7 December 2014
Transcript - #2014136, 2014

Press conference, Sydney

TREASURER:

Well, welcome everyone. Thank you for coming – on a Sunday as well. So, I particularly appreciate your effort. Today, I release the final report of the Financial System Inquiry. This delivers on a key election promise I made on behalf of the Coalition on the 25th of October in 2010. I want to begin by expressing my deep gratitude to David Murray for his outstanding effort. He has not only a formidable level of experience in financial services but he also has an incredibly formidable intellect and he was able to provide the leadership for the entirety in all of all of its domestic and international deliberations and I appreciate that he has provided us with a very comprehensive set of recommendations.

I want to emphasise here that this is a report to the Government. It is not a Government report. Its recommendations are independent. Even though the financial system is one of the largest sectors of our economy, its critical purpose is to facilitate the funding of sustainable economic growth for the broader Australian economy. The task of the Inquiry was to make recommendations to ensure that the financial system is well positioned to help Australia meet head on the economic challenges of the future.

Of course, the Inquiry was established just over twelve months ago. Soon after, the final Terms of Reference were released and the independent Inquiry Committee members were appointed, bringing with them wide‑ranging business and academic experience. The Committee was charged with examining how the financial system could be positioned to best meet Australia’s evolving needs and support our economic growth.

For the first time in this type of review, the Committee was supported by an International Advisory Panel that provided global expert advice on technological change, Australia’s global competitiveness, and offshore regulatory frameworks. I emphasise that particularly in light of our work at the G20 and the work of the FSB.

Stakeholder views were sought by the Inquiry through two consultation phases.

The first phase of consultation was held in the first three months of this year. Stakeholders were asked to share their views on changes to the financial system since the 1996 Wallis Report, and the factors most likely to influence the future development of the system. The Inquiry received over 280 submissions during that first phase and the second phase after the Interim Report on 15 July 2014, sought stakeholder views on the initial observations of the Inquiry. They received over 6,500 written submissions in this second period, many from the public.

I want to emphasise that the financial system is vitally important for boosting productivity and growth in the Australian economy. It provides funding for borrowers, investment opportunities for savers, and facilitates risk management.

The financial and insurance services sector is the largest industry in the Australian economy - the largest industry in the Australian economy, and has grown in importance since the Wallis Inquiry was conducted. It has increased from $41 billion in economic output in 1996 to $133 billion today. Since the time of the Wallis Inquiry there have been significant shifts in the system that meant a ‘son of Wallis’, or as I like to say, ‘a granddaughter of Campbell’, inquiry was timely. In particular: we have seen the superannuation system grow from $300 billion of assets in 1997 to over $1.8 trillion today and the domestic assets of Australian authorised deposit-taking institutions have increased from $560 billion in 1997 to $3.5 trillion today.

The Inquiry also noted a number of important developments since Wallis, including the increasing influence of Asia on the Australian financial system, and of course, the role of technological innovation in improving user outcomes and system efficiency.

Overall, the Murray Inquiry found that Australia’s financial system has performed well since Wallis and has many strong characteristics. However, it has also found that there is room for improvement. The Inquiry noted that the Global Financial Crisis demonstrated that financial systems are prone to instability, and any resulting financial failures can have a significant cost to taxpayers, economic output and of course, employment.

The Inquiry has identified three characteristics of an effective financial system: efficiency, resilience and fair treatment for customers. The recommendations of the Inquiry seek to improve efficiency, resilience and fair treatment in the Australian financial system, allowing it to achieve its potential to support growth of our economy and a better standard of living for future and current generations.

Two broad themes have shaped the Inquiry’s thinking: the effectiveness of the financial system in funding the economy, and the importance of competition. The final report sets out a package of 44 recommendations to lay a ‘blueprint’ to guide the financial system over the next decade. More than one third of the recommendations seek to improve competition in financial services.

