Superannuation industry groups have expressed their disappointment and suspicion at Prime Minister Malcolm Turnbull’s backflip on holding a royal commission into the banking sector at the request of Australia’s big four banks.
On Thursday, November 30, Turnbull, a long-time opponent of Labor’s plans for a royal commission into banking, announced his government’s own Royal Commission into Banking, Financial Services and Superannuation.
It came the day after the chief executives and chairs of Australia’s big four retail banks – Commonwealth Bank of Australia, Westpac Banking Group, National Australia Bank and ANZ Banking Group – sent a letter to Treasurer Scott Morrison arguing a “properly constituted inquiry” was now in the public interest.
Only two days earlier, Turnbull had told ABC Radio he would “never” launch a royal commission into the banking sector. He has spent the last 18 months opposing calls for one, including from members of his own Coalition government.
He has promised the royal commission will be completed within 14 months at a cost of $75 million. It is yet to be announced who will lead it.
Labor leader Bill Shorten had previously promised a royal commission into the banking and financial services sector, scheduled to run for two years at a cost of about $53 million, if he led a government.
Turnbull’s backflip has shocked many in the industry, including the union representing bank employees.
Australian Finance Sector Union national secretary Julia Angrisano said the workers’ group had “serious reservations” about Turnbull’s turnaround after he and other key ministers had repeatedly expressed concerns an inquiry would be expensive, unnecessary and lengthy, and would undermine international confidence in the sector.
“Doggedly, they have stuck to this line for many months, yet today, after receiving a green light from the banks, the PM has announced a royal commission,” Angrisano said. “Who is pulling the strings here? Has the government already spoken to the banks about the terms of reference?
“Having folded on the royal commission after receiving a letter from the banks, Mr Turnbull must now give Australians a guarantee that the banks [had] zero involvement in drafting terms of reference.”
AIST protests super’s inclusion
Australian Institute of Superannuation Trustees (AIST) chief executive Eva Scheerlinck said the initiation of the royal commission was “long overdue”, while also arguing that it should focus on misconduct within the banking sector “and not get distracted” by looking into the super sector.
“This inquiry has been brought on by the banks themselves,” Scheerlinck said. “They have abused their social licence and betrayed community trust, which has resulted in a deluge of complaints from their own customers.
“It is disappointing that the government is seeking to deflect from the real and systemic problems plaguing the big four banks by including the superannuation system in this inquiry. Australia’s super system is world class, and there is no evidence of gouging, fraud or unethical behaviour to warrant a royal commission into the industry.
“With only a 12-month window to complete the inquiry, the commission will be hard pressed to meet its obligations under the terms of reference in any meaningful way.”
AIST represents the non-profit super sector, which includes industry, corporate and public-sector funds.
FSC changes its tune
The Financial Services Council, which represents bank-owned and other for-profit super funds and has been a vocal opponent of Labor’s plans for a royal commission into banking and financial services, changed tack and welcomed the inquiry.
“The government’s announcement of a royal commission should end the politicisation of financial services and is an opportunity to establish a positive agenda for the future,” FSC chief executive Sally Loane said.
She added the industry had already come under “significant scrutiny” in the decade following the global financial crisis.
“With 18 reviews and inquiries, it has at times been treated like a political football…the politics and uncertainty this has created are causing harm to the confidence global markets should have in our banking and financial system.”
Loane welcomed the draft terms of reference for Turnbull’s royal commission, noting that they “made it clear” the inquiry is not required to go over the same ground as existing government inquiries.
The Association of Superannuation Funds of Australia (ASFA), which represents both non-profit and retail funds, released a statement expressing its disappointment at the explicit inclusion of superannuation in the scope of the inquiry, in light of a “plethora of never-ending inquiries, reviews and regulation” for the sector.
ISA calls for dumping super reforms
Industry Super Australia chair Peter Collins said the establishment of the royal commission was necessary and used the government’s turnaround on the issue to call for a similar backflip on superannuation governance reforms.
“Following a series of allegations and scandals within the banking system, the government’s decision to hold a royal commission into misconduct in the financial services industry was inevitable,” Collins said. “Given this decision, the government must withdraw its superannuation Bills, which seem motivated by the commercial interest of the banks, the ideological leanings of some in the government, or both.
“It defies credibility that the government would persist with superannuation Bills that have been campaigned and lobbied for by the major banks, and would dismantle the governance of not-for-profit super funds.”
Collins is a former NSW Liberal MP and state treasurer.
Minister for Revenue and Financial Services Kelly O’Dwyer said the year-long royal commission would be “sober and sensible” with “very clear terms”, to examine the banking, superannuation and insurance sectors.
“Given that we have got such fevered speculation, it is absolutely critical that the government takes control of this situation, O’Dwyer told Sky News. “We have done that. We’re not going to have other people determine what the terms of reference should be.”