22 April 2018
Transcript - #2018020, 2018

Interview with Barrie Cassidy, Insiders

Subjects: Banking Royal Commission, new penalties for corporate and financial misconduct, new powers for ASIC, company tax cuts

BARRIE CASSIDY:

Kelly O'Dwyer good morning.

KELLY O'DWYER:

Good morning.

BARRIE CASSIDY:

Welcome back.

KELLY O'DWYER:

Thanks, Barrie.

BARRIE CASSIDY:

Are you at all embarrassed by that now given you described it as a talk-fest and it turns out it's a whole lot more than that?

KELLY O'DWYER:

Well Barrie, clearly we have all been appalled by a number of issues that have been aired at the Royal Commission. There is no question of that. But the government has been very alive to the problems in the financial services industry and we have been acting from the get-go. We have known that people have had problems when they have complained to their financial institutions and rather than sitting idly by, we have gone about establishing the Australian Financial Complaints Authority. We have known that there have been issues with financial advisors who have given advice to people about their retirement savings with only four days' worth of training and being able to hang up their shingle and call themselves an expert. Instead of sitting idly by, we have acted, we have taken action and have established the financial advisor standards and ethics authority.

BARRIE CASSIDY:

But what you didn't do for a long time is set up a Royal Commission. Why didn't you do that?

KELLY O'DWYER:

Well, let me tell you what we have been doing. What we have been doing is we have been lifting the standards for financial advisors, we have been putting caps on the upfront commissions that people could, in fact, charge when they sold people insurance. We heard that harrowing story at the Royal Commission about insurance that was sold and huge upfront commissions were paid. The Government has actually acted on that. We have increased the money for ASIC, $127 million, increased surveillance enforcement. We increased their power and only on Friday, Barrie, we announced the culmination of the work that we have been doing, the ASIC Enforcement Review Task Force where we're increasing both the civil and criminal penalties for both individuals and corporations who are involved in corporate or financial misconduct as well as increasing powers of ASIC.

BARRIE CASSIDY:

And we'll get back to that. But ASIC is saying that's not necessarily the best way to go in any case.

KELLY O'DWYER:

No, ASIC has actually asked for these powers.

BARRIE CASSIDY:

I'll give you an opportunity to talk about that shortly. But first of all were you wrong to delay the calling of a royal commission for as long as you did?

KELLY O'DWYER:

Well, Barrie, I think the record speaks for itself – we have taken action. We have taken action, we established the Royal Commission, Barrie. We didn't do this as a political stunt...

BARRIE CASSIDY:

But you took so long to set it up. Were you wrong to do that?

KELLY O'DWYER:

I'm happy to answer your question but you've got to give me a chance. We did it soberly, we did it carefully. We wanted to take action straightaway to address those issues that we knew about. We reflected on whether, in fact, it was the right thing to do to establish it and we decided it was. We have done it, we have established it, not only with very broad terms of reference rather than the narrow focus that some might have actually had instead, but we have also put in place a very good Royal Commissioner who I think is demonstrating what a fantastic job that he is doing– demonstrating what a fantastic job the Royal Commission is doing in actually getting to the heart of these issues.

BARRIE CASSIDY:

I think I gave you an opportunity to answer the question, you didn't. Were you wrong to delay it as long as you did?

KELLY O'DWYER:

Look, Barrie, I have answered your question.

BARRIE CASSIDY:

No, you haven't.

KELLY O'DWYER:

We have in fact established...

BARRIE CASSIDY:

You have established it but it took a long time coming. Were you wrong?

KELLY O'DWYER:

Well let me put it to you this way – we would not have done all those other things that we have otherwise done to address these actions...

BARRIE CASSIDY:

Alright let me put it another way then, because clearly I'm not getting a direct answer on that. You said that the Royal Commission, at one stage when Labor suggested it was reckless and ill-conceived, were you right or wrong about that?

KELLY O'DWYER:

You can obsess and Labor can obsess about these issues. I'm actually obsessed about fixing the problems and that's what I have been focussed on as a Minister...

BARRIE CASSIDY:

You said it was very dangerous, were you right or wrong when you said it was very dangerous?

KELLY O'DWYER:

Well, we also have to have as a government a very sober view not only on the issues around corruption and misconduct but also around financial stability...

BARRIE CASSIDY:

It's an easy question to answer. Were you right or wrong?

KELLY O'DWYER:

Barrie, Barrie I'm trying to actually answer your question. And that is – the financial services sector accounts for about 10% of our economy. You can't rush into these things as a stunt. Bill Shorten went on radio in Melbourne declaring the need for a royal commission and he said, "I have jotted down some ideas on a piece of paper." They never produced terms of reference. In fact, when the Government established the Royal Commission at the beginning, they said it was going to be a whitewash. Then they said the banks had written the terms of reference and now they want to claim credit. So, Barrie, let me say to you – we have done the right thing for the Australian people.

