The PRESIDENT (Senator the Hon. Scott Ryan) took the chair at 09:30, read prayers and made an acknowledgement of country.
DOCUMENTS
Tabling
The Clerk: I table documents pursuant to statute as listed on the Dynamic Red.
Full details of the documents are recorded in the Journals of the Senate.
COMMITTEES
Meeting
The Clerk: Proposals to meet have been lodged as follows:
Environment and Communications Legislation Committee—
private meetings otherwise than in accordance with standing order 33(1) Thursday 6, 13 and 27 February and 26 March 2020, from 1 pm
public meeting on Monday, 10 February 2020, from 5.30 pm.
Environment and Communications References Committee—private meetings otherwise than in accordance with standing order 33(1) Thursday 6, 13 and 27 February and 26 March 2020, from 1 pm.
Foreign Interference through Social Media—Select Committee—private meeting otherwise than in accordance with standing order 33(1) on Tuesday, 11 February 2020, from 12.30 pm.
Rural and Regional Affairs and Transport References Committee—public meeting today, from 4.30 pm.
The PRESIDENT (09:31): I remind senators that the question may be put on any proposal at the request of any senator.
BILLS
National Vocational Education and Training Regulator Amendment Bill 2019
Second Reading
Consideration resumed of the motion:
That this bill be now read a second time.
Senator FARUQI (New South Wales) (09:31): I rise to continue my remarks on the National Vocational Education and Training Regulator Amendment Bill 2019. We cannot talk about a future that is just and that deals with the climate crisis and not talk about vocational education and training. Over the last decade, we have seen a decimation of our world-class TAFE, with massive funding cuts, increasing fees and privatisation of the sector which saw the entry of shonky providers, and this disaster needs to be reversed. Our TAFEs are vital for people to be able to gain and regain the skills needed for this transition and transformation. This is good for individuals but it is even better for all of society. Failing to fund them properly is incredibly short-sighted, and it's destructive, yet we've seen TAFE being slowly destroyed by the government's neglect, lack of funding and privatisation.
On vocational training the government says one thing and does another. They say they want to encourage people into trades, but then they underfund skills training by tens of millions of dollars. Labor and Liberal just recently teamed up to strip $4 billion from TAFEs and universities by abolishing the Education Investment Fund. Combined with this chronic underspend in skills funding, TAFE and their students are being starved of resources. Data shows us that student numbers have dropped by two per cent and that training hours are down by six per cent at a time when we are meant to be addressing the skills crisis and the jobs shortage. The motivation for the deliberate decimation of TAFE by state and federal governments is no mystery: they are ideologically opposed to the very principle of lifelong public education, particularly when there's a buck to be made for their friends and donors in for-profit education corporations by directing public funds their way.
The Greens are, and always will be, very proudly the party of public education. We are proud to support our TAFEs. The Greens have a plan to rebuild TAFE as the vocational training provider of choice for students. We will remove the Gillard-era contestable funding requirements and make TAFE and uni free for all, removing private for-profit providers entirely from federal funding of vocational training and giving as close to 100 per cent of federal training funding as possible to TAFEs. This is the bold vision that we need for our vocational educational training in Australia.
Senator O'SULLIVAN (Western Australia) (09:34): I rise to speak on the National Vocational Education and Training Regulator Amendment Bill 2019. This bill seeks to improve the efficiency and effectiveness of the Australian Skills Quality Authority, known as ASQA, without significantly increasing the regulatory burden on prospective or current registered training organisations. A more efficient and effective assessment of our vocational education and training sector will ensure higher standards and better prepare those who undertake vocational training for their future endeavours.
The genesis of this change comes from two independent reviews: Professor Valerie Braithwaite's All eyes on quality review of the National Vocational Education and Training Regulator Act 2011 and Strengthening skills: expert review of Australia’s vocational education and training system, by the Hon. Steven Joyce. These changes are part of the government's $18.1 million commitment to support and reform the national VET regulator, including improving engagement with the sector, ensuring that its regulatory approach is more effective, and ensuring better outcomes for students.
The bill includes a number of provisions to improve the efficiency and effectiveness of regulation in the sector, and I'm proud to be part of a government that has such a strong focus on ensuring that our vocational education system is robust and student-focused. This bill will strengthen registration requirements for the sector by requiring training organisations to demonstrate commitment and capability to deliver quality training. This will ensure that enrolling students are confident in the education they are enrolling to receive.
Further, this bill will clarify that standards in relation to VET accredited courses are ongoing standards and that these standards must be met throughout the entirety of registration. This will ensure that standards do not slip after initial registration while ensuring that the overall regulatory requirements are not onerous or burdensome. Electronic data sharing will be facilitated with prescribed bodies, making it easier for students to move courses and to pick up where they left off if life gets in the way of their studies. Further to this, data sharing between ASQA, tuition assurance scheme operators and the National Centre for Vocational Education Research will be streamlined. This is going to reduce double handling and make the whole system more efficient. This in turn will mean that TAFEs and vocational education providers can spend more time focusing on students and less time on red tape compliance and data management. This is something that all stakeholders have been calling for. It will ensure that provisions in relation to written undertakings given to ASQA by registered training organisations are clarified so that they can apply to all requirements of the National Vocational Education and Training Regulator Act.
Further, the bill will, importantly, provide the minister with the power to issue a direction to the regulator regarding the performance of its functions and exercise of its powers. This will ensure that the buck stops with the minister and that the minister has the power to intervene should things get out of hand or require intervention. It also provides a way, if necessary, to ensure that directives are carried out without being held up by step-by-step regulations. The bill also contains technical amendments that will streamline arrangements for commissioners and modernise corporate reporting requirements. This will bring the sector into line with expectations and allow it to be more responsive, adaptable and innovative.
The bill will also enable the Secretary of the Department of Education, Skills and Employment to release information to the public about training by registered training organisations and the outcomes and experiences of students attending registered training organisations. Feedback from employers of different RTOs will also be released. This will ensure full sector transparency and will allow prospective students to be fully informed about the quality of education they are likely to receive. Feedback from employers will be particularly useful, as the end goal of training should be to gain meaningful and rewarding employment.
The bill will also increase transparency of audit outcomes through the public release of audit reports by the regulator. This, again, will increase transparency and allow students and trainees to make an informed decision in relation to the training they undertake. These changes will act as a kind of market mechanism, weeding out underperforming and poorly run RTOs, and will ensure that new providers are not entering a market that is a certificate farm and that sees students more as a cash cow.
We are working on and fixing Labor's failed VET FEE-HELP scheme. Since 2016, over 66,500 students have had VET FEE-HELP loan debts of over $1 billion re-credited by the Commonwealth. Under Labor's disastrous VET FEE-HELP scheme, dodgy providers flourished and students were systematically exploited. They signed up and accumulated huge debts for training packages that were never delivered.
Some stakeholders have raised the potential for ASQA's release of audit papers to have a negative impact on the sector and have queried whether they're suitable for the public domain. So, through earlier consultations with the states and territories on this matter, care has been taken in this bill by this government to ensure that ASQA is not immediately required to publish audit reports once the amendments in the bills commence. Although more transparency is always a good thing, with the introduction of this legislation we do not want to see a rush to drastic reform and risk leaving behind or disadvantaging any providers. The government will work with stakeholders to identify appropriate information to include in published reports and will ensure that audit reports will not be published until after this consultation phase.
In October 2019, the government announced a rapid review of the Australian Skills Quality Authority, with a focus on the regulator's governance, policies and culture. This is complementary to these proposed legislative changes. The review is due for completion in March this year and will inform an ongoing program of reform to enhance ASQA's educative role and quality improvement approach. This will continue to support effective, modern regulation into the future, and the government will ensure that we have further announcements on the reform of ASQA in the future.
Further, some stakeholders have raised concerns that the amendments allowed for RTOs' registration to be cancelled with immediate effect. I want to put those concerns to rest, because this is not correct. The amendments in this bill do not change the natural justice requirements in the existing National Vocational Education and Training Regulator Act. These provisions provide certainty to RTOs by guaranteeing that providers are notified of ASQA's intention to cancel, and provide time for RTOs to respond to the notice. The amendments provide ASQA with flexibility and discretion in determining when cancellation takes effect. This is designed so as to minimise the impact on students. The last thing we want to see is students leaving part-way through a course and being left high and dry, with no benefit from their investment. For example, it may be appropriate to allow a provider to continue operating for a period while its enrolled students complete their training, or to arrange for them to transfer to another training provider with full course carry-over credits.
This government is committed to the vocational education sector. We are a party that wants to see people get ahead—the quiet, aspirational Australians. We want to give them the opportunity to do that. Nothing says 'aspiration' more than investing in yourself through education. In the financial year 2019-20, we are investing over $3 billion in vocational education and training. This includes $1.5 billion given to the states and territories every year through the National Agreement for Skills and Workforce Development. We are spending $1.5 billion to fund the government's own skills programs, including employer initiatives and support for apprentices, with a particular focus on regional employment, and $175 million is going to the states and territories via the Skilling Australians Fund, to support increased apprenticeships and traineeship numbers, again with a focus on regional employment.
We are the party of education, at all levels. We have introduced VET student loans so that students can access financial support in order to gain their qualifications, safe in the knowledge that they will not be ripped off. This amendment seeks to continue to strengthen the sector. I look forward to voting for this amendment and I commend it to the Senate.
Senator CASH (Western Australia—Minister for Employment, Skills, Small and Family Business) (09:44): I rise to sum up debate on the National Vocational Education and Training Regulator Amendment Bill 2019. In doing so, I thank all colleagues who have contributed to the debate on the bill.
The bill will ensure that the national VET regulator, the Australian Skills Quality Authority, otherwise known as ASQA, is positioned to safeguard and enhance the reputation and integrity of Australia's vocational education and training sector. Last year the government committed $18.1 million to support reform of ASQA. These reforms will ensure that regulation of the VET sector is transparent and effective and is aligned with the modern best practice models of governance and engagement. The bill is the first step of changes to ASQA which respond to recommendations from the 2018 Braithwaite review into the regulator's primary legislation and the 2019 Joyce review of VET to ensure the legislation is fit for purpose.
The bill supports ASQA's move towards transparency, ensuring it is a balanced regulator that builds quality and capacity in the VET sector. These measures ensure ASQA has the necessary powers to regulate registered training organisations and ensure only those RTOs genuinely committed and adequately resourced to deliver our quality training to students are allowed to operate. Improved transparency of regulatory actions will occur with the public release of RTO audit reports once an appropriate format for these reports has been consulted on and agreed. This important measure will improve VET sector confidence in the ability of the regulator to make appropriate, consistent and proportionate regulatory decisions.
Expanding information entered on the publicly available national register and enabling ASQA to share information electronically with others responsible for administering laws relating to VET will assist students to make informed enrolment decisions and provide employers with better information about training quality. Further technical amendments in the bill support ASQA to be a more responsive, efficient regulator and facilitate improved engagement with the sector.
ASQA will have powers to use enforceable undertakings to take action against an RTO where it deems an undertaking is more effective. This aligns it with similar powers of other regulatory regimes. Additionally, ASQA will have powers to stay the legal effect of regulatory decisions if an RTO seeks an internal review. This provides flexibility to support training delivery so that students' studies are not interrupted during a review.
The bill will also enable a simpler and faster-acting appointment process for ASQA commissioners. The minister will have the ability to appoint a commissioner to act as deputy chief commissioner during a vacancy or whilst the deputy commissioner is absent from duty. This is not currently available under the act. As a result, the deputy or acting deputy chief commissioner will automatically act as the chief commissioner where there is a vacancy in the position of chief commissioner. Further, the minister may appoint an acting commissioner, ensuring ASQA can continue to operate effectively and with a quorum.
The Morrison government is committed to ensuring the continuous improvement of Australia's skills and training sector, and a strong, responsive, transparent VET regulator is essential to our commitment. I commend the bill to the Senate.
Question agreed to.
Bill read a second time.
Third Reading
The DEPUTY PRESIDENT (09:48): There is no committee stage. I call the minister.
Senator CASH (Western Australia—Minister for Employment, Skills, Small and Family Business) (09:49): I move:
That this bill be now read a third time.
Question agreed to.
Bill read a third time.
Financial Sector Reform (Hayne Royal Commission Response—Protecting Consumers (2019 Measures)) Bill 2019
Second Reading
Consideration resumed of the motion:
That this bill be now read a second time.
Senator KITCHING (Victoria) (09:49): The Financial Sector Reform (Hayne Royal Commission Response—Protecting Consumers (2019 Measures)) Bill 2019 has been a while coming. It took the government 27 starts before it voted for a royal commission, and it seems to be taking it a commensurately long time to implement the recommendations of that royal commission. This bill finally implements four of the government's long list of unmet commitments from its response to the banking royal commission. This bill, when it finally passes the parliament, will bring the government to a grand total of 10 out of the 76 recommendations with the actions completed.
This bill does three things. Schedule 1 of the bill extends unfair contract term laws to cover insurance contracts. Schedule 2 of the bill brings funeral insurance into the general financial consumer protections regime. And schedule 3 of the bill introduces a best-interest duty for mortgage brokers and provides for regulations to reform mortgage broker regulation. I will step out the effect of each of these changes and why they are important.
Schedule 1 of the bill brings insurance contracts from the Insurance Contracts Act 1984 into the unfair contracts regime established under the ASIC Act. This is important because of the widespread use of standard form contracts by many businesses. These are essentially used on a 'take it or leave it' basis. I need to be clear. Although this is a reasonable business practice, it leaves customers with no power to negotiate with businesses if elements of a standard form contract are unfair. This is why Labor introduced the unfair contract terms regime in 2010, to protect consumers from exploitation and unfairness. Under the regime, terms in standard contract terms are nullified if they are found to be unfair, but until now insurance contracts have been exempt from this regime.
This has been highlighted as an issue for a while now. Commissioner Hayne, in his final report back in February, recommended that unfair contract terms be extended to cover insurance contracts. It was recommendation 6 of the Australian Competition and Consumer Commission's interim report into northern Australian insurance in 2018. It was recommendation 3.1 of the 2018 Parliamentary Joint Committee on Corporations and Financial Services bipartisan report into the life insurance industry. It was recommendation 11 of the 2017 Senate Economics References Committee's inquiry into the general insurance industry. And it was proposal 10 of the 2017 Australian Consumer Law Review.
There are some clear indications of harm. A 2012 government report estimated that, from available data on insurance claims, the detriments faced by customers as a result could be up to $10 million per annum. Since 2012 we have only seen the number and intensity of floods and bushfires increase. Australian insurance customers have suffered at least $20 million in detriments from unfair contract terms, and there has been report after report recommending that this government take action on this issue.
There is a clear question of priorities, of course, as well. Why has the government delayed introducing this legislation? I guess it's better late than never. The new law will bring insurance contracts into the unfair contract terms regime, but there are some sensible further refinements to address the unique issues relating to insurance contracts. Terms that define the main subject matter of an insurance contract will be excluded from the regime. Terms determining the upfront prices, excesses and deductibles will be excluded where they are disclosed in a transparent manner. And the duty of utmost good faith will continue to apply to insurance contracts. These refinements will ensure that insurers can offer insurance contracts with the knowledge necessary to set prices and assess risks, while consumers are protected by the new features of the regime.
In relation to funeral insurance, schedule 2 of the bill ensures that consumer protection provisions of the Australian Securities and Investments Commission Act 2001 apply to funeral expenses policies. The amendments do not impact the treatment of prepaid funerals, which continue to operate as funeral benefits. Some of the most distressing stories arising from the royal commission were in relation to funeral insurance. Labor welcomes this change. Commissioner Hayne was searing in his condemnation of so-called funeral expenses policies.
We also need to recognise the particular importance of Aboriginal and Torres Strait Islander people living in remote and regional Australia who are likely to purchase funeral insurance. The story of the so-called Aboriginal Community Benefit Fund is particularly extraordinary—a for-profit funeral insurance company that was neither run by Indigenous Australians nor run for their benefit or the benefit of their communities. This company, now trading as Youpla Inc., sold funeral insurance products to Indigenous Australians which lead to them paying more in premiums than their families could ever potentially claim in benefits. This company until recently had a direct relationship with Centrelink's Centrepay system, allowing them to deduct premiums directly from Centrelink payments. This company built a business model on exploiting the genuine desire of Indigenous Australians to ensure that their families were not left penniless at their passage. While Labor welcome the amendments in this schedule and see that they will put an end to a particularly sorry business model, we want to ensure that the approximately 19,000 policyholders who bought funeral insurance products in good faith are not left in limbo.
Schedule 3 of the bill introduces a best-interests duty for mortgage brokers that will ensure the consumer's interests are prioritised when a mortgage broker provides credit assistance. This will mean that a duty will apply in relation to the provision of consumer credit assistance. The policy also provides a regulation-making power to regulate mortgage broker remuneration. The draft regulations set out by the government require that the value of upfront commissions be linked to the amount drawn down by borrowers instead of the loan payment, ban campaign and volume based commissions and payments, and cap soft dollar benefits. Further, the period over which commissions can be clawed back from aggregators and mortgage brokers will be limited to two years, and passing on this cost to consumers will be prohibited.
We support these reforms and note that the Productivity Commission has found that the competitiveness of Australia's home loan market is now dependent on mortgage brokers. It will be important to ensure that these reforms work as intended. I note that the government has committed to a review of the mortgage broker reforms in three years time and yet this commitment appears nowhere in the legislation. While Labor will not be blocking passage of this bill, we will be working hard to ensure that this review takes place as promised.
Senator WHISH-WILSON (Tasmania) (09:57): I start by saying how glad I am that we're now receiving some legislation directly from the Hayne royal commission into financial services. The Greens worked very hard over nearly five years to get that royal commission up. I understand that this government is planning to bring before both the House and the Senate up to 42 pieces of legislation that directly relate to the recommendations of the Hayne royal commission.
I also add for anyone interested in this that a large number of bills were brought before both the Senate and the House prior to the royal commission. We were aware of many problems in the financial services sector, dating back to some of the original inquiries I was involved in from 2013, and this house legislated some significant reform. I pay credit to Kelly O'Dwyer and other ministers who had been active over this time. We didn't feel like it was enough, though. We wanted a full, independent inquiry into much of what the Senate and the senators who attended the various Senate inquiries had heard. We wanted a royal commission that had investigative powers, that had resources, that had adequate time and that had broad enough terms of reference to deal with some of the structurally inherent problems in the financial services sector.
The royal commission uncovered much that shocked the nation. Senators attended the many Senate inquiries and heard from victims of financial crime. Many of the victims have been in constant contact with my office over many years, as they have been with other senators' offices. I acknowledge Senator Williams's contribution to this debate and Senator Dastyari's contribution to getting a royal commission up. This was a team effort across all political parties. In the end even Senator O'Sullivan—and I will utter his name in this chamber—played an important role in finally getting the Hayne royal commission up. It is good to see this Financial Sector Reform (Hayne Royal Commission Response—Protecting Consumers (2019 Measures)) Bill 2019 before us today. I look forward to speaking to many bills in this place.
