Don’t stop with banks, hit insurers & super too
THERE’S a revolution happening in Australia — it’s called people power and it’s starting with your money.
Royal Commissioner Kenneth Hayne’s interim report into the behaviour of big banks has set the tone for what is likely to be a pre-election period dominated by politicians telling us they’re on our side.
Scott Morrison has caught the mood already, and began his prime ministership with the promise he was on “your side”.
He followed that up with a promise to hold a royal commission into the aged-care sector — another area where customers (or residents as the sector prefers to call them) are often the last consideration in the profitmaking machine that the aged-care business has become.
Mr Morrison’s next challenge will be how he deals with the banks, post-royal commission, having been party to the Turnbull government’s extreme reluctance to hold the inquiry in the first place.
Mr Hayne, in his interim report, indicated where he is going with his final recommendations. He harshly criticised the banks lack of competition and abuse of their government-protected monopoly status, and slated the failure of the regulators Australian Securities and Investments Commission (ASIC) and Australian Prudential Regulation Authority (APRA).
If we could offer Mr Morrison some advice, it would be to anticipate Mr Hayne’s recommendations by thoroughly cleaning out both regulators right now. That means sacking senior staff and finding new people who are not part of the cosy finance world — that is, people who didn’t go to private school and university with the banks’ senior executives — to run them. Maybe the world of law enforcement and policing would provide some useful candidates.
Next, crack down on mortgage brokers, financial advisers and the other clingers-on around the edges of banking. Ban trailing commissions. Impose “plain English” language requirements on insurance products, including funeral insurance, so customers understand what they’re buying. Require all insurers to offer bronze, silver and gold packages that are easily comparable. Look at imposing the same simple, easily comparable structure on mortgages and business loans. And maybe go a little further — what about remuneration controls on bank executives?
That might sound overly restrictive for a LiberalNational Coalition government — but remember, the government is already up to its neck in market intervention with the banks. It’s too late to pretend this market can operate without government involvement, let alone be trusted to police itself.
Next to cop intense scrutiny, and be forced to change its behaviour, will be the superannuation and insurance sectors. Consumers are realising — thanks to the work of journalists such as Sky News’ Adam Creighton, and our own finance columnist Scott Pape — that they don’t have to take what’s dished out to them by big organisations who put their interests last.
None of this is happening in isolation. Our generation is witnessing a digital revolution that has put vast information stores in the hands of every single one of us. We all have the world’s sum of knowledge in our pockets. The next step is translating that information into power, and using the power wisely.
RESPONSIBILITY FOR ELECTION COMMENT TAKEN BY THE EDITOR, MICK CARROLL, 2 HOLT ST, SURRY HILLS 2010