It is time to bring the dangerous neoliberal love affair with deregulation to an end. The government’s so-called war on red tape has weakened the rules that protect Australians from the sharp end of the profit motive.
Last week the interim report of the banking royal commission confirmed the widespread practice of ripping off customers and exploiting vulnerable Australians in particular. Meanwhile we’re still waiting for the government to address the scandalous usury that is part and parcel of payday lending and consumer leases. And soon we will confront the reality of poor regulation in the for-profit aged care sector.
Was it really so hard to see that taking an increasingly hands-off approach while expecting companies to conduct themselves honourably with respect to their customers’ best interests would end in tears?
On the question of how our banking and finance system became so rotten, Hayne said: “Too often the answer seems to be greed – the pursuit of short-term profit at the expense of basic standards of honesty.”
As a result we have seen more than 300,000 instances of potentially criminal conduct. Banks and financial institutions have charged fees for no service, including to customers who had died. Insurance policies have been pushed on people who can’t use them, including Indigenous Australians in remote communities. Private superannuation funds have deliberately parked people’s retirement savings in their own second-rate or even loss-making term deposits.
Perhaps we shouldn’t be so surprised. Where there is power and self-interest, exploitation will follow. The only way to prevent exploitation is through strict laws that are properly enforced. You would be a fool to put much faith in corporate morality, especially in the era of large companies whose systems are designed to treat people as numbers. This is especially the case with financial services, because every cent returned to you or me is a cent the company would rather pocket.
That’s why strong regulation is essential and self-regulation is an oxymoron. If you let companies keep themselves nice, the slide towards misconduct is inevitable. Some of the most worrying evidence to the royal commission involved financial consultants who were ostensibly independent being prevailed upon to change reports that companies thought were too harsh or critical.
Asking companies to commission “independent” reports into their own conduct renders such reports compromised from the start. The same is true when it comes to environmental assessments.
Despite the shocking evidence of industry-wide misconduct, the calls have already begun to steer clear of change that would unfairly burden the banking and finance industry. That chorus will gather strength in the months to come. There will be a concerted effort to make a show of contrition while seeking to avoid meaningful change.
After resisting the royal commission for years, the Coalition now says the corporate regulators need to be stronger. That’s like saying the ransacked house should have been more secure and better prepared when you’re the one who removed the locks, broke the windows, and switched off the power in the first place.
Since 2013 the Coalition government has strenuously resisted calls for a banking royal commission. They have cut funding to the Australian Securities and Investments Commission and to the tax office, and undermined stable leadership of the regulators. When the former head of Asic Greg Medcraft had the temerity to describe Australia as a “paradise” for white collar crime while arguing for more powers and stronger penalties, he was rebuked by the finance minister, Mathias Cormann, and required to correct his statement.
So let’s get one thing straight, whenever there is a conflicting corporate self-interest we can expect individual or community welfare will be at a real and enduring risk. That’s precisely why regulation and compliance is necessary. The red tape that some are obsessed with stripping away is in fact the safety barrier that prevents exploitation and harm.
We must have strong laws against such behaviour with stiff penalties. We must consider new rules that remove the incentives for ripping people off in the form of commissions, bonuses, and conflicted remuneration. Most importantly, we must have well-resourced regulatory agencies that are relentless and creative in sniffing out the drift towards the bastardry that comes with greed, and that come down hard when they find it.
• Josh Wilson is the ALP federal member for Fremantle in Western Australia
