The Australian government has released its response to David Murray’s financial system inquiry, making it plain how important the sector is, saying it “is the largest in our economy, having contributed $139 billion over the past year and employing around 400,000 Australians”.
The government says its response “sets out an agenda for improving our financial system”.
That’s particularly important because finance is being transformed by technology, innovation and globalisation and the government says “a competitive, innovative and efficient financial system supports the operation of the whole economy”.
The government’s response rests on five strategic priorities. They are:
The resilience measures for banking, which has seen APRA undertake an international comparison and increase the mortgage weights for larger banks, aimed at reducing the impact of potential future financial crises by ensuring the nation is better able to weather them and lower the cost to taxpayers and the economy.
The superannuation and retirement incomes measures are multi-faceted and include the development of legislation to improve governance and transparency in super, review retirement income streams, and ask the Productivity Commission to review “the efficiency and competitiveness” of the superannuation system to increase overall efficiency in the sector. The government claims that by doing this it will boost retirement incomes.
The innovation measures are looking directly at the connection between technology and banking. The government wants to look at legislation to support crowd-sourced equity funding.
In a clear win for consumers it also has excessive credit card surcharges directly in its sights. Prime minister Malcolm Turnbull said businesses were free to charge whatever they like in a competitive environment. But he added that when a business claims a credit card surcharge, it needs to reflect the cost of that transaction.
The government hopes this “will unlock new sources of finance for the wider economy and support competition.”
The consumer outcomes measures note that “consumers are responsible for the consequences of their financial decisions”, but wants to make sure that some sort of level playing field exists so that consumers are “treated fairly.”
To do this the government says it wants to better align the outcomes consumers get from financial products purchased with the incentives, experience and knowledge of the advisers who recommend them.
To this end it is increasing the qualifications and standards of financial advisers to what it says is a “professional footing”.
Assistant treasurer Kelly O’Dwyer said that for the first time advisers will need a tertiary degree and to undertake a professional year, as well as sitting exams and following a code of conduct.
There was however no word on whether this applies to all current financial planners or whether it was a measure which would only impact new planners and grandfather existing advisers
The government’s response also is specifically targetting other consumer advisers and seeks to “address the misalignment of incentives by reducing and improving the disclosure of conflicted remuneration in life insurance, stockbroking and mortgage broking.”
The government’s hope is that these measures will “give consumers confidence to participate in the financial system and the confidence that they are being treated fairly.”
The regulatory system measures are aimed at ensuring the gatekeepers of the Australian financial system are accountable for their actions and the changes they make to the system architecture.
To do this the government said it will “review the Statement of Expectations for APRA, ASIC and the Payments System Board and increase requirements for the regulators’ annual reports. A greater focus on performance assessment in these documents will ensure regulators are focusing on their capabilities and performance against their mandate.”
The goal is to “make regulators more accountable for their performance, more capable and more effective,” the governments response says.