Opposition leader Bill Shorten has said a bank royal commission should consider whether bank pay structures are creating pressure to sell customers products and extend credit they do not need.
Appearing on Melbourne’s 3AW with Neil Mitchell, Shorten did not rule out extending a tax levy on workers earning more than $180,000, but said a person on that income was not rich.
Shorten detailed a number of areas for inquiry by a bank royal commission, which Labor announced it would set up two weeks ago but for which it has not released draft terms of reference.
“I think a royal commission would have to look at vertical integration – because [banks are] expanding into so many different products, is there pressure to cross-sell things?”
“Is there proper whistleblower legislation? Are remuneration structures in banks working properly?”
When asked if this extended to consideration of executives’ pay, Shorten said “I’m not sure that’s the specific thing that I was getting at”.
“What I’m getting at is where you have a system that’s heavily geared towards flogging products to customers who don’t need them ... How many people have you met who have received in the mail [offers of] irresponsible lending, credit cards and credit card limits they can’t sustain, then you see people go to the wall.”
Shorten said a bank royal commission should consider compensation schemes and whether there should be a system of last-resort compensation, a government fund for bank customers who have been ripped off.
When asked if a royal commission should consider bank fees, service and closure of branches, Shorten replied “I don’t think we can just do business as usual”. “More customer-focused banks has to be good for customers.”
“The government is trying to make [the proposed] royal commission go away. The only people who are happy with that are the banks.”
He said the Australian Bankers’ Association (ABA) rushed out a press release congratulating the government on its decision to restore funding to the Australian Securities and Investment Commission rather than establish a royal commission which Shorten said “speaks volumes”. “If you keep trying to deal with each issue after it’s happened, you’ll get business as usual [in the banking sector].”
Shorten said “even a crocodile wouldn’t swallow” the claim banks would not pass on a levy on them to pay for the increased Asic funding.
On Thursday the ABA announced an independent review of product sales commissions and enhanced whistleblower protections in a bid to head off criticism of banks’ responses to scandals.
ABA chief executive, Steven Münchenberg, said the review “aims to address consumer concerns about remuneration, the protection of whistleblowers, the handling of customer complaints and dealing with poor conduct”.
“Trust is at the centre of banking and is critical for the stability of our financial system.”
“That’s why the banks will immediately establish an independent review of product sales commissions and product based payments, with a view to removing or changing them where they could result in poor customer outcomes,” he said. The review will be overseen by Gilbert + Tobin lawyer, Gina Cass-Gottlieb.
“Banks will also improve their protections for whistleblowers to ensure there is more support for employees who speak out against poor conduct,” Münchenberg said.
The prime minister, Malcolm Turnbull, said he and the treasurer, Scott Morrison, had spoken to the banks on Thursday morning.
He said he reminded them: “the customer had to be at the absolute heart of everything and they had to go further than simply talking about that. They had to ensure that every promotion, every bonus, every recognition of their employees took into account the conformity with that culture.”
Turnbull said the banks had outlined their package to clean up the industry, confirmed “strong support” for the government’s move to restore Asic funding and promised not to pass on the cost.
“We are [taking] real, decisive action to ensure that the corporate regulator, with all of its powers, has the resources to do its job better and that the banks change their ways to make sure that they treat their customers better.”
Shorten did not rule out Labor extending the high-income deficit levy, which could raise $1.2bn a year from 380,000 Australians who earn more than $180,000.
He said reports Labor was considering such a move were “speculation”. “There is already a deficit levy on high-income earners, we have to see what the government does in the budget.”
“If there’s a choice between cutting hospitals, pensions, schools or corporate tax reductions or reducing tax for higher income earners, I’m on the side of hospitals, pensions and schools.”
When asked if a person earning $180,000 a year was rich, Shorten replied “no, it’s not”. “But if you have $5m in superannuation at retirement, you probably don’t need the rest of taxpayers who are stuck in traffic this morning paying for you to get a tax concession.”
“I’ll tell you what isn’t rich – it’s people who are paying their mortgage and don’t have 10 negatively geared houses, it’s people who don’t have millions in superannuation. I’ll tell you who aren’t rich – teachers and nurses.”
Shorten said common sense was a good guide of who was rich and where the tax burden should fall on.
“I respect people who are successful in life and have amassed a good pile of money. It’s not just about simply increasing taxes,” he said.
“But in this country at the moment we spend more on taxpayer subsidies on negative gearing than higher education – is that the sort of country we want to be?”
