The Australian economy is weak, with gross domestic product (GDP) slowing over the course of 2024. Aside from the Covid-19 economic shock, we’re now seeing the weakest rate of GDP growth in a generation.
Treasurer Jim Chalmers has acknowledged that ‘‘the best kind of growth is private sector-led growth’’, but Australian companies are being held back by excessive regulation and neglect of export opportunities, in favour of the state and federally funded public sector economy.
In the lead-up to the next federal election, the government’s rhetoric must be matched by concrete policy commitments that would fuel a private sector-led economic recovery.
Australia’s fund managers, superannuation funds and the financial advice businesses the Financial Services Council (FSC) represents are stewards of over $4 trillion in private savings and comprise one of the largest sectors of the Australian economy. The FSC has released the industry’s policy priorities for the next parliament, designed to unleash the sector’s potential to be a source of economic growth.
The FSC is calling for the major parties to commit to deliver streamlined and efficient regulation and promote a financial services export agenda.
To contribute to a mature economic debate, the FSC also supports calls for an evidence-based, holistic tax review, instead of piecemeal tinkering with superannuation taxes.
Economic modelling demonstrates the FSC’s financial services-focused policy recommendations would generate an additional $19bn of GDP over the next decade and almost $2bn a year in export revenue for the sector.
The most urgent of the FSC’s proposed reforms is the clear and apparent need for a red tape razor gang responsible for slashing inefficient regulation. The regulatory pendulum swung too far following the financial services royal commission, and the industry and its customers have been left with the costly overhang.
ASIC chair Joe Longo recently called for a national discussion about regulatory complexity, recognising that when it comes to the legislative and regulatory landscape, “we don’t do simplicity well”.
You know things are bad when even the corporate cop is hindered by layers of complex regulation.
The FSC has prioritised nine deregulation opportunities that would contribute $800m a year to improvements in industry productivity. These include simplifying ASIC’s breach reporting regime and design and distribution obligations; a review and simplification of the onerous Compensation Scheme of Last Resort; and streamlining Foreign Investment Review Board processes for low-risk investments into Australia.
The low hanging fruit to promote sector growth is delivering on the commitment to reform financial advice laws. Advice businesses, super funds and life insurers stand ready to make significant investments in innovative human and digital advice solutions, with completion of the reform process all that stands in the way of a wave of investment in this critical consumer service.
Australia also needs to take seriously the opportunity presented by our globally competitive funds management industry. Our internationally recognised wealth management expertise offers immense opportunities for export growth, without the need for government subsidies or intervention.
Just 6.5 per cent of overall funds under management in Australia is globally sourced, compared to 78 per cent in Singapore and 90 per cent in Ireland.
The export-led growth in these jurisdictions has been achieved through a political focus on regulatory and tax settings that make them globally attractive. Tax settings can be streamlined so that Australian managed vehicles are internationally aligned, including removing barriers for funds transitioning to the new and globally competitive corporate collective investment vehicles.
Finally, tax reform presents the most significant opportunity to generate a step change in the broader economy, and all options should be on the table. At 30 per cent, Australia’s company tax rate is uncompetitive with the OECD average rate moving towards 20 per cent.
The FSC recognises that a mature and evidence-based discussion around tax reform, and how to fund it, requires all industries to keep an open mind. In this spirit the FSC supports calls for a holistic tax review.
Australians, however, have seen successive governments tinker with super, undermining consumer confidence in our retirement system. The legislated objective of the super system is to deliver income for a dignified retirement for Australian consumers, and unlike the government’s ill-conceived tax on balances over $3 million, future super tax settings must be measured against this goal. When the Australian economy does well, the retirement savings of millions of Australians do well.
Blake Briggs is the CEO of the Financial Services Council.
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