Treasury Laws Amendment (2017 Measures No. 5)
House of Representatives, 28 February 2018
Watch Matt's Speech
Mr KEOGH (Burt) (10:20): The Treasury Laws Amendment (2017 Measures No. 5) Bill 2017 and the related bill will strengthen protections against manipulation of financial benchmarks and provide for the appointment of a productivity commissioner with extensive skills and experience in dealing with policies and programs that will have an impact on Indigenous persons. Labor largely supports these changes.
While some benchmarks are calculated by the administrator using regulated and publicly available data, others rely on submissions from banks and other market participants. Examples of these include the London interbank offered rate—commonly known as LIBOR—and Australia's bank bill swap rate, the Standard & Poor's ASX 200 index, the ASX bond features settlement price, the cash rate and the consumer price index. If we look at these sorts of benchmarks, globally there have been many cases of market misconduct regarding their determination. As of August last year, penalties paid by financial institutions in relation to such manipulation had reached around A$25 billion. In Australia, ASIC commenced formal court proceedings in 2016 against the ANZ, NAB and Westpac for alleged market manipulation and unconscionable conduct in relation to the bank bill swap rate. Later, ASIC expanded the rate-rigging case to also include the Commonwealth Bank. These cases continue to proceed now.
The purpose of the bank bill swap rate is to provide an independent and transparent reference rate for the pricing and revaluation of Australian dollar derivatives and securities. It's an important benchmark because it impacts financial products used by many Australian businesses to manage their financial affairs, in particular their borrowings. Artificially moving the bank bill swap rate can have some very clear winners—often the banks—and plenty of victims, the Australian business community. So rate-rigging is a serious crime—well, at least it should be. In fact, it already is. The Corporations Act already criminalises market manipulation and misleading or deceptive conduct. But, as I can tell you, as a former prosecutor that specialised in corporate crime, the existing provisions are very difficult to prosecute. They are complex. So new and, in particular, clearer laws in this area are well overdue. Indeed, given how long ago the manipulations of the LIBOR and the BBSW were, it is concerning that it has taken the government so long to get around to fixing these things.
In government, the coalition made massive cuts to ASIC's capability as the corporate regulator—a massive free pass for corporate misconduct. The government only moved to restore that funding when Labor called for a banking royal commission. So I'm glad that ASIC is finally getting some positive attention from this government, a government that appeared to play favourites with its financial regulators, favouring APRA in many cases even where ASIC would be the more appropriate regulator.
But what will these laws specifically do? Schedule 1 will establish a new licensing regime, requiring administrators of designated significant financial benchmarks to obtain a new benchmark administrator licence from ASIC. ASIC will have the power to designate significant financial benchmarks, subject to one or more specified criteria being met. It will also give ASIC power to make rules imposing a regulatory framework for licensed benchmark administrators and related matters. This framework will reflect a set of principles released by the International Organization of Securities Commissions, IOSCO. And it will make manipulation of these financial benchmarks a criminal offence and subject to civil penalties with appropriate penalties attached. In addition, the ASIC Supervisory Cost Recovery Levy Amendment Bill adds benchmark administrator licensees to the list of entities from which ASIC may recover its regulatory costs.
While we welcome these bills, we are not blind to the Turnbull government's poor record on consumer protection in financial services. In the face of growing misconduct by the big banks and mounting consumer discontent, this government refused to establish a banking royal commission. While the banks eventually saw the writing on the wall and had to come and ask the government for a royal commission, it just goes to show where the loyalties of this government lie—with the banks and not the Australian people. The banks, indeed, wrote the terms of reference almost entirely themselves. This is, I think one can admit, a clayton's banking royal commission. It's the sort of royal commission you have when you're not having a royal commission. And, as we have seen, the timing allowed for this royal commission is woefully inadequate. The scope is broad but specifically excluding dealing with the regulatory regime in which banks operate.