The recommendations are focused on five specific themes. Firstly, to strengthen the economy by making the financial system more resilient. Secondly, lift the value of the superannuation system and retirement incomes and improve the quality of life for Australians in retirement. Thirdly, to drive economic growth and productivity through policy settings that promote innovation. Fourthly, to enhance confidence and trust in the financial system by creating an environment in which financial firms treat customers fairly and finally, enhance regulator independence and accountability, and minimise the need for future regulation.

The Inquiry also made a number of observations on taxation issues. These observations will be fed in to a separate consultation process leading up to the Taxation White Paper in 2015. Once again, I emphasise that these are independent observations and do not represent Government policy.

The Government will carefully consider the Inquiry’s final report. Before any decisions are made, we will consult with stakeholders. In the same way that there was bi-partisan support for implementation of the Wallis Inquiry, we are looking for bi-partisan support for the implementation of the Murray Inquiry.

The period for written submissions opens today and will remain open until the end of March 2015. I did think about the 1st of January but I thought you wouldn’t be too pleased about that. The Government values the views of industry and the general public, and will speak to a wide range of stakeholders early next year and will respond to the Inquiry during the course of 2015.

Finally, I would like to thank the Chair of the Inquiry again, David Murray, and the Committee members – Professor Kevin Davis, Craig Dunn, Carolyn Hewson AO and Dr Brian McNamee AO. I would also like to thank the international panel that did spend a considerable amount of time on this: Sir Michael Hintze AM, Dr David Morgan AO, Jennifer Nason and Andrew Sheng. Thanks must also go to the Head of the Inquiry Secretariat, John Lonsdale, and his team for Treasury, that have done a superb job, superb job in relation to this. Finally, I would like to thank the many organisations and members of the public that provided information to assist the Inquiry, both in person and in written form.

I say, the Government is pleased to release this final report. It builds on the solid foundation of previous financial system inquiries. After the Campbell Inquiry laid the foundations for the rewrite of the Australian economy in the 1980’s, and it was the Wallis Inquiry that recommended reforms that were critical at the time of greatest stress during the Global Financial Crisis. A strong and efficient financial system is vital to the long-term needs of the Australian economy. This is the sort of economic reform that Australia must embrace if we are to withstand some of the challenges that undoubtedly, we will face in the future. Thank you very much and over to you.

DAVID MURRAY AO:

Thank you, Treasurer. Our terms of reference asked us to examine how Australia's financial system can be positioned to support economic growth and meet the needs of end users. We've made 44 recommendations in the public interest to improve efficiency, resilience and fair treatment in the financial system as well as 14 observations for the tax White Paper.

I just want to lay out our recommendations in four areas. Firstly, on resilience, our work here reflected the lessons from the financial crisis and we've determined that given Australia's position in the world, bank capital needs to be unquestionably strong on a global basis. This means the top 25 per cent in the world. We need to do this to strengthen our capacity to manage bank failures and reduce taxpayer exposure to the cost of bank recapitalisation, particularly in a crisis. These crises impose massive costs on economies and societies and the circumstances that assisted us during the recent Global Financial Crisis will not be present in future crises.

Our recommendations on consumer outcomes reflect a view that disclosure and financial literacy are not sufficient by themselves for the system to work in the interests of consumers. This represents a paradigm shift for the system. We have recommended higher obligations on product manufacturers and distributors; our stronger regulatory framework and a more proactive regulator. This is designed to ensure that there are incentives for firms to improve their culture and fair treatment of their own customers.

Thirdly, with superannuation, we have recommended that there should be bipartisan support for a single objective of superannuation which focuses on retirement incomes and related to that, we have dealt with what we see as inefficiency in the system in the accumulation stage. In this area we have recommended that MySuper be replaced with a competitive mechanisms for allocating default members to the best funds, only if MySuper has failed to deliver significant fee reductions by 2020. This represents a challenge to the superannuation industry because we still believe that 120 basis points of average fees is too high and limits the accumulation over time.

We have also recommended that superannuation funds offer a retirement income product and together with our recommendations on fees, we believe that these two initiatives have the potential to increase retirement incomes by 25 to 40 per cent.

