On Tuesday, confirmation of the outcome of the most substantive review of the financial system in over twenty years was delivered by the Prime Minister and Treasurer.
There are a few key policies which will impact almost every adult in Australia in some capacity or another. Our analysis on those that we think will have the greatest impact are below:
1) Banks to hold more capital
The Murray review’s recommendation for banks to hold greater amounts of capital to absorb loan losses have been backed by the Government. Murray recommended in the review that the banks should become “unquestionably strong,” and measures to achieve this have already been executed by the Australian Prudential Regulation Authority (APRA). Westpac cited APRA’s tougher position on bank capital for its decision to increase mortgage interest rates by 0.2 percentage points last week.
2) Excessive Credit Card fees to be banned
Retailers will be banned from charging customers higher credit card surcharges than the merchant payment they incur. Treasurer Scott Morrison referred to the new legislation as a ‘fair dinkum’ test and the rules will be enforced by the ACCC.
3) Superannuation System Reviews
The Productivity Commission is being asked to assess the competitiveness and efficiency of the super system, after the Murray review said many Australians paid too much in super fees.
The Commission will delve into alternate paradigms for how the accumulated superannuation balances of members who don’t actively participate or elect their super fund, are allotted to a fund. This process may potentially require a tender process to determine where Aussies super savings are allocated.
There were also recommendations made to ban limited-recourse borrowing arrangements on Self Managed Super Funds – mainly because of their use for buying property inside superannuation. Fortunately for investors that use or are planning to use this method of investing in the future, the Government did not believe that there was sufficient evidence to support this.
4) Innovative finance and business practice to be encouraged
The Government plans to encourage new methods of accessing finance and allow easier entry to finance industry disruptors, to in order to further support the country’s growing entrepreneurism and encourage new ways of making payments. An “urgent” priority will be to develop legislation to support crowd-sourced equity funding for start-ups and carrying out consultation on draft legislation by the end of the year. It will also consult on crowd-sourced debt financing.
The government also aims to ensure legislation in key areas is “technology neutral” and will establish an Innovation Collaboration committee, which will be tasked with supporting innovation in the financial system.
If you would like to discuss how the financial system inquiry impacts you, feel free to phone our office on (03) 9999 7200 or contact us here.
Disclaimer: The information on this site is of a general nature only. It does not take your specific needs or circumstances into consideration. You should look at your own personal situation and requirements before making any financial decisions.