We think we've got a terrific superannuation system but it's not perfect and one of its imperfections is when it comes to adequacy for people on low and middle incomes in this country. That's why we fought tooth and nail against the Government's abolition of the Low Income Super Contribution which will impact 3.6 million Australians from next year. It's why we fought tooth and nail against their three freezes to the Superannuation Guarantee. Those two policy decisions -- the Super Guarantee and the Low Income Super Contribution -- have struck right at the core of people's retirement aspirations in middle Australia and we think they'll do real damage. So yes we are looking at ways that we could responsibly and affordably begin to address that issue of adequacy at the low end and in the middle income areas. We'll have more to say about that but we've had a detailed policy on tax, as you say, on the table for a year now. It's five minutes to midnight in an election year and we still haven't seen what the Government intends to do, apart from those two very damaging decisions that they have taken already which are hurting people's retirement incomes into the future.

CONNELL: So is the starting point restoring them and perhaps doing even more? Is this going to an expansive Labor policy that we're looking at?

CHALMERS: I think anybody who looks objectively at our superannuation system knows two things. The first is that the tax concessions are poorly targeted so that the bulk of the benefit goes to the top end, and the second thing is that we do have a real issue with adequacy, particularly with women in the superannuation system. So we do need to be constantly looking at ways to be rectifying that balance away from the excessive tax concessions at the top towards a more just and equitable treatment at the lower income levels

CONNELL: Alright, it sounds like announcement to come. We'll wait for that one. Finally, reports today that China is essentially shutting down elements of Australians trying to export into the country. There's a list from the tax authority in China that essentially approves some but hasn't approved for example a couple of dairy exporters, Blackmores Health is a bit uncertain as well. How concerned are you about this and what do you think the Government should be doing?

CHALMERS: I'm very concerned about these disturbing reports for some of our industries. We want our goods and services to have more access to markets in China and around the region, not less. The Prime Minister is in China this week, he has an opportunity to raise our concerns with the Chinese leadership directly. He shouldn't squib that conversation like he's squibbing a conversation with the Chinese about steel.

CONNELL: So, this should be something he should really go hard on and go public or is this about behind closed doors being the best way to do it?

CHALMERS: I think he owes it to exporters who want more access to Chinese markets to raise this with the Chinese leadership. It needs to be urgently clarified. There's a lot of uncertainty in the Australian economy about access to Chinese markets. He has an opportunity to raise this directly at the most senior levels in China. He shouldn't squib it. It's very disappointing to see he’s squibbing a conversation about steel. He can't add this to the list of things he will be squibbing in China.

CONNELL: Jim Chalmers, thanks for your time today as ever on Sky News. You're watching AM Agenda, we'll be back with more in a moment.