I will be brief in my contribution today. The terms 'best interests obligations' and 'conflicted remuneration' have been debated ad nauseam in this chamber since at least 2010. Labor brought in the future of financial advice laws, which was a very large reform, trying to stamp out conflicted remuneration. But, as we found out with the government's attempt to water down the FOFA laws, things did slip the net. One of the things that slipped the net was conflicted remuneration within the mortgage broking sector. That was focused on by the Hayne royal commission. I was very proud that the Senate was able to avoid watering down the FOFA laws that were brought in by Labor in 2012, but this was missed in the original legislation. It's high time to try and crack down on it. We want to make sure that this bill applies to all commissions received by mortgage brokers. I'll have some questions to ask on that if we go into committee stage. We want to make sure that mortgage brokers are stopped from receiving conflicted remuneration of any sort. We know that with the attempts to water down the FOFA laws there were some new catchphrases thrown in, like a checklist approach. Rather than perhaps commissions being paid or remuneration that might have been conflicted, employees were going to be remunerated in other ways from the bank. Either way, you had to look at where the incentives lined up as to whether employees would have actually been conflicted in their financial advice.
We want to know whether mortgage brokers will still be able to be paid commissions by landowners for facilitating property sales—I have just received advice from the Parliamentary Library in relation to that—and whether mortgage brokers have to disclose conflicted remuneration received from landowners facilitating property sales.
One thing that does concern me is that some mortgage brokers are still owned by banks, so they're vertically integrated within the banking structures. One thing that did disappoint me from the Hayne royal commission was that the Greens, my office, made a 96-page submission to the commissioner in the final stages of the royal commission, putting forward recommendations we would like the commission to look at, including breaking up the banks, looking at the vertically integrated business model. In the years that we were looking at this, we didn't believe it was possible to totally stamp out conflicted remuneration or some of the bad behaviour, the profit based culture that had permeated this industry and has caused so many problems, while the banks were totally vertically integrated. Interestingly enough, many have gone down the voluntary road of breaking up their vertically integrated business model, even without the government having to step in. They've decided that, for various reasons, it's too hard for them. Nevertheless there are still banks that, when a customer walks in and speaks to the teller, are happy to try and sell everything to them. That's still an ongoing issue.
In addition to the new best interests obligation, this bill requires mortgage brokers to resolve conflicts of interest in the consumer's favour. It sounds pretty logical. You would hope that that would have always been the case, but we heard many examples where it wasn't. In particular, if the mortgage broker knows or reasonably ought to know that there is a conflict between the interests of the consumer and the interests of the broker or a related party, the mortgage broker must give priority to the consumer's interest. This requirement is based on section 961J of the Corporations Act, which places an equivalent obligation on financial advisers.
That obligation, to give priority to the consumer's interests, is not limited to conflicts of interest that mortgage brokers currently know about. Mortgage brokers are expected to take active steps to identify all conflicts of interest covered by section 158LB to minimise the risk of a contravention, including obligations that can arise because of their commercial relationships with third parties. I'm not quite sure how that applies to a mortgage broker that is owned by a bank, if that is integrated within that organisation—whether they would even be classified as a third party. For example, if a mortgage broker has referral arrangements for the real estate agent, such that they are an associate, then the broker would need to consider the conflicts that could arise and ensure that they give priority to the interests of the consumer over their own interests—mostly their remuneration—or the interests of the real estate agent.
What constitutes reasonable steps will vary from case to case, according to the content of the obligation. Failure to take reasonable steps would include a failure to respond to or address identified problems that create a risk of a contravention—that is, licensees will need to act to prevent contraventions of the law and not simply respond to contraventions once they have happened. The reasonable steps are still open to interpretation.
The Greens have a very strong view that banking is an essential service. It's not a get-rich-quick scheme like it has been in this country and other nations for many, many years. Since banking has been deregulated in Australia, households have been carrying more risk. We've seen rising economic inequality, and we strongly believe that returning banking back to basics with strong government regulation and intervention to protect customers and improve stability is crucial. I think the Hayne royal commission's uncovered a shocking degree of rot within the foundations of the Australian banking and financial system. We're now one of the most heavily financialised economies in the world, with an enormous pool of money that creates enormous opportunity for fraud, for bribery, for misconduct and for pushing people into dodgy products and other systemic abuses of customers that this sector is supposed to serve. Let's have no doubt at all that the regulation that is before us today—and the other legislation coming to the Senate: the other 41 pieces of legislation, if that reporting is accurate—is designed to fix a systemic problem.
I remember asking a question of the late—sorry, I shouldn't say 'the late'; of former Senator George Brandis—
Senator Scarr: He's still alive!
Senator WHISH-WILSON: who's still alive, I understand!—in question time back in 2015 about some of the misconduct that we'd seen, and he very famously replied to me that it was just a few bad apples, which of course we'd all heard before, and how dare I insinuate that people who worked in banks were somehow criminal. That wasn't what I was insinuating, but I was insinuating that there are structural conflicts of interest within the banks and within these business models that over time have led to a culture and a cultural problem of profits before people. Of course we've seen the wash-up of that. Anyone who attended the Senate inquiries and heard from the hundreds of victims who had lost their homes, livelihoods and even their lives because of the way they'd been treated by financial advisers, the banks and other financial services companies would want to do something about it. I'll be watching with interest to see other legislation that comes before this place, and the Greens will be supporting this bill.
Senator RENNICK (Queensland) (10:08): I rise today in support of the Financial Sector Reform (Hayne Royal Commission Response—Protecting Consumers (2019 Measures)) Bill 2019. All 76 key recommendations from the 2019 Hayne royal commission were directed towards resolving specific issues of negligence and institutional misconduct, and addressing the negative impact on public confidence in Australia's banking and financial services sector. Of the 76 reform recommendations, 54 were directed to the government, 12 to the financial regulators and the remaining 10 to the industry to implement.
The Morrison government has made it clear that it will take action on all 54 government recommendations and has announced a further 18 commitments to help address the issues raised in the commissioner's final report. The government is on track to meet these commitments and take action on the commission's recommendations.
This bill is part of the Morrison government's strong commitment to take action to better protect consumers and regain public confidence in our financial sector. Specifically, this bill seeks to address concerns identified by the royal commission within the mortgage broking industry—in particular, issues that limit confidence in professional standards and cause criticism of established remuneration structures.
The government is also addressing royal commission recommendations 4.2 and 4.7 with respect to the application of unfair contract terms within the Australian Consumer Law and the unethical approach that has been identified by the royal commission regarding funeral insurance. Funeral insurance policies have been found to unfairly target at-risk Australians by selling policies that hold little to no value in many circumstances. Commissioner Hayne revealed that poorer, less well-educated Australians are typically the ones most likely to be entangled in overpriced, often meaningless contracts with funeral insurers.
The recent banking royal commission highlighted a particular insurance fund, the Aboriginal Community Benefit Fund, that was found to have over two-thirds of its funeral insurance policyholders under the age of 30. It was also found that over a third of their policyholders were under 15 years of age. You can't help but ask the question: why are so many people under 30 being sold funeral insurance, let alone children under 15? This is quite obviously a rort. Clearly, their premiums will exceed any possible payout, leading to undue financial hardship for these families. This is simply unacceptable, especially from an industry that, in many cases, is supposed to provide protection for families struggling with the prospect of high funeral expenses.
The Morrison government has committed to protecting these vulnerable Australians. The current framework of the Corporations Act has allowed these companies to be exempt from the scrutiny of the Australian Securities and Investments Commission. By amending the definition of 'financial services' within the Corporations Act, this exemption will be repealed to better ensure that Australians receive fair and equitable service from funeral insurance providers.
To further implement recommendation 4.2, this bill also removes any ambiguities within the ASIC Act that may currently exist to confirm beyond doubt that insurers will not be given a free pass. With respect to recommendation 4.7, the government will also implement a long-overdue addition to the unfair contract terms to now include all insurance brokers. There is simply no sound basis, in legal principle or in business, to suspect that an insurer would suffer an increased burden should they be included under such terms. The only negative consequence for any insurer will be if their claims are not being settled efficiently, honestly and fairly. And if that were the case, such a situation should not be tolerated by the insurance industry or by Consumer Law. By enacting this recommendation, it is a priority for this government to ensure that consumers and small business can renew their insurance policies without fear of being subjected to unfair contractual obligations.
Small business and consumers alike can rest easy knowing that the Morrison government is holding insurance brokers accountable by ensuring that they conduct their business in an open, fair and efficient manner that is fit for purpose. Australians can be assured that their financial commitments—whether they are small-business ventures or loans obtained to purchase a house or a car—will be treated with the utmost care and to the highest standard of professionalism and confidence.
For years, mortgage brokers have been able to act in their own interests, interfering with the best interests of their clients. It must be acknowledged that many brokers do act in the interests of their clients and without the need for purpose-built legislation to rein in bad behaviour. Unfortunately, the evidence of the royal commission made it quite clear that some within the industry have taken advantage of the system. As Liberals, we believe in reducing government regulation, in reducing red tape and in reducing government interference in the private sector. However, it is clear from the findings of the financial services royal commission that this industry requires immediate legislative boundaries in order to ensure better consumer outcomes.
In practice, the proposed 'best interests duty', defined by law as a legal obligation to ensure that the best interests of the clients are to be upheld, should already be the foundations of the mortgage broker's business. I do commend those brokers who already apply this framework. However, it is clear that this is not always the case. As I'm sure even the opposition will agree, this obligation must be front and centre to assure the Australian consumer that they are receiving the best advice for them, rather than the advice which best fills the broker's pocket.
An established duty of care is already in place for many professionals, such as doctors, teachers and construction contractors. They all must act in the best interests of their patients, students and clients, as required by law. Why should mortgage brokers be any different? After all, a home loan is one of the biggest financial commitments Australians make during their lives. It should rightly be expected that such a commitment, when guided by experts, would be dealt with professionally. It is hardly unreasonable to apply the same standard to mortgage brokers as the law applies to countless other professionals.
There is almost universal support for this proposal across the industry. Key mortgage brokers and lenders have all accepted a legally imposed duty of care as a welcome change that will work hard to regain consumer confidence. Striking the right balance with the mortgage broking industry is made all the more difficult by the currently conflicted remuneration structures. This government aims to eliminate the negative effect of such payments to better ensure that Australians receive the best quality advice. To this end, all campaign and volume based commissions, incentives and payments will be banned by this bill. It is the role of a mortgage broker to be impartial as to the product or lender that he or she recommends. While such payments continue to exist, this impartiality comes under pressure. Broker recommendations under existing commissions are likely to be made irrespective of the client's interests in order to maximise financial advantage for the brokers.
This government is committed to ensuring that conflicted benefits, whether monetary or not, are not made or accepted by brokers and lenders. This provision acts on recommendation 1.2 of the Hayne royal commission report. The government notes that trailing commissions have also been called into question by the royal commission. However, based upon a significant body of advice from industry experts, it has been determined that the best course of action is to hold off on such changes due to potential worker distortion and associated unintended consequences. It is not in the interests of this government nor the Australian people to see the mortgage broker industry crumble. There are approximately 16,000 mortgage brokering businesses in Australia employing over 27,000 people who collectively offer invaluable cost-effective advice to a great many Australians.
The industry review that the government has proposed is to take place in three years and will look at all remuneration structures for mortgage brokers, including trailing commissions, to better determine the effect on the industry and the likely impact on consumer protection standards. The Morrison government wants to ensure that the mortgage broking industry survives and prospers. We do not want to cripple an entire industry with sudden large-scale changes piled on top of each other all at once. This government prefers a process by which the industry is given time to adapt to newly implemented changes. Following a review process, future changes can then be fully considered and properly evaluated as standalone propositions and integrated into the industry, if necessary, without unreasonable or perverse consequences. The Morrison government respects all recommendations of the royal commission and has also heard the concerns of mortgage brokers. We listened and now we have acted.
It is the government's view that an unbiased review process in three years should be conducted into these matters. The review process will consider the impact that the currently proposed legislation will have on the industry. It will also determine whether changes to trailing commissions and the introduction of a 'borrower pays' remuneration structure are sustainable or even desirable. The government would not want to see sound mortgage broker advice become a commodity that only the rich can afford. We acknowledge the hard work and dedication of a majority of mortgage brokers in providing a high-quality, cost-effective service. This bill simply reinforces what many in the industry already practise, and this bill further highlights the government's commitment to restoring consumer confidence in our banking and financial service industry by assuring Australians that they will receive fair, ethical and efficient consumer service.
The Morrison government is confident that the measures contained in this bill constitute much-needed reforms to directly benefit all Australian buyers, borrowers and homebuyers. I commend the bill to the Senate.
Senator McCARTHY (Northern Territory—Deputy Opposition Whip in the Senate) (10:18): Labor is supporting this bill, as previous speakers have detailed, but there are valid concerns about the implications for thousands of Aboriginal and Torres Strait Islander people who have signed up for funeral cover under the Aboriginal Community Benefit Fund. I'd like to bring this to the attention of the Senate because I think, Minister, it's enormously important that these stories of First Nations people are heard here and placed on the record. Certainly, in terms of my constituents in the Northern Territory and, indeed, right across Australia, I would like to see a profound effort to look at the concerns that I'm going to raise in my speech.
Schedule 2 of this legislation extends consumer protection provisions of the ASIC Act 2001 to cover funeral insurance policies. The interim report of the Hayne royal commission identified a number of issues with funeral insurance—in particular, the sale of funeral insurance products to First Nations people. Recommendation 4.2 from the royal commission interim report proposed removing the exemptions for funeral expenses policies. It says the law should be amended to remove the exclusion of funeral expenses policies from the definition of 'financial product' and put, beyond doubt, that the consumer protection provisions of the ASIC Act apply to funeral expenses policies. There is a history of vulnerable people being targeted and exploited by dodgy selling practices when it comes to funeral expenses policies.
I will digress a bit to give you an example from across the Northern Territory. We have over 200 remote communities, and our death rates are so enormously high. We're obviously going to hear more about that next week from the Prime Minister and the opposition leader to the parliament in the Closethe gap report. In terms of funerals, in lots of communities—we have over 100 Aboriginal languages—there is sorry business at some place, or more than one place, across the Northern Territory every week. Sorry business is where someone has passed away or where those who are sick, usually on renal dialysis or with other health complications, choose to go back home because they want to be on country. The costs involved in holding funerals in these places across remote regions of Australia are enormously high, like in the protection of the body in a morgue. A lot of the morgues are not in these communities, therefore places like Alice Springs, Tennant Creek, Katherine and Darwin and Nhulunbuy become the focus. Places in Arnhem Land that cannot hold bodies have to work out places in the wet season to fly their loved ones in. The cost, just of burial, is extremely high in those remote places.
The Hayne royal commission heard some disturbing and, quite frankly, sickening examples of how First Nations people have been targeted by companies, with some having what can only be described as dodgy selling practices. I would go so far to say it's worse than dodgy. It is certainly about greed. It is certainly about an uncaring position towards those who are enormously vulnerable in Australia.
It must be remembered that First Nations people have lower life expectancy, higher morbidity rates and a high risk of life-threatening illness. We spend a lot of time at funerals. I'm constantly involved with families and constituents across the Northern Territory with some aspect of sorry business. Just over the Christmas and New Year break we were remembering a number of family members for people in Arnhem Land, in Gulf Country and also in the Wadeye region, the west of the Territory. Too much time and too much money from the First Nations community is spent in the death industry. It's something this Senate could actually have a really good look at.
I mentioned the cost of having funerals, but there are other additional costs that come in when relocating loved ones from the hospitals or morgues in Darwin, Katherine, Tennant Creek, Alice Springs and Nhulunbuy. There are questions of costs, like: will they fly their loved ones or will they come by road? What about in the wet season when some of those roads are cut? Then we have issues with particular places like Borroloola, where my family come from. For the other communities that do have morgues, when the power goes down—when technology goes down due to flooding or any other circumstances—there is a roll-on effect on the cost. And then there is the emotional wellbeing cost to families in how to deal with the loss of a loved one.
If I can just reflect on my clan system with the Yanyuwa Garrwa people: when someone passes away a couple of things come into place. The first thing is the respect of that person who's died. We can't say their name. In my language we call that person 'mudinyi'. 'Mudinyi' means that person has passed away and we can't say their name anymore. We follow that respect right up to the burial of the person.
For many families, the burial of a person can take up to three months, before they can actually have the funeral. So, the sorry-business period is from the immediate moment that a loved one dies to when the loved one is buried. If, financially, people have been unable to afford the cost of a funeral, afford the cost of transporting a body by plane or by vehicle, then to also have to pay the cost of a coffin—all these things are considered in that period of sorry-business mourning.
Sometimes in Arnhem Land that can blow out to six months. If you talk to some of the hospitals in the Northern Territory, they will tell you that they've had bodies in there for many, many months. This is unfortunately the reality of First Nations people, particularly in the Northern Territory, and I'm absolutely certain that it's replicated in Far North Queensland and certainly in the far west of Western Australia, and possibly across the country. Again, the Senate needs to be able to examine just what is going on in this space of sorry business and death.
The Hayne royal commission clearly outlined and made some very real comments about the efficacy—or lack of efficacy—of the Aboriginal Community Benefit Fund, and I do want to speak very clearly about that, and the absolute need for the government to make sure that the people who have invested in that scheme, and we know that there are thousands of those people, are not disenfranchised because of the passing of this bill and the potential for organisations to fall over. My colleagues in the other place have written to the minister drawing his attention to the 19,000 people who have invested in the Aboriginal Community Benefit Fund over many years. They invested in good faith and should not be left out of pocket, disadvantaged because of this legislation.
I would also say that more needs to be done to prevent all Australians and in particular First Nations people in remote areas from being fleeced by very, very expensive funeral plans. I believe we need to look at the overall expenses and the profits being made by the industry that surrounds death. People should not be exploited at one of the most vulnerable times of their lives.
Senator ASKEW (Tasmania) (10:27): I take this opportunity to make a brief contribution on the Financial Sector Reform (Hayne Royal Commission Response—Protecting Consumers (2019 Measures)) Bill 2019. This bill is further proof that the Morrison coalition government is continuing to fulfil our commitment to taking on all 76 recommendation of the Hayne Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry. During his speech to the Victorian Chamber of Commerce and Industry in Melbourne on 19 August 2019, the Treasurer announced the implementation roadmap, which set out how the government would deliver on its comprehensive response to the commission's recommendations. At that point the Treasurer indicated that we had already started to implement some of our commitments, and I will quote from that speech, noting that the date is 19 August:
Implementation is already substantially under way
The Government has made significant progress in implementing its response. We have already implemented 15 of our commitments, 8 of which relate to Commissioner Hayne's recommendations and 7 to our additional commitments. We have 24 streams of work under way.
Further, he went on to say:
Commitments already implemented include:
• Banning superannuation funds from treating employers, which will ensure that trustees do not use inappropriate means to influence employers to select a fund for their employees.
• Ensuring that trustees and directors of superannuation funds are subject to civil penalties for breaches of their best interests obligations.
• Funding the payment of around $30 million in legacy unpaid determinations from the Financial Ombudsman Service and the Credit and Investments Ombudsman.
During his response, Commissioner Hayne encouraged changes to be made carefully and simply, and the bill before us today seeks to respond to a further four of these recommendations.
This commitment to taking action on the recommendations laid out by Commissioner Hayne represents the largest and most comprehensive corporate and financial services law reform package in 30 years. It's important to emphasise that implementing the recommendations of the royal commission is critical to restoring trust and confidence in Australia's financial system, and it's part of the Morrison government's plan for an ongoing stronger economy. As the minister's incorporated second reading speech to this chamber states:
National unfair contract terms laws currently protect consumers and small businesses who purchase financial products and services through standard form contracts. Until now, insurance contracts have been exempt from regulation by these laws.
