Ross Greenwood asks Financial Services Minister Kelly O’Dwyer if the big banks have paid any of their penalties to the mysterious “consumer Protection Fund”
Introduction: Big banks commit millions to new consumer protection fund, yet to pay a cent
Ross Greenwood: Welcome back to Money News right around Australia. Of course, federal budget last night was key in many areas. There was one really good idea out there which was about trying to not only reunite Australians with the superannuation dollars but also to give young Australians an ability to opt out of life insurance that could erode their funds when in many cases they do not require or need that life insurance at such a young age. For a lot of them, it has been mandatory.
There’s a lot of other things happening clearly in financial services right now. The Royal Commission being first and foremost amongst those things. You’d imagine out of those circumstances that some of the key agencies particularly as given what’s been heard inside the Royal Commission might have been given even more resources to make certain the financial services industry, the banking industry, the superannuation industry is looking over its shoulder the whole time to make certain that there is not a place on the bait as it were. Let’s now go to the minister of revenue and financial services, Kelly O’Dwyer is on the line. Many thanks for your time, Kelly.
Interview with: Kelly O’Dwyer, Financial Services Minister
Kelly O’Dwyer: Great. Pleasure, Ross, great to be with you and your listeners.
Ross Greenwood: You are the minister for revenue. The government is awash with revenue right now. Is it reasonable to say however any revenue available to the government and the promises that it makes is also available to the Labor Party and promises it may also make either in tomorrow night response to the budget or indeed before the next federal election?
Kelly O’Dwyer: Well, we certainly are going to be able to see at large what Labor’s Party is on tomorrow night. The government has been incredibly clear the benefits of a strong economy deliver stronger revenue. We want to make sure that we return as much tax dollars to individuals who work incredibly hard for that money. Once we have guaranteed the services that Australians demand and expect that’s why we announced the need to have tax plan. We will receive 94% of taxpayers paying no more than 32 1⁄2 cents in the dollar if we can legislate that through the House and the Senate.
The Treasurer brought that legislation into the Parliament today. During the next parliamentary sitting session, we will debate that. We were not given leave by the Labor Party to debate that immediately sadly, but we will debate that in the next parliamentary sitting period. We want to see it go through the House and the Senate and then it will be certain for taxpayers for the next seven years.
Ross Greenwood: I mentioned to listeners earlier on that right there one of the stats that came out and jumped at me in the budget is that 3.6 million Australian households, 40% of all Australian households we’ve got received more in government payments than they pay in income tax. Is that a suitable situation for Australia that most Australians receive more from the government than they pay to the Government?
Kelly O’Dwyer: Well, I think it is concerning. I think we can’t forgive when people talk about fairness and when they talk about we don’t know it’s will hurt to provide tax relief to hardworking Australians. There are a lot of people out there who make these comments and of course, some of those people who make criticisms on returning money back to people who actually have interest don’t pay any tax. I mean the top 1% of taxpayers pay around about 17% of all personal income tax.
The top 10% pay around about 45%. The burden is very significantly on those people who obviously earn income and pay a very, very significant amount of tax. That’s why we believe it’s incredibly important to provide tax relief. First, aimed at lower and middle-income earners but then making it a simpler and fair system so that if you are paying between $41,000 right up to $200,000, you will be paying no more than 32 1⁄2 cents in the dollar.
That we believe it’s structurally significant. It’s important. It rewards people who work hard and who take risks. It rewards those people who aspire to a better future for themselves and for their families. It gets rid of those disincentives for people who might actually go into a high paying job.
Ross Greenwood: I want to take you to another area of your portfolio. This is the area of financial services. I had mentioned the Royal Commission, was there any consideration given to giving ASIC more resources? The reason for that is it seems as if the Royal Commission has identified that Australian Securities and Investments Commission is a misplaced bump which life insurance companies is on and big banks have navigated their way around and reported on a relative arbitrary basis when they see the need to. It would appear as though they haven’t taken their compliance with ASIC as seriously as what they probably should have.
Kelly O’Dwyer: Well, obviously, it’s very concerning what we’ve heard through the Royal commission particularly when we’ve heard about basically companies misleading the regulator and in fact lying to the regulator. That is obviously very, very concerning but look–
Ross Greenwood: It shows an upfront of the regulator. That’s what it shows, doesn’t it?
