4 February 2019
Transcript - #2019015, 2019

Interview with Leigh Sales, 7.30 Report, ABC TV

Subjects: Government response to the Final Report of the Royal Commission into Misconduct in the Banking, Superannuation & Financial Services Industry.

LEIGH SALES:

With me now live from Parliament House is the Treasurer, Josh Frydenberg. Thanks for your time.

JOSH FRYDENBERG:

Nice to be with you, Leigh.

LEIGH SALES:

You said you'll act on everything in this report. Given that's 76 things that need fixing, was the  Coalition wrong to strenuously oppose a Royal Commission into the banks for as long as it did?

JOSH FRYDENBERG:

Look, we can debate for hours, Leigh, what Labor failed to do when they were in office…

LEIGH SALES:

…No, I'm asking about you…

JOSH FRYDENBERG:

Well, I’m looking to the future. When we first came to Government, one of the first things we did was initiated David Murray's financial systems inquiry, a very significant inquiry that looked at the financial system and the recommendations of which we have been implementing ever since. We've adopted a number of important reforms that have been endorsed, not just by Commissioner Hayne today, but also by previous reports including by the Productivity Commission into superannuation.

LEIGH SALES:

Let me cut to the chase. Everybody remembers that you opposed the Royal Commission, I don't want to waste time by running through quotes. So instead, let me simply ask, why should the public trust this Coalition Government to clean up the banks when you had to be dragged to that inquiry in the first place?

JOSH FRYDENBERG:

Well, we did call the Royal Commission and today we've responded to it...

LEIGH SALES:

…but you did have to be dragged to it.

JOSH FRYDENBERG:

And today, we have said we're taking action on all 76 recommendations. These are recommendations that will have far-reaching consequences across the financial system, including putting in place  the banking executive accountability regime, not just within banks which we initiated, but also within insurance and superannuation companies, ensuring that trustees of superannuation funds actually face penalties for breaching of their duties. Putting in place a new disciplinary body, Leigh, that deals with financial advisors. There's a whole series of recommendations that Commissioner Hayne has handed down which we have adopted today.

LEIGH SALES:

Page four of the report notes that the primary responsibility for misconduct in this industry lies with the boards and senior management. Should heads roll?

JOSH FRYDENBERG:

Look, that is a question for boards and shareholders, ultimately. But, certainly there is very serious allegations and issues that have been raised through the course of this Royal Commission. I think we've all been shocked by hearing of fees for no service, charging of dead people, people being sold insurance that they couldn't even claim against. And of course that terrible situation where a young man with Down syndrome was being sold insurance that he didn't want, that he didn't need and that he didn't understand. For those offences people should be held to account and that's why Commissioner Hayne has referred more than 20 cases to ASIC and APRA  for investigation.

LEIGH SALES:

Commissioner Hayne singled out the National Australia Bank, basically saying the CEO and the Chairman don't get it and he lacked confidence in their ability to make the changes required. A lot of NAB customers would be very disturbed to hear that. As Treasurer, is that something that you are able to raise with NAB leadership?

JOSH FRYDENBERG:

Look, again, I'm not going to comment on specific cases or individuals or indeed companies, but I will leave that to the boards and the shareholders to make their own decisions.

LEIGH SALES:

The report notes in numerous cases the law has not been obeyed but also it has  not been enforced. The Commissioner effectively says that the watchdog, ASIC, needs to pick up its game or be abolished and replaced. Have you given any thought to abolishing and replacing ASIC? And, if you're not going to go down that course, how long would you give ASIC to improve its performance?

JOSH FRYDENBERG:

Well, Leigh, Commissioner Hayne did have some pretty frank assessments for our regulators  and found they were wanting, in particular in the case of ASIC, that they preferred the route of negotiation as opposed to litigation, even though some of the cases would have warranted litigation. What we have seen from ASIC is a change in approach and a change in leadership. And by the way, that was acknowledged by Commissioner Hayne in his report. As a Government, we've put in place a new chair and two new deputy chairs of ASIC. We've given them more powers and we’ve also given them more resources. And the expectation is that timidity that we have seen in the past does not continue into the future and I'm confident that will be the case.

LEIGH SALES:

Do you have a timeframe for how long you'll test that situation?

JOSH FRYDENBERG:

Well, one of the recommendations of Commissioner Hayne is actually that we set up a new oversight body of both ASIC and APRA and the Government has accepted that recommendation. They'll look at the effectiveness and the performance of those two bodies and report to Government. We'll keep a watching brief. Let me say to you and to your viewers, I think ASIC has got the message and what we've seen with their new leadership is a much more forward-leaning approach to these issues.

LEIGH SALES:

I guess we're talking in this inquiry about issues of trust and you mentioned to viewers, and of course it's real rattled the public's trust…

JOSH FRYDENBERG:

…I agree.

LEIGH SALES:

How can the public trust ASIC to competently investigate these potential criminal matters given what we know about their track record?

JOSH FRYDENBERG:

Well, it's not that they didn't investigate it. When they found that there was misconduct they would slap them with an infringement notice instead of something a bit more significant and something which was a bit more appropriate. Like I said, I think they'll adopt a new approach. I do want to point out that our banking system is absolutely vital to the health of our economy and therefore vital to the health of our community. We all want it to be effective and successful. But what the public definitely should expect and should see from their financial institutions is that they are treated honestly and fairly and that is where I think the culture of our financial institutions should change and that is where I think Commissioner Hayne's recommendations will make a significant difference.

LEIGH SALES:

Around 11:00am this morning, bank shares across the board rose about 1 per cent and they closed at around that level too. Did the banks get a briefing this morning on what the report contained, so they knew what to expect?

JOSH FRYDENBERG:

Absolutely not. There was lock-up. There were security guards around Parliament House. There was obviously Treasury officials and it was very, very closely monitored. The only people allowed into the lock-up

were stakeholders and when it came to the banking industry it was by their representative body and of course senior journalists including from our ABC.

LEIGH SALES:

Let me ask you about a couple of other things before we run out of time. Laura Tingle said earlier that the Government could possibly call a snap election if it loses a motion on a substantive policy issue. She cited, for example, the medical evacuations from Nauru and Manus Island. Is a snap election an option?

JOSH FRYDENBERG:

No. The Prime Minister has made very clear that I'll be handing down a Budget on April 2 and the Election will be held after that. The Budget will be our economic platform that we take to the Election and we've already seen unemployment fall to 5 percent, economic growth at 2.8 per cent, stronger than any G7 country except the US, and we have seen wages growth pick up. We have a strong economic record. But that's not an end in itself. It's because that delivers the health, the education, the infrastructure that people expect, need and deserve.

LEIGH SALES:

Any hope of your re-election probably hinges on the Budget, no pressure. Can you tell viewers what the theme of your budget will be? What the frame will be for all of the decisions that it will include?

JOSH FRYDENBERG: 

Like I said, strong economic management does take work. And we inherited unemployment  that was rising, we inherited an economy where debt was rising. What we have done is we've turned that ship around. And we will be announcing a budget surplus but along with that a number of important policies that can help that growth trajectory Australia is on. By delivering stronger economic growth, we can deliver the doubling in the health budget that we've seen for example under our watch for hospitals. We can see record investment in education, we can see $75 billion rolled out in infrastructure and a defence industry plan that sets us up for the next century. That's what you'll hear about in the budget, together with how younger people can look forward to Australia, to the Australia that they live in with confidence for the future.

LEIGH SALES:

I look forward to talking to you in more detail about the budget on another occasion. Thank you.

JOSH FRYDENBERG: 

Thanks, Leigh.