20 April 2016
Transcript - #2016042, 2016

In the role of: Minister for Small Business and Assistant Treasurer [21 September 2015 - 18 July 2016]

Interview with Patricia Karvelas, RN Drive

SUBJECTS: Turnbull Government’s increased funding to ASIC

KARVELAS:

Kelly O’Dwyer is the Assistant Treasurer and the Minister for Small Business. Welcome back to RN Drive.

MINISTER O’DWYER:

Great to be with you Patricia.

KARVELAS:

Was it Bill Shorten’s call for a Royal Commission this week that convinced you to take action on this?

MINISTER O’DWYER:

Absolutely not. It’s complete nonsense of Labor to suggest that they in any way lead this discussion or debate. We have been conducting since our time in Government a very rigorous review of the financial system. We said that we would have a financial system inquiry to look at the entire financial system on coming into government and we have implemented that. David Murry has released his report and in it were a number of recommendations on strengthening ASIC and giving them additional powers to intervene in products that were potentially causing harm. Now the Labor Party opposed us on this when we announced it when they were in Government – they said it didn’t need to happen. We said it did and we went on and did it. Following on from the Financial System Inquiry, we said we needed to do a full review of ASIC to make sure that they had the capabilities required to be the tough cop on the beat. We then instituted that inquiry, we had the report handed to us and today we are announcing the response to that inquiry. All of this has been in train for a long period of time. The Government has been getting on with the job, we have been properly investigating what needs to be done and we’re acting – we’re not talking, we’re acting. Labor has been the one behind the eight ball.

KARVELAS:

Kelly O’Dwyer the timing is, well it’s all at the same time. Are you honestly saying that Labor hasn’t exerted significant political pressure on the Government? Would the money have been increased, well really restored, because you gutted it two years ago – you’ve just restored the funding. The money was there, it left and now you’re actually just bringing the money back aren’t you?

MINISTER O’DWYER:

Labor, during their time in Government, actually imposed an increase, an efficiency dividend on ASIC which did strip money out of our financial regulator…

KARVELAS:

That’s true and then the Abbott Government cut it further.

MINISTER O’DWYER:

The Government has been looking at what capability is required for ASIC and we have made a very strong announcement today as part of our Budget process which we need to go through in order to confirm the funding for the regulator that we are giving it increased funding to ensure that it can conduct proper surveillance, increase surveillance and enforcement, this $57 million is ongoing for ASIC. It means that they can be proactive rather than reactive. It means that rather than simply cleaning up the mess after it has happened they can intervene where they see a problem…

KARVELAS:

With the benefit of hindsight, should you not have made those cuts two years ago given now you are restoring the funding that you previously cut?

MINISTER O’DWYER:

What we are doing is we are ensuring that the funding that we are providing to the regulator is targeted to those areas that will increase ASIC’s capability. We are giving it an extra $61 million to ensure that it can engage in a sophisticated data-matching capability. This will mean that they can again, focus on their people, resources and their investigative work in the areas where it will bare most fruit and again in the areas where they will be able to intervene before harm occurs on a systemic basis rather than after the event. These are very strong announcements and it is in keeping with what we have set in train for a long time.

KARVELAS:

On RN Drive my guest is Kelly O’Dwyer, she is the Assistant Treasurer. Our number here is 0418 226 576 if you want to text in your views of what you make of the Government’s announcement today or Labor’s alternative plan which is a Royal Commission. Is it true that the money that you have committed today doesn’t actually kick in until 2017?

MINISTER O’DWYER:

The money is going to be provided to ASIC to get on with the job of being the tough cop on the beat and strengthen their capabilities from this upcoming Budget. We are going to after that ensure that the industry, the banks, pay even more to fund ASIC, like they do with other regulators around the world so that we can make sure that ASIC is fully paid for on a sustainable basis by the industry who are properly regulated by ASIC. Now this industry funding model is a model that we have also committed to today. This will mean that the banks are going to be paying for our regulator which is appropriate; it is also going to…

KARVELAS:

Can I just interrupt at this point because the Treasurer Scott Morrison has said that he doesn’t want that to be passed on to customers but how would you possibly police that?

MINISTER O’DWYER:

  Well, what the banks are going to be paying is only a very small portion of their overall profits. As the Treasurer said today, he would be absolutely furious if the banks chose in any way to try and pass that on to consumers.

KARVELAS:

Well, you couldn’t prove that anyway, could you. They could pass something on. There is always increases in bank fees and they wouldn’t say that that’s why they increased it.

MINISTER O’DWYER:

  Let’s also just look at the other side of this particular coin. We’ve got Labor who’s calling for a royal commission into the banks; this is clearly going to cost a lot of money if this goes ahead. Are Labor truly saying that the banks are not going to pass on this particular cost? They can’t have it both ways on this particular question. So it’s very clear that the Government has told the banks and we will say it again and we will keep repeating it – that they will not be passing on any costs to consumers. This is what they need to do as responsible citizens.  They need to pay for the regulator like banks do in other countries. It is part of the industry funding model, and we need to make sure that we properly put the consumer at the heart of this whole system, which is why the Government has also announced that we are going to be increasing the capacity of the Financial Ombudsman Service and also the Superannuation Complaints Tribunal which has been dealing with legacy case issues as far back as 2012 and requires additional resources in order to deal with those issues. The Government, on top of that, wants to make sure that we have a one stop shop for consumer complaints. Too often, consumers have been confused by which regulator/oversight agency they need to go to in order to get satisfaction for their complaint. We are going to review that system to make sure that we have no one who slips through the cracks and that people can get a very quick response to their complaint and, in appropriate circumstances, compensation to ensure that they are no worse off than they would otherwise have been according to the financial misconduct that might have occurred.