Lastly, we want to strengthen competition and innovation. In this area we have recommended that the IRB risk weights for housing loans should increase so they are closer to the standardised risk weights used by smaller banks. This will strengthen competition in banking. There are also recommendations to strengthen the focus of regulators on competition and innovation, lower compliance costs and remove barriers to online distribution. In this area also, we have recommended changes to the card systems for card transactions so that surcharges are either eliminated or reduced and also that interchange fees can be reduced over time and we have made several recommendations to make life easier for small and medium enterprises.

Overall, we want Australia to have a very high quality financial system because we rely on the savings of foreigners to augment our own savings for economic development and growth. For this reason, we want not only a high quality financial system but one in which, in the event of a crisis which ultimately will happen again, we want the taxpayers off the hook as far as we can see. Remember, the cost of a crisis assessed by the Basel Committee in an average circumstance is about 63 per cent of GDP or about $1 trillion annually in Australia and the cost of a more severe crisis, about 158 per cent of GDP or $2.4 trillion annually. Even a modest crisis would cost 900,000 jobs. So, the recommendations we are making are designed to look after the taxpayer. In some cases may have an insurance cost in the system but we think that trade off is a fabulous one. So, I commend the report to you and look forward to your questions.

TREASURER:

Okay, over to you for questions. If you can identify who you are for our own purposes.

REPORTER:

[Inaudible] this is a very robust report. You have had a lot of consultation with the banks but I don't think they would like this report, particularly. How do you think you will cope with the backlash?

TREASURER:

Our charge is to do what is right to strengthen the Australian economy and ensure that the financial system is as robust as it can be. Now, we have got to weigh up carefully the implications for financial services providers but I want to emphasis, we need to prepare now for the challenges that may lie ahead. If that means that banks may need to raise additional capital, then that will be a matter for APRA to determine. But I want to make sure that we are doing everything we can to best prepare Australia for the future. I don't know if you want to add something?

DAVID MURRAY AO:

Only that a substantial part of bank debt funding in Australia relies on foreign investors. In the event that things in the world are less stable, the Australian banks need to compete for funds in the world and given the shape of our economy, we believe to do that over time effectively and to be able to rebound from a stressful situation, they need to be in the upper quartile of the borrowing group with whom they compete.

REPORTER:

[Inaudible] Mr Murray, [inaudible] are you happy with anyone who is above the top of 25 per cent or do you think the banks need to be firmly in the middle of that top quartile. [Inaudible] upgrade from rating agencies because of a perceived implicit guarantee duty, do you think that should be removed?

DAVID MURRAY AO:

On the first question what we are really saying is around the 75th percentile. Comparisons around the world are very difficult because of the different banking regimes in different countries but what we mean by it is around that 75th percentile. We can't mandate the removal of an implicit guarantee because it is implicit. What we did say in the interim report is that by charging a fee for it, you make it explicit. That has very significant consequences for Government, particularly in the determination of their contingent liabilities and the effect on their rating over time. So, we don't believe in that. We do believe that to the extent we strengthen the system, the implicitness of the implicit guarantee starts to fade away.

REPORTER:

Sally Patten from theFinancial Review. Mr Murray, how shocked were you that (inaudible) system is expensive that we still have an average fee of 120 basis points? And Mr Hockey, how concerned are you that Australians are paying so much for superannuation?

DAVID MURRAY AO:

I wasn't shocked, it's fact. The issue here is that administrative costs and fees in superannuation, together with taxation to the extent it applies, have a very material impact on the rate of accumulation of retirement savings and so that's what we focused on because in Australia, the superannuation system relies on taxpayer support to give tax benefits to the superannuation system and it is only right that we get the best possible outcome from that system for those benefits foregone. Remember also that for people who are in work during their lifetime of work, they are the ones supporting people who are in retirement. So we don't - the more that we waste that retirement effort and accumulation, the more pressure we put on people in work.

TREASURER:

In short, if we can get superannuation fees down, Australians will have more money for their retirement. This is a very key focus of what the Government will be consulting about over the next few months.

