Paul Howes blasts Labor’s call for banking inquiry

Paul Howes has criticised Labor’s call for a royal commission into the banking sector.

Paul Howes says he is not a supporter of a royal commission into banking. Picture: Jane Dempster.

Former Labor powerbroker Paul Howes has criticised his former party’s call for a royal commission into the banking sector, arguing that it would not “deliver anything” for bank customers and could “weaken confidence” in the economy.

In an interview with The Australian, Mr Howes, who is now head of wealth management advisory with accounting firm KPMG, said he was opposed to royal commissions being used as “tit-for-tat exercises by political parties”.

He said he had also opposed the idea of a royal commission into the trade union movement as a way of dealing with issues of governance problems and corruption issues with some trade union officials.

“I am not a supporter of a royal commission into banking,” the former Australian Workers Union boss said.

“I spent most of my time as a trade unionist and as a good Labor man but I don’t believe this (a royal commission) will deliver anything for average working people who may be customers of these banks.”

Mr Howes, who played a key role in the elevation of Julia Gillard to the position of prime minister in 2010, said he was able to take a position against the royal commission into the banking sector because he was no longer in politics. He said having a royal commission was “not good public policy”.

Mr Howes’ comments come as former federal Treasury secretary Ken Henry, who is now chairman of National Australia Bank, also rejected calls for a royal commission into the banking industry.

In an interview with The Australian at the weekend, Dr Henry said a royal commission was unnecessary and a distraction and would be costly for taxpayers.

Australia’s major bank chief executives are preparing for next week’s first parliamentary grilling, during which Malcolm Turnbull has said he expects them to deliver a “full ­account” of their dealings with customers and their interest rate policy.

Mr Howes took over as ­national president of the AWU in late 2007, when Bill Shorten moved into federal politics, later becoming Opposition Leader.

He stepped down after seven years in the job in 2014, moving to the role as partner with KPMG overseeing its wealth management advisory business.

He said there were issues that needed to be resolved within the banking sector, but these should be done by the banks themselves.

“Banks need to live up to their social licence — the licence which is provided to them by society to operate,” Mr Howes said. “They can’t take their social licences for granted. They have to earn it.

“But we, as a society, can’t take a strong banking sector for granted, either. A strong banking sector is more important than just about any other element in our economy.

“Weakening confidence in that sector weakens confidence in our economy as a whole.”

In his role as head of wealth at KPMG, Mr Howes advises the wealth management arms of the big banks, superannuation funds, private equity investors as well as the $500 billion industry fund movement. Mr Howes also called on the industry and retail superannuation funds to stop their ­political battles. “The sector has spent an inordinate amount of time fighting itself,” he said.

“It’s a really negative thing. It’s not healthy for the sector,” Mr Howes added.

“In other industry sectors you don’t see one side bashing up the other, but in super it seems to happen all the time.”

Mr Howes, a former trustee of the $100bn Australian Super, said the conflicts within the superannuation industry were preventing it from advocating for much needed reforms such as boosting the compulsory superannuation guarantee levy from its current 9.5 per cent.

“The danger with the level of conflict between retail and industry funds is that there are actually quite significant and important policy debates in which the sector does agree and has one view which they are unable to prosecute because they are spending so much time fighting with each other,” he said.

Meanwhile, Mr Howes said the royal commission into the trade union movement had not helped to resolve the issues around governance and transparency in the union movement that it was supposed to investigate. “This is the problem with the over politicisation of quasi-­judicial inquiries causes for our society,” he said.

Mr Howes said there was “nothing wrong” with bank executives having to appear before parliament to answer questions.

But he said there needed to be a “compact” between the political parties that royal commissions were not used for political ­purposes.

“There have been lots of examples where our political class have erred in the wrong direction and lots of examples where banking executives have erred in the wrong direction,” he said.

“We need to rectify that, we don’t need to destroy it.” Mr Howes said people at the top of both industry and retail superannuation funds had “more in common than they liked to admit”.

“It would be good for all concerned if they actually worked together,” he said.

Mr Howes said he felt that both sides should be able to work together to resolve issues such as the inclusion of default superannuation funds in industry awards and the governance structures around super funds.

He said he believed the changes to superannuation proposed this year by the federal government in the May budget were “smart and sensible” and helped to “ensure there is equity in the system”. “On the whole, the bills which have been introduced are good, positive reforms for the sector,” he said.

But he said the process of their introduction had been “pretty ugly (which) hasn’t been good for confidence in our wealth management system”. Mr Howes said the changes to superannuation introduced under the Howard government were made at a time when the government had plenty of revenue.

He said the changes made this year, which wind back many of those measures, were a step in the right direction. He said it was important that super was used to help fund people’s retirement and not used as a wealth accumulation vehicle.

But he said there needed to be a better level of political discussion around superannuation.

“Superannuation shouldn’t be a blood sport,” he said.

“Politicians should stop being so opportunistic when they are dealing with the issues around it.”

He said Australia did not need any more reviews into aspects of the superannuation system.

“Most of the sector knows what needs to be done,” he said.

“What we need is less reviews and more decisions.”