What this can be contrasted against, of course, is Labor's record in managing financial services and, in particular, protecting consumers. It was the previous Labor government that made landmark reforms like the introduction of the National Consumer Credit Protection Act in 2009. This was the first single, standard and nationally consistent regime for consumer credit regulation and oversight. It gave oversight to consumer credit, including home loans and credit cards, to the national regulator, ASIC. It included what are proving to be some very important and responsible lending obligations. We should also not forget Labor's enactment of the Future of Financial Advice reforms, the FOFA reforms, which the coalition indeed voted against. ASIC's Fees for no service report recently revealed that the big four banks and AMP had spent years taking fees from customers for financial advice services that in fact they never provided. A number of financial advisers engaged by the big banks were also charged for giving dodgy financial advice to consumers. The coalition's opposition to FOFA now looks incredibly embarrassing, and they should indeed be embarrassed by it. ASIC has stated that FOFA requirements that were passionately opposed by those opposite helped to bring to light the massive fees-for-no-service scandal.
Turning to schedule 2 of the legislation, it provides for the appointment of a productivity commissioner with experience and expertise working in Indigenous communities and with Indigenous people to oversee the work of the Productivity Commission in relation to the evaluation of policies and programs that have an impact on Indigenous persons. Labor stands with Aboriginal and Torres Strait Islander peoples to recommit to delivering a greater say in issues that affect their lives, such as this. However, there are factors in this bill that we have concern with. The definition of 'Indigenous person' is based on race and descent rather than the more standard definition, which is based on a three-part test of descent, identification and acceptance in the community. Labor has argued in the Senate multiculturalism report that it was necessary to move away from a race based terminology in legislation and policy. Labor will conduct further consultation in respect of schedule 2 in relation to this language and the definition in the bill and the issue of the new productivity commissioner being a non-identified person.
The use of the term 'race' has the capacity to reinforce negative perceptions of others from different cultures. The descent, identification, acceptance definition has been adopted by all Commonwealth agencies, which raises the question: why hasn't it been used in this legislation? In a multicultural society such as ours, terms like 'race' serve only to divide. I can think of another document where the term 'race' is also used quite liberally, the Australian Constitution. The Joint Select Committee on Constitutional Recognition of Aboriginal and Torres Strait Islander Peoples actually proposed the removal of sections 51(xxvi) and 25 of the Constitution because of their reliance upon race as an 18th century concept and the embedded racist thinking that governs their construction.
So why is the term being used here? This government likes the Constitution just the way it is, which is why, of course, it also rejected the Uluru statement. The voice to parliament, constitutional or legislated, was widely regarded as a modest change. Instead of a judicially enforced mere prohibition on racial discrimination, the body would be designed to provide active participation in the democratic life of the state. Although Indigenous people enjoy full equality in the electoral arena, their position as an extreme numerical minority makes it difficult for them to be heard by government, all the while holding a unique place in our society and history as this land's first inhabitants and its custodians.
In a media statement, the government said a referendum on a voice to parliament would have 'absolutely zero chance of success'. How do they know this? The Minister for Indigenous Affairs' explanation was:
I don't need evidence ... we have done a lot of polling, not on this particular … matter, but on other matters.
Well, that makes complete sense, apparently. I am glad that the government are proposing to have an Indigenous voice within the Productivity Commission, but they do need to get it right.
Finally, I would like to make some notes to the drafters. What is with these opaque and misleading legislative titles? Firstly, there are not one but two measures in this bill. At the very least, it would have made far more sense to have called this bill 'Treasury Laws Amendment (2017 Measures No. 5 and No. 6)'. But really, and I say this on behalf of every law student in the country, if not for others who struggle to understand our legal system: could you not have had two amendment bills: the 'Corporations Amendment Benchmark Regulation Bill' and the 'Productivity Commission Indigenous Commissioner Bill'? That would have made much more sense. We talk often about transparency and accountability in government. Maybe we could take just one small step in that direction in the way that we label our legislation.