Browsing articles in "Insurance"
Sunday 7th December 2014 - 7:05 pm
Comments Off on What changes can we expect from the Murray report?

What changes can we expect from the Murray report?

by Alan Thornhill

The 302 page report that the Financial Systems Inquiry delivered today is a robust document – and it needed to be.

Especially as:-

* Its lead author, the former Commonwealth Bank chief, David Murray, insists that there will be further crises – like that which followed the collapse of Lehman Brothers – and we must be ready for them.

* The Commonwealth Bank, traditionally one of the the nation’s most trusted financial institutions, was caught pursuing profit, at the expense of elderly customers, through investment advice that ignored their needs and

* Mr Murray admitted that he was shocked by the high fees superannuation funds have been charging, without producing satisfactory retirement incomes for their clients.

The report notes that Australia’s financial system has been performing strongly, since it was last reviewed in the Wallis report, back in 1997.

But it adds that it the system has “weaknesses,” too.

One also mentioned in the report is that our tax system favours the rich, over the poor.

So what changes can we expect, to flow from this splendid report?

Not quick ones, certainly.

The Inquiry’s recommendation that Australia’s big four banks beef up their reserves, for example, is to go to the Australian Prudential Regulation Authority, for further examination.

The FSI suggests Australia’s big four banks should boost their reserves by billions of dollars – and the banks are not happy about that.

Especially as the inquiry didn’t buy their argument that cost recovery, on this item, shouldn’t add more than 0.1 per cent to the rates they charge, on typical home loans.

Australia’s superannuation funds responded positively to the report, though, despite its criticism of their charges.

They said they like some of the ideas that that the Inquiry has put forward.

The report’s suggestion that negative gearing, tax breaks on shares and superannuation be scrapped – and the GST be broadened – won’t produce results, overnight, either.

The best that can be expected, there, is that some high end concessions on superannuation might, eventually, be modified by a government seeking at least some relief from critics, who never stop saying that its policies are unfair.

The Inquiry’s recommendations on financial advisers and consumer protection might prove more influential, though.

Especially if the government, still well behind in the polls, starts looking for ways to improve its image.

These include seeking fair treatment based on the concept that financial products and services should perform in the way that consumers expect or are led to believe.

The Inquiry says the current framework is not sufficient to deliver fair treatment to consumers.

And it adds: “The most significant problems relate to shortcomings in disclosure and financial advice.

The Inquiry this means some consumers are sold financial products that are not suited to their needs and circumstances.

“Although the regime should not be expected to prevent all consumer losses, self-regulatory and regulatory changes are needed to strengthen financial firms’ accountability,” it adds.

Haven’t we already heard something like this, though?

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Sunday 7th December 2014 - 5:28 pm
Comments Off on The FSI’s recommendations

The FSI’s recommendations

by Alan Thornhill

The Financial System Inquiry admitted that some of the 44 detailed recommendations it made for an overhaul of Australia’s financial system would require further discussion.

But what were those recommendations?

They include:-

On banks

Strengthening policy settings that lower the probability of failure, including setting Australian bank capital ratios such that they are unquestionably strong by being in the top quartile of internationally active banks.

Reducing the costs of failure, including by ensuring authorised deposit-taking institutions maintain sufficient loss absorbing and recapitalisation capacity to allow effective resolution with limited risk to taxpayer funds — in line with international practice.


On superannuation and retirement incomes

Setting a clear objective for the superannuation system to provide income in retirement.

Improving long-term net returns for members by introducing a formal competitive process to allocate new workforce entrants to high-performing superannuation funds, unless the Stronger Super reforms prove effective.

Meeting the needs of retirees better by requiring superannuation trustees to preselect a comprehensive income product in retirement for members to receive their benefits, unless members choose to take their benefits in another way.

All employees be given the ability to choose the fund into which their suprannuation guarantee contributions are paid

On consumers

Improving the design and distribution of financial products through strengthening product issuer and distributor accountability, and through implementing a new temporary product intervention power for the Australian Securities and Investments Commission (ASIC).

Further aligning the interests of firms and consumers, and improve standards of financial advice, by lifting competency and increasing transparency regarding financial advice.

Empowering consumers by encouraging industry to harness technology and develop more innovative and useful forms of disclosure.
These recommendations seek to strengthen the current framework to promote consumer trust in the system and fair treatment of consumers.

Regulation

Improving the accountability framework governing Australia’s financial sector regulators by establishing a new Financial Regulator Assessment Board to review their performance annually.

Ensuring Australia’s regulators have the funding, skills and regulatory tools to deliver their mandates effectively.

Re-balancing the regulatory focus towards competition by including an explicit requirement to consider competition in ASIC’s mandate and conduct three-yearly external reviews of the state of competition.

Improving the process for implementing new financial regulations.

Tax

Tax breaks on housing, shares and super should be scrapped and the GST applied more broadly


Financial advisers

Fundamental to fair treatment is the concept that financial products and services should perform in the way that consumers expect or are led to believe.

