The need for a carbon price and financial advice reforms - Sky PM Agenda

Tonight I joined Sky PM Agenda host David Speers and Parliamentary Secretary to the Treasurer Steven Ciobo to discuss the need for a carbon price, the federal budget and the Abbott government's reforms to financial advice.





SUBJECT/S: Carbon price repeal, Budget, Changes to Financial Advice, Senate.

David Speers: You’re watching PM Agenda, good to have you with us, let’s bring in our panellists this afternoon. We're joined by the Shadow Assistant Treasurer Andrew Leigh and the Parliamentary Secretary to the Treasurer Steve Ciobo, welcome to you both.

Andrew Leigh, Shadow Assistant Treasurer: Thanks David.

Speers: Let’s start on the Carbon Tax, a lot of people, not just me I'm sure, are wondering when is this finally going to be voted on in the Senate? Um, we know where you stand, we know where you stand, we know where I think everybody stands.

Steven Ciobo, Parliamentary Secretary to the Treasurer: We know where the Australian people stand, David.

Speers: Well, when is there going to be a vote?

Leigh: The great thing about Parliament which really surprised me before I came in David is the disconnect between the House of Reps and the Senate. I spend far more time with Steve's beautiful face then I do with my Labor Senate colleagues. So the Senate is a beast unto itself, and this Senate seems to be even more unusual.

Speers: Steven Ciobo last week it seemed like a good idea to move a guillotine on this debate, why doesn't the government do that now? 

Ciobo: Well, look we will see what happens, for people that are concerned about hot air, there seems to be a lot of it generated over in the Senate that's for sure.

Speers: You can bring it to an end, the government can move a guillotine

Ciobo: I know and the opposition could also just stop waffling on as could some of the cross bencher's.

Speers: Is it really going to go into the weekend? I mean I know government has always threatened this but...

Ciobo: Ya know, we're on a unity ticket on this, what the Senate does is determined by the Senate, and we'll see at some point, hopefully they'll get sick of the sound of their own voices as far as the government is concerned. And that will be at the point at which the opposition and the cross-bench, in particular the Greens decide that they have generated enough hot air, made a big enough contribution to global warming and then they'll be able to...

Speers: But right now you wouldn't put money on when this is going to happen?

Ciobo: Who knows.

Speers: Alright. The budget, meanwhile, we do know there are big differences on the key budget measures and Joe Hockey has said today that if they are blocked, in the Senate, he'll look at some alternative measures that don't require legislation, Steve Ciobo, what do you think he is looking at there?

Ciobo: Well David it’s about what it is that the governments attempting to do. I mean we've got a clear mandate from the Australian people, that we need to undertake a task of repairing the budget legacy, the billion dollars a month we're borrowing just to spend on interest on the debt that Labor accumulated. We're trying to repair that, we know that we're not the most popular people in town because were not just telling people what they want to hear, were actually saying what needs to be done for Australian's to live within their means, in terms of the government. So ultimately, at some point we think the opposition and again the cross-benches will need to wake up to the fact they just can't keep promising to spend more money, they can't keep promising to borrow more money. 

Speers: But you've been arguing that case for some time and its still, well there is no real movement from Labor, the Greens and the Palmer United Party on some of these measures, so what is Joe Hockey talking about when he says you might have a plan B?

Ciobo: Well we need to have as a nation the ability to live within our means, we can't keep stealing effectively off the next generation of Australians...

Speers: So what’s the plan?

Ciobo: To pay for today's expenditure. Well the plan is, will in many respects be informed by what the Labor party in particular does in the Senate. And what Labor in particular does in terms of actually allowing the government to put in place what we said we were going to do in relation to the budget and that's to restore Australia's finances. If they keep being a brick wall, who keep saying we don't care how much debt the nation is in, we don't care how much moneys borrowed...

Speers: Then you're looking at cutting spending elsewhere.

Ciobo: Then we've got to look at other alternatives.

Speers: Cutting spending?

Ciobo: Well we will look at making sure that as a nation we live within our means.

