Well Brad, thank you very much for that warm welcome and thank you Sally Loane, for your remarks earlier and to all the members of the Financial Services Council and BT Financial Group. Distinguished guests who are here today, thank you for inviting me here this morning.
You in this room represent the largest industry in the Australian economy. The financial sector alone accounts for around 10 per cent of the economy, employs more than 450,000 people, and manages a total of $2.7 trillion.
Perhaps more importantly, your sector touches the lives of Australian families at every stage—whether they are managing a household budget or a business, buying a home or a car, purchasing insurance, or saving for retirement.
It is hard to overstate how important a strong, dependable, trusted financial sector is for our country.
My Government is keenly aware of what you contribute and what you stand to gain in this time of rapid change. Two years on from the Financial System Inquiry, a range of reforms underway will make sure this sector is as robust and responsive as it can be.
These reforms are a critical part of our plan for a resilient and prosperous 21st century Australia.
Now it is worth reflecting on recent economic data and its implications for policy.
The national accounts outcome last week was a sharp reminder that we cannot afford to take growth for granted.
GDP fell by 0.5 per cent in the September quarter, to be 1.8 per cent higher across the year. Although this annual growth rate is faster than six of the G7 economies, the figures should reinforce to all of us the importance of serious structural and budgetary reform, if we are to protect and advance the living standards of all Australians.
Our national economic pie can only grow if we have inputs - or if we become better at using our existing inputs - due to innovation, improvements in knowledge or greater competition.
Remember innovation is the key to growth and productivity. Growth and productivity is the key to securing our prosperity.
This is why our National Economic Plan focuses on labour market reform, policies to boost investment and encourage innovation, trade deals that have opened up the markets of the world to our exporters, and our markets to the world, and of course further microeconomic reform.
We have restored the rule of law in the construction industry by re-establishing the Australian Building and Construction Commission. By establishing the Registered Organisations Commission, we have ensured that registered organisations, unions and employer organisations will have the same levels of accountability and transparency as company directors do to their shareholders. Straightforward reforms, you would think. But bitterly opposed during the eight week campaign - which I promise, there will never be another eight week campaign under a Government I lead. So you don’t have to worry about that. Although I must say Brad, you did mention what an interesting year it has been; an eight week campaign seems positively succinct compared to the epic the Americans inflict on themselves.
[Laughter]
Nonetheless, we have been able to secure the passage of those laws and of course the superannuation changes set out in the Budget. We’ve been able to secure those changes through the Senate, through the 45th Parliament, which many people said we would not be able to work with. So we have been able to do that in a relatively few weeks, between the election and the end of the year.
Now we are seeking to pass legislation to deliver our Enterprise Tax Plan, which will deliver tax cuts this year to 870,000 incorporated small businesses with turnovers below $10 million, and which will eventually reduce the company tax rate to 25 per cent for all companies.
We have established our National Innovation and Science Agenda, bringing more great Australian ideas to market, providing tax incentives to invest in start-ups and helping prepare our children for the jobs of the future by boosting participation in science, technology, engineering and maths.
We are boosting exports, with the big export trade agreements with China, Japan and Korea, and indeed a relatively new deal announced this year with Singapore, all of which give our businesses, our farmers, the service sector, a competitive edge and opening doors into expanding markets for a much wider range of industries than ever before. Those export trade deals are critically important to securing our future. We’ve seen political opposition to them from time to time, particularly from the Labor Party and the unions. Believe me, those who oppose those export trade deals are threatening to undermine the future of our nation, the security and prosperity of our children.
Microeconomic reform is vitally important and we’re engaging in its next round following the recommendations of the Harper Review. The Treasurer has initiated a five-yearly inquiry by the Productivity Commission into our productivity performance. While we talk about productivity a lot –and we should - we want the Productivity Commission to come to us with a wide range of new, practical ideas, to increase our growth in national income
Now under the Labor Party in the past, these objectives were reasonably bipartisan. But today, the modern Labor Party, the Bill Shorten Labor Party, opposes labour market reform. They want to increase taxes. They opposed the China-Australia free trade agreement, in particular, quite bitterly you might recall some very bitter, vicious advertising. They have no serious plans for boosting innovation or pursuing further microeconomic reform.
Labor’s economic agenda of 2016 consists of higher spending, higher taxes, higher deficits, and higher debt.
That is a blueprint for economic stagnation.
Unfortunately, the message in last week’s national accounts figures appears to have been completely lost on the Labor Party.
