Read the full speech below.
Ms BUTLER (Griffith) (10:31 ): It is really a pleasure to be here to speak in respect of the Treasury Laws Amendment (2017 Measures No. 5) Bill 2017 and the ASIC Supervisory Cost Recovery Levy Amendment Bill 2017. I do note the member for Burt's criticisms of the naming of the bills, and I agree with him that it is important to be transparent about exactly what we're debating.
Having made those remarks, I would like to talk about the contents of the bills and to specifically go to just a few issues in respect of each of the substantive parts of the legislation. Mr Deputy Speaker, as you well know, the Australian Securities and Investments Commission plays an incredibly important role in the context of our economy, as Australia's markets corporate and financial services regulator. I have to say that there is a lot of scepticism out there about whether or not it's even possible in our system, given the power that banks have, for a regulator to do anything to affect their conduct or to hold them to account. We certainly would say on our side that it is important that there be a banking royal commission and that it be a genuine banking royal commission that will look at holding these industry participants to account. I note that the government has instituted its own royal commission, after being dragged kicking and screaming to doing so. It took a long time for the government to acknowledge even the possibility of having a royal commission. Labor has made some criticisms of the conditions under which the royal commission has been established, and I won't repeat them here. But suffice it to say, our nation is in need of some good, strong scrutiny into the practices of Australia's banks. It is taking a royal commission to do that. At the same time, there needs to be an ongoing strong regulator that can be Australia's financial services regulator, that can hold the banks to account and, most importantly, that can enforce Australia's laws.
So you would be aware, Mr Deputy Speaker Mitchell, because of the interest that you take in financial services matters, that there has been some recent litigation brought by the Australian Securities and Investments Commission in respect of manipulation of the bank bill swap rate against Australia's four big banks. Two of those proceedings have settled, with each of the two settling banks paying tens of millions of dollars in fines as a consequence of their conduct in respect of the bank bill swap rate. One did not settle, but it has concluded in terms of hearings and a decision is awaited. The fourth, in relation to the Commonwealth, has really only just kicked off. We've only just this week seen the detailed allegations being made against the Commonwealth Bank in that case. I'm sure we will all be following it with great interest.
It is important to reflect on what we expect of a regulator like ASIC when it comes to litigation. This is a point that I raised with the new chair, James Shipton, and I might use this opportunity to welcome him to the chairmanship of the Australian Securities and Investments Commission. He is filling big shoes. I do hope he will take a very, very robust approach to enforcement of the law and to consumer protection and making sure that ASIC's responsibilities in respect of consumer protection are discharged. I put to him quite recently in a committee hearing that there are some thorny issues for ASIC in terms of how they go when they prosecute companies, particularly banks, or bring civil proceedings against them. That is this: if they win all their cases, does that show they are successful and invincible as a regulator? The concept of apparent regulatory invincibility is an important one. Market participants need to feel that if there are proceedings pursued against them they are likely to cause real difficulty in the event that the participant has engaged in unlawful conduct. Or does a high success rate mean that the regulator is pursuing only the easy cases and not the hard cases? In other words, a high success rate can be interpreted in very different ways when it comes to litigation.
In this case, I think we can be confident that these cases that ASIC is bringing in respect of the manipulation of the bank bill swap rate would not be considered to be easy cases. We will wait and see what outcomes arise once the courts hand down their decisions, particularly in respect of the matter that has concluded its hearings but hasn't yet been finalised and in respect of the new Commonwealth Bank matter, the other two having settled. But we should be wary and cautious, whatever the outcome, that we do not inadvertently, by our responses, put pressure on the regulator to stop bringing hard cases and to stop taking on issues that are complex and involve breaches of different aspects of the law.
Having said that, the existing provisions that ASIC is using to pursue these particular cases in respect of financial benchmarks manipulation are important but clearly insufficient in terms of future work in this area. So it's quite pleasing that this bill is bringing forward additional regulation and the establishment of criminal offences in respect of financial benchmarks manipulation. The bill will make manipulation of all financial benchmarks used in Australia a specific criminal offence as well as being subject to civil penalties. Individuals will be liable to fines of up to the greater of three times the benefit they gain or $945,000, which is 4,500 penalty units. Of course penalty units continue to grow as they are adjusted. A body corporate, on the other hand, will be liable to fines of up to the greater of $9.45 million—which is 45,000 penalty units—three times any benefits from the manipulation, or 10 per cent of the entity's turnover in the previous year.
These are meaningful penalties. That's what we need in this country. We do need there to be a big stick in the wings so that there are incentives for industry participants to conduct themselves according to the law. Often the existence of these provisions is enough to deter unlawful conduct. I'm certainly not saying that ASIC should be doing nothing but bringing legal proceedings. Of course they need to have a multidimensional and multifaceted approach to encouraging willing compliance, seeking undertakings, seeking civil remedies where appropriate and ultimately being able to seek criminal penalties as well. That's a hierarchy of different approaches to the regulation of industry, and it's a judgement call as to which part of that hierarchy should be used at any one time. I certainly don't mean to suggest that there should be nothing but criminal prosecutions. Having said that, the availability of criminal prosecutions is crucial to ensure that there are incentives in both senses—both positive and adverse incentives—for the industry participants to comply with the law.
