Looking for answers on some of the key questions relating to financial services, taxation and banking reform under the new Government? Then don’t hold your breath. The very broad brush, ‘wait and see’ approach of the then-Coalition pre-election remains the order of day in the LNP Government, if a recent breakfast where Assistant Treasurer, Arthur Sinodinos, held the floor, is anything to go by.
The final FSC AMP Political Series breakfast of for the year last Thursday took place before a packed house that included some of the biggest names in financial services and wealth management. The drawcard? Newly installed Assistant Treasurer and Minister for Financial Services, the Hon Arthur Sinodinos AO, in conversation with veteran reporter, National Affairs columnist from the Australian Financial Review, Jennifer Hewett. And BlueChip Communication was there.
As one of Mr Sinodinos’ first public appearances to the industry since transitioning from his more accustomed role of adviser to that of minister, there was real interest in the room. Were we going to get some revelatory disclosure here?
In a word, no.
Mr Sinodinos was characteristically affable and articulate, but on the gnarlier questions on superannuation, taxation and financial advice, his responses steered around the general more than a zeroing in on the specific.
If there was a key theme, it was ‘wait and see’. Mr Sinodinos’ portfolio is, like many others in the new government, “awash with audits” (Jennifer Hewett’s words). So, what we’re waiting to see is the policy outcomes of said audits, coupled with the results of consultation across a “broad landscape”.
This approach is, according to Mr Sinodinos, very much driven by the need to “take people with you” when effecting change. He cited the example of Work Choices as salutary in this regard, the intimation being that its narrow conception led to negative unintended consequences – whether to the government of the day or to workers, or both, was not clear.
In short, the general positioning on various policies was very much on message with that of the then-Coalition before the election, and with about as much detail.
That said, there was some telegraphing of potential firm landing places down the track, most of which can, unsurprisingly, be linked to the ideological position of the new government.
Superannuation
On superannuation, Mr Sinodinos stuck to the now Finance Minister Mathias Cormann’s line from pre 7 September 2013: that the focus will be on governance, transparency, choice and competition. Industry super funds in particular will need to look to their Board composition and address the issue of number and qualification of independent directors. As Mr Sinodinos pointed out, it is past time for super funds to meet the governance requirements of other major financial services organisations, as dictated by bodies such as APRA and the ASX.
In terms of the increasingly discussed notion of using superannuation funds for ‘community good’ infrastructure projects that support the population in the long term, Mr Sinodinos was all for it – so long as a strong privatisation position, in which the States would take the lead by selling off selected infrastructure assets, is the model. He outright nixed the notion of mandating such investment for super funds.
The related issues of member engagement and financial literacy were also discussed.
While Mr Sinodinos strongly agreed on the importance of both, the extent to which pursuing either is an issue for his government, rather than, say, super funds themselves and the education system, was less clear, with his “default position” for industry to “take the lead”.
On SMSFs and whether their oversight by the ATO is “an accident waiting to happen”, Mr Sinodinos philosophically favours the “light touch” regulatory line. This position extends to an arm’s length approach to potential government bailout for SMSFs that go pear-shaped. While lauding the right of the individual to be responsible for his or her own retirement savings, Mr Sinodinos stressed that this means he or she must be exactly that: responsible for his or her own retirement savings.
FoFA and advice
There was much discussion about balancing the need for quality, affordable financial advice and addressing the wrongs of the past with the need for cost effective solutions that are accessible for ‘ordinary’ Australians. That ever-useful catch-all term ‘red tape’ was reeled out by the metre.
The subtext (or superscript) here was in keeping with the then-Coalition’s representations made pre-election: many elements of FoFA are too onerous and will lead to excessive compliance costs that will drive many players out of the market and cause advice to be unaffordable. In an ideal world the government would cut the red tape and find some kind of middle ground where advice was plentiful, good and cheap. Sound familiar?
The rub? The Senate. Mr Sinodinos was frankly uncertain about the fate of a partial FoFA repeal given the constitution of the upper house come July next year.
On the question of the make-up of the new Parliament and how it might affect the government’s policy plans, the man who’s become like a ‘political photobomb’ in the new discourse also scored a (seemingly inevitable) mention. Mr Sinodinos exhorted us: “don’t underestimate Clive Palmer”, citing his skills at mobilising blocks of supporters – typically from both of the mainstream sides of politics and with associated potential to distort election results.
Taxation
Unsurprisingly, given the terms of reference framing the upcoming ‘Son of Henry’ taxation reform white paper are yet to be decided, little firm information was forthcoming.
Mr Sinodinos highlighted the expansive nature of the paper: it is, he said, “intentionally broad-ranging to enable ventilation of the issues”. And briefly, the GST elephant appeared in the room, with Mr Sinodinos’ oblique reference to excessive media (and others’) concern about ‘what’s in and what’s out’ of the review.
Australia as a financial services hub
When it comes to what the new government might do to support Australia’s export of financial services – in line with the thrust of the Johnson Report – Mr Sinodinos was colourfully clear (if metaphorically mixed) on one point: “Subsidies are the teat on the road to perdition”.
That said, he did make special reference to the need to encourage financing innovation and related venture capital initiatives. No further detail on how this might occur was given, and Mr Sinodinos was at pains to stress that such encouragement is required because there are “gaps in the market”, as distinct from non-sustainable industries such as car manufacturing.
The wrap up? A steady, no-surprises performance from a new minister – but seasoned campaigner – who already seems well across what he says is a key difference between being an adviser and being a minister. That is, the need to be careful and responsible and “think that second longer before responding because the buck stops with you”.