The current framework is not sufficient to deliver fair treatment to consumers.

The most significant problems relate to shortcomings in disclosure and financial advice, which means some consumers are sold financial products that are not suited to their needs and circumstances. Although the regime should not be expected to prevent all consumer losses, self-regulatory and regulatory changes are needed to strengthen financial firms’ accountability.

The Inquiry’s recommendations to improve consumer outcomes aim to:

Improve the design and distribution of financial products through strengthening product issuer and distributor accountability, and through implementing a new temporary product intervention power for the Australian Securities and Investments Commission (ASIC).

Further align the interests of firms and consumers, and improve standards of financial advice, by lifting competency and increasing transparency regarding financial advice.

Empower consumers by encouraging industry to harness technology and develop more innovative and useful forms of disclosure.
These recommendations seek to strengthen the current framework to promote consumer trust in the system and fair treatment of consumers.

Sunday 7th December 2014 - 12:30 pm
Comments Off on We will seek further advice: Hockey

We will seek further advice: Hockey

by Alan Thornhill

Joe Hockey says the Federal government will seek further advice, on key recommendations made in a report by the Financial System Inquiry, beore acting.

The report, by a panel headed by the former Commonwealth Bank Chief, David Murrray, was published today.

The panel found that although Australia’s financial system had performed strongly, it also had several weaknesses.

The Treasurer said Australia has some of the best banks and financial institutions in the world and equally good regulation.

“But the landscape has changed since the last serious look at our financial system through the Wallis Report in 1997,”Mr Hockey said.

“The financial and insurance services sector’s output has increased from $41 billion in 1996 to $133 billion in 2013-14.

“The superannuation system has grown from $300 billion of assets to over $1.8 trillion today.

“The domestic assets of our banking institutions have increased from $560 billion to $3.5 trillion in 2014.”

Mr Hockey said consumer protection is a major focus of the report.

“The inquiry received over 6,500 submissions in response to its interim report.

“More than 5,000 of those were on the issue of credit card surcharges alone,” Mr Hockey said.

And he added: “ More than a quarter of the recommendations have a positive impact on competition.”

Then Mr Hockey said: “Several of the Inquiry’s recommendations, including those on bank capital and the payment system, are for APRA and the RBA to consider as independent regulators.

“ The regulators will consider recommendations relevant to their mandates.”

Mr Hockey also said: “The Inquiry also makes a number of observations on taxation issues.

“These will be referred to the Tax White Paper for consideration.

“The Government intends to consult with industry and consumers before making any decisions on the recommendations.

“ This consultation will occur up until 31st March 2015. 

“I look forward to hearing stakeholders’ views on the recommendations over the coming months,” Mr Hockey said.

Thursday 27th November 2014 - 3:44 pm
Comments Off on PM says he is committed to making Medicare “sustainable”

PM says he is committed to making Medicare “sustainable”

by Alan Thornhill

Tony Abbott declared today that he – and his government – are committed to making Medicare “sustainable.”

The Opposition Leader, Bill Shorten, had asked the Prime Minister, at question time, to clarify the government’s position, on the $7 co-payment that the government announced in its May budget, for visits to bulk billing doctors.

Mr Shorten said there had been different messages from senior Ministers, today on what the government plans to do about its proposed $7 co-payment.

Mr Abbott replied: “I am committed, the government is committed, to making Medicare sustainable.”

His Health Minister, Peter Dutton, had said earlier that the is determined to “send a price signal” on Medicare.

Mr Dutton, also said the government is considering “different options” to replace the $7 Medicare co-payment, which the Prime Minister, Tony Abbott, has ruled out for now.

But he refused to say what those “options” are.

The co-payment has been blocked in the Senate

Mr Shorten had warned, earlier, that Mr Abbott’s decision to abandon his proposed $7 Medicare payment, for now, will provide only temporary relief for Australians.

He said the Prime Minister is still committed to the concept of a co-payment.

However Mr Abbott has – effectively – admitted that he has no hope of pushing the measure through a hostile Senate at present.

He is blaming Labor.

“This is a Labor Party which has entirely given up… they’ve got no plans, no policies, they’re just a chorus of complaint,” he said.

The Prime Minister said his decision had been made:”At the expense of our country’s long-term national interest.

“It’s economic vandalism,” he said.

However, Mr Shorten said: “… make no mistake, the Abbott Government remains hell-bent on introducing a GP Tax.”

Mr Shorten said that scrapping the co-payment, even temporarily, was a victory.

“But it is only temporary relief for millions of Australians who cannot afford a GP Tax,” Mr Shorten added.

 
“Tony Abbott has only acted now because he was forced to.

 
“And for as long as he is Prime Minister the GP Tax remains a threat to universal healthcare in Australia.

 
“For as long as the Abbott Government remains in office, it will seize any opportunity to bring back the GP tax.