REPORTER:

How far do you think they will they come down? [Inaudible]

TREASURER:

I won't speculate but if we can get the fees of companies down, if we can get fees of intermediaries down, Australians will have more superannuation for their retirement which is the entire goal of the superannuation system.

REPORTER:

[Inaudible] from Network Ten. Mr Murray, you said that a financial crisis is – will ultimately happen. [Inaudible] But I would like to know what your thoughts are on crowd funding; the report suggests the regulatory framework should facilitate financing by the internet?

TREASURER:

We have already indicated that we are quite encouraging of changes that facilitate crowd funding. The Small Business Minister Bruce Billson has been consulting widely in relation to this already. Secondly, there is no pending financial crisis in Australia, I want to emphasise that, lest anyone misinterpret this report. This is about ensuring that we are at our very best should that occur. It's one of the reasons why 15 years ago – 16 years ago, there was a Wallace inquiry that prepared Australia for the future and before that, roughly the same period, was the Campbell inquiry that prepared Australia's financial system for the future. It's one of the reasons why I've been absolutely determined and consistent since 2010 to have this inquiry to make sure that we are at our best. Now, one of the things that I was most keen on, which is addressed here, is how we cope – how our system copes - with technological change. This is a bigger issue that will require a lot more thought, particularly with the advent of – or the emergence of new payment systems like Bitcoin or payment systems that are outside of the mainstream financial system and that is a great challenge moving forward. So, I'm most enthusiastic about some of the areas that focus on technological change and how we are to cope with that in the future.

REPORTER:

[Inaudible] Treasurer, do you have any concerns that forcing banks to raise more capital at the moment could impact on growth here, which is undergoing difficulties? Mr Murray, what do you think when the banks claim that this could impact growth – forcing them to raise capital?

DAVID MURRAY AO:

Well, the recommendation on the risk weights are, prima facie, should not have an effect on interest rates because it's meant to remove a competitive distortion in the system. Whether other changes to capital levels have an impact depends on how the banks and APRA deal with it. APRA and the Basel Committee and the Financial Stability Board have generally, looked very carefully at the timing of implementation of changes. These can be implemented either by reducing bank returns or by raising costs. We are very fortunate in the Australian system that bank returns are very, very strong, dividend payout ratios are high. So, there is room for a lot of adjustment but remember this, if you strengthen bank capital, you represent to their own investors and shareholders, a stronger investment. So, there is a trade off but we believe that given Australia's particular circumstances, using foreigners' money for investment in this country, that we have to have an unquestionably strong banking system.

TREASURER:

This really is a matter for APRA and the timing on these issues needs to be dealt with by APRA in consultation with the banks. From my perspective, I have long stated that it is vitally important that our banks be well capitalised, and they are, and they are. What the Murray Inquiry is recommending is there be a further look at increasing those levels of capital and that's something that needs to be dealt with by – appropriately – the regulator.

REPORTER:

Treasurer, Laura Jayes from Sky News. The Inquiry helpfully points out that the GST is not levied – in the observations, not levied on most financial services...

TREASURER:

[Inaudible]

REPORTER:

And puts that off to the Tax White Paper. You have always said the States will make the case for this but this is just the latest inquiry saying that GST needs to be looked at – at the broadening of its base. Does this mean the Federal Government will take the lead on making the case for GST?

TREASURER:

No, no. This is the observation of an independent inquiry. They are perfectly entitled to do that. They make a number of observations about taxation change. I think this illustrates the fact that there needs to be a broad consensus on Australia undertaking change to strengthen our economy and build a better future. What we've seen over the last 12 months is Bill Shorten said he's proud to have had a year of resistance. I mean he's proud as the Leader of the Opposition to have resisted so much during the course of the year. I wouldn't see that as a moment of great pride. I actually see it as quite destructive. We are facing challenges. This is another step along the way in trying to address some of those challenges. It requires bipartisan support.

DAVID MURRAY AO:

I might just add, Treasurer, that is just a simple statement of fact that it's not levied. The reason we included it is that theoretically, if you have GST in a system, it is possible to have GST in this component, the financial component of the system. There are a lot of services within the financial service system that are the subject of GST but the reason it's not there is that it is practically impossible to implement. But we include it as a statement of fact.

