Senator the Hon Mathias Cormann
Minister for Finance
Date: Tuesday, 25 March 2014
JANINE PERRETT: Well as if being Finance Minister ahead of a crucial and tough first Budget is not enough on your plate, then your colleague gets in a bit of strife and you add the Assistant Treasurer’s job to that, and that job comes with its own challenges in the form of controversial changes to the Future of Financial Advice or FOFA advice, no wonder it was time to hit the pause button. Joining me now from Canberra – Senator Mathias Cormann.
MATHIAS CORMANN: Good evening.
JANINE PERRETT: Welcome back to the show. It’s good to see you. Are you the...
MATHIAS CORMANN: It’s good to be back.
JANINE PERRETT: Good to be back.
MATHIAS CORMANN: I did say I’ll be back.
JANINE PERRETT: You did. You always do. Would you be the busiest man in Cabinet at the moment? Not content with one major job, you’ve just added another one.
MATHIAS CORMANN: I am one of many busy people in the Cabinet who are all working very hard to build a stronger economy and create more jobs.
JANINE PERRETT: Is the priority the Budget at the moment?
MATHIAS CORMANN: We have a range of priorities. Fixing the Budget mess that we have inherited from our predecessors certainly is one of the very big priorities for the Treasurer and I, working together with the Prime Minister and the whole Cabinet.
JANINE PERRETT: Well you see, because I am a bit confused, Senator Sinodinos has stood aside. The fact you didn’t give the job to someone else at this crucial time would indicate you don’t consider it’s going to be for very long. Is he just being sort of parked away for a few weeks until after the WA Election and then you’ll move him back?
MATHIAS CORMANN: Our expectation is that Arthur Sinodinos absolutely will come back in to the Assistant Treasury position. He was doing an outstanding job as Assistant Treasurer. Obviously there are some issues that will need to be resolved in front of an inquiry in New South Wales. That will take place in the next little while and as soon as it is appropriate our expectation would be that Arthur Sinodinos will take his position back up.
JANINE PERRETT: And you don’t think any of these, well there’s no allegations of corruption there’s certainly been questions about his judgement. You don’t think this in fact in any way would cause you maybe to have pause about him taking up such a key job?
MATHIAS CORMANN: The very important point to make here is that Arthur Sinodinos is participating in this inquiry as a witness. He is not being accused of any wrongdoing. He essentially is participating as a witness. He is somebody of great distinction who has provided distinguished public service to Australia for many decades and we are confident that he will be able to take his position back up hopefully as soon as possible.
JANINE PERRETT: So really it is just a very quick temporary measure. There’s not going to be any assessing of what impact anything that comes out in the Commission about him and his judgement will have on?
MATHIAS CORMANN: Let’s just let the process take its course... interrupted
JANINE PERRETT: Okay.
MATHIAS CORMANN: ...and that’s the way it’s currently working.
JANINE PERRETT: You weren’t just trying to avoid a reshuffle in case you had to put a woman in the Cabinet is it?
MATHIAS CORMANN: We have got a very strong Cabinet and I am acting in the Assistant Treasury position on behalf of Arthur Sinodinos while he has stepped aside.
JANINE PERRETT: Okay. Let’s move on to that position because the other Senator was in the midst of some very controversial reforms to the Future of Financial Advice legislation. Now yesterday despite having an interview and saying all along up until yesterday morning that you were going to stick with it, you did hit the pause button yesterday afternoon. What was it that made you change your mind yesterday and freeze these changes?
MATHIAS CORMANN: I actually didn’t hit the pause button yesterday afternoon. I hit the pause button on Friday. I hit the pause button in relation to one particular aspect of the process. Just to explain this to your viewers, the Coalition is committed to implement the improvements to the financial advice laws that we took to the last election. We think that the previous Government imposed way too much red tape, which is unnecessarily pushing up the cost of advice for consumers. We think it’s important to restore the balance between appropriate levels of consumer protection and ensuring that access high quality advice is affordable for consumers, in particular for people saving for their retirement. Now having said all of this, we introduced legislation into the House of Representatives last week, to give effect to our commitments that we took to the last election. As a part of that process there is also a set of regulations which relates to that legislation. What I’ve decided is that while the legislation is going through a Senate Committee process, which is ordinary parliamentary process, I will take advantage of that time to conduct some further consultation in relation to the exact wording of the Regulations. There is clearly a level of confusion and a level of misinformation out there. This is a very technical area. It is very easy in this area for people with a vested commercial interest, or indeed with political motivations to create mischief... interrupted
JANINE PERRETT: Senator, just on that, just to be fair. Some of the people who have come out against you are ex-Liberal Premier Peter Collins who heads a super fund. There has been a lot of very eminent business people and people from your own side who have criticised it, it’s a bit unfair to make out it’s just the Opposition.