BARRIE CASSIDY:

Alright. Another thing you said at the time – this would be of no benefit to consumers. You said that. Surely shining a light on the atrocities that the banks have committed in some cases, that will benefit the consumers, were you right or wrong about that?

KELLY O'DWYER:

ASIC has made a statement that said that they have been investigating a number of these issues. So a lot of these issues that are being aired before the Royal ...

BARRIE CASSIDY:

Will the consumers benefit from this exercise? Will they benefit?

KELLY O'DWYER:

There is no question we got it right in establishing the Royal Commission. Very happy to say that to you Barrie, very happy to say that.

BARRIE CASSIDY:

Will consumers benefit from this Royal Commission?

KELLY O'DWYER:

They will benefit from the action we have taken, they will benefit from the Royal Commission...

BARRIE CASSIDY:

From the Royal Commission?

KELLY O'DWYER:

From the royal commission as well, there is no question.

BARRIE CASSIDY:

Then you were wrong about that, will you concede that? You were wrong to say consumers would not benefit?

KELLY O'DWYER:

I'm very happy to concede that we have taken the right action. We have been taking the right action, and we'll continue to take the right action.

BARRIE CASSIDY:

Barnaby Joyce conceded you got it wrong. The four banks have all conceded they got it wrong. Why are you so reluctant?

KELLY O'DWYER:

Because, Barrie, governments need to be sober and deliberate in how they go about their business of government.

BARRIE CASSIDY:

How about being upfront as well?

KELLY O'DWYER:

And we have been upfront. We have been upfront. You know, it's very clear, the record demonstrates, you know, that we took action in relation to all these other measures. We have increased the powers of ASIC, we have increased the funding, we put them on a secure footing, we brought in a new chair of ASIC, we've brought in a new deputy chair with enforcement focus, we said we need to have higher standards for financial advisors, we're putting in place a one-stop shop for consumer complaints, we put in place the banking executive accountability regime which, you know, a number of people said we shouldn't do but we did because we wanted people in banks to have accountability. So these things would not have happened, Barrie, had we not taken action from the get-go. Had we simply said, "We're going to kick it off into the long grass", we have not done that, we're going to continue to take action. But we were right to establish the Royal Commission with broad terms of reference, that's what we have done...

BARRIE CASSIDY:

But you won't concede you were wrong to delay it….

KELLY O'DWYER:

…..that is part of what the Turnbull Government has delivered.

BARRIE CASSIDY:

You said earlier that, you, your approach is broader, Labor's was too narrow. And yet at one point you said that Labor's approach would damage the economy. Doesn't it then follow if you have a broader approach you'll damage the economy even more.

KELLY O'DWYER:

The Government, when we put together our terms of reference, were very very careful in how we constructed the terms of reference. We wanted to make sure that the Royal Commissioner could go into any area that he needed to go into in order to examine our financial system. Our financial system is not just the banks, it includes superannuation, it includes insurance. We've been hearing issues raised in the Royal Commission about those specific areas, areas the Government put in its terms of reference.

BARRIE CASSIDY:

Isn't part of the problem that you have now, is that you haven't exactly had an aversion to royal commissions? Your approach on the banks was in stark contrast to the way that you rushed to Royal Commissions in areas where you could put your political opponents in the dock. You put Kevin Rudd in the dock, you put Julia Gillard in the dock, you put Bill Shorten in the dock over royal commissions that I think a lot of people would say were nowhere near as urgent or as compelling as this one.

KELLY O'DWYER:

Well, the Government's established one. I don't know...

BARRIE CASSIDY:

But it took you a long time, you were dragged kicking and screaming to the Royal Commission.

KELLY O'DWYER:

If you want to go over the political entrails, Barrie, let me say this...

BARRIE CASSIDY:

Well, it's important as well.

KELLY O'DWYER:

The first person who called for a royal commission was actually Mark Bishop in the Labor Party when Labor was in government. The big scandals that happened – Trio, Great Southern, Storm Financial – happened when Bill Shorten was the Financial Services Minister, and had direct responsibility. He was almost three years in the job. Labor did virtually nothing. We acted on coming into government. We put in place a Financial System Inquiry. We have been instituting the vast bulk of all of those recommendations. Labor opposed that. You know, I think it is a bit rich for people to claim that we should have acted earlier when, in fact, they had the opportunity, and when we, as a Government, have been very sober in the way that we've gone about it, and we are actually getting results for consumers. We care about consumers.