Schedule 1 will increase protection for consumers and small businesses purchasing general and life insurance products. It will give effect to the Royal Commission recommendation 4.7 and bring insurance's regulation into line with that for the rest of the financial services sector.
Ensuring consumers and small businesses can purchase or renew their insurance policies with confidence is important. Insurance cover for homes, motor vehicles, building contents and income protection helps limit loss and support households and, in turn, the broader economy.
Deterring insurers from drafting unfair terms in standard contracts and providing a remedy in cases where they are found will support fair treatment of consumers and small businesses.
Furthermore, schedule 2 of this bill will ensure adequate consumer protection provisions apply to funeral expenses policies. During the conduct of the royal commission, evidence was uncovered surrounding the significant harm caused to vulnerable consumers by the poor sales practices adopted by funeral expenses policy providers. The exemption in the Corporations Act that has allowed these providers to escape the scrutiny of the Australian Securities and Investments Commission will be removed. They will be subject to the Australian financial services licensing regime. This bill will ensure that the consumer protection provisions in the ASIC Act apply to funeral expenses policies, clarifying any ambiguity that may exist on this matter. The removal of this exemption will ensure that consumers have appropriate protections when taking out policies to help fund the costs associated with a funeral.
Schedule 3 of the bill will introduce a duty for mortgage brokers to act in the best interests of consumers, with a view to better aligning the interests of consumers and mortgage brokers, and will reform mortgage broker remuneration, with a view to mitigating the incentive for brokers to suggest loans that are not in consumers' best interests, as well as reducing impediments to consumer loan switching. The royal commission identified evidence of mortgage brokers recommending loans based on the commissions they would receive. Both the best interests duty and the reforms to mortgage broker remuneration will mitigate the incentive for mortgage brokers to suggest loans that are not in the best interests of the customer. The new rules will also limit the period over which commissions can be clawed back from aggregators and brokers to two years and will prohibit the cost of clawback from being passed on to consumers.
Reflecting on the progress to date in relation to the recommendations, I also reflected on my earlier career and the brokers and insurance agents that I had dealt with on a regular basis. During my first speech in this place in April last year, I acknowledged that most of my career had been in banking. At that time, I went on to say:
… I am the first to say that poor practices should be exposed and those undertaking them should be held to account. But it is important not to overlook the diligent work being undertaken by tens of thousands of loyal and committed staff who get great job satisfaction in assisting Australians with their everyday banking needs. The only thing that separates a bank officer from a bank customer is a counter. We all share the same pressures of home budgets, making ends meet, working out how to buy a house, planning for retirement and dealing with unexpected expenses which can arise. My experience with former banking colleagues and with senior managers is that almost everyone I met approached their job and their responsibilities with integrity and care for the circumstances of the individual customer.
The implementation of the recommendations will only serve to benefit and further protect those working in the financial sector. However, those sentiments still remain. We must remember that staff on the front line, whether in retail banking, broking or insurance, deserve our respect and to be treated that way in our daily interactions. The irresponsible actions of just a few can harm so many.
Having said that, those of us in this chamber must remain focused on providing an environment where all Australians are not being taken advantage of by unfair contracts, not being exploited in vulnerable times of their lives or not having their best interests supported by lenders. This bill seeks to address these issues, and I commend this bill to the Senate.
Senator BROCKMAN (Western Australia—Deputy Government Whip in the Senate) (10:34): I too rise to speak on the Financial Sector Reform (Hayne Royal Commission Response—Protecting Consumers (2019 Measures)) Bill 2019. I will follow on from the contribution of Senator Askew to highlight or perhaps expand on some of the points she made. In the wash-up of the Hayne royal commission, as we look at some of the revelations that shocked the Australian community and shocked members of this place in terms of the depth and breadth and systemic nature of some of the problems in the industry, we also must remember that 30 years of continuous economic growth had many underpinnings, but one was a robust and highly performing financial sector. We can't ignore that fact as we now deal with the repercussions and recommendations of the Hayne royal commission. So, whilst there were problems and there are problems, and those problems need to be addressed, there is also a fundamental underpinning of a very good structure across the financial system, across our banking system. It is a competitive market with a number of smaller players, who I personally think need to be encouraged and supported by our regulatory regime, but we also have four major institutions in that space. So we do have to remember both the good and the bad. When we are dealing with these issues we must deal with them in a responsible way and in a way that enhances our financial services system. And that is what this bill seeks to do.
In terms of the three issues covered by this bill, obviously insurance contracts are front of mind at the moment as we deal with the recovery following the bushfires in January and ongoing. In the north we've had some significant rain events, which will also call on our insurance providers, and we obviously still have the remainder of the fire season this year to go. So the insurance issues are very much front of mind for many Australians. Schedule 1 of the bill ensures that unfair contract terms in insurance contracts are read in such a way as to protect consumers. So unfair contract terms should not be read in such a way as to be to the detriment of consumers. We need to stop technical restrictions in contract terms that in practice result in a level of functional underinsurance, where people believe themselves to be covered by the overarching nature of the policy they hold. It's about protecting consumers who, in this context, do lack bargaining power and receive a contract on a 'take it or leave it' basis. Particularly where there are thin markets—and they do exist, as many in this place have heard, particularly in the north of Australia—effectively the contracts are 'take it or leave it'—there aren't other providers or companies to go to and negotiate a better deal. Even if there were, chances are it would be another 'take it or leave it' proposition.
Let's face it: insurance contracts can also be very complex for consumers. I believe it's important that we encourage consumers to engage with some of the complexities of the financial services system rather than saying that regulation can foresee all circumstances in a particular contract. But, at the same time, we don't want consumers in these circumstances to be unfairly dealt with where they believe they have insurance and they effectively don't have it due to an unfair exclusion or onerous condition within the contract. This provides a protection in cases where an insurer has attempted to deny a claim or restrict the payout available to a consumer or small business on the basis of an unfair term. For insurance contracts, the regime will be tailored to increase clarity and certainty for industry and consumers. This includes defining the up-front price as premiums and excess or deductions payable, and defining the main subject matter of the contract as what is being insured. This is in line with the royal commission recommendation for point 7.
On the issue of the main subject matter—and I think this is key to this particular schedule—it's the idea that the main subject matter of an insurance contract can never be described as an unfair contract term. So, if the main subject matter is an insurance contract for a particular property—a four-bedroom, brick and tile house—then that is outside the idea of the unfair contract term regime. If a husband and wife purchase life insurance then the individuals involved and the sum that is insured are the main subject matter, and that is outside the unfair contract terms regime. However, other aspects, extraneous matters to the central contract of insurance, will be within the unfair contract terms.
I will move on to the funeral expense facilities which are covered in schedule 2. As Senator McCarthy very eloquently described, the royal commission did find, particularly amongst Indigenous communities, a level of exploitation of people in relation to the payment of funeral expenses in advance. That was certainly something that shocked many of us—the level of unfairness and exploitation that was involved in some of those examples. It wasn't just the Indigenous community; vulnerable consumers across Australia were open to being exploited in this way by some of the funeral expense policy providers. The current exemption in the Corporations Act that has allowed providers to escape the scrutiny of the Australian Securities and Investments Commission will be removed. That will mean that they will now become subject to the Australian financial services licensing regime. That means that the consumer protection provisions of the ASIC Act will now apply to funeral expense policies, clarifying any ambiguities that may exist in the current arrangements. The removal of the exemption will ensure that consumers have appropriate protections when taking out policies to help fund the costs associated with a funeral. The provision of prepaid funerals will also be unaffected by these reforms on the grounds that they will be able to rely on the funeral benefit exemption in the Corporations Act. This bill will come into effect after royal assent, and providers of funeral expense policies that do not have a financial services licence will have until 1 April 2020 to gain one.
Just briefly and finally, schedule 3 of the bill addresses the issue of mortgage brokers. This schedule fulfils the government's commitment to implementing the response to two recommendations from the royal commission. It introduces a best-interest duty for mortgage brokers and reforms mortgage-broker remuneration. The regulation sets out the details of the reform to remuneration. The best-interest duty will require mortgage brokers to act in the best interests of consumers when providing credit assistance in relation to credit contracts. This obligation will bring the law in line with what consumers currently expect of mortgage brokers. Together, the bill and the regulation will make changes to mortgage-broker remuneration by requiring the value of up-front commissions to be linked to the amount drawn down by borrowers instead of the loan amount, by banning campaign and volume based commissions and payments, and by capping soft dollar benefits. The new rules will also limit the period over which commissions can be clawed back from aggregators and brokers to two years and will prohibit the cost of clawback being passed on to consumers.
There was some evidence provided at the royal commission that mortgage brokers were recommending loans based on the commissions they received. These changes will mitigate the incentives for mortgage brokers to suggest loans that are not in the best interest of the consumer.
Again, we have a long way to go in terms of our response to the Hayne royal commission. It was a significant body of work. It is important that we hasten slowly. We need to make sure we get the balance right. We need to make sure that the regulation and changes to the legal framework that we put in place for our financial sector do strike the correct balance. We do not want a financial services sector that has served this country very well to be tied up in too much red tape. However, we also need to ensure that the Australian public have confidence in the financial sector and have confidence that, when they are in dealings with the financial sector, they will be treated in an ethical, a responsible and a legal way.
Senator McDONALD (Queensland) (10:46): I rise to speak in support of the Financial Sector Reform (Hayne Royal Commission Response—Protecting Consumers (2019 Measures)) Bill 2019. There are a number of things that we do after forming government and in being part of this place, but I think there is nothing more important than providing Australians with the confidence that the systems that they operate in are effective and fair.
I know that the decision to hold the financial services royal commission was debated widely, and I want to commend former senators Wacka Williams and Barry O'Sullivan and other Nationals for the part they played in ensuring that this royal commission went ahead, because this is a very serious topic, particularly for regional Australians.
Some of the matters that have come out around insurance in regional Australia could not be more topical than they are right now. Last year, we saw the floods in the north and north-west of Queensland, and we have seen bushfires and other events most regularly in my home state of Queensland that mean that consumers often have the unfortunate and unhappy experience of discovering that, although they thought they were well insured and covered, that is not the case. That is a very, very serious issue, because insurance right across Australia is becoming increasingly expensive. I hear stories about it being more and more difficult to insure individuals, businesses and homes. Sometimes they are self-insuring, meaning they are not insuring at all, but often they cannot get insurance. The most shocking part is that there are businesses, strata title units and other residences, particularly in North Queensland, that cannot get insurance at all. This is a very difficult situation, given that banks and financial institutions require these assets to be insured. So this royal commission was very important and I'm very pleased to speak to the response and protecting consumers bill.
Life can be full of much drama, and it is, but there is nothing quite so difficult as financial headwinds. This is why the Morrison government is acting to give added peace of mind to millions of hardworking people who want to know that they are getting what they paid for.
The Insurance Contracts Act will be amended to allow the ASIC Act unfair contracts law to apply to insurance. I am especially happy to commend this act because, as I've already touched on, the cost of insurance in my home region of North Queensland is prohibitive, forcing people to underinsure or forgo insurance altogether. There are businesses in North Queensland who remain completely uninsured. These are in some cases well-known and high-profile businesses, but they run the risk of not being paid out in the event of a claim and are setting money aside for those events that we know will come again, particularly in North Queensland and particularly cyclones and flood events.
The Insurance Contracts Act will offer protection to consumers who lack bargaining power when they receive their contracts on a take-it-or-leave-it basis. These consumers are very vulnerable to unfair terms like exclusions or onerous conditions which can be hidden in the contract. This will provide important protection in cases where an insurer has attempted to deny a claim or restrict the payout available to a consumer or a small business on the basis of an unfair term.
For insurance contracts, the regime will be tailored to increase clarity and certainty for industry and consumers. This includes defining the up-front price as premiums and excess or deductibles payable, and defining the main subject matter of the contract as what is being insured. This is in line with the royal commission's recommendation 4.7. Consumers and ASIC will be able to apply to the court for a declaration that a term of an insurance contract is unfair, and if they succeed that term will be void.
Schedule 2 of this bill deals with funeral expenses. For anyone who has gone through the tragic and terribly sad time of losing a close family member, it is shocking to find that this is potentially a time when they will have the double impact of an unfortunate experience with their funeral expenses. The financial services royal commission uncovered evidence of the significant harm caused to vulnerable consumers by the poor sales practices adopted by funeral expenses policy providers. A funeral expenses policy or facility involves the payment of a premium over a period of time to insure against the event of a funeral. It differs from insurance in that the payout may only be used to meet the costs of the funeral and those things incidental to it.
The funeral expenses exemption in the Corporations Regulations 2001 excludes funeral expenses policies from being a financial product under the Corporations Act 2001. This means that providers of funeral expenses policies are not regulated under the Australian financial services legal framework. The exemption has allowed these providers to escape the scrutiny of the Australian Securities and Investments Commission. As part of its response to recommendation 4.2 of the royal commission's final report, the government has committed to removing the exclusion of funeral expenses policies from the definition of 'financial product' in the Corporations Regulations 2001 and put beyond doubt that the consumer protection provision of the Australian Securities and Investments Commission Act 2001 do apply to funeral expenses policies.
The government is acting on the evidence presented by the financial services royal commission that many Indigenous people living in regional and remote communities are being misled and pressured into funeral expenses policies. This bill will ensure that the consumer protection provisions in the ASIC Act apply to funeral expenses policies, clarifying any ambiguity that may exist on this matter. The removal of this exemption will ensure that consumers have appropriate protections when taking out policies to help fund the costs associated with funerals.
The provision of prepaid funerals will be unaffected by these reforms on the grounds that they will be able to rely on the funeral benefit exemption in the Corporations Act. This bill will come into effect after royal assent, and providers of funeral expenses policies that do not already hold an Australian Financial Services licence will be required to gain a licence by 1 April 2020.
Schedule 3 of the bill deals with mortgage brokers and fulfils the government's commitment to implement its response to two recommendations from the royal commission into misconduct in the banking, superannuation and financial services industry royal commission. The bill will introduce a best interests duty for mortgage brokers and reform mortgage broker remuneration. The best interests duty will require mortgage brokers to act in the best interests of consumers when providing credit assistance in relation to credit contracts. This obligation will bring the law into line with what consumers currently expect of mortgage brokers. The bill and regulations may change as to mortgage broker remuneration by requiring the value of up-front commissions to be linked to the amount drawn down by borrowers instead of the loan amount; banning campaign and volume based commissions and payments; and capping soft dollar benefits. The new rules will also limit the period over which commissions can be clawed back from aggregators and brokers to two years, and prohibit the cost of clawback from being passed on to consumers.
The royal commission identified evidence of mortgage brokers recommending loans based on the commissions that they would receive. Both the best interests duty and reforms to mortgage broker remuneration will mitigate the incentive for mortgage brokers to suggest loans not in the best interests of the consumer.
I wish to speak, though, to the mortgage brokers across the nation who work diligently and work hard to ensure that their customers are being kept up to date with the best and most suitable product for them, particularly in their home loans and other assets that they hold. The mortgage brokers are able to more easily compare and contrast the different products that are available from financial institutions. I have mortgage brokers in my town of Townsville that I know do a terrific job of contacting their customers on an annual basis to review the product that they had recommended the previous year and to ensure that their customers were receiving the best product and the most suitable product for them. I want to commend those people who provide a very necessary financial service to those in the community who may not have the time or the expertise to compare various products and ensure they get the best product for them.
This government is helping people to gain confidence during some of the most difficult times in their lives—that is, when they've lost a loved one or need to make an insurance claim—and to particularly deal with it quickly after disaster strikes.
It is a shocking situation that in North Queensland, and particularly in Townsville, there remain so many homes that have not yet been repaired following the floods, because of the methodology used by panel building appointments. One local builder I spoke to only last week has been given the job of repairing only six homes in Townsville when there remain so very many that have not yet been touched. So there is still much work to be done in the insurance industry. I'm very sure that this government will continue to provide support to consumers to ensure that there are better outcomes. These recommendations also help protect consumers from unfairly getting into financial situations which can have harrowing and lifelong consequences. I commend this bill to the House.
Senator SCARR (Queensland) (10:59): At the outset, I'd just like to acknowledge the contributions of a number of senators who've spoken before me. First, to Senator Whish-Wilson: I acknowledge his involvement in many inquiries and his passion in relation to this issue over a number of years. As a relatively new senator, that's a pretty good example for me to follow. You did refer to my good friend George Brandis, who was a senator in this place and served with distinction over a number of years. I must say, as someone who was in a position as a secretary of a listed public company and advised directors of listed public companies over many years: if someone had asked me before the Hayne royal commission whether or not there was such a systemic cultural problem in some of our oldest and largest financial institutions, I would have found it hard to believe. I was deeply stunned by some of the evidence that came out of the Hayne royal commission, so I think George Brandis was not alone in terms of those views.
I'd also like to acknowledge, as my good friend Senator McDonald has, the contribution of former Senator—as he then was—Barry O'Sullivan to the debate in relation to the royal commission. I think Barry also, in that regard, performed an extraordinarily important role, as did the member for Wide Bay, Llew O'Brien, in terms of ensuring that the Hayne royal commission came into being. I'll also, finally, as an introductory comment, just place on the record how much I agree with Senator McDonald's comments in relation to people in my state of Queensland, especially in the regional areas, being able to access insurance on a reasonable basis. Senator McDonald outlined a few issues there, which I think a number of us representing the state of Queensland will be pursuing.
Prior to talking about the specifics of the legislation—and I will deal mainly with the part of the legislation dealing with insurance contracts—I want to refer to two case studies that are detailed in the Hayne report, because, to me, these case studies put into stark relief why this legislation is so necessary. The first case study involves an insured, a fellow Australian, who suffered a heart attack in January 2014. The gentleman had had his life insurance policy in place since 2000. He suffered his heart attack in January 2014. Like many Australians, he would have applied for insurance, entered into a life insurance policy, had the policy sitting there, been loyally paying his premiums over a number of years, had his heart attack in January 2014 and then sought to make a claim. What he found was the insurer—and I'll name them: CommInsure—had actually changed the definition of 'heart attack' under his insurance policy.
Now, most Australians would think a heart attack is a heart attack. You wouldn't necessarily be looking for the fine detail to ascertain the definition of 'heart attack'. I'll state the definition here: 'A heart attack requires an elevation in levels of troponin I above 2.0 mcg per litre.' I don't think any reasonable Australian would be searching through their insurance policy to ascertain what the definition of a heart attack was, nor—even if they did—would they have any understanding of what such a definition meant.
After the heart attack, the insured made a complaint to CommInsure in June 2014. CommInsure did not change its decision. We then saw the power of the media and the importance of a free press in this country, when the ABC's Four Corners program and Fairfax Media, as it then was, reported on concerns about CommInsure's life insurance business. As a result of those reports, CommInsure decided to amend the definition of 'heart attack' again—and that occurred in 2016—and to backdate that definition to 11 May 2014. But that didn't help the insured, because he had his heart attack in January 2014. So the insured was still in a position where he wasn't able to claim on that insurance. There was then engagement between CommInsure and the Financial Ombudsman Service, toing and froing, all the while the insured not having access to his policy, a policy which he first applied for in the year 2000 and for which he had been loyally paying his premiums. It wasn't until 2016 that, eventually, CBA/CommInsure came to the party and made an ex gratia payment, more than two years after the insured suffered the heart attack. From my perspective, that is an example of why this legislation is so necessary. If the insured hears this debate in the Senate, I hope he knows that at least now—and it's taken until 2020—we have legislation before the Senate which will be passed and which will hopefully address people in a similar position.
