In December 2013 the federal government commissioned a wide-ranging Financial System Inquiry to examine how the financial system could be positioned to best meet Australia’s evolving needs. In December 2014 the Final Report was released. The federal government has finally responded to the report, accepting all but one of the 44 recommendations made.
How have industry groups responded to the FSI?
The response of various industry groups to the government’s acceptance of the FSI recommendations has been as follows:
CPA Australia: Measured and appropriate
CPA Australia chief executive Alex Malley says the Government has got the balance right in its response to the Financial System Inquiry report.
“David Murray’s inquiry found that our financial system is essentially sound and had withstood the challenges of the past, but that we can’t be complacent about necessary enhancements for the future,” Malley said.
“The Government has responded in a measured and appropriate manner, with a real focus on better protections for consumers and an eye for future. It’s particularly pleasing to see the government acknowledging that technology has changed the face of many Australian industries, none more so than financial services.
“The Government’s adoption, with further consultation, of the recommendation for ASIC to be given new powers around temporary product intervention is also good news for consumers and underlines a new level of confidence in the regulator’s ability to effectively oversee the market.
Council on the Ageing: Welcome stronger consumer protection
Council on the Ageing chief executive Ian Yates has welcomed the government’s agreement to legislate the objective of superannuation into legislation, to review the efficiency and effectiveness of the superannuation system and to support the development of comprehensive retirement income products.
“We also warmly welcome the government’s agreement to legislate to make issuers and distributors of financial products accountable for products and services performing in the way consumers are led to expect, and to give ASIC the power to intervene to modify or ban harmful products that risk significant consumer detriment,” he said.
“Overall the government’s FSI response heads in the right direction but there is a long way to go with further consultation, reviews and decisions to be made.”
ASFA: Considered approach required
The Association of Superannuation Funds of Australia (ASFA) has complimented the government on its timely response but has cautioned that the recommendations relating to superannuation and retirement incomes are complex.
“ASFA highlights the importance of the government’s proposal to enshrine the objectives of the superannuation system in legislation. It is equally important that we consider measures of success,” said Pauline Vamos, CEO, ASFA.
“The superannuation system is one of the most highly regarded private pension systems in the world, but there is always room for improvement to ensure that it is sustainable and provides the best retirement outcomes for all Australians.
“In the context of our ageing population, the superannuation industry and the government must prioritise establishing an appropriate framework for managing people’s superannuation not just in the accumulation phase but also after they retire. It is good to see the government’s focus on retirement income products–this will help us to finish building the superannuation system.
“We look forward to working with the government on implementing these proposals to ensure they deliver to the full needs of Australians in retirement.”
Customer Owned Banking Association: Consumers the winners
The Customer Owned Banking Association (COBA) welcomed the Government unambiguously backing the Murray Report’s vision for a more competitive, more consumer-friendly banking market.
“The Government’s response to David Murray’s Financial System Inquiry report is great news for consumers,” said COBA CEO Mark Degotardi.
“The FSI delivered a blueprint for reform and the Government is to be congratulated for accepting the overwhelming majority of the inquiry’s recommendations. These measures will unleash genuine, sustainable competition in retail banking.
“COBA welcomes the Government’s commitment to regularly review competition in the financial system and to increase the accountability of regulators. We also welcome a suite of specific pro-consumer commitments, including a crackdown on credit card surcharging, a requirement on financial advisers and mortgage brokers to disclose their relationships with major banks, and a new product intervention power for ASIC to ban harmful products.”
Australian Retailers Association
The Australian Retailers Association (ARA) says retailers support the Federal Government’s Financial System Inquiry (FSI) recommendations to ensure excessive credit card surcharging is legislated and cease exorbitant merchant fees by unregulated payment systems through regulation.
ARA Executive Director and Chair of the Australian Merchant Payments Forum (AMPF), Russell Zimmerman, said the recommendation will benefit both retailers and consumers, allowing retailers to reduce surcharging on high cost payment systems.
The ARA believes there are flaws in the current system, the biggest of which being the lack of regulation of the plethora of high cost and new payment systems coming into the market.
“The devil will be in the detail. Where retailers do surcharge it is often a blended rate, including the high cost payment systems to simplify the payment for the customer,” Mr Zimmerman said.
“Will retailers need to break out low cost cards they don’t usually surcharge on such as Visa and MasterCard and surcharge the high cost systems separately, or will there be a blended rate for ease of use by customers?
“The ARA and AMPF firmly believes that there is an unequal playing field, with some card systems able to decide their own pricing model and choose if they wish to allow surcharging by the merchant.
“Both Visa and MasterCard are regulated to ensure that merchants are rightfully not charged more than a reasonable Merchant Service Fee, and we believe this should be the case for all cards.”