Even after last week they still wants to let the CFMEU reign supreme on building sites of Australia.
They still want to deny Australian small businesses a tax cut that will give them the incentive to invest, grow and employ Australians.
And last Friday, we also saw the Labor State Premiers refuse to sign up to an agreement that set out basic principles and a framework for implementing path breaking microeconomic reforms recommended by Professor Harper in his competition policy review.
The modern Labor Party is not the party of Hawke and Keating. Hawke deregistered the Builders Labourers Federation. Shorten defends the CFMEU. Paul Keating cut business taxes. Shorten wants to increase them.
Their agenda is populist, opportunistic and every element of it deters investment, discourages trade and undermines employment.
In contrast, my Government is undertaking a wide range of necessary reforms, everything we are doing, every element of our policy is designed to promote investment and economic growth because we know that if you encourage investment, if you encourage business innovation, you will drive more employment, you will have more jobs and better jobs.
We face big structural changes in the global economy. We face big headwinds in the global economy. Complacency - trying to turn the clock backwards, trying to seize every populist zephyr of wind to exploit for your own political opportunistic purposes - that my friends, is the road to ruin.
We have to recognise that driving productivity, being more competitive in every sector is the only sure way to secure our future and that is my commitment.
Now to the financial sector, as Sally noted, our superannuation tax changes were passed by the Parliament last month. They are designed to ensure the sustainability, flexibility and integrity of our superannuation system.
When you think of the scale of these changes and the inevitable complexity of them because of superannuation, as you all know, is a very complex business, I think it is a great credit to the Ministers, Scott Morrison and Kelly O’Dwyer that the bill that was finally passed was passed with relatively few amendments. We were able to secure it through the Parliament with very few amendments. The vast majority, in fact only, of all the major measures, only one was reconfigured to secure its support through the Parliament. That shows how well my ministers, my economic ministers undertook the advocacy in what it inevitably a very complex area.
The savings system must also be efficient and competitive, so as you know we have tasked the Productivity Commission with the first comprehensive review of the entire system’s efficiency and competitiveness.
They have just released stage one of its review—developing the criteria for its assessment. Stage two, due next year, will consider alternative models of fund allocation, and stage three, following the full implementation of the MySuper reforms in July 2017, will complete the process.
We will enshrine in legislation, for the first time, the objective of the superannuation system to provide income in retirement that substitutes or supplements the age pension. This is a clear, simple objective that will restore confidence in the system and guide decisions about super for generations to come.
It is also clear that governance standards must apply consistently to all sectors of the superannuation industry – whether retail, corporate or industry funds.
That is why in 2017 my Government will reintroduce legislation to address existing inconsistencies, raise the standards of governance and put the interests of members ahead of any self-interest in the superannuation sector.
We are also pursuing reform in the area of financial advice. Just last month, the Minister for Revenue, Kelly O’Dwyer, introduced legislation into Parliament to mandate professional standards for financial advisers.
These new requirements replace a system that has allowed some financial advisers—with only four days of training—to provide advice to retail consumers.
It will mean much more stringent training and supervision, so that consumers can have confidence in the industry and confidence that the advisers they speak with are ethical and qualified and are putting their interests first.
The new standards will come into effect at the beginning of 2019, so all new advisers entering the industry from then will need a degree. Existing advisers will have until 2024 to complete the requirements. We are also working to make sure remuneration structures don’t adversely affect the quality of advice consumers receive.
On regulation, our $127 million package, will equip ASIC - I see Greg approves there, thumbs up - to conduct better surveillance and combat misconduct in the industry. We will consult on strengthening ASIC’s enforcement tools for the financial services and credit licensing regime, and we’ll make issuers and distributors of financial products more accountable.
Our new requirement that bank CEOs appear at least annually before the House of Representatives Standing Committee on Economics, will improve the transparency and accountability of the banking sector and bring about cultural change within the banks.
It will be over time a very important confidence building exercise and a very important exercise in increased accountability.
Finally, we have appointed Professor Ian Ramsay as you know to chair a review of the role, powers and governance of all of the financial system’s external dispute resolution and complaints schemes, including the Financial Ombudsman Service, the Superannuation Complaints Tribunal and the Credit and Investments Ombudsman.
The current dispute resolution system is not working as well as it should be. Our ultimate goal of future reform in this area is to ensure that all of the relevant bodies are working effectively, and that they produce the right outcomes for consumers and small businesses.