In terms of the principles governing this legislation, I'd like to make a few points. Firstly, this legislation does not impinge upon freedom of contract—the reasonable interests of both the insured and the insurer. I believe it will promote people entering into insurance contracts, it will assist in those insurance contracts being provided at a reasonable cost and it will protect the most vulnerable in our society. I think that's important. And, when I talk about the most vulnerable in society, that includes people like many of our people in the First Nations but also those who have undergone a tragic event in their own life and are at their most vulnerable at that point in time. All of us have those moments in our life, and it's important that at those times we have protection.
The mechanics of the legislation are such that, if an insurance contract is subject to the unfair contract terms regime, a term in that insurance contract may be declared unfair and therefore void. It's important to note in this context that the term could be unfair on its face—it doesn't matter what the individual case is—or the application of the term in an individual case could be unfair. That's an important principle. Whether or not the specific term is unfair depends upon whether or not one of three tests are met: whether it would cause a significant imbalance in the party's rights and obligations arising under the contract; whether or not it's not reasonably necessary in order to protect the legitimate interests of the party that would be advantaged by the term; and whether or not it would cause detriment to a party if it were to be applied or relied on. Examples of terms that are unfair in this context are provided in the explanatory statement, and they include:
• a term that allows the insurer to, instead of making a repair, elect to settle the claim with a cash payment calculated according to the cost of repair to the insurer, rather than how much it would cost the insured to make the repair;
• a term that is an unnecessary barrier to the insured lodging a legitimate claim (for example, requiring the payment of a large excess before the insurer considers a claim or requiring the insured to lodge the claim within an unreasonably short timeframe)—
and in this context we're talking about insured who have suffered tragic events—
• a term in a contract that contains unexpected payment arrangements (for example, that would enable the insurer to unilaterally start making direct debit deductions to an account of the consumer despite the consumer selecting a different payment method);
• a term in a disability insurance contract—
and this goes back to the initial case study I referred to—
that uses an outdated, and therefore inaccurate and restrictive, medical definition to determine whether the consumer meets the criteria to be eligible to have a claim paid; or
• a term in a contract that significantly reduces the cover offered where compliance with the preconditions for being covered is unfeasible (for example, a term in a travel insurance policy that only covers loss of luggage when it has been personally attended by the insured at all times)—
which we know is an impossible condition to meet.
The act does protect the legitimate interests of insurers and it gives examples of terms which would not fall foul of the unfair contract term regime. These include where an insurer has, in a bona fide way, referred to actuarial evidence in order to calibrate the pricing of an insurance contract. It also includes the insertion of standard terms in a contract which are required for the insurer to obtain reinsurance—both legitimate interests of the insurer.
The last point I'd like to make is in relation to an exclusion which deals with the main subject of an insurance contract. This was referred to by my good friend Senator Brockman. The unfair contracts regime will not respond to what is at the heart of the contract. The examples go to someone who purchases home insurance for a specific property with a specific definition and a specific amount—the fundamental terms of the contract which go to the heart of the deal and are clearly stated, being obvious to both the insured and the insurer when the contract is entered into. I don't think Australians are expecting the main subject of the contract to be regulated in this way. What they are most concerned with is the fine print, if I can put it that way, that undermines the efficacy of the contract.
I think the legislation satisfies all of the principles which should be adhered to in relation to such legislation. Hopefully it will promote confidence in the insurance industry. It will assist people when they obtain their insurance to get what they bargained for and get what they're contracted for and it will protect the most vulnerable in our society. I commend the legislation to the Senate.
Senator CANAVAN (Queensland—Deputy Leader of the Nationals in the Senate) (11:12): I rise also to support the Financial Sector Reform (Hayne Royal Commission Response—Protecting Consumers (2019 Measures)) Bill 2019. It's a bill that implements some of the recommendations of the Hayne royal commission. I'd like to firstly pay tribute to some of my former and current Nationals colleagues who played a big role in establishing the Hayne royal commission in the first place, particularly former senators Barry O'Sullivan and John Williams, who were at the forefront of advocating for this commission, and also the member for Wide Bay, Mr Llew O'Brien.
I must say on the record that, at the time, I had some robust conversations with my colleagues about this. I was not convinced of the merits of the case, but I take the opportunity to put on the record here that I was absolutely wrong, as has been shown clearly through what was uncovered in the royal commission. I recognise that many of the Labor members of parliament were also ahead of the game on this and put it forward first, but it does take a degree of courage and fortitude to advocate for a position that goes against your own side, as Barry, Llew and 'Wacka' did a couple of years ago. It's a great tradition in the National Party that we respect the different views of people within our party room. We give them the opportunity to express their views privately to us but also publicly without massive retribution. There's some degree of admonition at times, but they are free to do that. By being able to step just a little bit out of line, they have been able to deliver enormous benefits to Australian consumers by eventually successfully establishing this inquiry and, today, seeing the fruits of that, with stronger regulations to protect consumers. While Senator O'Sullivan and Senator Williams are no longer here to see the passage of this legislation, they can take great heart that their names are written all over this. It would not be here but for their efforts.
This example shows that we must always be cynical of the loud voices in our community that have a certain position, and we should seek to respect what we hear from farmers and from small businesses. These complaints were coming through, but many of us were reassured at times by the big banks that everything was fine and that these were isolated problems and it wasn't part of a widespread culture. But we know better now. After this commission we know better that there were indeed more systemic problems within the financial sector. What's important here for us, as a principle, is that it is always more important for us to listen to and act on the views of our constituents before simply seeking to please our colleagues here in Canberra. We have to work collaboratively as a team, but, ultimately, we're all here to represent the people who put us here. That's what I try to do in my role as a senator for Queensland—and certainly Barry, Llew and 'Wacka' have all provided a great example of how to do that.
I will now turn to the specific provisions of the bill. This bill is part of the response to the Hayne royal commission, and there's other legislation coming forward to respond to what was a very comprehensive report on the financial sector. This bill basically does three things. The three measures go to unfair contract terms—extending those to insurance contracts—dealing with misconduct in the funeral expenses industry and changes to obligations for mortgage brokers. On unfair contracts, I want to say that the coalition has a proud record of extending and supporting the regulation of unfair contract terms. I recognise that it was the former Labor government that first introduced unfair contract terms into our consumer laws. But, when the coalition came into government in 2013, we extended those unfair contract terms to small businesses, which I think was very important. When small businesses interact with larger businesses, they often are in the same power-type position as a small consumer, and they deserve similar protections to those a consumer gets. Those laws have been successful and they have stood the test of time.
Given that experience over the last decade, it makes sense that we extend unfair contract term legislation to the insurance industry through this bill. Schedule 1 of this bill will do that. It will mean that national unfair contract terms that currently only protect consumers and small businesses will now be extended to standard form insurance contracts. Until now insurance contracts have been exempt from regulation by these laws. The Insurance Contract Act will be amended to allow the ASIC Act's unfair contract laws to apply to insurance. This measure will offer protection to consumers who lack bargaining power and receive their contracts on a take-it-or-leave-it basis. These consumers are vulnerable to unfair terms, like exclusions or onerous conditions, which can be hidden in the contract. This will provide important protection in cases where an insurer has attempted to deny a claim or restrict the payout available to a consumer or a small business on the basis of an unfair term.
For insurance contracts, the regime will be tailored to increase clarity and certainty for industry and consumers. This includes defining the up-front price as premiums and excess or deductibles payable and defining the main subject matter of the contract as what is being insured. This change is in line with the Hayne commission's recommendation 4.7. Consumers and ASIC will be able to apply to the court for a declaration that a term of an insurance contract is unfair. If they succeed, the term will be void, as occurs under other unfair contract terms legislation. It is a very important change. It will mean better outcomes for consumers. A coalition government will always stand up for the rights and interests of consumers and protect them accordingly.
The second part of this bill, as I mentioned, deals with misconduct that the Hayne royal commission exposed in the funeral industry. Obviously, this is an industry where people interact at times of great heartache and sometimes hardship. It's extremely important that we ensure that particularly the people who at times would be in a vulnerable position are fully protected by the law, and there are strict regulations imposed on anyone seeking to in any way abuse someone's vulnerability. The Hayne royal commission uncovered evidence of significant harm caused by the poor sales practices adopted by some funeral expenses policy providers.
There is an exemption in the Corporations Act that has allowed these providers to escape the scrutiny of ASIC, the Australian Securities and Investments Commission. We are going to remove that exemption and they will now be subject to the Australian financial services licensing regime because the products they offer often do have a financial element in terms of requiring payment over a period of time. So the bill will ensure consumer protection provisions of the ASIC Act apply to funeral expenses policies, clarifying any ambiguity that may exist in these matters.
The removal of this exemption will ensure that consumers have appropriate protections when taking out policies to help fund the costs associated with a funeral. The provision of prepaid funerals will be unaffected by these reforms, on the grounds that they will be able to rely on the funeral benefit exemption in the Corporations Act. The bill will come into effect after royal assent. Providers of funeral expenses policies that do not already hold an Australian financial services licence will be required to gain one by 1 April this year.
Obviously, the Hayne royal commission uncovered misconduct across the financial sector. Another area where misconduct was identified was the mortgage broking industry. But I do want to stress upfront that I think the mortgage broking industry is incredibly important to the financial performance of the Australian economy. It's incredibly important to many Australian consumers whose home loans originated through a broking service. It is extremely important in rural and regional country areas, where often there's not a large presence of major banks but there may be a small broker who can help connect a family in a small town to financial service providers and home loan providers right across the country and, indeed, across the world. That allows someone living in Longreach, Cloncurry or Ingham the opportunity to access global capital markets through a mortgage broking system. We must ensure we have a healthy mortgage-broking system so that all Australians, not just those who happen to live in large markets, can benefit from that competition.
While I said there was evidence of some issues in the mortgage broking sector, I want to place on record that, in this area, having read the Hayne royal commission report, I don't think—with all respect to Justice Hayne—the conclusions he drew were exactly correct. We were supportive of the Hayne royal commission. As I've mentioned before, he did a comprehensive, excellent job. But no-one is a deity and no report should be accepted at face value. It should be interrogated by this place, interrogated by the government and interrogated through consulting with those affected by any potential recommendations, and we should come to a considered view after factoring those things into account.
I understood the issues that Justice Hayne had identified, but I didn't think he drew quite the proper comparisons between the mortgage broking sector and the plain-vanilla mortgage services operated by banks or deposit-taking institutions. For example, Justice Hayne made a significant issue of trailing commissions. When a consumer conducts business with a mortgage broker and originates a loan through that broker, there might be a fee upfront, maybe paid by the bank, but, over time, the broker will get additional money as the loan continues to be serviced or operated. Now, Hayne described those trailing commissions, in his own words, as 'money for nothing'. He asked:
Why should a broker, whose work is complete when the loan is arranged, continue to benefit from the loan for years to come?
Prime facie, that's a compelling and almost rhetorical question. But I don't think it withstands examination in terms of how financial markets operate, particularly financial markets that involve the creation of long-term debt products for consumers who are often capital constrained.
While the trailing commission for a mortgage broker might not always be transparent to the consumer, although it should be, it's obvious there's a payment or transfer from the loan-originating institution through to the broker. As a direct payment, you can quantify it and you can see it—and, obviously, Hayne investigated it. But a trailing commission is not that much different from exactly how banks work when they originate home loans. The banks have trailing commissions; they're called net interest margins. That's how they make their money.
I've got a loan through the Commonwealth Bank, and they don't charge you much upfront to originate the loan. They've got a lot of costs upfront. They've got overheads. They've got to assess my application. They've got to have a branch network for it to go into. They don't recover all of those costs upfront through a fee. They often waive those fees. I've even seen ads by major banks that they'll pay you money to originate a loan. You get a subsidy to originate a loan. But they recover their costs. They're not doing it out of charity. Those banks recover their costs over time by charging me and other Australian families a higher interest rate than the rate they themselves borrow at—which is perfectly fine; that's how banks work. That's how they've worked, going back to Renaissance times: they make their money on the margin between the interest rates they charge and the interest rates they have to pay, to get money from consumers into the bank or on capital markets. That is a trailing commission. That gap, that interest margin that exists over the 30 years of my home loan and other people's home loans, is a trailing commission. It's no different from the mortgage broker; it's just not very transparent. It's all internal to the bank.
And so, if we are going to ban trailing commissions for mortgage brokers, which was suggested by Hayne, the question that arises is: why would you let banks do the same thing? That would be ridiculous. The whole reason you have a model like that is that people who are going to borrow money, obviously, at that time often don't have the capital they need to buy a house or buy a large product. So they can't pay upfront fees, and they would like—or at least they have a preference—to defer some of the overhead costs of originating the loan through the life of the loan, as they do through the costs of buying or building a home as well. So I didn't think it made sense, from an economic point of view, to ban those trailing commissions.
I welcome the fact that the government is not proceeding with that recommendation. If we did, I think it would put mortgage brokers at a disadvantage relative to banks that don't use mortgage brokers. That would mean smaller banks and smaller deposit-taking institutions would be put at a disadvantage compared to bigger banks, and we'd have this perverse outcome—that a royal commission that was set up largely to deal with malpractice in large financial institutions led to a result where those same large financial institutions would actually benefit, unfairly, compared to smaller financial institutions that rely on mortgage broking for their lifeblood.
The government will not proceed with that, but it will proceed, in this bill, with a best interests duty on the mortgage-broking industry. That's a sensible reform recommended by Hayne. It will see the outlawing of a number of different types of fees, such as volume based commissions. There will be a limit of just two years to clawback provisions in contracts. And we will review the operation of these reforms in three years time and look again at this issue of trailing commissions.
I support the measures in this bill. They will enhance protections for consumers, and it is a sensible response to the Hayne royal commission. Once again, I thank my Nationals colleagues for their efforts, and the fruits of those efforts are what we're seeing here. I look forward to the further changes that will come forward as a result of the Hayne royal commission's findings.
Senator HUME (Victoria—Assistant Minister for Superannuation, Financial Services and Financial Technology) (11:27): First, I would like to thank those senators who have contributed to the debate on this bill, the Financial Sector Reform (Hayne Royal Commission Response—Protecting Consumers (2019 Measures)) Bill 2019, particularly those who have expressed support for the measures in the bill, support which has been almost universal, and those who have expressed some very heartfelt and personal views about some of the measures in this bill, and particularly Senator McCarthy: thank you very much for your contribution.
The government is committed to implementing its response to the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry by extending the unfair contract terms regime to insurance contracts, by ensuring adequate consumer protection provisions apply to funeral expenses policies, and by introducing a best interests duty requirement for mortgage brokers and reforming mortgage broker remuneration.
Schedule 1 of this bill implements recommendation 4.7 of the royal commission. Extending the unfair contract terms regime to insurance contracts will ensure that consumers and small businesses are protected from insurers using unfair terms in standard form contracts. By preventing insurers from including unfair terms in insurance contracts and providing a mechanism to enforce them, it enhances consumer rights and provides consistency in financial services regulation. The bill has been tailored to the specific features of insurance contracts to ensure its effectiveness. Applying the unfair contract terms regime to insurance is an important component of the reforms to this sector which together represent real and beneficial changes to the insurance industry.
Commissioner Hayne discovered evidence of harm being inflicted upon vulnerable consumers by providers of funeral expenses policies. That harm derived from the provision of poor sales practices and the distribution of low-value products by these providers. Schedule 2 of the bill will ensure that the consumer protection provisions of the ASIC Act apply to funeral expenses policies, removing any ambiguity that may currently exist.
Schedule 3 of the bill amends the National Consumer Credit Protection Act to require mortgage brokers to act in the best interests of the consumer when providing credit assistance. This ensures the law is in line with consumer expectations when interacting with a mortgage broker.
Mortgage broker remuneration will also be reformed by requiring the value of upfront commissions to be linked to the amount drawn down by borrowers instead of the loan amount, banning campaign and volume based commissions and payments and also capping soft dollar benefits. Further, the reforms introduce a limit to the period over which commissions can be clawed back from aggregators and mortgage brokers to two years and prohibit the cost of clawback being passed onto consumers. Collectively, these reforms will mitigate the incentive for mortgage brokers to suggest loans that are not in the best interests of the consumer and will improve consumer outcomes. I commend this bill to the Senate.
Question agreed to.
Bill read a second time.
Third Reading
Senator HUME (Victoria—Assistant Minister for Superannuation, Financial Services and Financial Technology) (11:30): I move:
That this bill be now read a third time.
Question agreed to.
Bill read a third time.
Treasury Laws Amendment (2018 Measures No. 2) Bill 2019
Second Reading
Consideration resumed of the motion:
That this bill be now read a second time.
Senator McALLISTER (New South Wales) (11:31): I rise to speak on the Treasury Laws Amendment (2018 Measures No. 2) Bill 2019. Labor support the objectives of the bill. We support the establishment of a fintech sandbox to provide some regulatory relief when needed to allow innovative products and services to be brought to the market. However—and this is an important caveat—there must be adequate protections and genuine benefits for consumers. A regulatory sandbox is a closed testing environment designed for experimenting with web or software products and, in this case, a financial product or service. A sandbox provides some level of flexibility in relation to regulatory standards.
Financial technology is already a significant industry in Australia. Ernst & Young have estimated that 58 per cent of digitally active Australians are already using financial technology in their lives. We are early adopters of all sorts of technology, and it is no different in the area of fintech. Generally, we see fintech and Australian firms active across the five different areas: transfers and payments; budgeting and planning; savings and investment; borrowing and lending; and insurance. They're widely disparate areas, and the technologies that support them are disparate, but Australians generally welcome innovation where it leads to better outcomes for them.
In December 2016, ASIC launched Australia's first sandbox. After just over a year, there were only three entities using the sandbox and 15 in the pipeline. Over a similar period, the UK had 50 entities from 146 applications, Singapore had 30 applications, Malaysia had seven in the first six months and Hong Kong had nine entities use the sandbox for 11 trials. The low number of applications in the Australian context suggests that we're not doing it right. There is something not quite right, and there is a need for reform. That is why we support the objectives of this bill.
We want to see a flourishing and expanding financial technology sector in Australia. We support the establishment of a fintech sandbox to provide some regulatory relief when needed. However, as I said at the beginning of my remarks, there must be adequate protections for consumers. The framework should be used by start-ups who are genuinely seeking to deliver something innovative and who provide a clear consumer benefit.
Innovation, of course, can produce significant benefits for consumers. However, not every product innovation is necessarily in the consumer's best interest. That is particularly the case in complex markets such as financial services where the risks of bad product design can have catastrophic consequences. For example, we've recently seen some very important innovations, as they might be described, by payday lenders. It's led to more online targeting; sophisticated microtargeting, in fact, of consumers; and quick loan applications for high-cost debt.
