Senator the Hon Mathias Cormann
Minister for Finance
ALAN JONES: People get into government with the very best intentions, no one has been more supportive of the Abbott Government than I have because I know the mess that have inherited and they deserve support. You look at the job that Michael Baird has done in New South Wales, we just talked about it. The Abbott task after six years of Labor is unbelievable, massive debt. The independent Parliamentary Budget Officer Phil Bowen said a couple of weeks ago that the Budget emergency wasn't concocted. We have got a deficit running away faster than any other country in the developed world. Standard and Poor's say deficits are an issue and must be reduced. The International Monetary Fund says our spending is the fastest growing of 17 like countries surveyed. Government debt has tripled since the Global Financial Crisis. The World Bank says we are the most expensive jurisdiction in the G20. Social security and welfare at $145 billion, the aged pension alone $40 billion, 10 per cent of Federal spending. 80 per cent of retirees; forget compulsory superannuation, 80 per cent of retirees still receive an aged pension. The Commission of Audit said within the decade, the cost of sustaining the aged pension in its current form will reach $72 billion a year. When it was introduced in 1909 the aged pension you only collected after 65, men only lived until about 55. It was a gesture towards a bit of welfare now look at it and where it is going. Labor gave Tony Abbott $190 billion in deficits in the first five years and if had kept going, under Rudd and Gillard there would be another $160 billion over the next five. But the polls yesterday said we want them back. Well you can have them back. I'll be turning out the lights. But the problem is, you get into Government and then you lose sight of simple things. Now Mathias Cormann is the Finance Minister. He is no dunce. But I have to be critical of him and say that he has taken his eye off the ball which is the reason I want to talk to him. He is on the line. Finance Minister good morning.
MATHIAS CORMANN: Good morning Alan and good morning to your listeners.
ALAN JONES: Now I see you speaking a lot and hear you talking a lot and can I be critical and say I never hear you talking about the things that my listeners are talking about. The Gillard Government passed legislation which came into effect on June 1 last year allowing the Federal Government to be thieves, to appropriate money and bank accounts which have been inactive for three years. In other words, steal money from Australians if there are no deposits or withdrawals from an account for three years. Now what are we talking about? You haven't amended the legislation, what's worse you're talking about having some kind of review of all of this and increasing the three years to seven years. What right have you got to touch any of this money?
MATHIAS CORMANN: A couple of points here. Firstly, you're quite right, we did inherit a mess and we are working our way through fixing the mess step by step. Obviously we do have to prioritise what we are doing here. Now in relation to the attack on peoples' bank accounts which you rightly are critical of which was initiated by Wayne Swan when he was trying to keep the illusion of a 2012/13 surplus alive for a little bit longer, we were opposed to it in Opposition and we are fixing it in Government. Now...interrupted
ALAN JONES: What do you mean by fixing it? Because the previous Coalition Government also robbed but didn't rob for seven years, they still robbed money. What right, Mathias, you just can't answer a simple question. What right has the Government of Australia got to other peoples' money?
MATHIAS CORMANN: Well the Government of Australia has got no right to other peoples' money.
ALAN JONES: Correct.
MATHIAS CORMANN: But the problem that we have is neither should the money stay with the banks if people have genuinely lost those accounts so the principle...interrupted
ALAN JONES: They are not lost accounts.
MATHIAS CORMANN: Well the principle and the evidence is that if somebody has genuinely not been in touch with their bank account for seven years, chances are that it is genuinely inactive...interrupted
ALAN JONES: Well hang on, hang on, hang on, Mathias, hang on. Ross has a child, he has been working with me for 25 years, he said Alan would you be the godfather to my little boy, I'd love to Ross and as a little gesture, Ross doesn't know, I put five thousands in the little fella's account. He is not going to touch it when he is two, three, four, five, six or seven. And it's there. What right, and it can stay there forever, what right of Government to assume oh well the little fella has gone missing. I mean this is scandalous.
MATHIAS CORMANN: The example that you raise there is a very legitimate example. And that is why as part of the discussion paper that I have put out I have also made the point that there is a whole range of banking products that should be excluded from the scope of this. But you have got to bear with me in relation to the principle. It is true that there are circumstances in which people genuinely forget about bank accounts that they hold and the longer you wait before you do anything about it the harder it gets to reunite people with their money. Now under the Howard Government, as you've said that period of inactivity was seven years which we thought was an appropriate period. The Labor Government...interrupted
ALAN JONES: But then you stole all the money with no differentiation, you stole all the money, no differentiation, seven years, take it.
MATHIAS CORMANN: No it is not a matter of taking it, it is a matter of making sure that it doesn't stay with the banks but that you have a process of reuniting it with the rightful owners and of course if you leave it with the banks forever and ever there is a risk that bank fees and the like start eroding the value of it whereas if it is held by Government in the appropriate circumstances, with an appropriate interest rate with it and no cost applied to it in the same way the banks would, then you actually are able to preserve the capital for people in those circumstances. The problem Alan is, that Labor because they were desperate for cash, they reduced the period of inactivity from seven to three years, which was completely inappropriate...interrupted
ALAN JONES: And stole $360 million.
MATHIAS CORMANN: Which means that now people get caught up who absolutely have not lost their bank accounts, who are absolutely clear of where their money is and the Government...interrupted
ALAN JONES: Put them in gaol! Put them in gaol, they are thieves Mathias Cormann, 80,000 accounts. They are thieves. Gillard and the lot of them. $360 million, 80,000 accounts, good God. So anyway look when you get that discussion paper, we can talk again right?
MATHIAS CORMANN: Indeed.
