Today I chatted with ABC News Radio's Marius Benson about the importance of getting banking and financial sector reform right for Australian consumers. Here's the transcript:
ABC News Radio
TUESDAY 15 JULY 2014
SUBJECT/S: Australia’s banking and financial system; changes to Future of Financial Advice laws
MARIUS BENSON: The future of Australia's banking and financial system could become clearer today with the release of a report by former banker David Murray. That system is dominated by the big four banks and there's been criticism that their record profits of recent years have been underwritten by taxpayer-backed guarantees, but the public hasn't benefited from their success. The Murray Report will also look at the financial advice industry as the government moves ahead with its plans for changes to its Future of Financial Advice laws. For a Labor view on changes in the Australian financial world, I’m speaking to the Shadow Assistant Treasurer, Andrew Leigh.
Andrew Leigh, good morning.
ANDREW LEIGH, SHADOW ASSISTANT TREASURER: Good morning, Marius.
BENSON: In broad terms, is Australia's financial system bust? Is there need for significant change?
LEIGH: Well we ought to take pride in certain elements of our system. Our banks performed very well during the Global Financial Crisis at a time when many other countries saw big banks go bust. But I think it is always important to be looking carefully at how we can make improvements to the financial system and so Labor will take a constructive approach to any recommendations that will come out of this interim report.
BENSON: The big four banks are doing very well. In fact, they're doing better and better and the profits are going up. People do point to the fact that there is - since the global financial crisis – there has been an effective government guarantee. That is the way the international financial world views Australia's big four banks and they get funding at a discount as a result. Do you think that's fair, and is the public benefiting from that circumstance?
LEIGH: Well the tension here is always between making sure that you've got prices being as low as possible, interest rates being as low as possible, but also insuring that you've got stability within the system. No-one benefits from bank collapses and we've seen during the Great Depression, during the Global Financial Crisis, the shock waves that run through a system when an institution fails or even looks like it might fail. So I hope the Murray Inquiry will be making sure that it gets that balance right. One thing I am slightly concerned about is some of the suggestions that the four pillars policy might go, that's a policy that prevents the big four banks from merging. I don't think we need more concentration in our banking system than we have at the moment.
BENSON: Do we have too much concentration right now?
LEIGH: Well we certainly want to encourage non-bank lenders, we want to encourage small banks to get into the competitive space. As with any other market, it benefits from competition. One of the things that Labor did in government was to make it easier to switch banks. Wayne Swan put through a number of important measures there, which just enabled consumers to take their money and walk down the road if they found a better deal.
BENSON: Did anyone do that? Cause it’s such a schlep changing banks.
LEIGH: It is a little, and that was one of the things Wayne did in making sure that you could get a standardized statement out from your bank show the payments that were being made out of it, so you could take that statement onto the next bank. That was one of the…
BENSON: Yes, but did anyone do it?
LEIGH: We certainly saw an increase in bank shifting as a result of that, and also in the mortgage world. We encourage more shifting of mortgages, and making sure that we got rid of mortgage exit fees - something which was opposed at the time by the Coalition – was an important measure in terms of boosting competition in that part of the banking sector.
BENSON: On the Future of Financial Advice - the financial advice industry has been under scrutiny, the government has proposed its changes. Your party opposed to them, the Greens are opposed to them, there are slightly conflicting reports about exactly where the cross bench, and specifically Clive Palmer, sits now. Are you confident you can block the moves this week by the government to change financial advice laws?
LEIGH: We're certainly hopeful, and this has been extraordinary battle as your listeners will know. Labor had to table the government’s own regulations so that we could move to disallow them. And these were regulations which would take away consumer protections from Australians. These are measures that are opposed by National Seniors and Choice, they are measures which the government was attempting to push through at a time when revelations are coming out about mums and dads losing their life savings in yet another financial problem. So these are bad changes being made by the government under the guise of red tape repeal. Really what they're doing is stripping away fundamental protections that look after pensioners, in order to give more to those at the top of the distribution. At a time when banker’s earnings have been going up a whole lot faster than pensioners, that's bad reform.
BENSON: Andrew Leigh, thanks very much.
LEIGH: Thank you Marius.
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