Leigh: David, debt is not a bad thing of itself. I've got a mortgage and perhaps you do as well…

Speers: Sure do

Leigh: But the reason that we took on this debt was in order to save 200,000 jobs and tens of thousands of small businesses from the global financial crisis. Now, if the Coalition had gotten through everything that they wanted to in the budget, then the deficit would be larger, not smaller, than when they came to office. So their budget was one that increased the deficit, and that's in part to do with the repeal of the carbon price that we talked about at the outset. That costs the budget, almost $20 billion of revenue over the next four years and that now of course has to be made up in other ways. And then there is the government going soft on multinational profit shifting, giving $1 billion back to some of the world's biggest companies. And its parental leave scheme, which is a multi-billion dollar scheme that gives $50,000 to millionaires who have a child. 

Speers: So you think we can fix the budget without the measures that are currently being held up?

Leigh: The sum total of the Coalition's measures since they came to office have put the budget in a worse place than when they came to office. So let’s not believe the hype that Steve's trying to pursue. 

Speers: But the measures they're trying to get through would help the budget bottom line.

Leigh: They would have the effect of taking it to a position where it was worse than when the government took office. What Steve would like you to do is compare Joe Hockey's first budget update with his budget: Joe vs. Joe. But if you compare the state of the books when Joe Hockey took over with the budget he bought down, the deficit is bigger rather than smaller. 

Speers: Well let’s just look at where the budget is now and where we'd like it to be in a few years’ time, and that's where these measures that are currently proposed would help, wouldn't they? 

Leigh: Well we're going to be standing against cuts to schools and to hospitals, these are certainly measures that weren't talked about before the election. Tony Abbott was very clear: no cuts to health, no cuts to education, no cuts to pensions, and his broken all of those.

Speers: What about something like fuel excise, I am can you as an economist Andrew Leigh really say we shouldn't be indexing fuel excise?

Leigh: Well the view that we take is that this is a broken promise, that this is something that Tony Abbott very clearly said he wouldn't do before coming to office.

Speers: True, but so arguably was the deficit levy but you voted for that.

Leigh: Well we need to pick our battles and on this one this is a measure which hits hard people who have to drive every day...

Speers: How hard does it hit them?

Leigh: Well it’s increasing fuel prices steadily over time. I mean the effect will mount just as the change of indexation of the pension will mount. So that pensions will, as the Prime Minister says, pensions will inch up. But they'll go with prices not with wages. Pensioners won't enjoy costs of...

Speers: Given all of that Steve Ciobo, the clear reluctance to consider, reconsider any of these measures, what’s the strategy? Do you do a mini-budget? A new budget, a fresh approach to some of these things.

Ciobo: David the Australian people will see the consequence of Labor's approach. I mean Andrew made the comment; oh well I've got a mortgage, do you have a mortgage David. As if it is a perfectly natural thing. You know what, having a mortgage is a perfectly natural thing. But what’s not a natural thing and what Labor has actually done. Your mortgage repayment, currently under Labor's policies, they're borrowing money to make that monthly repayment, we're borrowing a billion dollars a month to make the interest repayment on the debt so when Andrew sits here and says; oh well Labor's very responsible because you know having a mortgage is perfectly okay, what he actually deliberately, deliberately omits to say is that Labor has left the country in such bad shape that we are borrowing a billion dollars a month just to pay the interest. So you know I think Australian people will see in the fullness of time, when Labor's here arguing, as Andrew is, that its somehow more equitable and fair to put another 43 billion dollars of spending back into the budget and we're trying to argue look we know everyone wants to be Santa Claus, but we simply cannot afford it as a nation it’s not fair to rob from the next generation of Aussie kids, so that we can pay for spending today. At some point the Australian people will see, in very stark terms why our approach differs to Labor's and why our approach is actually equitable.

Leigh: If there is a budget crisis, the question you have to ask yourself is why the Coalition is pursuing a parental leave scheme, a multi-billion dollar scheme, rejected by the productivity commission, hated by the Coalition backbench.        

Speers: Well is that something that you'll have to drop?

Ciobo: Well you know, this paid parental leave scheme, is important David and I'll tell you why it’s important. One, its actually in place in most countries around the world, that's the first point, so Labor's arguing that women, for some reason Labor has this view that women should be on the minimum wage...