Many of these reforms have a focus on our domestic systems and institutions and the way they handle the savings of Australian families and businesses.
Looking outward, there is enormous potential for our financial sector to be among our greatest exports, and for our major cities to be financial hubs in the Asia-Pacific - the world’s fastest-growing region.
Australia has one of the largest and most sophisticated managed funds industries in the world, but exports from this industry are among our lowest. Right now, less than 4 per cent of the funds under management in Australia are managed on behalf of foreign investors.
We are working to make sure our industry can take advantage of the vast opportunity unfolding in our neighbourhood.
In the May Budget we announced a tax and regulatory framework for two new types of collective investment vehicles: a corporate CIV and a limited-partnership CIV.
These vehicles are common overseas, so Australian fund managers will be able to offer products that foreign investors are already familiar with, making it easier for our funds managers to export more of their services.
We are as Sally noted, carefully considering the sustainability and competitiveness of the withholding tax regime.
Introducing these vehicles complements our work on the Asia Region Funds Passport.
The Passport means that Australia’s industry will be able to access a single market, with high standards of investor protection right across the Asia region. Thailand has joined Australia, Japan, Korea and New Zealand in signing on, which means the combined population of member countries is now well over 250 million people.
We have until the end of next year to get our domestic arrangements in place to use the Passport; once any two of the five member countries are ready, the Passport will activate and we will be in business.
There are vast opportunities here for our well-managed, well-resourced, high-performing sector to grow and branch out into new regions.
Another aspect of this growth will be the swelling tide of technological change, often referred to as fin-tech.
This is a disruptive force in the industry, one that is already changing the way you do business, delivering efficiencies for markets and better interface for consumers.
Concepts like peer-to-peer lending and crowdfunding; mobile payments, digital currencies; robo-advisers all help to stimulate competition and increase choice.
My Government wants all of this kind of innovation to be encouraged, to flourish and for the effective elements of it, for the successful to go on to greater heights.
Fin-tech is a big opportunity in Australia. I know many of you are aware of the private equity and venture capital that is going in to Fin-tech here in Australia and in particular here in Sydney at the Fin-tech hub here.
We have a very strong, very well regulated financial services sector. Innovation is going to be a very big part of it and we have to work with you to make sure that regulation enables innovation, rather than constraining it. So that’s why we’re taking a technology neutral approach, and so where we can we’ll change the law to make sure nothing impedes technologies that offer genuine improvements. Our introduction of legislation to make crowd sourced equity funding easier to access is just one example.
Now over the past few months I’ve travelled to summits and meetings around the world and amid the discussion of important issues like growth, trade, security, what struck me is at all of those meetings, is what a bright spot Australia is on the globe. How much we have going for us. We have every reason to be very positive, very optimistic, never complacent but determined to succeed better than we ever have before. The opportunities around us are breathtaking in their scale and possibility but there is no doubt however that holding on to the gains of the past while seizing the promises of the future requires effort and resolve. Complacency, looking backwards, is not an option, not in the 21st century.
We are living at a time, and this is the tenor of the time – we are living at a time where the pace and the scale of change is greater than at any previous moment in human history. That is the tenor of our times, the theme of our time is extraordinarily rapid change, driven in large part by technology. But it is not just the pace of the change, it is the scale of it. And we are in the fastest growing, most exciting region of the world. And you are in one of the most exciting industries in the world. It’s so vital for our future and the future of our children and grandchildren.
So, we know that if we stay the course, if we remain committed to the economic reform that in the past has delivered us prosperity, that in the past has secured our prosperity – if we continue focusing on the path, economic reform, open markets, trade, constantly improving through innovation, productivity and our competitiveness, I know and I believe that our future can be brighter than ever.
You are a great and innovative industry, you are trusted by millions of Australians with their future. We will support you, we will work with you, we will work with your leaders, we will work with your regulators, to ensure that Australians’ economic futures are secure, their savings are secure, they’re confidence to invest and employ is greater than ever. There is a great future for us all, but we must stay the course. Populism, opportunism, taking approaches that deny the realities of growth, that want to shut the door to trade and want to load up business with higher taxes, that is the road to ruin. The path to prosperity is built on freedom, it’s built on economic reform, it’s built on open markets, it’s built on encouraging investment and the employment that comes from it.
That’s our commitment to you as your government. And I wish you all a very happy Christmas and some rest from your labours, well deserved no doubt, over the holiday.
Thank you.
[ENDS]