Consumer advocates like CHOICE raised concerns around consumer protection back in 2016 when the ASIC framework was introduced, and these concerns remain. That's why Labor will be moving amendments to this bill. Our amendments aim to ensure that access to the regulatory sandbox is limited to firms that are applying for genuinely innovative operations. Our amendments seek to ensure that companies accessing regulatory relief through the fintech sandbox must show that they are using it for products and services that are genuinely innovative but also that will actually benefit customers. Our amendments seek to safeguard the very purpose of providing a sandbox and ensure that the public interest is clearly established when this sort of regulatory relief is provided. We do wish to encourage firms to innovate. We do not wish to provide a backdoor for firms to avoid regulations that would apply to the rest of the industry.
Senator WHISH-WILSON (Tasmania) (11:35): This bill, the Treasury Laws Amendment (2018 Measures No. 2) Bill 2019, increases the length and widens the scope of exemptions that the Australian Securities and Investments Commission can grant for new entrants to the market from having to hold a financial licence. Under this bill, new entrants will be able to be granted a financial licence exemption for up to 24 months, up from an existing 12 months. And, under this bill, financial licence exemptions will be able to be provided for a much wider range of products, including consumer credit.
I want to point out to senators—especially those who were in the chamber for the legislation that we've just passed on the Hayne royal commission bill—the irony and the contradiction that, before us now, we have a piece of legislation that's going to deregulate financial markets and increase risk for investors and consumers. Have we learnt nothing? It was interesting seeing the government put up a number of speakers who got up and waxed lyrical about what a great job they are now doing bringing forward legislation to this place to protect consumers of financial products and investors in financial products. What's this? A regulatory sandbox, providing a more flexible environment for entrepreneurs to develop sophisticated financial products. You know what that spells to me? One word: risk. These kinds of initiatives will be like burley to sharks.
Why are we loosening regulations around investments and the licensing of advisers on products like this? I have absolutely nothing against the fintech industry, and I totally get the argument for developing new credit products that will help break down the power of the big banks and financial services companies and break open the market, which, of course, will have potential long-term benefits for consumers of financial products. But why are we making it easier for this industry and for potential spivs coming into this industry to rip off more Australians? Despite a royal commission, which we've all just talked about, that laid bare the horrors of 30 years of deregulation in the banking system, here we are again loosening the rules that government financial markets and those who are entrusted with other people's money for a vested interest—which is, of course, the fintech operators, fintech entrepreneurs and fintech advisers who want to flog and sell these products. This time around it's not the wonders of a perfectly free market delivering a Utopia to consumers in humankind in general; this time around it's the wonders of the digital age which, with more deregulation, will unlock potential and deliver us Nirvana. I've heard the spiel, believe me. So fintech's here to save us, and a fintech sandbox is where it's at.
Anyone who understands finance and economics 101 knows that with more complex products, with more sophistication, we get potential higher risks. We've heard all about the dangers—'Buyer beware'—in buyers being informed about financial products, and that's from licensed financial advisers. What we're looking at doing here is loosening the licensing arrangements on the sale of these potentially very sophisticated and very high-risk products. I've always had a view that I have absolutely no problem with people investing in high-risk products and developing new industries, allowing research and development and entrepreneurial flair to deliver new products in new markets. But there are sophisticated investors out there who understand the risks and who have a diversified approach to investing in high-risk products: angel investors, equity investors—people who know what they're doing. I don't want to see a high-risk market opened up to more mums and dads, to more retail investors, that's going to lead to potential risk.
Let's boil it down to a nutshell: if we could name anything that was uniform throughout the Hayne royal commission, it's simply human nature: wanting to make more money, greed and the incentive structures that led to a culture of profits before people. Humans don't always behave the way we want them to. What kind of regulations are we putting in place in this set of regulations in the legislation before us to crack down on the kinds of unscrupulous operators that, as I know from my experience working as a young stockbroker when I started my first job out of university, will be coming into this kind of market? Very soon—I'm probably going to run out of time—I will finish my contribution by giving you some examples of fintech companies that have already failed, with hundreds of millions of dollars lost to investors.
These kinds of products should be sold to sophisticated investors. We shouldn't be opening up and deregulating licensing arrangements to allow more products that, by their very nature, are high-risk products. Yes, they have high return and high potential pay-off. High risk means high return—another fundamental concept in finance. But what we're doing here is opening up high-risk, high-return products to potentially unscrupulous advisers and operators. This is not reducing the licensing arrangements for the companies themselves, the actual sellers of these products. Rather, it is reducing the licensing arrangements for those advisers and operators.
I challenge any senators who've been here during all the inquiries the Senate has held in the last 10 years, when we have heard from victims of financial crime, victims of the banks, victims of financial services companies, victims of managed investment schemes—just one example is Storm Financial—and even victims of the global financial crisis. I know there are some senators in here who have finance backgrounds, who understand economics. There are plenty of examples of highly innovative financial products that have led to catastrophe. I lay before you the global financial crisis. Remember collateralised debt obligations, CDOs—financial engineering and financial innovation at its finest. That essentially came close to collapsing our global economy. Remember the kind of suffering and devastation we saw, especially in the United States, from financial innovation. High-risk, complex, difficult-to-understand products were being churned out and sold by, in many cases, unscrupulous advisers and being sold to unwary and unwilling buyers.
The PRESIDENT: Order, Senator Whish-Wilson! You will be in continuation when the debate resumes. It being 11:45, we will move on.
NOTICES
Withdrawal
Senator FIERRAVANTI-WELLS (New South Wales) (11:45): Pursuant to notice given on 5 February 2020, I withdraw business of the Senate notice of motion No. 1 standing in my name for 26 February 2020 proposing the disallowance of the Telecommunications (Protecting Australians from Terrorist or Violent Criminal Material) Direction (No. 1) 2019.
Senator CAROL BROWN (Tasmania) (11:45): Pursuant to notice of intention given yesterday, I withdraw business of the Senate notice of motion No. 1 standing in my name proposing the disallowance of the Marine Order 47 (Offshore industry units) 2019.
COMMITTEES
Selection of Bills Committee
Report
Senator DEAN SMITH (Western Australia—Government Whip in the Senate) (11:45): I present the first report of 2020 of the Selection of Bills Committee and I seek leave to have the report incorporated into the Hansard.
Leave granted.
The report read as follows—
SELECTION OF BILLS COMMITTEE
REPORT NO. 9 OF 2019
I. The committee met in private session on Wednesday, 5 February 2020 at 7.12 pm.
2. The committee recommends that—
(a) the provisions of the Australian Business Growth Fund Bill 2019 be referred immediately to the Economics Legislation Committee for inquiry and report by 21 February 2020 (see appendix 1 for a statement of reasons for referral);
(b) contingent upon introduction in the House of Representatives, the provisions of the Social Services and Other Legislation Amendment (Simplifying Income Reporting and Other Measures) Bill 2020 be referred immediately to the Community Affairs Legislation Committee for inquiry and report by 20 February 2020 (see appendix 2 for a statement of reasons for referral); and
(c) contingent upon introduction in the House of Representatives, the provisions of the Paid Parental Leave Amendment (Flexibility Measures) Bill 2020 be referred immediately to the Community Affairs Legislation Committee for inquiry and report by 19 March 2020.
3. The committee recommends that the following bills not be referred to committees:
International Human Rights and Corruption (Magnitsky Sanctions) Bill 2020
Marine Safety (Domestic Commercial Vessel) National Law Amendment (Improving Safety) Bill 2019
National Consumer Credit Protection Amendment (Mandatory Credit Reporting and Other Measures) Bill 2019
National Vocational Education and Training Regulator Amendment Bill 2019
Student Identifiers Amendment (Higher Education) Bill 2019
Tertiary Education Quality and Standards Agency Amendment (Prohibiting Academic Cheating Services) Bill 2019
Treasury Laws Amendment (2019 Measures No. 3) Bill 2019
Treasury Laws Amendment (2019-20 Bushfire Tax Assistance) Bill 2020
4. The committee deferred consideration of the following bills to its next meeting:
Air Services Amendment Bill 2018
Commonwealth Electoral Amendment (Donation Reform and Other Measures) Bill 2020
Constitution Alteration (Freedom of Expression and Freedom of the Press) 2019
Customs Amendment (Safer Cladding) Bill 2019
Discrimination Free Schools Bill 2018
Governor-General Amendment (Cessation of Allowances in the Public Interest) Bill 2019
Great Australian Bight Environment Protection Bill 2019
Regional Forest Agreements Legislation (Repeal) Bill 2017
Social Services Legislation Amendment (Better Targeting Student Payments) Bill 2019
Social Services Legislation Amendment (Ending the Poverty Trap) Bill 2018
Social Services Legislation Amendment (Payment Integrity) Bill 2019
Treasury Laws Amendment (Reuniting More Superannuation) Bill 2020
5. The committee considered the following bill but was unable to reach agreement:
Fair Work (Registered Organisations) Amendment (Ensuring Integrity No. 2) Bill 2019 (see appendix 3 for a statement of reasons for referral)
Treasury Laws Amendment (Research and Development Tax Incentive) Bill 2019 (see appendix 4 for a statement of reasons for referral)
(Dean Smith) Chair
6 February 2020
Appendix 1
SELECTION OF BILLS COMMITTEE
Name of bill:
Australian Business Growth Fund Bill 2019
Reasons for referral/principal issues for consideration:
To seek clarity or the governance and operational arrangements of the Fund
To seek views from stakeholders and experts on how best to implement the Fund
Possible submissions or evidence from:
Department of the Treasury
Committee to which bill is to be referred:
Senate Economics Legislation Committee
Possible hearing date(s):
To be determined by the Committee
Possible reporting date:
21 February 2020
SELECTION OF BILLS COMMITTEE
Proposal to refer a bill to a committee
Name of bill:
Australian Business Growth Fund Bill 2019
Reasons for referral/principal issues for consideration:
To understand the current supply of credit to small and medium enterprises (SMEs), including any particular market conditions and any regulations that are affecting the supply of credit to SMEs.
To understand the possible competition impacts of this Bill, including whether it would give preference to bank capital over other forms of capital.
Possible submissions or evidence from:
Economists
Business associations and industry groups
Financial sector
Shareholders
Committee to which bill is to be referred:
Economics
Possible hearing date(s):
Not necessary
Possible reporting date:
April 2020
Appendix 2
SELECTION OF BILLS COMMITTEE
Proposal to refer a bill to a committee
Name of bill:
Social Security and other Amendments (Simplifying Income Reporting and Other Measures) Bill 2020
Reasons for referral/principal issues for consideration:
Ensure there will not be negative consequences for any social security recipients.
Possible submissions or evidence from:
ACOSS
National Social Security Rights Network
COTA
National Seniors
Committee to which bill is to be referred:
Senate Community Affairs Legislation Committee
Possible hearing date(s):
To be determined by the Committee
Possible reporting date:
19 March 2020
SELECTION OF BILLS COMMITTEE
Proposal to refer a bill to a committee
Name of bill:
Social Services and Other Legislation Amendment (Simplifying Income Reporting and Other Measures) Bill 2020
Reasons for referral/principal issues for consideration:
This bill fundamentally changes the way income is reported and assessed for the purposes of determining income support payments. It will affect 1.2 million income support recipients and generates significant savings from the social security budget. It is necessary to scrutinise and understand the impact this new legislation will have on income support recipients.
Possible submissions or evidence from:
ACOSS, NSSRN, Anglicare Australia, Jobs Australia, Australian Unemployed Workers Union, Community and Public Sector Union, Accountable Income Management Network.
Committee to which bill is to be referred:
Community Affairs Legislation Committee
Possible hearing date(s):
Possible reporting date:
Appendix 3
SELECTION OF BILLS COMMITTEE
Name of bill:
Fair Work (Registered Organisations) Amendment (Ensuring Integrity No. 2) Bill 2019
Reasons for referral/principal issues for consideration:
The Bill is substantially different from its previous iteration. None of the amendments incorporated by the Government to form the new bill were debated in either House. The potential impact!, of these amendments need to be examined in detail.
Possible submissions or evidence from:
The ACTU, state labour councils, unions, union members, workplace relations academics and lawyers, employer representatives.
Committee to which bill is to be referred:
Senate Education and Employment Legislation Committee
Possible hearing date(s):
To be determined by the Committee
Possible reporting date:
Friday, 1 May 2020.
SELECTION OF BILLS COMMITTEE
Proposal to refer a bill to a committee
Name of bill:
Fair Work (Registered Organisations) Amendment (Ensuring Integrity No.2)
Reasons for referral/principal issues for consideration:
The Bill is incompatible with International Labour Organisations (ILO) treaties and infringes on the rights of workers and their unions.
Possible submissions or evidence from:
Unions
Fair Work Commission Fair Work Ombudsman
Committee to which bill is to be referred:
Education and Employment Legislation Committee Possible hearing date(s):
Possible reporting date:
25 June 2020
Appendix 4
SELECTION OF BILLS COMMITTEE
Proposal to refer a bill to a committee
Name of bill:
Treasury Laws Amendment (Research and Development Tax Incentive) Bill 2019
Reasons for referral/principal issues for consideration:
Stakeholder feedback on changes between this bill and previous iteration, including new inter sity threshold schedules
Evaluate likely impacts (sectors, industries, businesses by firm size or type) of the bill
Evaluation the impact of technical definitions in the bill
Interaction with other industry and innovation support
Possible submissions or evidence from:
Treasury
Industry
External (numerous)
Committee to which bill is to be referred:
Economics Legislation Committee
Possible hearing date(s):
To be determined by the Committee
Possible reporting date:
Friday, 30 April 2020
Senator DEAN SMITH: I move:
That the report be adopted.
Senator RUSTON (South Australia—Minister for Families and Social Services and Manager of Government Business in the Senate) (11:46): I move the following amendment:
At the end of the motion, add "but in respect the Fair Work (Registered Organisations) Amendment (Ensuring Integrity No. 2) Bill 2019, the bill not be referred to a committee."
Senator GALLAGHER (Australian Capital Territory—Manager of Opposition Business in the Senate) (11:46): I have an amendment to the government's amendment that has been circulated. I move the amendment to the amendment moved by Senator Ruston circulated in my name, which completely disagrees with the government's amendment:
Omit "not be referred to a committee", substitute "be referred immediately to the Education and Employment Legislation Committee for inquiry and report by 1 May 2020"
We do believe this is a fair request to put to the government. This is a highly contested bill. There were significant amendments made to the bill during the debate last year in this place. We think a quick committee inquiry into those changes and any further ones that are currently being negotiated, as we are aware through media reporting, should be explored by the Senate Education and Employment Legislation Committee prior to formal debate in this chamber. We would seek other senators' support for that amendment.
Senator SIEWERT (Western Australia—Australian Greens Whip) (11:47): I indicate that we will be supporting that amendment.
The PRESIDENT: The question is that the amendment moved by Senator Gallagher to the amendment to the Selection of Bills Committee report moved by Senator Ruston be agreed to.
The Senate divided. [11:52]
(The President—Senator Ryan)
The PRESIDENT (11:55): The question is that the amendment moved by Senator Ruston to the Selection of Bills Committee report be agreed to.
The Senate divided. [11:55]
(The President—Senator Ryan)
Senator RUSTON (South Australia—Minister for Families and Social Services and Manager of Government Business in the Senate) (11:58): I move:
At the end of the motion, add "and in respect of the Treasury Laws Amendment (Research and Development Tax Incentive) Bill 2019, the provisions of the bill be referred immediately to the Economics Legislation Committee for inquiry and report by 19 March 2020."
Senator GALLAGHER (Australian Capital Territory—Manager of Opposition Business in the Senate) (11:58): I have an amendment to Senator Ruston's amendment. I move:
Omit "19 March 2020", substitute "30 April 2020".
I acknowledge that there has been effort to reach agreement and not resolve this in the chamber, but, unfortunately, on this one we haven't been able to reach agreement. My amendment seeks to extend the reporting date by six weeks to 30 April 2020, and I ask for other senators' support for this amendment.
Senator SIEWERT (Western Australia—Australian Greens Whip) (11:59): Can I indicate that the Greens will be supporting this amendment to the amendment.
The PRESIDENT: The question is that the amendment moved by Senator Gallagher to the amendment moved by Senator Ruston be agreed to.
The Senate divided. [12:04]
(The President—Senator Ryan)
The PRESIDENT ( 12:06): The question now is that Senator Ruston's amendment, as amended, be agreed to.
Question agreed to.
The PRESIDENT: There being no other amendments, I will put the question on the original motion moved by Senator Smith on the Selection of Bills Committee report, with the amendments incorporated by the Senate just now.
Question agreed to.
BUSINESS
Rearrangement
Senator RUSTON (South Australia—Minister for Families and Social Services and Manager of Government Business in the Senate) (12:07): I move:
That government business orders of the day as shown on today's Order of Business be considered from 12.45 pm today and that government business be called on after consideration of the bills listed in paragraph (a) and considered until not later than 2 pm today.
Question agreed to.
Rearrangement
Senator RUSTON (South Australia—Minister for Families and Social Services and Manager of Government Business in the Senate) (12:07): I move:
That the order of general business for consideration today be general business notice of motion No. 363 standing in the name of Senator Gallagher, relating to ministerial standards.
Question agreed to.
NOTICES
Postponement
The Clerk: Postponement notifications have been lodged in respect of the following:
General business notice of motion no. 398 standing in the name of Senator Siewert for today, regarding the Newstart and Youth Allowance, postponed till 10 February 2020.
COMMITTEES
Economics Legislation Committee
Economics References Committee
Reporting Date
The Clerk: Notifications of extensions of time for committees to report have been lodged in respect of the following:
Economics Legislation committee - Treasury Laws Amendment (Your Superannuation, Your Choice) Bill 2019, extended to 20 March 2020.
Economics References Committee – Australia's oil and gas reserves – additional extension to 16 September 2020
The PRESIDENT (12:08): I remind senators that the question may be put on any of those proposals at the request of any senator. There being none, we will move on.
Economics Legislation Committee
Reporting Date
Senator BROCKMAN (Western Australia—Deputy Government Whip in the Senate) (12:09): I move:
That the reporting date of the Economics Legislation Committee inquiry into the Currency (Restrictions on the Use of Cash) Bill 2019 be extended from 7 February 2020 to 28 February 2020.
Question agreed to.
BILLS
Telecommunications Amendment (Repairing Assistance and Access) Bill 2019
Explanatory Memorandum
Senator URQUHART (Tasmania—Opposition Whip in the Senate) (12:09): At the request of Senator Keneally, I seek leave to table a document which is a replacement explanatory memorandum for the Telecommunications Amendment (Repairing Assistance and Access) Bill 2019. The previous version had a minor typographical error, and I note this was agreed previously with the whips.
Leave granted.
Senator URQUHART: I table the document.
The PRESIDENT: I shall proceed to the discovery of formal business, and it being Thursday I'm going to go through them in the order on the Notice Paper.
Treasury Laws Amendment (2019-20 Bushfire Tax Assistance) Bill 2020
Consideration of Legislation
Senator RUSTON (South Australia—Minister for Families and Social Services and Manager of Government Business in the Senate) (12:10): I move:
That the provisions of paragraphs (5) to (8) of standing order 111 not apply to the Treasury Laws Amendment (2019-20 Bushfire Tax Assistance) Bill 2020, allowing it to be considered during this period of sittings.
Question agreed to.
