2GB MONEY NEWS
MONDAY, 25 FEBRUARY 2019
SUBJECTS: Labor’s plans to make mergers fairer; Banking Royal Commission and Labor’s Banking Fairness Fund.
ROSS GREENWOOD: I want to take you to the Labor Party and its policies. As you know and as we saw today, Labor remains well ahead in the polls and so you've got to watch the policies to understand what's taking place in a prospective Labor Government after the May federal election. Now a few of them are important. One of them quite clearly is in regards to banking. And this is about though the government saying or rather Labor saying that if elected it would actually hit the banks to pay some $640 million to create a fund to allow more Australians access to compensation if the wrong thing is done to them by their banks. Now this would include more broadly - not just the big four banks, but it would include the likes of Macquarie, the Bendigo and Adelaide Bank, the Bank of Queensland would be in there as well, contributing to this fund. Now that tops up what is already available through the Australian Financial Complaints Authority, which has been increased in terms of its payouts in the last little while. Second thing is also, as a part of this, Labor will fund more financial counsellors that will help people and small businesses to take on the banks. So at the moment there is a a number of them out there, say there's 500 or so, they’re saying they'd like to see a thousand out there. But on top of that also a few other bits and pieces, say for example when big companies merge, is competition taken out of the marketplace or not? We’ll again hear Labor as saying they want the ACCC to go back and review mergers and after they've happened see whether the desired consequences have actually occurred. Now to help us out here, let's bring in Andrew Leigh, the Shadow Assistant Treasurer and the Shadow Minister for Competition and Productivity is on the line right now. Andrew, as always, many thanks for your time.
ANDREW LEIGH, SHADOW ASSISTANT TREASURER: A pleasure, Ross. A lot to get through there.
GREENWOOD: There is a lot to go through. Let's start with your portfolio specifically and that's this area of the ACCC and mergers. Now clearly there are some mergers that take place you look back in hindsight and say it was actually just a concentration of power - they got more power, they were able to basically clean up their competition. Is that the desired you know sort of effect of what you're trying to achieve here?
LEIGH: We need to make sure that mergers are in the interests of all Australians, Ross. The merger proponents will often put forward pretty powerful arguments about why you get economies of scale and prices will fall and wages will rise, they’ll hire more people and invest more. But the trouble is right now we don't go back and check those arguments afterwards. So it's a bit like a footy coach that never watches any video replays of how the game went. Under a Shorten Labor Government there will be a check by the ACCC at the five year and ten year point after a merger is approved to have a look as to whether the claims made by the merger proponents have actually come to pass. If not, they might well look at cracking down on misbehaviour through appropriate competition enforcement. It can also inform their thinking about future mergers.
GREENWOOD: One issue about that that just makes me think, if I was sitting on the potential acquisition side of that deal, I'd be look at it looking at it and saying ‘well, if I want to be checked in five or 10 years time, will I actually make that merger?’ I mean, quite often you do want efficiencies to take place because you've got fast moving economies and you got new competitors springing out of the ground the whole time, but you don't want it to be a handbrake on corporate activity where that corporate activity actually might be necessary for the efficiency of the nation and our economy.
LEIGH: You've hit the nail on the head, Ross. We want people to be merging where it's not harming the competitive process and is helping the economy, but we don't want people to get away with making claims about what a merger will do that don't hold up in reality. Australia has had a seven-fold increase in merger activity since 1989 and we want to make sure that under a Labor Government, consumers are getting the best deal. Now a lot of our economy is in very, very concentrated - just a few firms dominating industries like supermarkets, banking, beer, baby food - you name it. There's an oligopoly issue in Australia. So we have to be really careful that the claims made it made at the time of mergers are borne out.
GREENWOOD: Okay. Let's move on. I want to take you to the other aspect of Labor wanting a $640 million banking fairness fund. Some people have indicated to me well okay, you could take $640 million out of the banks to create this fund but won't the bank simply take it out of their customers and or their shareholders? The money's got to come from somewhere.