 
“Just yesterday Health Minister Peter Dutton was insisting the GP Tax was good health policy, and expressing confidence he would soon win support in the Senate,” Mr Shorten said.

 
“Tony Abbott has never believed in Medicare.”

He believes Australians should pay a tax every time they visit the doctor.
 

“Putting a tax on the sick and vulnerable is not reform,” Mr Shorten said.

 
“Labor introduced Medicare and only the election of a Labor Government will ensure Australians are safe from Tony Abbott’s disastrous GP Tax,” he added.

Sunday 23rd November 2014 - 3:01 pm
Comments Off on Government hails Medibank Private sale

Government hails Medibank Private sale

by Alan Thornhill

The Federal government says the Medibank Private share offer has exceeded expectations, raising $5.679 billion.

The Finance Minister, Mathias Cormann, said this money would be invested in job creating infrastructure.

He said 100 per cent of Medibank Private shares had been sold.

“The level of demand from investors, both retail and institutional, was very strong,” Senator Cormann said.

“Based on this, the Government has set a final price for Medibank Private shares for institutional investors of $2.15 per share,” he added.

“Accordingly, the final price for retail investors has been set at the retail price cap of $2.00 per share,” Senator Cormann said.

He said this represents a 7 per cent discount for retail investors on the price per share paid by institutional investors.

But he said the Retail Price would only apply to the first $250,000 worth of shares (rounded down to the nearest share) allocated to applicants under the Retail Offer.

“ If applicants are allocated shares above $250,000, they will pay the Final Price for those shares,” he said.

Senator Cormann said retail investors had been allocated 60 per cent of the shares on issue.

“Eligible Medibank Private and ahm policyholders have been allocated 33.2 per cent of shares allocated under the Retail Offer excluding the Broker Firm Offer,” he added.

Sunday 16th November 2014 - 6:10 pm
Comments Off on G20:the key decisions

G20:the key decisions

by Alan Thornhill

Tony Abbott says decisions taken at the G20 Summit will make the global tax system “fairer” and the world economy more “resilient.”

The Prime Minister made these observations, in joint statements with his Treasurer, Joe Hockey.

They said:” the G20 is on track to deliver on the two-year Base Erosion and Profit Shifting (BEPS) Action Plan to address tax avoidance, with all actions scheduled to be delivered this year as promised.”

And that the G20 leaders had endorsed a range of measures designed to make the global economy more resilient to future shocks and to protect business and consumer interests.
 
“Australia has focused on four areas to ensure the circumstances that led to the 2008 global financial crisis will never be repeated,” they said.

The G20 had decided to:
 
·         strengthen financial institutions;
·         protect taxpayers from having to fund bailouts if ‘too big to fail’ financial institutions run into difficulty;
·         address shadow banking risks; and
·         make derivative markets safer.

Friday 7th November 2014 - 1:51 pm
Comments Off on Bankruptcy overhaul

Bankruptcy overhaul

by Alan Thornhill

The Federal government is planning to streamline Australia’s bankruptcy and insolvency laws.

The plan, announced by the Finance Minister, Matthias Cormann, today covers both personal and corporate bankruptcies.

Senator Cormann said:” These reforms are designed to empower creditors to better protect their own interests by enhancing communication and transparency between insolvency practitioners and creditors.”

He said that, specifically, creditors would be empowered to protect their own interests by giving them the ability to determine when and what information they could get from an insolvency practitioner.

“The Government’s reforms will also give creditors the power to remove poorly performing insolvency practitioners through a resolution of creditors instead of having to seek the Court’s agreement,” he added.

He said the proposed changes include:

* Allowing the use of electronic provision of documents

* Streamlining remuneration approval processes and

* Aligning administrative rules across personal and corporate insolvency.

” Over the first four years, this reform package is estimated to reduce compliance costs by around $215 million,” Senator Cormann said.

The draft Bill and a proposals paper on the proposed regulations and Insolvency Practice Rules are available for comment on the Treasury and Attorney-General’s Department websites (www.treasury.gov.au and www.ag.gov.au). Submissions close on 19 December 2014.

The second phase of reform to strengthen our insolvency laws will be announced later.

Thursday 30th October 2014 - 12:08 pm
Comments Off on Medibank Private offer reaches a target

Medibank Private offer reaches a target

by Alan Thornhill

The Federal Finance Minister, Mathias Cormann, says the Medibank Private Broker Firm Offer has exceeded expectations with almost $12 billion in bids received – and $1.5 billion allocated.

Senator Cormann said this represented a successful completion of the Broker Firm Offer.

He said Australian broker clients could still apply through the General Public Offer or, if eligible, the Policyholder Offer or Employee Offer, which remains open until 14 November 2014.

“Retail investors can apply and pay online at medibankprivateshareoffer.com.au or call 1800 998 778 for a prospectus,” he added.

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Alan Thornhill is a parliamentary press gallery journalist.
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