Days and Hours of Meeting
Senator RUSTON (South Australia—Minister for Families and Social Services and Manager of Government Business in the Senate) (12:10): I move:
That on Monday, 10 February 2020:
(a) the sitting of the Senate shall be suspended from 11 am until 2pm, to enable senators to attend the address by His Excellency Mr Joko Widodo, President of the Republic of Indonesia;
(b) the routine of business from not later than 2pm shall be as follows:
(i) questions without notice,
(ii) motions to take note of answers until 4 pm, and
(iii) consideration of private senators bills until 5pm; and
(c) following conclusion of consideration of private senators bills, the Senate return to the routine of business.
Question agreed to.
Community Sport Infrastructure Grants Program
Senator RICE (Victoria—Deputy Australian Greens Whip) (12:10): Before asking that the motion be taken as formal, I wish to inform the chamber that Senator Farrell will sponsor the motion, and I seek leave to amend general business notice of motion No. 380.
Leave granted.
Senator RICE: I, and also on behalf of Senator Farrell, move the motion as amended:
That the Senate—
(a) notes that:
(i) sport and physical recreation are essential elements of the culture of many Australians,
(ii) sport and physical recreation are necessary for the maintenance of good mental and physical health and wellbeing,
(iii) participation in sport plays an important role in the development of social, organisational and communication skills,
(iv) community-based sporting clubs and associations are an integral part of our society,
(v) Government has a responsibility to ensure equitable access to affordable sport and physical recreation facilities and services, and
(vi) the integrity of sport should be encouraged by sound and transparent governance structures; and
(b) calls on the Government to provide the tens of millions in extra funding for all applications under the Community Sport Infrastructure Program that were recommended or listed for recommendation by Sport Australia, but not awarded grants by the Minister.
Senator DUNIAM (Tasmania—Assistant Minister for Forestry and Fisheries and Assistant Minister for Regional Tourism) (12:11): I seek leave to make a short statement.
The PRESIDENT: Leave is granted for one minute.
Senator DUNIAM: Our government's Community Sport Infrastructure grants program has funded 684 local sporting projects by investing $100 million. The program is supporting the construction of new community infrastructure and upgrading many sporting facilities to help support local jobs, increase participation in sport and get more Australians moving. In relation to paragraph (b), funding decisions relating to sport must be dealt with through the budget process, and therefore we oppose this motion.
The PRESIDENT: The question is that motion No. 380, as amended, be agreed to.
The Senate divided. [12:16]
(The President—Senator Ryan)
Aged-Care Assessments
Senator GRIFF (South Australia) (12:18): Before asking that the motion be taken as formal, I wish to inform the chamber that Senator Siewert will sponsor the motion. I, and also on behalf of Senator Siewert, move:
That the Senate—
(a) notes:
(i) with deep concern, the Government's decision to privatise aged care assessments from April 2021 with a tender to be held this year, and
(ii) the Government's decision was not made in consultation with State Health Ministers;
(b) recognises that there are eighty aged care assessment teams (ACAT) operating across the nation which include state-employed multi-disciplinary teams of nurses, geriatricians, physiotherapists, occupational therapists, psychologists and social workers who work at public hospitals, to expertly assess the more complex level of care required by individual elderly Australians;
(c) further notes the recent statement by the Chair of the Royal Commission into Aged Care Quality and Safety on ACAT privatisation that:
(i) the Royal Commission's Interim Report did not endorse the Government's position on privatising ACAT, and
(ii) the Commission has not yet made a recommendation about which sector or mechanism will best achieve an integration of Regional Assessment Services and the Aged Care Assessment Teams;
(d) acknowledges that:
(i) health experts argue that no private providers can offer the expertise to adequately assess the often complex needs of hundreds of thousands of elderly Australians, and
(ii) outsourcing assessment teams would have a serious detrimental impact on the delivery of proper care; and
(e) calls on the Federal Government to consult with the state health ministers on the issue of ACAT privatisation, as a matter of urgency.
Senator DUNIAM (Tasmania—Assistant Minister for Forestry and Fisheries and Assistant Minister for Regional Tourism) (12:19): I seek leave to make a short statement.
The PRESIDENT: Leave is granted for one minute.
Senator DUNIAM: The government has not made a decision to privatise aged-care assessments. It's disappointing that claims to that effect are misleading the community and parliament. The government made a commitment in the 2018-19 budget to streamline the assessment process of aged care in line with the 2017 Tune review recommendation, which goes as follows: 'That the government integrate regional assessment services with aged-care assessment teams.'
The royal commission in the interim report stated:
The Government has announced that it will implement this recommendation and will integrate the two assessment workforces from 2020. The Royal Commission considers that this integration needs to be progressed urgently.
The government is committed to creating a better experience for senior Australians entering aged care, and our position remains unchanged: we're committed to ensuring that Australians seeking to enter aged care receive timely, consistent, high-quality needs assessments.
Senator ROBERTS (Queensland) (12:19): I seek leave to make a short statement.
The PRESIDENT: Leave is granted for one minute.
Senator ROBERTS: I speak in support of this motion. These assessment teams play a vital role in connecting everyday aged Australians with the health care and support they need. What is truly important is that the care package that the assessment team delivers is the right one, because it affects the health and happiness of people in need. These are real people with real needs which should not be ignored. So we support this, and we call on the government to consult with the state health ministers on the issue of ACAT privatisation as a matter of urgency.
The PRESIDENT: The question is that the motion moved by Senator Griff, No. 393, be agreed to.
The Senate divided. [12:21]
(The President—Senator Ryan)
Her Majesty Queen Elizabeth II
Senator DEAN SMITH (Western Australia—Government Whip in the Senate) (12:24): I move:
That the Senate—
(a) notes that 6 February 2020, marks the 68th anniversary of the accession of Her Majesty Queen Elizabeth II, Queen of Australia and Head of the Commonwealth;
(b) recognises the enduring role that Her Majesty has played as a symbol of peace and stability across the Commonwealth; and
(c) extends to Her Majesty, its appreciation for the sense of duty and extraordinary grace in which she fulfils her duties as Queen of Australia and Head of the Commonwealth.
Question agreed to.
Citizenship
Senator ABETZ (Tasmania) (12:24): In relation to motion No. 395, I seek to add the name of Senator Fierravanti-Wells. I, and also on behalf of Senator Fierravanti-Wells, move:
That the Senate—
(a) notes the Australian citizenship pledge, which in part reads as follows:
I pledge my loyalty to Australia and its people, whose democratic beliefs I share, whose rights and liberties I respect, and whose laws I will uphold and obey; and
(b) calls on all schools to consider having the citizenship pledge recited by students on appropriate occasions.
Senator FARUQI (New South Wales) (12:25): I seek leave to make a short statement.
The PRESIDENT: Leave is granted for one minute.
Senator FARUQI: Instead of working to make students proud of our nation by leading on justice for First Nations people, by tackling the climate crisis and by ensuring that no Australian is left behind because of rising inequality, some in this place would rather have them recite a US-style pledge. This is a classic tactic of creating a problem where none exists. The bushfire crisis this summer has demonstrated the enduring strength of the Australian spirit in the community. We don't want to cheapen that spirit by forcing students to perform a jingoistic pantomime that fails to acknowledge Australia's settler colonial past and continued occupation. The Greens will not be supporting this motion.
The PRESIDENT: The question is that motion No. 395 be agreed to.
The Senate divided. [12:27]
(The President—Senator Ryan)
Oil Exploration
Senator HANSON-YOUNG (South Australia) (12:30): I move:
That the Senate notes—
(a) that Norwegian oil giant, Equinor, has received its second of four rounds of approvals from the National Offshore Petroleum Safety and Environmental Management Authority, the government regulator responsible for oversight into exploratory petroleum drilling in the Great Australian Bight;
(b) the deep community opposition to 'big oil' drilling in one of our most pristine ocean environments and sites of natural heritage in the world; and
(c) that tens of thousands of Australians continue to fight for the Bight, in forums both formal and informal, as communities across the country unite to reject Equinor's disastrous plan.
Senator GALLAGHER (Australian Capital Territory—Manager of Opposition Business in the Senate) (12:30): I seek leave to make a short statement.
The PRESIDENT: Leave is granted for one minute.
Senator GALLAGHER: Labor supports rigorous safety and environmental assessments that consider whether impacts and risks are acceptable on the basis of independent scientific expertise. Labor also believes that science and consultation, including from the community, should be at the heart of NOPSEMA's decision-making processes. This motion by the Greens is another attempt to undermine the trust and work of the independent regulator and its assessment processes, and therefore Labour will not be supporting the motion.
The PRESIDENT: The question is that motion No. 396 moved by Senator Hanson-Young be agreed to.
The Senate divided. [12:32]
(The President—Senator Ryan)
Ministerial Conduct
Senator GRIFF (South Australia) (12:36): I, and also on behalf of Senator Patrick, move:
That the Senate—
(a) notes a number of recent examples of questionable conduct by Government Ministers that may fall under the purview of an independent anti-corruption commission, if one existed federally, including:
(i) numerous allegations against the Minister for Energy and Emissions Reduction, Mr Angus Taylor, including questions over the $80 million purchase of overland flow water licences and his ties to a company accused of clearing endangered grassland, and claims of document falsification in relation to the Sydney Lord Mayor,
(ii) Senator Bridget McKenzie and the 'sports rorts' affair, and
(iii) suspected leaks of classified information from Minister Peter Dutton's office about the costs of medically evacuating refugees, where the confidential information was reportedly de-classified at a time the Australian Federal Police was still investigating the leak; and
(b) further notes that the Government's proposed Commonwealth Integrity Commission (CIC) would not have the ability to make public findings of corruption, and can only refer potentially criminal behaviour, and will fail to expose improper conduct of Members of Parliament and public servants; and
(c) calls on the Federal government to strengthen its proposed CIC and introduce a bill to create a federal anti-corruption commission that will have the power to hold public hearings and to make public findings of corruption.
Senator DUNIAM (Tasmania—Assistant Minister for Forestry and Fisheries and Assistant Minister for Regional Tourism) (12:36): I seek leave to make a short statement.
The PRESIDENT: Leave is granted for one minute.
Senator DUNIAM: The Commonwealth Integrity Commission will have both the resources and the power that it needs to investigate allegations of criminal conduct that could occur across the public sector. The government is keenly aware that many people's lives have been damaged actually, irretrievably and unfairly through being effectively denied procedural fairness through the failings of state anticorruption bodies. The CIC will have extensive powers to compel information and hold compulsory hearings so they can thoroughly investigate allegations of criminal corrupt conduct. Courts, with their well-established procedures to protect individuals' rights, are best placed to determine criminality, not investigative bodies.
The Senate divided. [12:41]
(The President—Senator Parry)
The PRESIDENT: The question is that motion No. 397 be agreed to.
The division was unavail able at the time of publishing.
Question agreed to.
MOTIONS
Donations to Political Parties
Senator GRIFF (South Australia) (12:44): I move:
That the Senate—
(a) recognises transparency and accountability in Government are the hallmarks of a strong democracy;
(b) acknowledges trust in government has reached an all-time low compounded by recent scandals;
(c) notes, with concern, the results of the Australian National University 2019 Australian election study that:
(i) satisfaction with democracy is at its lowest level (59%) since the constitutional crisis of the 1970s,
(ii) trust in Government has reached its lowest level on record, with just 25% believing people in government can be trusted, and
(iii) 56% of Australians believe that the Government is run for 'a few big interests', while just 12% believe the Government is run for 'all the people'; and
(d) further acknowledges that winning back people's trust is among the most urgent challenges facing political leaders;
(e) recognises rebuilding trust with voters involves tightening the rules around political donations;
(f) further recognises that donations to political parties revealed in the Australian Electoral Commission disclosures published on Monday demonstrate the need for urgent political donations reform;
(g) recognises that, ideally, the Government should ban corporate donations from vested interests that seek to influence government policy; and
(h) calls on the Federal Government, as a minimum, to:
(i) lower the disclosure threshold for political donations to $1000; and
(ii) for real time disclosures of donations to political parties.
Senator DUNIAM (Tasmania—Assistant Minister for Forestry and Fisheries and Assistant Minister for Regional Tourism) (12:44): I seek leave to make a short statement.
The PRESIDENT: Leave is granted for one minute.
Senator DUNIAM: Australia has a robust system of political disclosures overseen by the independent Australian Electoral Commission. Under changes introduced by this government to improve transparency, political campaigner disclosures have now been published for the first time, which reveal that nine unions spent almost $33 million on electoral expenditure in 2018-19, with just the ACTU spending over $21.2 million. When including third-party electoral expenditure, unions spent almost $35 million in 2018-19. A complete ban on corporate donations is misguided and will create an uneven playing field between big unions and other organisations in the Australian community, as well as posing potential constitutional problems. A $1,000 unindexed threshold is very low, and such a measure would risk increasing red tape and discouraging individuals from participating in the political process for fear of intimidation or retribution from political opponents.
Senator HANSON (Queensland) (12:45): I seek leave to make a short statement.
The PRESIDENT: Leave is granted for one minute.
Senator HANSON: One Nation does agree with the whole concept of this notice of motion, but I'd have to draw attention to section (f), where it states 'further recognises that donations to political parties revealed in the Australian Electoral Commission disclosures published on Monday demonstrate the need for urgent political donations reform'. That notice published on Monday was basically that the media said it was donations to the political party. It wasn't. It was revenue that was collected by the political parties from January 2018 to 2019. They were not political donations. It comes from membership and it comes from revenue and sales by the party, therefore I dispute the over $3 million as political donations to the political party that was published in the paper last Monday.
The PRESIDENT: The question is the motion moved by Senator Griff be agreed to.
The Senate divided. [12:47]
(The President—Senator Ryan)
The division was unavailable at the time of publishing.
Question agreed to.
BILLS
Financial Sector Reform (Hayne Royal Commission Response—Stronger Regulators (2019 Measures)) Bill 2019
Second Reading
Consideration resumed of the motion:
That this bill be now read a second time.
Senator McALLISTER (New South Wales) (12:50): I should start by clarifying that the Financial Sector Reform (Hayne Royal Commission Response—Stronger Regulators (2019 Measures)) Bill 2019, despite its name, has very little to do with the Hayne royal commission. In fact, this bill implements recommendations from the ASIC Enforcement Review Taskforce from two years ago, but it's been dressed up to look as though the government is taking action following the royal commission.
It is a year since the release of the Hayne royal commission report, and it is deeply shameful that in the past year the government has implemented only six of the 76 recommendations. During the royal commission, we heard stories of everyday Australians being exploited by the banks. A couple was given bad advice that saw them lose their family home. Fees were knowingly charged to people who had passed away. There are instances of discrimination against a person with a disability. In his interim report, Commissioner Hayne stated that the main reason for this behaviour was greed, the pursuit of short-term profit at the expense of basic standards of honesty. The horrific stories that surfaced in the royal commission and Hayne's report have demonstrated that much needs to be changed to restore Australia's confidence in the financial sector. But this government has done very little to deliver the long-overdue legislative response needed to protect Australians. In a similar vein, the government has taken over two years to implement the findings of the ASIC Enforcement Review Taskforce, which reported on its findings back in 2017. This task force was established to review the enforcement tools available to the Australian Securities and Investments Commission and assess the suitability of the existing regulatory tools they use to perform their functions.
This bill implements the remaining recommendations of the ASIC Enforcement Review Taskforce report in four schedules. Schedule 1 of the bill contains amendments which enhance and modernise the search warrant powers. This schedule will ensure ASIC has consistent search warrant powers across the legislation where it has specific enforcement responsibility, and it recognises the role technology plays in the communication of information. Schedule 2 of the bill contains amendments which allow ASIC to receive telecommunications intercept material to investigate and prosecute serious offences. It's important to note that it will not expand the range of offences for which telecommunications intercept warrants can be sought. Schedule 3 of the bill contains amendments which strengthen ASIC's licensing powers and the offences for false and misleading documents, and schedule 4 of the bill contains amendments which extend ASIC's banning powers to ban individuals from managing financial services businesses. Labor will be supporting this bill.
Senator HUME (Victoria—Assistant Minister for Superannuation, Financial Services and Financial Technology) (12:53): First I would like to thank those senators who have contributed to this debate. The government is committed to implementing a comprehensive response to the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry, which is set out in its Financial Services Royal Commission Implementation Roadmap. The Financial Sector Reform (Hayne Royal Commission Response—Stronger Regulators (2019 Measures)) Bill 2019 is an important step in delivering the response by implementing the recommendations of the ASIC Enforcement Review Taskforce to ensure that regulators have the resources and powers that they need to strengthen their approach to enforcement and supervision. These reforms build on the substantial steps already undertaken by the government to protect Australian consumers and deliver on its commitment to implement the recommendations of the royal commission. I commend this bill to the Senate.
Question agreed to.
Bill read a second time.
Third Reading
The ACTING DEPUTY PRESIDENT ( Senator Faruqi ) (12:53): I understand that there are no amendments and we don't require a committee stage, so I shall now call on the minister to move the third reading.
Senator HUME (Victoria—Assistant Minister for Superannuation, Financial Services and Financial Technology) (12:54): I move:
That this bill be now read a third time.
Question agreed to.
Bill read a third time.
Treasury Laws Amendment (2019-20 Bushfire Tax Assistance) Bill 2020
Second Reading
Consideration resumed of the motion:
That this bill be now read a second time.
Senator CAROL BROWN (Tasmania) (12:54): Labor will support this bill. Labor's priority has always been to ensure the right support and assistance is provided to bushfire affected communities. As the leader of the Labor Party, Anthony Albanese, has consistently said, 'Labor stands ready to provide bipartisan support to the government to measures that will help these impacted communities and to ensure expedited passage of appropriate legislation for these measures through this place.' The bill before the Senate now is one example of that appropriate legislation.
The Treasury Laws Amendment (2019-20 Bushfire Tax Assistance) Bill 2020 ensures that all relief and recovery payments and benefits provided by the Australian government in relation to the bushfires are exempt from tax. This includes the Disaster Recovery Allowance and payments under the Disaster Recovery Funding Arrangements.
The bill will also ensure that payments provided to compensate for the loss of income for volunteer firefighters are tax-exempt. This will apply for those who are self-employed or work for small and medium businesses and who have been called out for more than 10 days. As announced by the Prime Minister late last year, these payments are meant to provide for lost income of up to $300 per day, for a total of $6,000 per person. This recognises the extraordinary and exemplary work that these volunteers have undertaken in the last few months.
The bill will also provide deductable gift recipient status to two trusts: the Australian Volunteer Support Trust, which will support families of volunteers who have died fighting these bushfires and in future disasters, and the Community Rebuilding Initiative, which is aimed at helping businesses and communities impacted by the bushfires. I recommend the bill to the Senate.
Senator WHISH-WILSON (Tasmania) (12:56): The Greens will also support this bill. We've all had the chance in here to reflect on the truly heroic efforts of volunteer firefighters and the sacrifices that they've made, including, tragically, for some, the ultimate sacrifice. Making payments to volunteer firefighters tax-exempt is a simple and logical thing to do that will provide a little bit of extra support for the brave men and women who have given us so much.
The Greens also support the granting of deductable gift recipient status to the Australian Volunteer Support Trust and the Community Rebuilding Initiative. The Greens acknowledge the efforts of the Business Council of Australia in having established these trusts so quickly, in encouraging the business community to donate and in directing donations to families of people who have died or been seriously injured and to communities who face the enormous task of rebuilding in the face of these devastating fires.