LEIGH: Well, that's not what Scott Morrison said when he announced a banking levy, which was nearly 40 times as large as what we've announced. He said it would be bank shareholders that paid for that, not bank customers. We believe the same approach should apply here. Look, it's important to boost the number of financial counsellors in Australia. These are people working often in small community organisations, helping out those who've maxed out a bunch of credit cards and are at risk of losing their home or their job or their car or their marriage. They do fabulous work in their local community, Ross, but there's only about 500 of them across the country. We think we need 1000 to start to right the wrongs that have been identified by this royal commission and make sure that people are able to get back on their feet.
GREENWOOD: I will say one thing and that is I agree 100 per cent with you about the role of financial counsellors. We do need more of them in our society and the work that they do is absolutely vital and I have obviously had contact with a large number of them over that period of time. And of course, the real issue here is that you know for many people who have got themselves maxed out credit cards or in strife with power bills or whatever it might be, they don't feel as though they've got the power to be able to have that conversation. And that's where the financial counsellor becomes absolutely vital, even if it's preparing a case or a claim to go before the Australian Financial complaints authority for example.
LEIGH: It's really interesting, isn't it? There's that sort of power imbalance where people don't feel like they can push back against claims being made by the debt collectors knocking on their door and sometimes the financial counsellor will simply say ‘look it is within your rights to push back - you can ask for a payment plan’. Just that that simple human help - part social work, part financial advice - is so valuable in terms of turning people's lives around. I mean, there's people who've taken their own life as a result of some of these awful situations they've found themselves in. Financial counsellors can help them out.
GREENWOOD: Okay. So $6.2 billion is coming out of the big banks with the bank levy that you mentioned earlier on. You did say it was significantly larger. Another $640 million here. At what point did we start to say - well, I'd never say poor banks, I'll never say that I promise - but the truth is at what point did we start to say, okay we want our banks to be unquestionably strong, we don't want to ever have to have taxpayers bail them out but we've still got to be a little conscious of their financial health do we not?
LEIGH: Well, as I recall Ross, that $6.2 billion figure is annual and the $640 million is a four year figure. It's true that banks aren't a cash cow. Yet what we've seen out of the royal commission is seriously bad conduct by our big financial institutions and when it comes down to a question as to who should pay for redressing some of that, I think it is appropriate that we ask the banks to contribute in proportion to their size with an increased levy to repairing some of the harm that we've seen coming out of the royal commission - advice being paid for, but not received; dead people being charged; a whole suite of scandals which has really led Australians to question their faith in big financial institutions. Labor wants to tackle that. This will be part of our response, but as Bill Shorten and Chris Bowen and Clare O'Neil have said, there'll be more to come.
GREENWOOD: Okay. I noticed that Bill Shorten your leader has asked for a smooth transition of power in the event of a Labor victory. Are you doing similar thing with the Treasury portfolio right now?
LEIGH: We need to make sure that we don't drop the ball. This is a challenging year for the world economy. We're having growth forecasts being revised down in Europe and in the United States at the moment. There's a fragility about consumer spending and new car sales for example. We’ve got the challenges right across right across the economy of sluggish wage growth, which is flowing into poor household income and then problematic retail sales. And the leadership uncertainty that we've seen the rotisserie of prime ministers on the Liberals’ side has dented confidence. Labor wants to make sure that we're doing all we can to ensure that if there is a change of government at the next election that that is is orderly and systematic as possible.
GREENWOOD: I did ask whether you actually asked them for that smooth transition. Have you asked them or not?
LEIGH: We're always engaging with them, asking to be consulted. We believe that the spate of Liberal mates appointed to the Administrative Appeals Tribunal is just again a desperate act of a desperate government. At this stage in the political cycle, knowing that the election needs to be held by the end of May, the government should be acting in the national interest not in the interests of the Liberal Party. Christian Porter giving a job to somebody who's given him a campaign bus just stinks to all high heaven. Now that's not the way a government should ever behave, but particularly at this stage. Decisions need to be made on a bipartisan basis, if they’re senior appointments which will run well into the term of the next government.
GREENWOOD: There you go. Andrew Leigh is the Shadow Assistant Treasurer and Andrew, as always, I appreciate your time.
LEIGH: Thank you, Ross.
Authorised by Noah Carroll ALP Canberra.