KARVELAS:

Here’s what Jeff Morris, who blew the whistle on misconduct in the Commonwealth Bank’s financial planning arm had to say about this extra money for ASIC..

The problem has been that it doesn’t have the will to use the powers that it already has. So I don’t think adding bells and whistles or more powers to ASIC or more funding for ASIC is really going to achieve anything more than the same, more of these scandals, year after year.

The argument there is that even with an extra $120 million dollars, ASIC is still a weak regulator. That is at the crux of the problem. That’s why people are calling for – the Labor Party and I know there is a lot of public support for it – a Royal Commission.

MINISTER O’DWYER:

But a royal commission will do nothing other than to investigate…

KARVELAS:

It will investigate to potentially improve these regulators.

MINISTER O’DWYER:

But that is the point that is actually the point Patricia. It will make recommendations. It will not provide compensation, it will not do anything other than investigate which is what we have already done with two separate inquires. The Financial System inquiry, very comprehensive inquiry, and also the Capability Review which we released today which has done a full review of ASIC which does say that some of ASIC’s regulatory capabilities are at the forefront of global practice, but does acknowledge that there were aspects that needed to improve, such as their stakeholder engagement, such as their management information systems, such as their data infrastructure. Well, we’re doing that. We’re responding to that. We’re acting. Labor is talking.

KARVELAS:

Ok wouldn’t a way of getting around this Kelly O’Dwyer be to do what you have done today to outline immediate changes and funding that the regulator previously lost under both Labor and the Abbott Government both Governments cut funding to ASIC lets be very clear including your Government and the Labor Government as you have pointed out but wouldn’t the solution be to do what you are doing but also have a long term solution through a Royal Commission to look at long term changes to the sector wouldn’t that actually be the strongest course of action that you could possibly take, stronger than what even Labor is doing wouldn’t that be the way to take all of the sting out of this?

MINISTER O’DWYER:

Well no Patricia. We’ve done the review that’s the whole point here. The Review has actually been done into the financial system. No-one credible is actually asking for a Royal Commission. This is simply something that has been dreamt up by Chris Bowen and Bill Shorten both of whom I might add were Assistant Treasurers, Chris Brown of course was a former Treasurer both of whom decided during their time in Government that this didn’t actually require any further scrutiny whatsoever I mean we on coming into Government said it did, we have conducted the Financial System Inquiry, we responded to it, we are acting on it, we have conducted the capability review, we have responded to it, we are acting on it. These guys simply want to talk about it. It’s nothing more than a political stunt. We all know what they think of Royal Commissions, we have just had a Royal Commission into corruption in the building industry, we know that they pay no attention to Royal Commission’s, they are actually protecting thugs in the construction sector, they are refusing to support legislation that would fix the problem in putting a tough cop on the beat in the construction sector, so they have no credibility.

KARVELAS:

Seems like a my Royal Commission is better than yours competition between both sides.

MINISTER O’DWYER:

But they don’t respect Royal Commissions, they actually haven’t respected the findings of the most recent Royal Commission, they have no credibility, it is a political stunt Patricia and you and your listeners know that.

KARVELAS:

Before I let you go and I have got a couple of text messages on this, and I have seen it reported as well so I think it is only fair to ask you, the National Australia Bank was a sponsor to a fundraiser for your re-election in the seat of Higgins I understand. Someone writes here, and there is others too, but this particular person I am very cynical about the genuineness of the ASIC move given that. What do you say to people who think that you are being – you know – your campaign is being bank rolled by banks and therefore you don’t have enough distance from them?

MINISTER O’DWYER:

Well look, what I would say is I have an independent arm that supports me in being re-elected as the Member for Higgins and all appropriate disclosures, all legal disclosures are made in relation to that.

KARVELAS:

But do you understand why people see it, I am talking about the optics here that when banks sponsor particular MP functions, like your own, that people think well there must be a relationship which is perhaps unethical at least?

MINISTER O’DWYER:

I don’t accept that at all Patricia, and if that is the logic and if that is the logic that the Labor party wants to pursue that means then that they shouldn’t be taking any donations or have any support from the trade union movement which is heavily bank rolling and funding the Labor party. It should mean the Greens of course take no big corporate donations, they had of course the very largest corporate donation in the whole history of donations, more than a million dollars donated to the Greens and not disclosed until well after the last election. There are appropriate laws that look at these issues and they should properly scrutinised the right disclosures, I abide by all of the disclosures that relate to me and that is as it should be.

KARVELAS:

Kelly O’Dwyer many thanks for coming on the program tonight.

MINISTER O’DWYER:

Thanks very much, Patricia.