BARRIE CASSIDY:

And on Friday, you did, as you said, announce stiffer penalties. What's the point, though, of stiffer penalties if you don't catch them in the first place?

KELLY O'DWYER:

That's why you have to strengthen the regulator as well. You have to make sure that you not only have the right penalties – so you can't simply have penalties that are seen by some corporations or institutions as the cost of doing business – no more, we've said to that. We have said, "You need to have stiff penalties where you can disgorge profits if people have done the wrong thing." And we've said that you need to have a strong regulator that can actually enforce that. So you've got to build their capability. We've got a new chair of ASIC, our conduct regulator, that's James Shipton. We have a new deputy chair that we have announced and that is Dan Crennan QC with a specific focus on enforcement. We have put them on a secure funding footing by having industry funding for ASIC. We have strengthened their powers – part of what we announced as well on Friday was strengthening their powers to actually ban individuals who had been involved in misconduct. We have also given them additional ability to actually look at telecommunications interception materials and strengthen their warrant powers so that they can actually investigate, go after, prosecute, and stop those people doing the wrong thing.

BARRIE CASSIDY:

We're running short of time but I want to ask you about company tax cuts now. Given what we've heard in the Royal Commission, it's going to make it so much harder now for you to prosecute a case that you want to give big tax cuts to the banks. In fact, the lion's share of the tax cuts to the banks.

KELLY O'DWYER:

We want to actually give tax cuts to all companies.

BARRIE CASSIDY:

Including the banks.

KELLY O'DWYER:

Well, I mean... ..so, Barrie, what are you suggesting? That somehow we have a...

BARRIE CASSIDY:

It's not what I suggest. Derryn Hinch, a critical player in this – you need his vote to get these company tax cuts through – he says the banks should be excluded.

KELLY O'DWYER:

So, you know, we're going to have a new taxation system that's based on a morality tax? I mean, let's get a little bit real here.

BARRIE CASSIDY:

Well you've just lost Derryn Hinch's vote.

KELLY O'DWYER:

Let me explain why it is that we are prosecuting the case for a company tax cut. I think it's pretty clear. We have had 26 years of uninterrupted economic growth, but that is not guaranteed. That prosperity, the high living standards that Australians have benefited from – they're not guaranteed. We've got to put in place the right economic framework that can actually encourage our economy to grow. You do that through investment. You do that through the creation of jobs. And that will increase wages. We are not internationally competitive.

BARRIE CASSIDY:

So you give these billions of dollars to the banks. How do you think they'll spend the money?

KELLY O'DWYER:

I'll finish this point – we have not been internationally competitive. We were in 2001 when we cut the company tax cut rate down to 30%. We were ahead of 19 other OECD countries. Now, we are ahead of 3. The US has cut their tax rate from 35 to 21%, the UK has cut it down to 19%.

BARRIE CASSIDY:

Let me go back to the question. If you give, if you give, the banks these billions of dollars, how do you think they'll spend the money?

KELLY O'DWYER:

We think they're going to invest in their businesses. When they invest in their businesses they actually invest...

BARRIE CASSIDY:

The banks will?

KELLY O'DWYER:

We think that they're going to invest in their businesses, they're going to innovate, they're going to make sure that they can employ...

BARRIE CASSIDY:

They'll pass on wage increases to their employees?

KELLY O'DWYER:

This is what we've heard from some of these big companies.

BARRIE CASSIDY:

You trust them to do this?

KELLY O'DWYER:

This is what we've heard from a number of big companies...

BARRIE CASSIDY:

And you trust them?

KELLY O'DWYER:

In fact, Bill Shorten...

BARRIE CASSIDY:

Do you still trust the banks to do this?

KELLY O'DWYER:

I think the banks themselves have got a lot of reparation that they need to do in order to build trust of the Australian people. There is no question about that.

BARRIE CASSIDY:

Including how they spend this, the tax cuts?

KELLY O'DWYER:

You are trying to conflate two issues that I think should not be conflated. It is good for our economy – I mean, it's more than just the banks who are actually part of the economy here, as well.

BARRIE CASSIDY:

Sure. It includes them.

KELLY O'DWYER:

It includes them, right, but it includes a whole host of other businesses as well. Let's not forget, some of these bigger businesses employ smaller businesses. Are you seriously suggesting that, if we've got small business who actually benefit from the company tax cut...

BARRIE CASSIDY:

They've already got the cuts. I'm talking about whether the banks should get them.

KELLY O'DWYER:

…and if they do the wrong thing we should have some sort of morality tax on them? Let's be a little bit real.

BARRIE CASSIDY:

OK, thanks for coming in this morning. Appreciate it.

KELLY O'DWYER:

Great pleasure.