REPORTER:

Mr Murray, just two very different questions. In terms of the interchange fees, the focus has been on credit cards. Under the changes you envisage, could you see fees going up for non-credit card card payments; and just in terms of superannuation, the comprehensive income arrangement you have proposed, could you just walk through how that would work in practice?

DAVID MURRAY AO:

The non-credit card payments are usually – generally characterised by some form of [inaudible] value payment or prepayment. The recommendations we have made around innovation suggest that regulators should have a graduated system in which they can admit people to the system, see how it goes for a while and then decide whether they need more formal upgrading of the regulatory arrangements and licensing under which they exist. This allows innovation to come into the system. We want to do that because of the digital world. So, it is possible that these will have fees or if you go to more interesting new business models, that actually have a payment service hanging off a supply chain service, it could be that the remuneration to the provider of that model is somewhere else in that system. This allows regulators to look at it, to understand it and either the payment system board, APRA or ASIC can deal with it as it grows. We think that is very healthy. Your second question?

REPORTER:

On the super change [inaudible] at it as a wealth management but what your income will be closer to retirement, getting the superannuation trustee involved?

DAVID MURRAY AO:

It has a very significant implication for all the design features of the superannuation system. We pointed out in the interim report that distortions in equities in the superannuation system have the consequence of continually politicising that system. What we found was that unless you have an agreed objective of the system, it's very hard to remove those distortions and get everyone on a more stable long-term path. It's very very clear to all of us on the Committee that this is about having a retirement income. Otherwise, why would a Government give a tax concession and an age pension at the same time when you can have both? So, it's very important with an ageing population, and we believe if you bed it down as a retirement income system, it will have that consequence and we also believe that a product like this, because of the pooling effect that it has, can lift retirement income substantially and that helps take pressure off the age pension which is valuable for any Government.

REPORTER:

[Inaudible] from Crikey. The report seems light on recommendations for improving access to finance for small to medium enterprises. It's a common criticism that business can't get finance from big banks and recommendations about crowd funding and peer-to-peer lending or credit reporting don't seem to address that criticism.

DAVID MURRAY AO:

Well, they do, because if the terms and conditions of lending to small and medium enterprises by the existing banking system are too onerous, others will step up into that market. That's what these recommendations are about. The information, the crowd funding, peer-to-peer lending all have that effect. The truth of the matter here is that small businesses are riskier than some other businesses. We spoke to people around the world at initiatives that governments have put in place to try and deal with this. Generally, behind the scenes people are not - don't find those compelling or solving a lot in the long-term. So, we've looked at how we can enhance what's there for small business. The effect on risk weights will put more competition to the extent that residential mortgages are used to fund small business and we've also looked closely at loan contracts for small business which have these quite unreasonable non-monetary default clauses and recommended a new regime to deal with that. We have dealt with the Small Business Minister on all of these issues.

REPORTER:

[Inaudible] ASIC, in its submission to the inquiry suggested that the Committee look quite closely at the British model of licensing financial advisers, whereby there is a clear distinction between independent and what they term, ‘restricted advisers’. The US has also a similar program. Any thoughts on your views or the appropriateness of that model for Australia?

DAVID MURRAY AO:

We think it's very appropriate. It was raised by the Senate inquiry. We had already been down that path with our interim report work by the time that was raised So, we support it. Don't forget, paradigm shift here with this report is that disclosure by itself is not enough. There is an information asymmetry and a knowledge gap and an information imbalance between consumers in the financial system and product providers and distributors. We have done a lot to rectify that and the proper qualification and licensing and register for advisers is part of that. If you look at – there is a public register in Australia for the licensing of medical practitioners, this follows exactly the same line of thought.

REPORTER:

James Mitchell from Mortgage Business. I have got a question for Mr Murray. In the interim report you said that [inaudible] could add potentially add conflicts of interest [inaudible]. I was wondering if you have made any recommendations about that?