ALAN JONES: Okay, now look, the Gillard Government overseen by the Fair Work Commission appointed a panel to examine super funds. Default funds. Now default funds are funds whereby people have contributed to superannuation but the employees don't know really what fund it has gone into, they haven't chosen. So all these outfits were lining up to get this kind of money. I mean billions of dollars we are talking about. So the panel was formed by the so called Fair Work Commission, a joke, a union carnival. Now you are the Finance Minister, but the Fair Work Commission Audit ordered two private sector representatives off the panel because of quote potential conflicts of interest, that left a former ACTU advocate and former ACTU industrial officer on the panel and so to make up the quorum, the unions got into it again, the President Iain Ross, a former ACTU assistant secretary, unilaterally appointed himself the third member of the panel because they wanted this windfall money to go to their union mates in the superannuation industry. The Financial Services Council is furious, applied to the Federal Court and last week, the Federal Court found this Iain Ross had incorrectly reconstituted the panel, so full marks to the Federal Court. But I want to know where was the Finance Minister Mathias when this rort was going with people's money?
MATHIAS CORMANN: Well the Finance Minister has a long history with all of these issues, because I was also the Shadow Minister for Financial Services and Superannuation when we were in Opposition. And you're quite right, Labor in government, and this goes beyond the setting up of this panel, the Labor party in government set up a process to select default funds of superannuation, that is in relation to people who don't make active choices about their own superannuation, some years ago, which is anticompetitive, which is a closed shop arrangement to favour union dominated industry funds which happen to be close to the Labor Party. We have always said that we are totally committed to ensure that there is proper and genuine competition in this space so that people saving for their retirement and who don't make active choices have access to the benefits of competition. Now again it goes to prioritisation. I did move amendments in the Senate just before the last election in order to open up this whole space to competition, but Labor and the Greens controlled the Senate and Labor and the Greens voted down the amendments that would have enabled all so called MySuper funds which are the default funds which have all of the consumer protections enshrined in them to compete, they voted those amendments down. The truth is that Labor and the Greens still have control of the Senate and until such time as that changes there is no prospect of us getting...interrupted
ALAN JONES: So you're saying that the Federal Court did what the Government couldn't do?
MATHIAS CORMANN: Well the Federal Court dealt in our view appropriately with an aspect of what Bill Shorten did as Minister for Workplace Relations and we, as you would be aware, the Federal Government actually was a party to that particular court action that was initiated by the Financial Services Council. So we joined in on the action and we certainly are very pleased with the outcome. But in terms of resolving the issue conclusively, through a change in legislation, there is no prospect of being able to achieve that in the Senate as it currently stands. Right now we are trying to scrap the carbon tax, scrap the mining tax and all of these things are being blocked in the Senate by Labor and the Greens. As soon as that circumstance changes, this is one of the issues that we will revisit very quickly.
ALAN JONES: Just finally, the Commonwealth Bank has already paid out $52 million bucks because their financial planners were basically corrupt. Allegations of fraudery, misconduct. The victims were hundreds and hundreds of clients of the Commonwealth Bank's two financial planning divisions, Commonwealth Financial Planning and Financial Wisdom. To put it simply people were going into the Commonwealth Bank, they had $100,000, they were being told what to do and because it there was a commission in terms of the advice that was given, they didn't really care whether the advice was beneficial to the poor unsuspecting individual that was depositing the money. Now Labor, hard for me to give this mob any credit, imposed requirements on financial advisors and I thought those requirements brought this whole issue into appropriate focus. Now the banks have obviously have got onto you, the insurance companies have got onto you, people were damaged by the financial collapse, are you going to water down the Labor legislation?
MATHIAS CORMANN: There are a couple of important points here. Firstly, we totally agree that financial advisors must be required to act in the best interest of their client and anybody who does the wrong thing should have the book thrown at them and I would expect that any financial services institution whose advisors have done the wrong thing to go out of their way to fix that situation...interrupted
ALAN JONES: That is easier said than done. Labor said an advisor must disclose the fees they are receiving for recommending products.
MATHIAS CORMANN: And we agree with that.
ALAN JONES: Okay, that's good. Secondly, a financial advisor must obtain a client's consent in writing every two years for the relationship to continue.
MATHIAS CORMANN: Well we do not agree with that. And you see this is the point you just raised before regarding the anticompetitive arrangements around default super. Labor was driven very much in their agenda by union dominated industry funds who had a particular vested interest. Now there were a lot of things in the reforms to financial advice laws that Labor initiated that we support. We support the requirement for advisors to act in the best interests of their clients. We support the banning of conflicted remuneration and commissions which essentially lead to a situation where advisors would choose and recommend a product not based on what was in the best interest of their client...interrupted
ALAN JONES: Because they were getting a commission.
MATHIAS CORMANN: That's right. So we support all of that. But we think that Labor changes went too far in imposing too much excessive red tape beyond what was justified on consumer protection grounds and the problem with that Alan is that if you force too much red tape into the system, the cost of funding that red tape ultimately is borne by the consumer, ultimately is borne by the investor. We want to balance this more properly.
ALAN JONES: We got to go but one question I have got to ask is when then are we going to be able to see what your changes are, when will we know?
MATHIAS CORMANN: Very soon.
ALAN JONES: Right and I won't ask you to answer this question, I will just give you this piece of mathematics we have got a $1.7 trillion superannuation industry and $20 billion every year goes in fees. Someone has to address that concern.
MATHIAS CORMANN: Well we want access to advice to be more affordable. We think the costs are too high.
ALAN JONES: $20 billion bucks.
MATHIAS CORMANN: Well the system needs to be made to be more efficient and more competitive.
ALAN JONES: Okay, we will talk again.
MATHIAS CORMANN: We will talk again.
ALAN JONES: Okay, there is the Finance Minister federally, Mathias Cormann.