MATHIAS CORMANN: Well if I could just talk about Peter Collins for a moment. He is the head of Industry Super Australia. So it is not as if he is a disinterested party in this debate when it comes to the policy settings. Furthermore, he was on some media last week making assertions that the Government was planning to get rid of the best interest duty, which is not true. The Government has never suggested that we should get rid of the requirement for financial advisers to act in the best interest of their clients. Indeed we are maintaining that commitment. We think that it is a very important part of the reforms that were passed by the last Parliament. So one of the things that I want to do in this debate is to make sure that we all agree on the facts. There might be some disagreements on certain aspects of what the Government intends to do, but it is very important that everybody at least has a consensus on what it is that we are actually doing, rather than what people’s perception is of what we’re doing.
JANINE PERRETT: Before we get to the consensus, let’s look at the facts. Alan Kohler, a rather eminent financial reporter, even though he works for the ABC but his company owned by News Corp, he wrote a very scathing article about your handling of this today claiming that you tied yourself up in knots and said there was complete confusion of the best interest that you seem to be talking at odds. Have you read that article and can you clear up his confusion?
MATHIAS CORMANN: I’ve seen the article. I’ve never spoken to Alan Kohler in my life. So maybe if he wanted to be better informed on what the Government is doing he should do what you’re doing and invite me for an interview every now and then. There is absolutely no confusion. The Government right from the outset, in fact when we were in opposition, we supported the best interest duty. We believe that it is important for financial advisers to be required to act in the best interest of their clients. So we think that advisers ought to be required to identify the subject matter of the advice, identify the objectives of the client, the financial situation of the client, the circumstances that are relevant to the giving of the advice. We think that advisers should be required to make a judgement on whether they’re qualified to provide the advice ... interrupted
JANINE PERRETT: And what about getting commissions? Alan Kohler seemed confused on the issue of commissions.
MATHIAS CORMANN: Well let’s move onto commissions on a moment. Just to finish on the issue of best interest duty. All we are saying is that the vague and open ended requirement in a catch-all provision that Labor put in place that an adviser should take all other reasonable steps increases the level uncertainty for consumers and for advisers on how the best interest duty should operate in practice. We don’t think that is in the best interest of consumers because increased uncertainty means increased costs. Ultimately we want consumers to be able to access advice at the most affordable price possible, advice that they can trust. Now in relation to commissions... interrupted
JANINE PERRETT: Yes, what about the argument that all you’re doing, the only people really pushing for this are the four big banks who have a vested interest and that you’ll be back to paying commissions to tellers selling the product.
MATHIAS CORMANN: That is just not true. We support the ban on conflicted remuneration. We do not intend to bring back sales commissions for financial planners. This is where the whole debate has just completely gone off the rails from some people. There are some people who clearly have an interest in creating confusion. My interest is going to be to bring the debate back on track.
JANINE PERRETT: Well I’m just thinking Senator, if there was this confusion and there was an awful lot of confusion about it, could you blame the former Assistant Treasurer? Maybe he was pre-occupied with briefing QC’s for his appearance at ICAC, but it hasn’t been sold very well if you have to put a pause to go and explain it to people has it? Do you take some responsibility for that as a Government?
MATHIAS CORMANN: Well again, this is not an area where everybody comes to it in a disinterested way. Let’s just remind ourselves of the consumer interest in this. Yes the consumer has an interest in appropriate levels of consumer protection. But the consumer has also got an interest in getting affordable access to high quality advice, that they do not have to pay an arm and a leg for the advice that they require in order to maximise their retirement savings. Now it is very important in that context that any additional piece of red tape that is imposed by Parliament actually delivers a tangible and proportionate benefit.
JANINE PERRETT: Okay, what about the fact that you were in an interview today, I think it was in The Australian said that you were not at all open to compromise on this. Now you’ve said that you’ll have consultation with people about it, it sounds like you’re not going to change a thing, you’re going to tell them what they are going to tell them what they are going to accept; or are you open to consultation that if they raise something you might have an open mind?