DAVID MURRAY AO:

No, not directly, no. It was raised with us by some people. We think if we go down the path that we have recommended with product manufacturers and distributors, it has the same consequence of straightening up any issues to the extent there are in the mortgage broking industry. So, hopefully that should deal with it.

REPORTER:

[Inaudible] David Murray, in the report you recommend that APRA-regulated superannuation funds have [inaudible] Independent trustees. What is the time scale for that happening? What do you envisage the time scale being?

DAVID MURRAY AO:

The issue for us is the principle, not the timeframe for implementation. The principle is that in other parts of the sector, in listed companies, in managed investment schemes, there is generally a majority of independent directors on a governing body. We believe the same should apply to superannuation because in general, it is not a defined benefit system. So, the involvement of employee/employer is somewhat distant in reality once you go to an individual accumulation system with choice and they are open-offer funds. So to be consistent, you would have a majority of independent directors.

REPORTER:

Do you envisage a transition period?

DAVID MURRAY AO:

We haven't given any – fortunately, we didn't have to worry about that [inaudible]…

TREASURER:

That's our task.

REPORTER:

[Inaudible] from theFin Review. I would just like to come back to the [inaudible] element and ask about who may bear the cost of additional capital. We heard in the last bank-reporting season, comments from the chief executives that potentially interest rates may rise over the economy and eventually deposit rates could fall and eventually dividends could be reduced. Mr Murray, the report seems to down play the impact of those costs. You seem to suggest than they are lower than the banks are suggesting. Perhaps you can talk a little bit more about the costs and Treasurer, your preference for how those costs may be allocated through the various avenues as capital is built?

DAVID MURRAY AO:

The report does indicate the impact of incremental leverage in the banking system or deleveraging. We sought expert input on arriving at those conclusions and you are quite right that the public statements by the banks are wildly above those numbers. They are exaggerated and hopefully other experts will look at the numbers and reach a conclusion similar to ours but it does not mean rates have to rise because as you rightly point out, the effect can be on the bank returns. Bank returns in Australia could be lower and still with two consequences. One, they could be lower and still be attractive investments for people to capitalise and, if necessary, recapitalise banks. Secondly, they could be lower and still have enough internal capital generation to support economic growth.

TREASURER:

From my perspective this is very much an issue for APRA. They are the ones that have to work it through with the banks. We want to ensure that there is less risk for taxpayers and this is quite clearly where the Murray Inquiry has landed. I just emphasise, this is also something that is occurring around the world. It's not exclusive to Australia. I continue to have great faith that we have very good banks with very strong balance sheets. What the Murray Inquiry is recommending is that the balance sheets be strengthened even further and that's to be worked out between APRA and the banks.

REPORTER:

Just on the mortgage risk weighting: you suggested in the report, Mr Murray, that the individual risk weights of the four majors and Macquarie may not fully capture the systemic risks which can be in fact the biggest risk during a period of crisis. Do you think that means that the major banks may have gone a little bit light on their current mortgage risk weightings? And when you have in the report that 25 per cent to 30 per cent range; is that a suggestion to APRA – about a rough range they might want to look at for mortgage risk weighting?

DAVID MURRAY AO:

No, the range was about if we were going to deal with competitive neutrality, the range had to be enough to get it close enough to the standardised risk weight to make a difference. Your first question was?

REPORTER:

Does that imply the systemic risk issues not being factored into those individual models – does that imply some of the major banks may have gone a bit too low in their current risk weighting?

DAVID MURRAY AO:

As APRA pointed out recently, the average mortgage risk weights in the banking system have fallen in the IRB system – have fallen noticeably over time. APRA has conducted some stress tests and we highlighted in the interim report that housing is an issue – there is so much on the bank balance sheets. It's increased from 50 per cent of assets to 65 per cent and it represents a single risk in the totality of the system. So, having more capital to support it doesn't hurt but our major concern in this area was competitive neutrality.

