ABC NEWS BREAKFAST
TUESDAY, 30 MAY 2017
Subjects: Bad banking behaviour, Labor’s plans to crack down on phoenix activity, Treasury forecasts.
MICHAEL ROWLAND: Let’s go to Canberra now and higher penalties as well as a register of company directors are being proposed by Labor to crack down on so-called phoenix insolvencies
VIRGINIA TRIOLI: The federal opposition says it will ensure workers, the tax office and creditors don’t lose out. Andrew Leigh is the Shadow Assistant Treasurer and joins us now from Parliament House. Andrew Leigh, good morning.
ANDREW LEIGH, SHADOW ASSISTANT TREASURER: Good morning, Virginia.
TRIOLI: We will get to your proposals in a moment, but I’m interested in a story that popped up overnight - the government appearing to be doubling down on banking executives, giving the banking regulator new powers to deregister executives who engage in so-called scandalous behaviour, including drug taking apparently, that have failed to meet what they call community standards. Do you think it is a good idea?
LEIGH: Virginia, we'll scrutinise the detail when we see it. At the moment, it’s just a media drop to a tabloid newspaper. But it comes from a government that has been doing its level best to protect the banks over the recent years. They’ve been offering the big banks a company tax cut that will be worth $7 billion to them and they’ve been shielding them from a Royal Commission, despite the plethora of scandals that Australians have seen occurring at big banks over recent years. Bill Shorten is committed to a Banking Royal Commission. Malcolm Turnbull wants to give the bank executives a slap on the wrist.
TRIOLI: Well, I don’t think this is a slap on the wrist. Do you think it’s a good idea?
LEIGH: We’ll wait and see the detail, as I said.
TRIOLI: The detail, as I describe it, does that prima facie look like a good idea?
LEIGH: We’ll scrutinise the legislation, as you’d expect a sensible opposition to do. But it’s no substitute for a Royal Commission, which is a chance for the victims to tell their stories, to look systematically at some of the issues within the banking sector - the major issue of vertical integration for example - and to scrutinise how we can make sure that our banking system remains strong.
TRIOLI: You are proposing the new laws to crack down on so-called phoenixing – that’s company directors who strip a company out to avoid creditors and then simply start out with a new company. Do you think the government might feel the same way?
LEIGH: I certainly hope they do, Virginia. Brendan O’Connor, Katy Gallagher and I announced these measures last week because we believe that we need stronger laws to make sure that directors can't simply strip the assets out of a company and set up a new one. One expert said recently that the laws are such that it is almost possible to register your dog as a company director. It’s much harder to set up a bank account in Australia than it is become a company director.
Labor's proposal is we should have that 100 point identity check apply to directors as well. It’s a proposal that’s been welcomed by the Australian Institute of Company Directors and by a range of independent experts. Labor would also increase the penalties on dodgy directors and make sure we’ve got the standard of proof right.
TRIOLI: Do you agree with Treasury Secretary John Fraser, as we heard yesterday, that the Australian economy is on the verge of a fresh burst of growth powered by rising business investment?
LEIGH: If you look back at the track record of Treasury forecasts, they don't fill you with confidence. The projection for wage growth doubling just in the next couple of years is at odds with the fact that we’ve got wage growth now at its lowest level in a generation. The government keeps on talking about the need to cut penalty rates, but that’ll make things worse rather than better. They’re not willing to implement an Emissions Intensity Scheme, they’re taking money out of Australian schools, they’re not building the National Broadband Network with fibre to every home. All of these things will be a drag on Australian growth in years to come and heroic assumptions aren’t going to cut it.
TRIOLI: John Fraser also warned on debt and household debt, what do you think is the level of household debt of which we should be wary? Do you have a topline figure in mind?
LEIGH: It is certainly getting high, it is among the highest in the world and a range of experts have pointed to the risks that negative gearing and the capital gains tax discount have exacerbated. They're tax concessions that encourage people to over-gear and to put their investments in a single asset class.
Chris Bowen has made the point we need to tackle negative gearing and the capital gains tax discount for financial stability reasons as well for housing affordability reasons. Not only is home ownership at a 60 year low, but housing debt is going through the roof. That means that Australian households are much more vulnerable to a rise in interest rates or a house price correction than would be the case if we had smarter tax concessions in place.
TRIOLI: Andrew Leigh, I know time is tight this morning, so I will let you know go but thanks for joining us this morning
LEIGH: Thank you, Virginia.