If you are a politician, what do you do when your bad judgement – or worse – has been dramatically called out for all to see?
That’s the question which has faced the government as appalling behaviour by the Commonwealth Bank, AMP and Westpac has been revealed this week at the royal commission into misconduct in the banking, superannuation and financial services industry.
Former deputy prime minister Barnaby Joyce went the full-monty confession. “In the past I argued against a Royal Commission into banking. I was wrong. What I have heard … so far is beyond disturbing”, he tweeted.
The ministers claim the government laid down terms of reference that took the inquiry beyond what Labor was proposing. But although Labor never released terms of reference, it flagged in April 2016 a broad inquiry into “misconduct in the banking and financial services industry”.
The real difference between the government and the opposition was the emphasis on superannuation. While Labor’s inquiry would have covered it, the government wrote in a specific term of reference, hoping evidence about industry funds might embarrass the unions and therefore the ALP. The commission has yet to reach those funds.
Revenue Minister Kelly O’Dwyer, pressed about her refusal to admit the government had erred in opposing a commission, told the ABC on Thursday, “Initially, the government said that it didn’t feel that there was enough need for a royal commission. And we re-evaluated our position and we introduced one”.
Well, that’s the short version. In fact, the government was forced to drop its resistance when Nationals rebels threatened to revolt. Take a bow, Queensland Nationals backbenchers Barry O’Sullivan, George Christensen and Llew O’Brien. You did everyone a service.
Indeed, the Nationals were on the case of the banks very early. Nationals senator John “Wacka” Williams for years pursued the rorts, through Senate committee investigations.
The government’s resistance to the royal commission was bad enough but remember its earlier record on consumer protections in the financial services area.
When the Coalition came to power it was determined to weaken measures Labor had introduced. Eventually, it was thwarted by the Senate crossbench, with the upper house disallowing its changes.
Just why the government was so keen to shield an industry where wrongdoing had been obvious is not entirely clear. It appears to have been a mix of free market ideology, a let-the-buyer-beware philosophy, and some close ministerial ties with the banking sector.
In light of what is coming out, the government should be ashamed of its past performance.
This week, the commission heard about AMP, which provides a wide range of financial products and advice, charging for services it didn’t deliver, and deliberately misleading the regulator, the Australian Securities and Investments Commission (ASIC), about its behaviour.
It also heard how the Commonwealth Bank’s financial planning business charged customers it knew had died, including in one case for more than a decade. Linda Elkins, from CBA’s wealth management arm Colonial First State, agreed with the proposition put to her that the CBA would “be the gold medallist if ASIC was handing out medals for fee for no service.”
A nurse told of the financial disaster after she and her husband, aspiring to set up a B&B, received advice from a Westpac financial planner, including to sell the family home.
Seasoned journalist Janine Perrett, who now works for Sky, tweeted, “I thought nothing could shock me anymore, but in my forty years as a journo, most of it covering business, I have never seen anything as appalling as what we are witnessing at the banking RC. And I covered the 80’s crooks including Bond and Skase.”
Janine Perrett@PerrettReportI thought nothing could shock me anymore, but in my forty years as a journo, most of it covering business, I have never seen anything as appalling as what we are witnessing at the banking RC. And I covered the 80’s crooks including Bond and Skase.
The commission’s interim report is due September 30 and its final report by February 1, not long before the expected time of the election. There is speculation over whether the reporting date will be extended. Bill Shorten says the inquiry should be given longer if needed; Finance Minister Mathias Cormann has indicated the government would do what Commissioner Kenneth Hayne wanted.
Those in the government who think the original timetable should be adequate note that, unlike for example the royal commission into institutional responses to child sexual abuse, this inquiry is not undertaking deep dives into everything, but exposing the general problems.
From the opposition’s point of view, it would be desirable for the inquiry to run on. That would keep the banks a live debate, and leave it for Labor, if elected, to deal with the commission’s outcome. Shorten is already paving the way for a compensation scheme financed by the industry. Given the poisonous unpopularity of the banks, the Coalition could hardly run a scare about what a Shorten government might do.
Ideally, the government needs the issue squared away before the election.
The government insists it has already put in train a good deal to clean up the industry including a one-stop-shop for complaints, higher standards for financial advisers, beefing up ASIC, and a tougher penalty regime.
Treasurer Scott Morrison on Friday will announce the detail of stronger new penalties for corporate and financial misconduct, including ASIC being able to ban people from the financial services sector.
One argument the government made against a royal commission was that it would just delay action. But of course if it had been held much earlier, by now we might have in place a full suite of reforms.
Most immediately, the shocking stories from the commission are adding to the government’s problems in trying to sell its company tax cuts for big business to key crossbench senators and to the public.
This article was written by:
Michelle Grattan – [Professorial Fellow, University of Canberra]