MATHIAS CORMANN: That is a very fair question Janine and I saw that article. Again there was a little bit of quoting out of context. What I’ve said is that we are committed to the policy that we took to the last election, which was to remove the excessive and unnecessary and costly red tape which is pushing up the cost of advice without making a tangible difference to consumer protection. However what I am prepared to talk about is to ensure that where the wording in the regulations can be improved to make sure that the policy intent, that we have clearly stated, which includes keeping the best interest duty, which includes not re-introducing conflicting remuneration for financial advisers. If there are things that we can do to make sure that the wording of the regulations is made more precise, then I am very happy to have a conversation along those lines. Indeed I have already engaged... interrupted
JANINE PERRETT: So you do have an open mind then?
MATHIAS CORMANN: I don’t have an open mind on the policy objectives that we want to achieve, but I’m quite happy to take advice that if people have got suggestions about the wording in the regulations, how they can be improved to better achieve the objectives that we took to the last election, then of course I am happy to have that conversation.
JANINE PERRETT: One final question on this. There has been a lot of speculation on this and it sounds like it has come from very informed sources, that the reason why you hit the pause button is because you received legal advice that if you had pushed through these changes as they were. It would a legal minefield and could be overturned. Can you just confirm, that did you or did you not receive such advice?
MATHIAS CORMANN: No, I did not receive such advice. That is a completely inaccurate rumour. It is just one of the many rumours again that people with a barrow to push are spreading. I can tell you very simply that I took over responsibility for this policy area again in the middle of last week. I was obviously briefed on all of the current issues. I was obviously aware that we had introduced legislation into the House of Representatives. As a matter of proper process I took the view that until I was satisfied that we have dotted all the I’s and crossed all the T’s in relation to the regulations and in particular given there was a Senate inquiry going to take place into the legislation that it was appropriate for me to pause the implementation of the Regulation while those processes took place, while explaining the rational for what we are actually doing.
JANINE PERRETT: There was one more question on this and I will do it quickly because I know I want to get to your gloating, well not gloating, but talking about the mining tax which you feel so strongly about. Just quickly, when do you think you will re-introduce? What is the timetable because David Murray was on Peter Switzer last night? He has got the financial inquiry coming up. Would it be best to wait until that has been given an interim report?
MATHIAS CORMANN: Janine, with all due respect that is the wrong question. The legislation is before the Parliament and the legislation continues to go through the process before the Parliament. What I have decided is not to go ahead with the Regulation related to that legislation at this point in time to do some further consultation in relation to the wording of the Regulations and... interrupted
JANINE PERRETT: But for how long?
MATHIAS CORMANN: ...at this stage my intention would be to let the Senate inquiry take its course and obviously it depends on the consultations very much. If I am satisfied that we have landed in a position where everything is consistent with what we took to the last election, then obviously I will be in a position to press the button on the Regulations themselves.
JANINE PERRETT: Okay, just before I get to the Mining Tax very quickly. A big scoop in the Australian Financial Review today that Gina Rinehart received over half a billion of US taxpayers money, outraging the right there with a government handout. Would you agree that the age of entitlement is not over? Do you think that’s a good thing?
MATHIAS CORMANN: I’m not going to comment on the tax affairs of individual Australians and you wouldn’t expect me to.
JANINE PERRETT: Oh it was a try because you’re a West Australian, I thought you would defend her. Okay, here’s your chance. The mining tax repeal knocked back again, you must be devastated.
MATHIAS CORMANN: Well, not knocked back again. It is the first time that the mining tax repeal was knocked back in the Senate. It took forever to get here... interrupted
JANINE PERRETT: Seems like forever.
MATHIAS CORMANN: The Labor Party has run a massive filibuster in the Senate trying to stop the will of the Australian people being given expression, in terms of our commitments to scrap the carbon tax and scrapping the mining tax. Today the Labor Party showed again that they are an anti-West Australian Eastern States centric Party. The mining tax is a tax on WA, it is bad for the economy and confidence and jobs and investment in WA. It is a tax which has raised very little revenue but all of it for WA and tied up the West Australian mining industry in massive costly red tape in the process.
JANINE PERRETT: Okay, I told you I’d let you get that in, but we’ve run over time. Always good to talk to you, thank you Senator Mathias Cormann.
MATHIAS CORMANN: I’ll be back.