Changes of political leadership in Australia have become almost routine. With five prime ministers in five years, we’ve managed to get the process working like a well-oiled machine: the media frenzy, the feint, the protestations of innocence; then the night of the long knives, and the long wait for a result; and finally, the proclamation that “the King is dead, long live the King!”
Rarely have leadership changes been met with such enthusiasm from the business community as the transition from Prime Minister Abbott to Prime Minister Turnbull. But while leadership changes provide public entertainment, once the dust settles and the hype disappears, it is often the changes further down the line that have a greater impact on industry regulation, government policy and the machinery of government. Nowhere is this more apparent than in the financial services industry today.
The outgoing Assistant Treasurer Josh Frydenberg was well regarded in the financial services industry. His carriage of the government’s response to David Murray’s Financial System enquiry was generally viewed as balanced, well thought through and consultative in approach. While the recommended changes won’t have pleased everyone, most industry participants felt that their voice was heard and that the government was seeking to make good policy rather than placate vested interests. Frydenberg’s success in the role is reflected in the fact that he was one of very few Abbott supporters to receive a promotion in the ministerial reshuffle.
The new Assistant Treasurer, Kelly O’Dwyer, has inherited the portfolio at a critical time. The government’s response the Financial System Inquiry was due to be released in the week that the leadership change took place, and that release has been deferred indefinitely while the incoming treasury team (Treasurer Scott Morrison and O’Dwyer) consider its contents. No indication has been given as to the timing of its release.
The financial services industry will be watching the government closely as it works its way to a new position. The reforms contained in the Murray Report are among the most important changes to the financial services sector in a decade or more, with potentially large consequences for the industry. As it watches the government, the industry will – I believe – be on the lookout for three things.
First, the industry will be looking for timeliness. Ongoing debate creates uncertainty, and uncertainty deters decision making, particularly in an industry like superannuation where the decisions of today have long term consequences. An agreed position as soon as practical in the circumstances will help create confidence in the sector, provide an environment suitable for long term decision making, and reinforce the impression that the changes will be more resilient because they have the backing of the government as a whole, not just one or two individual ministers.
Second, the industry will be looking for consultation. Financial services is a sector made up of many players with different and sometimes competing objectives. No meaningful reform can be implemented without some losers, but as long as the industry feels like it is being heard, that its views are being considered, and that the government’s position reflects a reasonably fair trade-off to the industry’s competing demands then the reform will enjoy more widespread support.
Third, the industry will be looking for consistency. Many of the indications coming from Minister Frydenberg were viewed as sensible and indeed important changes to Australia’s retirement savings industry. Potential reforms such as changes to board composition at industry super funds, the selection of default super funds and improved education and professional standards for financial advisers are important steps in creating a robust, competitive retirement savings industry supporting the needs of Australia’s current and future retirees.
There is nothing to indicate that any of this will change with the change in leadership at Prime Ministerial and Ministerial levels. It is entirely appropriate for a new Treasurer and Assistant Treasurer to insist on reconsidering their personal position and the government’s position on such an important reform agenda. Malcolm Turnbull’s reputation is high in the business community at large, and Kelly O’Dwyer is seen as an up-and-comer within the government. Indeed, their response to the Financial System Inquiry forms a very important test case allowing the new government to demonstrate an ongoing commitment to rigour and process in government decision making that has been so sadly lacking for so long.
Alex McNab is chief investment officer of Blue Sky Alternative Investments (ASX:BLA), a leading diversified alternative asset manager with $1.35 billion of assets under management across private equity, private real estate, hedge funds and real assets.