I also wanted to just quickly put on record that I hope the Business Council of Australia's concern for bushfire victims, and the victims of future disasters, will signal a shift in their policies and their rhetoric around climate change. Right now, the Business Council of Australia are amongst the most powerful forces in this country, and in this place, stopping climate action. This summer's bushfires are the direct result of climate change. The evidence is clear and undisputable. So, and I say this genuinely, if the Business Council really care about the victims of bushfires and of other natural disasters that we know are being exacerbated by climate change—and I suspect many of their members do care deeply about these issues—the most effective thing they can do now is support phasing out fossil fuels as quickly as possible. They say they support a price on carbon, but then opposed a successful one that was legislated in this place by the Greens in the previous Gillard Labor government. They've cheered as loudly as anyone when the political wrecking ball that was Tony Abbott repealed the carbon tax. And, not content with having knocked out a first-class carbon price and a clean energy package, they waged war against the Turnbull government's fourth-rate National Energy Guarantee, calling for a 45 per cent reduction in CO2 by 2030 and labelled it as 'economy wrecking'—a catchphrase that quickly caught on with many on the other side of this chamber.
So the Greens hope that the establishment of the Australian Volunteer Support Trust and the Community Rebuilding Trust are signs that the BCA recognises that we are in a climate emergency and that we need to take action now to completely transition our economy to being 100 per cent renewable. In fact, we'd love to see a public declaration from the Business Council of Australia to that effect. I think that would be greatly appreciated by many in the Australian community, as well as their efforts to quickly get these initiatives up and running. I certainly hope that especially the executives in the fossil fuel companies that are members of the BCA share the sentiments that many Australians share—that what we're seeing now is devastating, that the impacts have been devastating and all-pervading through communities right around Australia, whether they be directly impacted or whether they be witnessing this, and that we are likely to see a future of more extreme weather events, more tragedies and more catastrophes if we don't make the transition as quickly as possible, listen to the science and get out of coal, oil and gas.
Senator SESELJA (Australian Capital Territory—Assistant Minister for Finance, Charities and Electoral Matters) (13:00): I would like to thank all senators for their contribution to the debate and for their support. This bushfire season Australia has faced devastating fires which have disrupted the lives of communities around the nation. The government is supporting volunteer firefighters involved in the firefighting effort as well as ensuring that communities and businesses affected by the bushfires can get back up and running as soon as possible. The government is making the support tax free.
On 29 December 2019, the Prime Minister announced that the payments being made to eligible volunteer firefighters will be free from tax. Further to that, given the exceptional circumstances of these bushfires, on 8 January 2020 the government announced that the disaster payments in response to the 2019-20 bushfires will be free from tax. Schedule 1 to the bill gives effect to the announced tax treatment. Schedule 2 to the bill amends the Income Tax Assessment Act 1997 to include the Australian Volunteer Support Trust and the Community Rebuilding Trust on the list of deductible gift recipients. Deductible gift recipient status allows members of the public to receive income tax deductions for gifts of $2 or more made to these organisations.
I want to thank the opposition and other senators for their constructive engagement on this important bill and their support for its swift passage through parliament. I commend it to the Senate.
Question agreed to.
Bill read a second time.
Third Reading
The ACTING DEPUTY PRESIDENT ( Senator Kitching ) (13:02): No amendments have been circulated. Does any senator require a committee stage? If not, I shall call the minister to move the third reading.
Senator SESELJA (Australian Capital Territory—Assistant Minister for Finance, Charities and Electoral Matters) (13:02): I move:
That this bill be now read a third time.
Question agreed to.
Bill read a third time.
Treasury Laws Amendment (2018 Measures No. 2) Bill 2019
Second Reading
Consideration resumed of the motion:
That this bill be now read a second time.
Senator WHISH-WILSON (Tasmania) (13:03): I was just making the point that the Treasury Laws Amendment (2018 Measures No. 2) Bill 2019, the bill for a sandbox for fintech, may well become kitty litter for spivs if we don't have the right controls in place, if I could use that analogy. Those parliamentarians who are perhaps caught in the thrall of fintech need to consider this very seriously.
Let me remind senators of the drastic consequences that financial innovation can have. I want to give you a couple of examples that relate directly to consumers as well as investors. On the consumer side, this bill opens the door for new forms of payday lending to operate without a licence. Can anyone seriously say that what we need right now is faster and looser controls around consumer credit and more ways for loan sharks to ply their trade?
It's worth looking at what happened recently in the UK in this respect. Fintech payday lender Wonga was basically an app that allowed people to get quick loans online. Wonga was charging effective interest rates of up to 1,500 per cent to their customers. In their drive to get big and go public, they got loose with lending standards, and it all went belly-up—a story I think we're all very familiar with—leaving about 400 million pounds in outstanding loans. Yet, through this bill, the government is paving the way for fintech payday lenders—loan sharks—to get in the sandbox here in Australia.
Let's be totally frank about this: we are making it easier for these start-ups, if that's what you want to call them, or these fledgling fintech companies to raise more money, to go to investors. Why are we doing that? Because, obviously, this industry has lobbied for this because they're finding it difficult to access capital. They're finding it difficult to access capital because this is a very complex and high-risk area, and they're asking for a lowering of regulations and standards to get them up and running. I don't have a problem, as I said earlier, with professional investors investing in these kinds of businesses, because they know what they're doing and they're usually very well diversified. I do have problems with mums and dads who are at a barbecue, who hear about the next best thing since sliced bread, who jump on board without adequate disclosure of risks and who end up getting burnt. It doesn't matter whether it's $1,000, $10,000 or $20,000—that's a lot of money to many small investors.
For investors, this bill is likely to pose even more risk. In the brief time that fintech start-ups have been selling their products, we've already had some pretty good examples of what can go wrong right here in Australia. There's Bux Global, who developed another app—there's always an app—that would allow customers to transfer money internationally. The now Chair of AMP, David Murray, was an adviser to this company, but even David Murray, with all his experience, couldn't foresee that the company was going to go bust and leave investors short-changed to the tune of $100 million. How about Sargon, who were going to provide electronic superannuation infrastructure services? I'm not quite sure exactly what that is; however, former senator Stephen Conroy—I used to enjoy his contributions in this chamber—was on the board, and they were also shaping to go public. That also collapsed late last year and is now under administration.
The conclusion, to put it simply, is the parallels between the frenzy around fintech and things like the millennium dotcom boom are remarkable. I didn't participate in the inquiry that went around looking at and hearing evidence on the companies, and I respectfully also highlight what I highlighted at the beginning of my contribution, which is that I understand that these kinds of businesses can be important for the economy in terms of increasing competition and breaking down concentration of power, particularly in credit markets, but we've got to get there the right way—the right way that protects investors and consumers.
I remember One.Tel from 20 years ago, and I'm very concerned that we're going to repeat a similar kind of investment catastrophe, such as we've seen with Bux Capital and Sargon, if we loosen standards and we don't have the right regulations in place. I wish these companies well. I certainly hope they turn out to be successes, both for the people who run these companies and their investors, but 'buyer beware' doesn't cut it. We know that even in the best examples where financial advisers, even with licences, provide information to consumers, often those consumers aren't financially literate. They don't fully understand the risks, and that is no longer, after the Hayne royal commission, an excuse under law, and nor should it be in this instance.
I want to finish by saying that one thing we've learnt from the royal commission is that, if we're to protect consumers and protect investors, we need a better regulated financial industry. We don't need more loopholes that allow disreputable operators to operate in this kind of high-tech, highly complex environment.
Senator RENNICK (Queensland) (13:09): I rise to contribute to the debate on the Treasury Laws Amendment (2018 Measures No. 2) Bill 2019. This bill is another key step in the government's billion dollar National Innovation and Science Agenda, a strategy to promote a culture of innovation, entrepreneurship and risk-taking to expand, develop and strengthen the Australian economy. This bill allows for very specific targeted amendments to Australia's tax and regulatory architecture. Once applied, these changes will better support Australia's developing financial technology sector to more effectively market test new products and services.
The bill also seeks to clarify tax provisions to deliver greater certainty for early stage venture capital investment in Australian small-cap businesses, including crowdsource funding for start-ups. These reforms will help establish Australia as a leading fintech hub by driving competition that will help deliver better outcomes for consumers, including cheaper financial products.
The bill comprises two schedules, which will have different purposes. Schedule 1 amends the Corporations Act 2001 and the National Consumer Credit Protection Act 2009 to allow conditions to be imposed on providers of financial and credit products who utilise the Australian Securities and Investments Commission's existing regulatory sandbox arrangements to test new, innovative fintech products in the Australian market. Schedule 2 makes minor amendments to the Income Tax Assessment Act 1997 and the Income Tax Assessment Act 1936 to ensure that the venture capital and early stage concessions in either of the acts operate as intended. The coalition government is committed to supporting the Australian innovation ecosystem by providing a tax and regulatory environment that will help innovation in Australian businesses and help them to raise capital, grow and succeed, and get more Australians into more and better paying jobs.
What is fintech? Financial technology refers to the use of innovative technology in providing financial products and services to consumers. Fintech has applications across lending, financial advice, investment management and payment services. What is the regulatory sandbox? In order to facilitate the development of new fintech products, ASIC's regulatory sandbox allows new products to be tested in the Australian market for 12 months without requiring financial advisers or dealers of the product to first obtain an Australian financial services licence or an Australian credit licence.
The licensing exemption is limited to those providing financial advice on relevant products or those dealing in the products. This exemption is not available to issuers of the product. The purpose of providing an exemption is to reduce the barriers to new product development by reducing the time and the costs associated with bringing new financial products to the market and allowing for the viability of a new product to be tested in the market. It may also assist advisers and dealers to satisfy the conditions for obtaining an AFSL or ACL following the 12-month testing period.
To balance the testing regime with the need to protect consumers, strict conditions apply to licensing exemptions provided under the sandbox arrangements. The exemption is limited to certain financial products and credit contracts. They include listed or quoted Australian securities, securities issued by the Australian government, simple managed investment schemes, deposit products, some general and life insurance products, payment products, and some credit contracts. Consumers must be informed that the product sold to them is being tested in the regulatory sandbox, that the provider of the product is not licensed and that some of the normal protections associated with receiving services from a licensed provider will not apply.
The services and products that can be issued under a licence exemption are subject to limits in order to minimise the risk of losses to consumers. These include that businesses relying on an exemption can only provide services up to 100 retail clients; the maximum exposure to a financial product for each retail client is $10,000; the maximum credit contract that can be provided is $25,000; the amount insured under a general insurance contract is limited to $50,000; and there are no individual exposure limits for wholesale or sophisticated clients, but the total exposure of all clients must be limited to $5 million.
The government's enhanced sandbox is about helping fintech businesses overcome the initial regulatory burden and costs of licensing that may otherwise hinder some of their innovative offerings. Schedule 1 to this bill extends the regulation-making powers in the Corporations Act, establishing the foundation for the government's enhanced regulatory sandbox. Regulations will outline the detail of eligibility criteria, the types of products and services that can be tested, and the conditions which apply during testing.
A regulatory sandbox allows entrepreneurs to test new products without the inhibitive need to have a financial services or credit licence from the Australian Securities and Investments Commission. It will allow trial and errors in a safe environment, helping firms to work out if their products and services are robust and will be valuable to consumers. The government's enhanced legislative sandbox builds on ASIC's existing licence exemption. The enhancements will broaden the scope, expanding who can use it, what can be tested and how long businesses can test. The enhancements enable firms to test specified financial services, including financial advice, the issuing of consumer credit contracts and facilitating crowdsourced funding. The first iteration of the sandbox was a good start, with seven companies entering the sandbox since 2016. However, over the same period, the FCA sandbox in the UK has had 89 companies make use of its sandbox. It's clear that changes must be made. The enhanced fintech sandbox is similar to the UK's sandbox and hopes to replicate its success.
The government has been methodically progressing policies that will ensure Australia is a leading destination for fintech talent and investment. This is a competitive sector, with comparable countries like the UK and Singapore keenly looking to attract Australian firms. The regulatory sandbox is expected to lead to greater competition and increased pressure on financial providers—traditional and emerging—to be more responsive to consumers' needs and to deliver better outcomes for Australians. This is one more step in the government's systematic approach to ensuring the policy settings are right to support Australian fintech businesses to succeed.
The parliament retains its sovereignty: all regulations relating to the bill are disallowable, and there are no provisions for ministerial discretion. Schedule 2 to this bill makes a number of minor technical amendments to the early stage venture capital limited partnership and tax incentives for early-stage investor regimes, which have been developed through ongoing engagement with stakeholders and the ATO. The amendments, despite being minor and technical in nature, will ensure these programs operate in accordance with their policy intent, providing certainty to stakeholders and helping to ensure that innovative Australian businesses can grow and flourish.
An active fintech sector is a critical driver of more competition in financial services. We want to see competition, because it will increase the pressure on financial providers—both traditional and emerging—to be more responsive to consumers' needs and deliver better outcomes for Australians. The enhanced regulatory sandbox will allow firms to test new products and services without needing to obtain a financial services licence or a credit licence from ASIC first. It will therefore allow for trial and error in a controlled environment, giving firms a chance to confirm their concept through initial testing with their clients.
We have worked hard to develop a legislative regulatory sandbox which builds on ASIC's existing licence exemption. But we have also been mindful of ensuring the firms in the regulatory sandbox maintain protections for retail consumers. The amendments being made by this bill will ensure that investors in innovative Australian businesses continue to benefit from effective, generous government support and have certainty as to how these programs are intended to operate. This policy was inspired by the financial hubs of London and Singapore. It is these leaders of finance and trade—fellow members of the Commonwealth—who we have to stay with and surpass to remain competitive.
This side of the chamber has a plan for an even stronger economy—an economy driven by world-class innovation, entrepreneurship and investment pathways. It is about building resilience, rewarding aspiration and improving the consumer environment. The Morrison government is reducing the costs of doing business, by lowering taxes, prioritising abundant and affordable energy and driving deregulation. We will continue to play to our economic strengths and remain on track to realise our opportunities as a nation. I commend this bill to the Senate.
Senator O'NEILL (New South Wales) (13:19): Before I make my contribution to the debate on the Treasury Laws Amendment (2018 Measures No. 2) Bill 2019, I have to remark on hearing the close of Senator Rennick's speech and the speeches of so many of those on the other side. They get to the end and they give you this little three-line patter about how they are doing this and they're doing that—and the great PR machine of the government rolls on!
At the end of every speech you get a little signal of it. The problem is that the gap between the rhetoric and the reality is growing by the day.
Sadly, as much as they talk about innovation, as much as they talk as though they're able to support businesses, this is a government that have been in for three terms, and this bill's coming to us because they haven't been able to get the job done right. They have not been able to create the context in which innovation booms in the way that they've proclaimed it would, just by them showing up and becoming the government.
I take great interest in this bill, the Treasury Laws Amendment (2018 Measures No. 2) Bill, particularly given my former role as shadow assistant minister for innovation. I think we would all agree that we should and indeed must do everything we can to support Australians nascent start-up industry. This bill creates a regulatory sandbox that would allow—at least in principle—fintech companies to develop new financial products without traditional regulatory constraints and makes minor changes to the venture capital and angel investor tax arrangements.
Schedule 1 of the bill has been described by some of my colleagues, and I concur that it changes regulations which will allow ASIC to grant conditional exemptions to the Australian financial services licence or an Australian credit licence requirement for the purpose of testing financial and credit service products. Schedule 1 also empowers ASIC to decide when the exemption starts and ceases to apply, as well as the discretion to enforce specific conditions to the exemption. Schedule 2 of the bill amends the Income Tax Assessment Act 1997 to change tax concession provisions regarding venture and early-stage investor capital. This measure is one that Labor supports as it addresses gaping holes previously left in the government's Tax Laws Amendment (Tax Incentives for Innovation) Act 2016. I think that proves my opening remarks: this government has got it wrong on so many occasions across the three terms that it has been elected to serve this nation.
The bill under discussion at this point of time here in the Senate broadly attempts to allow the Australian fintech industry greater freedom from the current regulatory regime at the very beginning of a product's conception. I accept and we understand that this is a development stage element that's crucial in the eventual development of technology and it's important to allow innovation in areas that would not traditionally be possible. Fintech is a growing and important industry, with almost 58 per cent of Australians who are digitally active using some form of technology that automates some aspect of financial services. As more and more of our society and industry becomes digitised, the provision of financial services through technology will become even more crucial in our everyday lives.
The financial services industry in Australia is a huge export industry worth almost $4.6 billion. We are a global leader in the industry. To remain on top, we must also be on top of new and emerging technologies. Fintech—already worth around $1 billion despite the inefficient regulatory regime that has lagged far behind the market's development, needs better care. The introduction of a regulatory sandbox—the idea of a temporary exemption from certain regulations to stimulate innovation in a risk-free environment—is one that should be carefully considered given the current regulations are designed to protect consumers from predatory financial institutions. I need to remind no member of this chamber or anyone who might be here visiting parliament today or, indeed, those who might be listening to the broadcast, of the pernicious dangers of financial institutions, which were all too clearly revealed to a horrified public through the course of the banking royal commission. We must always remember that regulations exist for a reason and we should only alter them under the most careful of circumstances. Labor is a great supporter of innovation. We are also energetic supporters of the fintech industry. Labor backs entrepreneurs who create with their minds as much as we want to support tradesmen who create with their hands. That's why Labor will be supporting this bill but with certain amendments. To ensure that safety of consumers is embedded in this legislation, our efforts will be to try and correct what we think is bad about this legislation, to better give it viability.
New fintech services allow small and medium businesses access to financial services and to circumvent the monopolies that some of the larger businesses in the financial and insurance industries have on particular products that we all might want as consumers. We absolutely support greater competition in the industry through interesting and affordable technologies, but we must also make sure that our regulatory regime keeps up and is not lapped by sneaky and malicious actors. I've been very vocal in this house, and only last year I spoke about the need to cut down on the capacity that there seems to be for scammers to exploit our citizenry, particularly by using schemes that reach into our pockets and into our lives through our phones. This bill should not be a green light for wannabe con artists who want to get their hands on Australian people's money through technology that is not properly contained and regulated to a degree that gives people safety and certainty in their interaction with it. There should be the relevant protections. There's a public interest, and the exemption that the bill will provide for should be able to be used only by those whose motives and methods seek to advance the common good.
We've often heard from those opposite about the need for innovation. Was it not erstwhile Prime Minister Malcolm Turnbull who called for an Australian ideas boom? Remember? It would last and go on forever. That was what he said. It was going to provide us with jobs and growth—one of those phrases that we have all become familiar with hearing but, sadly, not experiencing. The reality is that that gap between the rhetoric and the reality is emerging more and more, because, while this government talks as though it supports innovation and would have people believe that it supports business and opportunity, it is presiding over the erosion of the opportunities for Australians to get the skills they need for an innovative economy. Our STEM standards continue to fall as this government pulls money out of schools hand over fist and walks away from equitable, genuine needs based funding. The TAFE sector across this country, particularly in my state of New South Wales, is a shadow of its former self—a broken thing. The sector of TAFE continues to shrink, and arrogant LNP governments are taking away the opportunity for young people and people who seek to retrain through TAFE to access the new knowledge that they need to participate in a genuinely innovative economy.
We can't just relax our regulatory regime to ensure Turnbull's fabled ideas boom happens. It's hard to have a go when you can't get a go—as the Prime Minister often wants to tell us— and if you cannot get proper education or access training for the roles that innovation offers up. When the government fails, that means long-term suffering for Australian people—for young people and people who find themselves in industries that no longer need their services and who want to retrain. Long-term unemployment is what this government constructs a recipe for. It's wasting the most precious resource of this country: the Australian people.
