House of Representatives, 25 June 2018
Watch Matt's Speech
What a pleasure it is to follow the member for Chifley in speaking to this legislation because, once again, we have the Husic-Keogh double act speaking on essential legislation for our financial services sector. What do we hear from the government on their own legislation? Nothing, zilch. I'm pretty much convinced that those on the other side of the chamber don't actually understand what this legislation does. One of the things that confirms that proposition for me is exactly what the member for Chifley has just said, and as he and I have both said on many occasions in this House. It is that we're getting sick of having to come back and deal with legislation that is coming into the House and having to fix up the government's own legislation, which didn't work and could have worked so much better if they had just followed our advice and our wilful cooperation to get these things right in the first place.
That is in this context where we hear so much from those on the other side of the chamber who say that apparently Labor would know nothing about business and that apparently we don't understand the economy. What do we see? No speakers from the government side at all and no understanding at all from the government about what is actually required when it comes to dealing with the modern parts of the economy: the fin-tech sector, crowdsource funding and angel investors. These guys would not have a clue about any of that. The thing that we need to bear in mind is that this stands in contrast with what the government likes to say. In his first statement after being elected, the Prime Minister told our nation that, as a nation, we were going to be agile, we were going to be innovative and we were going to be creative. He told us that technology can be our friend if we are agile and smart enough to take advantage of it. What we have before us today is one of the first of what should be an innovative and agile initiative by this government. Instead, in fin-tech we have the first initiative, and it's this fin-tech regulatory sandbox which was initially launched back in 2016. But, unfortunately, this first foray into innovation by the Turnbull government has seen, to be frank, an epic fail.
Labor has been pushing the government to better support the early-stage innovation and start-up community for years. It is, we know on this side of the chamber, the way of the future. The local fin-tech sector is fast growing. It's emerging as a real competitive threat to our major financial services players and potentially providing consumers with greater opportunities for new financial products. It may go against the grain for those Liberals that only seem to care for big business and their buddies in the big banks, but we in Labor know that the only way for this country to prosper in this evolving world economy is to support these dynamic small businesses and give them a platform to thrive as well.
In 2016, ASIC did launch Australia's first regulatory sandbox, an opportunity for companies to test new products in a regulatory environment that allows fin-tech start-ups to determine if such products are potentially viable. This regulatory sandbox allows these companies to offer products that would normally not be able to come to market for a much longer period of time and would have to jump many, many hurdles in the process. The regulatory sandbox framework comprises three broad options for testing without a licence. There's eligibility for licensing exemptions where there are fewer than 100 retail clients, there's a plan to test for no more than 12 months and there's a total customer exposure of no more than $5 million, among some other conditions. The benefit of this sandbox is that innovative concepts can be tested in a more forgiving regulatory environment, bringing more consumer focused offerings to local and international markets.
But, after just over a year, in Australia we havewait for ita grand total of three entities making use of this sandbox, with a mere 15 in the pipeline. Over a similar period, the UK has had 146 applications to take part in their program, while Singapore has had 30. Some may say, 'Oh, but look at those countries and their financial services markets; they're so much bigger than in Australia.' Actually, when we look at what we have in Australia in terms of funds under management and the scope and maturity of our financial services sector, where we have full and creative business minds applying to this sector, there is no excuse, and there's clearly no lack of willingness from the Australian marketplace to participate. We have a reputation of being global market leaders in the financial sector, so why are we not leading the world when it comes to innovation? I find it hard to believe that businesses would not be seeking out the opportunities to grow their businesses with the financial and regulatory support of government entities where it's available. No, the low participation rates clearly reflect the limited scope of products and services that were available as part of the pre-existing program. The government's current system, though, is so constrained that we can see it is effectively unusable. Widening the range of products permitted to be trialled and constructing a more engaging approval process, while providing increased consumer protection, should increase the appeal for others to take part in this system.
In Australia, our local fin-tech sector, as I said, is growing. It is emerging as a real competitive threat to our major financial services players. If undertaken properly, this process could provide customers with greater opportunities for new financial products and potentially might be able to put forward something that the big banks can't offer. If we get this right, it will make available financial investment opportunities and advice not previously available. It will be able to penetrate into areas of the market that currently are not accessed by a lot of the financial services sector. There will be opportunities for wealth creation for each and every person in our electorates.