Leigh: That's a no.

Ciobo: And get no superannuation, we don't think women should be on the minimum wage...

Speers: So you've made deeper spending cuts before, touching that.

Ciobo: Well-paid parental leave David, is about making sure that when people take long service leave, sick leave, holiday leave and they get their replacement wage we think they should get their replacement wage when they take parental leave. 

Speers: Okay I got to take a break, stay with us.

Speers: You’re watching PM agenda and we're talking to Steve Ciobo, the government's Steve Ciobo, Labor's Andrew Leigh I wanna tender the financial advice changes which the Palmer United Party last night did get on board with the government after, bagging them for some weeks, non the less that dis-allowance that Labor tried failed. It seems to me though financial planners will still receive special bonuses won't they if they direct clients into their bank products?

Ciobo: You know what’s gonna happen now David, we actually have given a big win to consumers and the reason it’s a big win to consumers is because under Labor, there was so much red tape, so much compliance, that people were basically just dropping out of financial planning. And the people that actually needed financial planning the most....

Speers: Is there evidence to support that?

Ciobo: Well anecdotally, I mean I can't point you to a particular think tank, but it’s pretty basic that if you lump in a whole bunch of business costs that loss are to be... passed onto the consumers. It’s sort of economics 101.

Speers: Yeah but I just don't recall a lot of concern, or outrage or much commentary at all about this red tape regulation, apart from those in the industry but consumers I'm talking about here.

Ciobo: But if you talk to the industry.

Speers: Sure but I'm talking about consumers here, those who are worried about getting ripped off and left high and dry when Storm collapses, when CBA involves in dodgy advice.

Ciobo: I can say very confidently David, that if you did an old family feud survey and said what does a survey say when spoke to one hundred people on the street, about whether paying three and a half thousand dollars, to a financial planner upfront to get financial planning advice is affordable, I have no doubt that the vast majority would say no. 

Speers: No I agree with you.

Ciobo: So what happened is that Labor put all this red tape....

Speers: But then if you had the option B is same amount of money strung out over a commissions over a period of time.

Ciobo: No no no no no no, that's not option B. Option B is to have less compliance built into the business so those costs are cheaper and it’s more affordable and more accessible and that's exactly what consumers have got now. It’s a big win for consumers, that still have all the protects that applied under Labor's, in terms of the best interest duties, that is still there. And Labor runs around spreading furfies around the best interest duty has been abolished or has been watered down, not true it remains that's why....

Speers: So what’s your big concern here?

Leigh: To understand the impact that this has, you just need to listen to the key groups, Choice has said the government's decision will have financial planners doing cartwheels in the streets, National Seniors and the Council on the Aging have castigated the government for these changes. Because ultimately they will mean that consumers will end up paying more - we have good research from Industry Super on this.

Speers: So hang on, consumers will pay more for the same financial advice?

Leigh: That's right. Because the thing about hidden commissions is you end up paying a whole lot more...

Speers: It’s not hidden here is it, because there is a new layer of transparency?

Leigh: The requirement to disclose fees in some form has always been there. The problem has been that the fees have been hidden in the fine print on page 27 of the agreement. What we would have required is for financial planners to disclose very clearly to clients what their fees were and what the client was getting for that and to opt into those agreements. We required a catch-all best interest test which is now gone and frankly after Storm, Trio, the CBA scandal we've seen recently I have to say the next financial scandal will be on the heads of the Government and Palmer United. 

Ciobo: Andrew, you’re about to start hyperventilating because your so over cooking the egg on this it’s not funny, best interest duty remains, in fact it is explicit that they must act, there's a now requirement under the arrangements reached with the Palmer Party that there's a signed document that they have acted in their best interests, so on and so forth, so that remains. The notion that through less compliance people are going to have to pay more I think is frankly laughable. And thirdly there's this secret boogie man that Andrew's trying to talk about in relation to secret commissions, it's about as secret as when you buy a block of land and you know the real estate agents getting paid a commission for the sale of the block of land. I mean every Tom, Dick and Harry in the country knows in relation to a block of land that there is a commission involved, there's nothing secret about it to the extent that there may be some remuneration in terms of commissions, not conflicted commissions but commissions...