When the government last introduced this regulatory sandbox, it was such a failure that only three businesses applied. Compare this with 146 in the UK and 30 in Singapore, after only one year of operation. That's what happens when the government actually does its day job properly and gets the settings right. It's happening in other countries. It's just that we've got an incompetent government at the helm. We need more than just the lifting of regulations to ensure the future success of our fintech innovation. Labor absolutely supports the creation of a sandbox to help genuinely innovative and helpful products be developed and delivered. But we will not turn away and ignore the reality that this government hasn't got a good track record of protecting Australians from those who would misuse their intellect and create things that would be of little economic or social value and perhaps even become profoundly exploitative. That's why Labor will be moving an amendment to this bill.
Labor's amendment, applying to schedule 1 of the bill, introduces a requirement for companies accessing the fintech sandbox exemptions that are created under this bill to submit a notice outlining the details of their service or product and give a sound and fulsome justification as to why the exemption that they seek is likely to benefit the public. Under Labor's amendment, ASIC will have the power to remove a company's access to the fintech sandbox exemption if ASIC decides they're not satisfied that the new service or product is actually innovative or likely to benefit the public. We need to send a message: you can't just use this as a fast track to get around all the rules and regulations that protect Australian consumers; you have to satisfy the Australian Securities and Investments Commission that it's for the common good, that it's to the advantage of all Australians and that it's a fair and ethical product.
This test is not new. It's actually common in other jurisdictions. It could've been in the government's legislation at least a term ago. But they miss the details, too often. As I said, this test is common in other jurisdictions. It's supported by consumer groups such as CHOICE, the Financial Rights Legal Centre and the Consumer Action Law Centre, and the local fintech sector has also endorsed a move for a public-interest test. FinTech Australia, in their submission to this bill, called for an official review test to ensure that only appropriate companies can be exempted from the regulations. It's a commonsense measure. If a company or entity wishes to suspend consumer protection laws, they should provide a crystal-clear and ironclad reason for doing so, and that reason must clearly meet the public-interest test.
Labor supports innovation and a smart economy which will sustain Australia well into the future and which will create the jobs that will give such satisfaction to Australians into the future. However, while this government continues to govern we will do everything we can to make sure that Australians are protected from this government's failure to do its job properly. We will ensure that consumers are protected and that vulnerable Australians are not preyed upon by people who are more interested in making money than doing the right thing, people who should not be exempted from government regulation.
More needs to be done to support our education sector so that we can produce the kinds of skilled people who will staff these start-ups and come up with the brilliant ideas that will make our lives less cluttered, more efficient and more enjoyable. If I had a dollar for every request from leaders in the innovation field for us to change how we invest in education! So many great start-ups are looking overseas to get their graduates because this government has our whole education sector running on the smell of an oily rag. It's just not good enough. The minds of our future generation are the most renewable resource that we have. We see success in places like Silicon Valley and the start-up industries in Israel. Australia should be right up there with them. The guts, the brains and the can-do attitude of the Australian spirit is fertile soil for the brilliant ideas of tomorrow to grow. I move:
The amendment was unavailable at the time of publishing.
Senator BROCKMAN (Western Australia—Deputy Government Whip in the Senate) (13:34): I rise to make some brief remarks on the Treasury Laws Amendment (2018 Measures No. 2) Bill 2019. But, before I start, I will just correct the record a little. The information I have in front of me is that, actually, seven companies have entered the sandbox since 2016, and the government are happy to acknowledge that we want that number to be higher. In fact, we would love that number to be a lot higher, which is why this bill is before the Senate. Over the same period of time, the UK's sandbox had something like 89 companies make use of their provisions. So it is clear that, in what is a competitive environment, where you have financial centres like Singapore and the United Kingdom very keen to attract the best and the brightest—the best and the brightest firms, the best and the brightest individuals, those who are on the cutting edge of innovation—we need an environment that facilitates that innovation in the most effective way possible.
I also wish to pick up on something that Senator O'Neill and Senator Whish-Wilson both referenced: the concept of risk and, in particular, the idea that anything is risk free. Nothing, particularly in the financial services sector, is free, and I would contend that it shouldn't be. The role of regulation is not to lock Australians in a white room with no doors. The role of regulation is to manage risk and to balance—and allow people to balance—risk against potential rewards. People need to go into these kinds of new products with their eyes wide open. They need to understand what they are doing. But there is an inherent level of risk in something that is new. The only way of having no risk is to lock yourself in a white room with no doors. That is not what the Australian people have shown they want to do. Australian people embrace innovation. Australian people have been early adopters of many of the new technologies in the financial services sector. Giving Australian companies and Australian entrepreneurs the maximum opportunity to develop ideas within the safe-harbour provisions of the sandbox, the innovation precinct of the sandbox, gives Australian companies that opportunity to compete with other nations, like Singapore, the United Kingdom, the US, Israel and other places where people naturally think of innovation occurring. But innovation occurs in Australia, and by enhancing the regulatory environment in this way we can enhance that level of innovation in the financial services sector.
Basically, what this legislation does is allow businesses and entrepreneurs to test new products without the inhibitive need to have a financial services or credit licence from ASIC. This is very important. We have legitimate hoops to jump through to gain a financial services licence or credit licence in this country, and that is to provide a level of protection to consumers in what is a very complex financial environment. However, those hoops—that level of regulation—do provide a barrier to entry, particularly for the entrepreneurs and innovators in this space. We want people to be able to 'trial and error' these kinds of products in a safe environment, to help them to work out what works, what doesn't and what is safe to be released more widely, and then to gain access to a financial services or credit licence.
These enhancements to the legislative sandbox build on the existing arrangements. They broaden the scope, expanding who can use it, what can be tested and for how long a business can test it. The enhancements enable firms to test specific financial services, including financial advice, the issuing of consumer credit contracts and facilitating crowdsourced funding.
This is part of the government progressing policies that ensure that Australia is a leading destination for fintech, not only for talent but also for investment. We want foreign investment in Australian fintech. We need to be more responsive to what consumers need. When payWave first appeared on the market, I was very surprised that Australians and I myself adopted it as quickly as we did. I thought there would be a barrier there. I thought people would be inherently resistant to how seemingly easy it was to transfer money with very little check or balance with no signature anymore. But I and other Australians adopted it extraordinarily quickly. Consumers often drive these products into the market, but entrepreneurs are the ones who need to develop them and who need to undertake the R&D to make sure the systems work and to make sure that they provide consumers with what they want and need and, in that way, deliver better outcomes to all Australians. This is one part of a systematic approach to getting the policy settings right in this area and to support Australian fintech businesses to succeed.
I believe Senator Bragg may be speaking on this bill shortly. I know he has taken an enormous interest in this sector and through the select committee on fintech. I'm very interested to see what will come out of that, Senator Bragg. As I said, the government are committed to ensuring that we get the balance right in terms of risk. We want entrepreneurship. We want new ideas in the Australian economy. The enhanced sandbox is part of that.
Senator MARIELLE SMITH (South Australia) (13:41): I also rise to speak on this important bill, the Treasury Laws Amendment (2018 Measures No. 2) Bill 2019, and I'm pleased to do so as a keen supporter of the fintech industry and as a keen supporter of start-ups and innovation and developments which will make life easier and better for consumers. When we're talking about issues relating to fintech and financial regulation, I think for senators on this side, like in all spheres, in particular our concern is always to make sure that we're supporting innovation, supporting growth, supporting opportunity but balancing the needs of consumers and making sure adequate protections are in place for consumers, because, at the end of the day, that's who we need to be standing up for. We've seen in this industry in recent times some terrible, terrible examples of where consumers haven't been put first and have been left vulnerable. That's front and centre of mind for Labor senators. But I believe you can protect consumers whilst also supporting this important industry to thrive.
On this bill in particular, I want to address what has been proposed in schedule 1 as well as speak to Labor's proposed amendments which Senator O'Neill recently introduced as well. Schedule 1 of this bill seeks to extend the minister's regulation-making powers under both the Corporations Act and the National Consumer Credit Protection Act. These powers will enable ASIC to provide exemptions from the Australian financial services licensing regime under certain circumstances. These powers are being established for the purpose of testing financial and credit products and services in what is described as the 'fintech regulatory sandbox'.
Senators would know that we have a select inquiry into financial technology and regulatory technology at the moment. I acknowledge Senator Bragg in the chamber; he is leading this inquiry. I'm pleased to be the deputy chair of it. What we are seeking to do in this inquiry is understand what the challenges and barriers are for Australian fintechs and regtechs in trying to grow their enterprises in their respective industries and to try to make things, for the most part, better for consumers and make regulation easier to navigate and therefore more effective. I'm very pleased to be part of this inquiry.
One of the things which has been raised in this inquiry has been ASIC's regulatory sandbox and the ability for fintechs to access the sandbox and participate in it. We've also heard about a number of other challenges from the fintech sector above and beyond the current regulatory settings that relate to financial services and product development. These are some of the issues that I'm really keen to explore. There's the issue of access to local capital. That's something which has been raised by lots of fintechs, with many having to seek equity internationally to overcome the initial start-up phase. There are also questions around access to skills and what the government can be doing to better promote STEM and innovation in education to support the skills requirements in this sector. I think this is a very important piece, because, while this government has claimed to be the champion of this sector and of start-ups and innovation, we can't do this without a greater focus on STEM education and the skill shortages we have in Australia at present. We need to make sure that firms can source local, high-quality software developers and programmers, and to do that we need to make sure that we have the education settings in place so that young, smart, talented Australians who want to go into this sector have every opportunity to do so and to take up the jobs that this sector potentially offers and can promote. So these are some of the fundamental issues that I think we need to be considering in any question about changes to the regulations for the fintech sector, and it's something that I hope to further explore as part of this inquiry.
I get that there are lots of other challenges out there for fintechs too. It's hard. It's hard when you're in the start-up phase. It's hard when you're working in new technologies and in a new space. I've worked in a business which was looking to bring a very innovative technology to a traditional business in Australia, and I remember dealing with some of the challenges which fintechs talk to me about now: where you set up, how you set up, where you find your staff, how you test things and how to be innovative in a very regulated environment. It is really challenging, and we need to make sure that those people who are taking risks and exploring opportunities are able to be supported and do that. We want, in Australia, to see innovation. We want to see small firms grow. We want to see new industries flourish, especially if they're industries that offer greater potential for consumers.
I'm really pleased that in Australia, according to KPMG, the sector is now worth around $1 billion—I think that is their estimate. So that's where they're at now, with the current settings in place. With more support and greater opportunity, who knows where the growth could be, what opportunities there are, what potential there is, what opportunities there are for consumers, and what greater benefits can come from what this industry is doing and from what is being done in the regtech space as well? So I look forward to our inquiry continuing its work, I look forward to us reporting back, and I look forward to see what we can do to make sure we get that balance right between supporting this important sector, making sure that consumers are protected and making sure that good things for consumers come out of this industry and come out of innovation and growth.
In reference back to the sandbox, we get that sometimes you need space to innovate, and we understand the intent of what the government is trying to do. Firms granted access to the sandbox will be provided with regulatory relief and specifically exempted from regulations that have been established by the government for the purpose of protecting consumers from predatory financial firms. This sandbox will allow eligible fintech companies to test certain products or services for up to 12 months without the AFS licence or credit licence. It is important that some of these new products can be tested in a regulatory environment that determines the viability of such products. The sandbox allows innovative concepts to be tested in a more forgiving environment, freeing more consumer focused offerings to Australian and oversees markets.
The only justification for ever exempting firms from regulations which are designed to protect the public is where such exemptions could open up significant further benefit to the public. In growing our fintech industry, we are potentially providing jobs and wealth as well as products and services that can drive competition in both standards and price that will ultimately benefit consumers. We really have to remember that point, though. We don't want to see lower regulation unless the lower regulation actually means more effective regulation and better outcomes for consumers.
We know the current uptake of the sandbox is low, and it's been put to me by FinTech Australia that greater involvement of local fintechs in this sandbox would be highly desirable, so there is a need for this bill. The current sandbox that was launched in December 2016 has seen only seven entities participate, while 44 applications have been submitted. To put this into a global perspective, the United Kingdom had over 146 companies apply to use their sandbox after one year of operation, and Singapore had 30 applications in their first year of operation. Australia's current framework allows for the entry of entities with a total exposure limit of $5 million, a maximum of 100 retail clients—there is no limit on the number of sophisticated clients—and a maximum test time of 12 months. The bill provides for regulations which ASIC and the government can use to grant extensions to the framework which I have just outlined and therefore grant fintechs conditional exemptions from AFSL and ACL requirements. This will give ASIC the power to decide how exemptions will start and then cease to apply, as well as the ability to enforce specific conditions. It will allow a greater range of products and services to be tested over a longer period. Importantly, ASIC will be able to specify conditions, stipulate how entities meet these conditions, and cancel exemptions where an entity fails to meet conditions or is suspected to be not of good character.
I'm pleased to note that the bill does provide for an independent review of the sandbox provisions to be conducted one year after implementation—an important tool to ensure that these changes have the desired effect in promoting innovation in the development of financial services and products, whilst, of course, protecting consumers.
I know there have been concerns raised by consumer groups such as CHOICE. That's why Labor has proposed amendments that would require entities using the regulatory sandbox framework to apply to ASIC for approval, with the regulator only able to grant approval if they are satisfied that the proposed product or service was genuinely innovative and of potential benefit to consumers. Similar conditions are in place in foreign jurisdictions, including Hong Kong, Singapore and the UK, where, as I've outlined earlier, we have seen a significant uptake in the sandbox—a much greater uptake than we have seen in Australia.
These amendments are important, because we do not want to see regulatory relief provided through the mechanisms of this bill for products that are not innovative and have no prospect of providing substantial benefits for consumers. Of course, it is crucial to ensure that we address this balance always to ensure that innovation and growth in the fintech sector does not come at the cost of consumer outcomes. ASIC itself has publicly acknowledged the importance of maintaining this balance. Its Innovation Hub, established in 2015 to assist fintechs in navigating Australia's regulatory system, aims to provide the right balance between innovation and potential risk of poor consumer and market integrity outcomes. I note that Fintech Australia has also called for an official review process to ensure that only appropriate companies are able to enter the sandbox, which is in line with Labor's amendments. This bill, in establishing a new regulatory regime for fintech participants in the sandbox, provides just one of a number of examples that this parliament and the government will need to grapple with adequately to ensure that we do get that balance right in encouraging the growth of new and innovative financial products and services, whilst, of course, protecting consumers and consumer outcomes.
Many other issues have arisen in the course of the inquiry, which I'm a part of, and will continue to come up as part of that inquiry process. How do we ensure the consumer data right and open banking, with the free flow of consumer data to third parties, caters for appropriate consumer consent? Or, how do we ensure that the continued transition to cashless forms of payment does not leave vulnerable people behind? This is an issue I'm particularly concerned about as we do move towards a cashless society. What does that mean for people who are less able to access technology products which effectively replace cash? What does that mean for vulnerable people? What does that mean for the techless? While many of us in this chamber are among the tech endowed, there are people in our community who have great difficulty accessing technology and navigating technology. When that technology seeks to supersede other forms of transaction, like cash, then that does have the potential to leave people particularly vulnerable. Of course, there are other issues around natural disasters or emergencies, where you rely on these sorts of systems. I think that's something that this parliament and our committee still needs to do some work on.
In conclusion, I note that, with the greater powers and responsibilities to be at ASIC's disposal at the passing of the bill, greater capacity within its agency may also be required. That's something that requires further consideration. Ultimately, Labor wants to see a flourishing fintech sector in Australia. I think we've been supportive of this sector right from the beginning. I'm certainly supportive of this sector, and the regtech sector, and I'm certainly excited to see the future innovation and development that will come out of it. I'm very proud to be able to support measures that will ensure that sector has every opportunity to thrive in Australia and thrive locally. I am also particularly concerned to see that that growth and opportunity in the sector isn't just restricted to Sydney and Melbourne. I think there are huge opportunities in my state of South Australia for fintechs to grow and thrive—huge opportunities in South Australia. I look forward to doing everything we can as a parliament to ensure the benefits and opportunities in this sector aren't concentrated in one part of the economy and one part of our nation, in particular, but are spread more broadly throughout our country.
There are so many amazing fintechs operating in South Australia already—fintechs like Tic:Toc, an award-winning fintech which I was lucky enough to visit a couple of weeks ago, and there are many more. So much innovation is happening in South Australia in this space. As a government, we need to make sure that the settings are in place for that sector to thrive and grow and for consumer outcomes to be delivered so that we ultimately get more products on the market in this financial space which benefit consumers in the way they engage with the financial sector.
Senator BRAGG (New South Wales) (13:55): Our agenda in this space has been very clear and consistent for some years. The Prime Minister, when he was the Treasurer, was, in many respects, Australia's first champion in the parliament for fintech. Over the last few years we have had a royal commission into the banking and financial sector where we have seen that the incumbents aren't doing a very good job. So Australians need more choice when it comes to financial products. These new choices—more competition—won't just fall out of the sky. Innovation will have to, ultimately, be the pathway for us to have more choice in this country in the financial sector.
This bill, the Treasury Laws Amendment (2018 Measures No. 2) Bill 2019, is one part of a broader agenda. As Senator Marielle Smith alluded to, we are currently running an inquiry into the fintech and regtech sector, which the Senate supported last year. The overriding agenda here is getting more jobs in Australia and having more consumer choice. As the Hayne royal commission showed, Australians need more choice, and the bridge to that choice is fintech.
Ultimately there are five large challenges, in my view, which determine how competitive or how good you as a nation will be in this fintech space. They are: capital; access to skills; taxation; the regulatory regime; and, of course, the culture. People often remark that the culture, which is difficult for a government to drive, will determine the dynamism and the nature of the products which are available on the market. Countries and jurisdictions like Israel, Singapore and California are regularly held out to be the exemplars of culture. All of those factors will be considered by the select committee inquiry.
When you talk about the key principles that you will weigh up when you're looking at regulation or legislation, as we are today in relation to this sector, I believe that you're weighing the need to innovate against the need to protect consumers. Those are ultimately your two counterweights. So every single bill that comes into this place that we propose, like this sandbox bill today, weighs up the need for our country to innovate and to deliver more and newer products against the need to protect vulnerable consumers, because it is true that the financial sector has shown a regular propensity to fail when it comes to consumer protection.
Turning to the particulars of this bill, we have a waiving of a licence requirement for two years. This is not a carte blanche approach. The regulator, ASIC, in the circumstance of having a waived licence, could still intervene within 30 days and say: 'No, that is not an appropriate idea, business or concept. There will be no waiver for you, Mr or Mrs Fintech.' Effectively, it provides relief for 24 months from having to take out an Australian credit licence or an Australian financial services licence. There are some exclusions: it can't be a margin lending product and, equally, it cannot be a derivatives product. It's taking the really complicated, confusing products, if you like, off the market.
Further, this deploys a much more flexible approach to the regulatory framework than we've seen, which recognises that this fintech environment is very dynamic and changes so regularly. The idea of bringing a bill through these two chambers every time you want to respond to a market development really is outdated. It gives the minister—in this case, a very good minister—the ability to make a regulation to change or to tweak the regulatory framework.