But perhaps this is why the government can't seem to get their act together on proper plans for this. They don't want to disturb the peace that they have with their big bank brothers in arms. All the start-up sector has received since the 2016 launch of this project by this Liberal government is talk, some flashy media announcements and a bit more talk but very little concrete support. It's not too different, basically, from everything else that this government seems to do. This scheme was, as I said, put in place back in 2016 and is intended to make it easier to create evolutionary changes in our financial services sector, to make sure that that evolution is not prohibitively slow, and to have it move into the future to create more tailored financial opportunities for our community and across the sector. But it seems that the scheme has been heavily flawed.
Getting the fin-tech regulatory sandbox right also means, of course, that there will be more work for ASIC. Yet what have we seen? As in so many areas, ASIC has actually received significant funding cuts under this budget. The government have cut $26 million from the ASIC budget over the forwards of the current budget. It's the financial services regulator. It needs to be properly financed. As I've said many times in this place: we've got a banking royal commission going on, which has been spewing out claims that need to be properly investigated. There will be findings that come when the royal commission concludes that will need to be furthered by our corporate regulator. But, instead, this government has seen fit to cut the funding for ASIC. At the same time, we have programs like this, we have legislation like this, that requires, rightfully, ASIC to assist in doing new regulatory work to make sure that we can have this fin-tech sector blossom. But, instead, funding has been cut from our corporate regulator. Who should be making the investment? The government should be making this investment to make sure that the regulators are properly resourced to do their work. It is unsustainable presently for them to continue to do their work properly as the cop on the corporate beat, let alone take on these new projects.
We have heard time and time again that the government will crack down on companies and big banks doing the wrong thing. We've heard they want to enhance ASIC's powersbut where's the substance to that? An increase in their capabilities and responsibilities through this and many other bills should come with funding increases, not with a $26 million funding cut in the budget. ASIC has previously flagged with the government its limited capabilities with regard to staff numbers from its funding cuts. It's beginning to sound a bit like a broken record. Even on Friday, in the House Standing Committee on Economics hearing with ASIC, we heard from Mr Shipton, their chair, and from other commissioners that they are at a crossroad, that their powers and capabilities are effectively being limited and stymied by the budget allocations being given by this government, or rather the lack of budget allocations being given by this government. They are being muzzled by the government in their ability to effectively perform their role.
In discussing this bill, in particular, we simply can't agree to adding a further cap to ASIC's hat without them receiving more support. In addition, consumer advocate Choice have raised significant concerns about this scheme. Choice and other consumer advocates are concerned that some of the concepts trialled in the sandbox environment are not demonstrating a legitimate need for regulatory relief and that some concepts may not be good for customers in practice as promised. They say this legislation would allow unlicensed financial advice on superannuation, insurance and long-term investment products. These services areand I think everyone would agreetoo complex and important for the long-term wellbeing of customers to be offered without adequate protections that are removed by the sandbox environment. It essentially creates an environment where the issues raised in the banking royal commission of poor advice, poor client relations and not acting in customers' best interests will be at further risk, if not done properly.
A fin-tech regulatory sandbox is still very much worthwhile, but these concerns should be examined. It's why Labor believe that there is merit in this legislation being properly considered by a Senate inquiry so that we actually get this right. Despite significant government fanfare on the announcement of this program a mere two years ago, only three entities have bothered to be involved with it. This is why the government needs to make these changes. It's why we are here today, on yet another piece of legislation fixing the government's previous legislation so that we can get this right, because it is important.
We have seen that overseas there has been far better take-up of those arrangements, because they've got it right. I refuse to believe that the local uptake of the regulatory sandbox arrangement has been poor because we don't have the brains to do it in this country. We certainly know that that is not the case. It is in stark contrast, I believe, to the way in which this country is at the forefront of so many of the financial services around the world and in being able to promote them. So it is important that we get this right. We don't want to lose this opportunity. We do not want to see a situation where we continue to stall and allow other countries and other financial services sectors to get the jump on us. We have fantastic innovative minds in this country. We need to make sure that they are allowed to blossom here and promote this around the world.
The regulation of the financial services industry is such that we can support projects like this. We just need the support of organisations, in particular, ASIC, in funding and resourcing to make this happen. This is why Labor support the referral of this legislation to the Senate. We need to explore why local uptake has been so dismal and also make sure that consumers are adequately protected in the process. They say: if it ain't broke, don't fix it. Well, it is broke and we need to fix it. It is crucial that we encourage the development of fin-tech products that are genuinely innovative and provide tangible consumer benefits while growing our financial services sector and the economy at large. I commend the bill, but I ask again: as with so much of this government's legislationfor example, the crowd-sourced equity funding regime which we have dealt with several times in this Housethe government need to do the work to make sure that they get the balance right.