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What does the new Cabinet really mean for financial services? The silence is deafening.
“We are forming a government for the 21st Century. A ministry whose composition and focus reflects our determination to ensure that Australia seizes the opportunities of this, the most exciting time in human history.”
These are the words with which the Hon Malcolm Turnbull MP introduced his new Cabinet and reinforced his focus on ensuring that Australia remains a “prosperous, first-world economy with a generous welfare safety net”, on the back of more robust competition, productivity and innovation.
According to Phillip Coorey, writing in the Australian Financial Review, Turnbull is likely to act quickly on his economic agenda while business and consumer confidence is high, so that he can cement economic reforms already underway, and live up to expectations that he and his new Cabinet will bring better economic leadership.
But what does this mean financial services and more specifically for the raft of reforms currently underway? Are they now at risk?
Delay and change - the biggest risks
New Treasurer Scott Morrison has already flagged that he is reviewing tax reforms and will consider incentives to encourage retirees to unlock and use money tied up in assets like their homes.
He has confirmed that the Government was proceeding with the Tax Whitepaper process inherited from his predecessor Joe Hockey, but that everything needed to be considered, including superannuation, capital gains tax and negative gearing.
He has also hinted that the draft tax white paper, known as the green paper, would present options flagged in submissions about raising the GST and lowering company and income taxes.
If the choice is made to revisit other financial services reforms, arguably the best scenario is delays in implementation. If the delays continue into next year, an election year, there is a chance they will be paused for 12 months. And if the choice is made to revisit reforms from the beginning, we’re back to square one – in this increasingly crazy game of snakes and ladders, the results of extensive consultation already undertaken will be lost.
To date there has been no indication that a fundamental change of policy with respect to financial services is on the agenda, but the new Assistant Treasurer, the Hon Kelly O’Dwyer MP will want to put her personal stamp on reform.
There has been speculation in the Sydney Morning Herald that the Government’s response to the Financial Systems Inquiry may take longer than previously indicated to see the light of day. The response, prepared by former Assistant Treasurer Josh Frydenberg, was due to be released on Tuesday morning last week. However, given the events of the day, it’s no surprise that it was never presented. Chances are that the new Assistant Treasurer will want to give it a good going over before it’s released.
And what of Christopher Pyne, Minister for Industry, Innovation and Science? Mr Turnbull has repeatedly emphasised the need for innovation as a co-ordinated policy across Government, so will Mr Pyne will need to review it as well?
At the same time, industry sources say it is unlikely that the new treasury team will interfere with areas where consultations have already taken place.
Since the Cabinet spill there has been a growing confidence that the major impact will largely be a delay and given the new Prime Minister’s dislike at governments ‘spinning their wheels’ this delay may be shorter than many have feared.
ASFA CEO Pauline Vamos is squarely in this camp. "A lot of the reform is already underway or done.
For example, fee disclosure work that arose from FSI, the work around independent and trustee Boards from FSI and the Cooper Review, we know the tax white paper will now definitely include super and the work Treasury has done around income streams will continue. We don’t see any of the processes being abandoned,” Pauline said after news of possible tax changes surfaced.
“We know a full response to FSI was put to government. There’s no reason to think government will change their position on reforms already underway. We do expect a delay but not a complete review - you have to remember these are government policies not necessarily the policies of the previous minister. It’s also just a matter of time for the new Minister Kelly O’Dwyer to get her head around the issues so she can respond,” she added.
Responses positive overall
The financial services community has warmly welcomed the Cabinet changes. According to the Self-Managed Super Fund Association, combining the portfolio of Assistant Treasurer with that of Small Business and moving it to Cabinet is a very positive sign. There is also a sense that under united leadership of Kelly O’Dwyer, the Treasurer, Scott Morrison and the Finance Minister, Mathias Cormann, we will see a ‘concerted response to the current and future reform agendas’. In their view, the Financial System Inquiry, the Parliamentary Joint Committee on Corporations and the Financial Services Inquiry will now be scrutinised sooner rather than later.
The Financial Planning Association (FPA) of Australia also praised the decision to elevate the financial services portfolio to Cabinet. FPA CEO Mark Rantall said Kelly O’Dwyer’s understanding of financial services would ensure continuity. Her dual appointment as Assistant Treasurer and Minister for Small Business could also provide benefits in relation to understanding the pressures regulations place, particularly on small licensees. “We look forward to engaging with Minister O’Dwyer to discuss the importance of raising education and professional standards for financial planners, as well as working with her to maintain the reform agenda,” he added.
Financial Services Council CEO Sally Loane urged the new Cabinet to make progress. “Australia needs both focused financial services reform in this Parliamentary term and a mandate for structural tax reform in the next. In particular this includes delivering reforms to reduce superannuation fees, finalising the Financial System Inquiry, and creating more trade opportunities as demand from Asia for financial services increases. Fixing our Federation and tax system must be high on the agenda for the Turnbull administration because they are limiting investment and job creation in their current form,” she said.
So don’t think new ministers means new reforms – at this stage it’s most likely we’ll have exactly what we had two weeks ago. Just with yet more delay.