Kelly O’Dwyer: This is exactly why we have had a massive shake-up of the regulator. I mean the regulator does have significant resources but we’ve done a couple of things. We’ve actually changed the head of the regulator. We’ve actually hit-hunted someone from overseas who is a regulator overseas and who’s had experience being a regulator and somebody who’s been on the front line. John Shipton is the new chairman of ASIC we’re appointing and was announced the appointment of this person a new deputy chair of ASIC Daniel Krieman QC who will be the person responsible for enforcement activity at ASIC.
We have put ASIC on a very themed financial footing. They’ve got industry funding now which means they’re on a very themed financial footing but they’ve got to properly appropriately to view the powers that they have. They need to be I think a feared regulator. They need to be able to take strong enforcement action. I think they also need to be able to use the new powers that we have said that we will give them in relation to product intervention powers so that they can prevent harm before that occurs particularly in relation to retail consumers–
Ross Greenwood: A couple of bits and pieces before I let you go. I want to get moving on one other subject, that is the Commonwealth Bank and the deal it’s done with ASIC today, $25 million. Under the calculation, it would take the Commonwealth Bank based on what they earned in the last quarter a little of over 23 hours to pay a $25 million fine out of their after-tax profits. Is that appropriate? Given the fact that this is actually an admission by the Commonwealth Bank that they have rigged a key interest rate into Australia?
Kelly O’Dwyer: Well, that’s precisely the reason why the government did a review of ASIC’s penalties. The government provided its response to that. We’re significantly increasing the penalties that ASIC can in fact pursue. I don’t know why it’s pursued the highest penalties that they’ve currently got at the moment but we are actually significantly increasing the penalties they can pursue we’re also significantly increasing. The fact that we a range of these penalties, it would see jail time for individuals who might be in breach.
We are making sure that ASIC has got increased powers to be able to gain information through both words and telephone interception powers as well so that they can gather the evidence that they need in order to be able to pursue those penalties.
Ross Greenwood: A couple of bits and pieces here. I know, say for example in the case of NAB and ANZ that settled. They had $50 million in total that they settled. In the case of the Commonwealth Bank, it ends up coming out to $25 million. In the case of the NAB and ANZ, I didn’t know they agreed that they would put in a $20 million a piece into a Financial Consumer Protection Fund. In the case of the Commonwealth Bank, I noticed they’ve agreed to apply $15 million to a Financial Consumer Protection Fund. What is a Financial Consumer Protection Fund?
Kelly O’Dwyer: The government is also tipping in $10 million as a result of the budget as well–
Ross Greenwood: Wait, have you done something wrong?
Kelly O’Dwyer: No, we’re doing it because we actually think it’s critically important that we actually do build financial capability–
Ross Greenwood: One question. What is the financial consumer protection fund?
Kelly O’Dwyer: We’re going to have a little bit of an announcement about that very, very shortly but I think if you–
Ross Greenwood: Hang on a second. One another question, how much has the ANZ and NAB which agreed to put that money in six months ago, how much have they put into the funds? Where do those interject to?
Kelly O’Dwyer: My understanding is that is with ASIC at the moment–
Ross Greenwood: I understand it’s not. I don’t think they’ve actually sent a cheque to anybody.
Kelly O’Dwyer: Well, as I said that’s my– [crosstalk]
Ross Greenwood: I did a bit of research on this, this afternoon.
Kelly O’Dwyer: I’m very happy to follow it up.
Ross Greenwood: Seriously, Kelly, they have not sent a cheque to anybody. They agreed six months ago but the problem as I understand is because you haven’t announced this Financial Consumer Protection Fund. There is no a fund. They haven’t paid the money into the fund so basically, both are sitting on $20 million. Commonwealth Bank has agreed to $15 million. There is no fund they can send the cheque to.
Kelly O’Dwyer: Well, there is going to be an announcement in relation to this particular fund. We believe it’s incredibly important to provide financial capability across the board in Australia to actually help people to be able to be more financially literate and to do that right throughout their lives. We think that there needs to be a much more holistic approach to this. Just as you recall there was an issue around mental health during the how
government use and they set up beyond blue. We want something set up, financial capability authority that can be set up that can live beyond any one particular government, that can holistically provide the sort of advice that Australians need.
Ross Greenwood: Kelly, you’ve got to go, but can I just say, give ASIC a call. I don’t think they know too much better and neither do the banks, because I have done a bit of checking around today, and they don’t seem to think that they have paid and I don’t seem to think they know about that protection fund as well. Kelly O’Dwyer, the Minister for Revenue and Financial Services, I appreciate your time in the program this evening.
Kelly O’Dwyer: Great, pleasure.
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