Speers: But a bonus?

Ciobo: Its laid out in front of the customer, look Labor's dug their heels in on this, I understand the need the Labor Party has to say the worlds gonna end because the Coalition's put through these reforms. But see in the fullness of time that it’s not the case and it’s just become more accessible and more affordable and that's why it’s good.

Leigh: Steve, fundamentally you have weakened financial protections after a period in which we've some severe.... 

Ciobo: Why? But that happened before FOFA. What you’re talking about happened before the Financial Advice laws were in place...

Leigh: You are precisely right and that's why we put in place FOFA...

Ciobo: Were improving your laws, were not abolishing them...

Leigh: If you think you’re improving financial protections my question for you would be why you’re not getting that response from Choice, Council on the Aging, National Seniors. The expert consumer bodies are outraged by this deal. The four point plan struck with Palmer United does nothing substantially different from the existing law, but the protections that were embodied in FOFA are gone....

Speers: What does it do? Some of the things Palmer has negotiated here actually already existing in the current law, has the PUP leader been sold a PUP?

Leigh: The requirement for example to act in the best interests of the client exists in the Corporations law.

Speers: Did you need these changes?

Ciobo: I mean as far as I'm concerned if the Palmer United Party is satisfied that their concerns have been addressed which obviously they are, then I think that's a good thing. I mean we obviously aren't...

Speers: Even if they are completely unnecessary?

Ciobo: Well we’re not reeds in the wind, I am were not just gonna blow around on anything we were very clear and Senator Cormann has done an outstanding job at championing why these reforms need to happen, he has been consistent from day one in relation to this. We've got now some enhancements from the Palmer Party, they're satisfied, consumers are the beneficiaries, industry a beneficiary through less red tape when they can pass those lower overheads back to consumers.

Leigh: I don't deny it's good for bankers. It's certainly bad for consumers not to have clarity of what you’re paying. Because when you can hide the structure of commissions, you can require people to pay more, what you can say is you’re taking a small percentage of people's earnings over time and someone might look at that and say ‘oh they're just going to take half a percent a year’, but you add that up over twenty or thirty years then actually it’s a much bigger amount than if you had paid up front. We're simply asking people to opt-in to advice and asking that there be a catch-all best interests provision. That's now gone, and removing those financial protections in the face of collapses which have seen people not only lose their life savings, but also now be deeply in debt in the case of Timbercorp, is a retrograde step. 

Speers: I was going to ask you Steve Ciobo, were near the end of two weeks of the new Senate, you've had a win with the Palmer Party on this one, presumably you will at some point in the coming days on the Carbon Tax as well, how are you finding the relationship with the Palmer Party?

Ciobo: Well, the relationship with the Palmer Party that they obliviously willing to listen, they have a constituency that they represent and they're gonna put forward certain views, we as a government are clear eyed about what our direction is and what we are attempting to do. The biggest disappointment frankly with the Senate remains the Labor party and the Greens. This is the Labor party who championed they were going to terminate the Carbon Tax for example, declared the Carbon Tax had been terminated, yet on every occasion when Labor could have actually have ended the Carbon Tax, they voted to keep it so my disappointment actually isn't with the cross-bench, it’s with the Labor party and the Greens.

Speers: Alright you’re not finding them, volatile at all?

Ciobo: Look how I, I don't have direct dealings with them in the Senate I speak to colleagues as I said, we've been able to secure the passage of some important reforms that are going to be beneficial for consumers, beneficial for the industry, we're going to get the Carbon Tax Repeal through it looks like, they’re good outcomes, they're consistent with us honouring our promises so I think that's a good outcome.

Speers: Alright we're going to have to wrap it up there, Andrew Leigh, Steve Ciobo good to talk to both of you thank you very much for joining us this afternoon. 

Leigh: Thanks David. Thanks Steve. 

Ciobo: Thanks David.    




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Cnr Gungahlin Pl and Efkarpidis Street, Gungahlin ACT 2912 | 02 6247 4396 | [email protected] | Authorised by A. Leigh MP, Australian Labor Party (ACT Branch), Canberra.