The manipulation of financial benchmarks has real life consequences for people—for people sitting around the household table, for people in their businesses trying to work out what to invest. If there's manipulation of benchmarks then that can put up the cost of borrowing and that can damage the confidence that our society has in our financial markets and in financial services provision. Of course, anything that damages confidence makes investment more difficult, makes loan decisions more difficult and makes economic activity more difficult. So it is important that, in seeking to maintain confidence and regulation of our financial services sector, these criminal offences are introduced and there are strong laws incentivising good behaviour in the financial services sector.
Secondly, this bill will establish a new licensing regime requiring administrators of certain designated significant financial benchmarks to obtain a new benchmark administrator licence from ASIC. Again this regulation will assist in promoting confidence in the financial services sector, so I welcome it. These bills also go to the supervisory cost recovery levy. Deputy Speaker, you'll recall that the new supervisory cost recovery levy was introduced last year and started taking effect from 1 July 2017. The government introduced a user-pays model, where those being regulated make a contribution to the cost of regulating them. The formulae that have been set up are aimed at allocating the costs to those who require the most regulation, so it's a complex set of formulae.
When we spoke about this move to having the industry pay for the operations of ASIC we noted that that might give some opportunities in respect of some of ASIC's other work. I specifically want to mention the shadow minister's speech of 15 June 2017. She did note the complexity in the way that the industry cost model has been created and indicated that we would be watching that closely, which remains the case. We also accept that it's important that ASIC be properly resourced so that it can be a good, strong law enforcement focused regulator. Of course, the government's own conduct hasn't always been consistent in sending that message to ASIC. You'll recall the $120 million cut to ASIC in the 2014 budget. I spoke against that particular component of the 2014 budget at the time. I thought it was reckless to take away funding from one of our important white-collar crime regulators.
Anyone who's read the 2014 statement of expectations of the government towards ASIC would find it fairly light on when it comes to consumer protection. There's a lot of quite warm language in there about encouraging compliance, but you don't see from this government a really full-voiced robust demand that the regulator really focus on consumer protection. I hope that will be taken into account when the government drafts the next statement of expectations for ASIC, in the event that there is another one coming down the pipeline now that there is a new chair.
The shadow minister also in her speech on the original ASIC industry cost-recovery legislation noted that, as part of the government's process of developing that bill, there had been submissions calling for additional funding for financial counselling services, including from Financial Counselling Australia and the consumer group CHOICE. The shadow minister said:
Given the importance of financial counsellors to those in financial trouble, and their importance to the functioning of the financial sector, we think that these issues warrant further consideration from the Government.
I do hope that the government has taken that on board.
My interest in financial counselling, apart from the general interest that anyone in this place would have, arises from my role as the shadow assistant minister for preventing family violence. That is because there is an important need for financial counselling for women leaving violent relationships. It's a time of great risk of poverty and, accordingly, it is important to note that the shadow minister, in addressing the previous bill, talked about the arguments that had been made in the context of the industry funding model that there should be consideration given as to how that might support further or better resourcing for financial counselling in this country. I make no further comment on that other than to draw the attention of the House to those remarks that the shadow minister made at the time.
The other part of this bill that can't really go without comment is the Productivity Commission reform. This reform will, or is at least intended to, set up a regime with a view to ensuring that Indigenous perspectives are included in the Productivity Commission's consideration of policy measures. There has been, I think, a lot of concern raised about the definition of Indigeneity contained in this legislation. I hope that the government will take on board the criticisms that have been made. We do not need to go backwards in the way that we recognise Indigeneity in this nation. We don't need, in something that's purportedly designed to improve outcomes for Indigenous people, to inflict upon them old-fashioned and outdated thinking in respect of definitions of Indigeneity, and I certainly hope that this is a matter that will be able to resolved by consent, once this legislation heads to the Senate. I'm sure that the member for Lingiari, who will be speaking in respect of this legislation soon, will have many more things to say about the definition of Indigeneity in the legislation.
It is important to say in the context of this that I acknowledge that the Turnbull government is seeking to create in the Productivity Commission a specific focus on the impact of policies that are created purportedly for the benefit of Indigenous people. But it's another thing altogether to actually listen to Indigenous people themselves through a mechanism that provides them with a real voice to parliament as was anticipated by the Uluru Statement from the Heart. I call on the Prime Minister to rethink his opposition to supporting the Uluru Statement from the Heart. I hope that he will listen to Indigenous people and make good on his commitment to do things with people, not to them.