REPORTER:

[Inaudible] Can I just clarify, despite this all being [inaudible] the report talks about [inaudible] Are you talking about CUT loans [inaudible] to the majors by 2016?

DAVID MURRAY AO:

In terms of increasing their capital, we are generally talking about [inaudible] The report addresses the bail-in proposals that have been raised in Europe and developed at the G20. We don't know whether they will be introduced on a global basis or not but we have set out principles that should apply if they are introduced. Otherwise, the model that APRA has in place is appropriate.

REPORTER:

[Inaudible] How did your thinking – how did your understanding of the banking system change over the course of the inquiry?

DAVID MURRAY AO:

Well, it changed to the extent that when we spoke with Government departments and regulators in Europe, the UK and the United States, it was clear to us that they were taking their systems down a path that would cause the Australian banks to have to follow simply because they rely on foreign capital. And we then had to consider our philosophy versus the response, particularly in Europe, to the crisis. The response in Europe was, ‘this must never happen again’ and a response like that forces a consideration of capital well beyond what's traditionally been considered. Our philosophy is, ‘crises do happen over history in the financial system’. We want our banks to be unquestionably strong and we looked at a number of studies conducted by countries similar to Australia where they are relatively smaller in the scheme of things in the world and they have this outside dependency. That's what drove our thinking about the banking system.

TREASURER:

Can I just add there a very important point: this is one of the reasons why, as chair of the G20 this year, I worked with Mark Carney to pull back on this massive new demand for excessive regulation and higher taxation on financial services providers. There has been a tsunami of political push to have more regulation on banks, to have greater control of the banking system by Governments and at the end of the day, there is a cost associated with that. So, we didn't waste our opportunity chairing the G20 this year and that's why we finalised in Brisbane – we drew a line in Brisbane – which has now changed the direction of the G20 and provided some clear directions to the FSB. In doing that, you can see how Australia has to react and how Australia has to meet the global standards. So, we've influenced the global standards now in a way that we would never have been able to but at the same time we are now facing the challenge of meeting the global standards and we have to – we have to. Notwithstanding the fact that we have an excellent financial system, we need to have a regulatory system that is comparable with that in other jurisdictions, precisely as David said, because we rely on funding from those other countries, we rely on them lending us money to help to pay for our growth.

REPORTER:

[Inaudible] Mr Murray, how do you want this inquiry to be remembered?

DAVID MURRAY AO:

Hopefully as a blueprint for the next phase. It's not necessarily a matter for us whether all the recommendations are implemented. What we would like to think is that people who read our report develop a way of thinking about our financial system that's extremely healthy for Australians. Hopefully, that will help influence policy for the better.

TREASURER:

Thanks David, thank you so much. I really appreciate it. I think Australia appreciates it as well.

REPORTER:

Treasurer, can we ask about the PPL?

TREASURER:

One quick question.

REPORTER:

The Prime Minister has been out this morning saying that there will be a watering down of what is his signature policy but the levy on the top 3,000 businesses to stay. Now, we have been talking about broken promises in the political arena a lot at the moment. Does this constitute a broken promise [inaudible] and are you expecting a backlash from these businesses?

TREASURER:

We are listening to the Australian people. We hear what they are saying but at the same time, we must continue with reform that will strengthen the Australian economy and anything we can do to lift female participation is going to help to strengthen the Australian economy. You will see in MYEFO that the current system in relation to childcare has had some significant cost blowouts and what we recognise is that the system is not meeting all the needs of working families. In particular, it is not meeting the needs for flexibility of working families. So, given that we have just had a Productivity Commission inquiry with very fulsome recommendations, and given the fact that we hear the concerns of the Australian people about particular policies, we are responding but the net outcome will be that there will be policies put in place that will increase workforce participation and let me say to the largest businesses in Australia, your interests and our interests are the same in ensuring that there is more flexible support for families so that you have a bigger pool of potential workers in the future.

REPORTER:

[Inaudible] How hard is it for you to do your job when we are getting increasing reports [inaudible]?

TREASURER:

I am not going to comment on comments. I'm doing my work, everyone else is as well. Thank you.