New Treasurer Jim Chalmers picks up Frydenberg’s unfinished business

From crypto to the high-stakes fight for the future of financial advice, this unfinished business belongs to the new treasurer.

The Albanese government hits the ground running after Labor’s weekend election win. Picture: NCA NewsWire/Andrew Taylor

The global oil market doesn’t stop for Australian elections, with new treasurer Jim Chalmers given the welcome gift of petrol pump prices returning to near record highs.

Average unleaded petrol prices jumped by just over 14 cents last week, marking their third biggest increase ever.

With inflation on the march across the economy, including food and rent or mortgages, Australians are spending more of their income on day-to-day items. In other words it costs more just to stand still.

Incoming Treasurer, Jim Chalmers. Picture: NCA NewsWire

A more welcome gift came from ratings agency S&P which had an upbeat assessment for Australia’s rolled-gold AAA credit rating. Despite leveraging up on the national credit card during the pandemic, S&P says the change in government has no impact on the ratings or the stable outlook. It also expects Australia’s economic recovery and surge in commodity prices to help the budget bottom better than the March forecasts, while inflation perversely will drive nominal GDP and push up tax revenue.

This is positive news for the new Albanese Government which, according to Capital Economics, will keep fiscal policy “looser” than the previous government and adding some upward pressure to the cash rate.

Beyond the big structural pressures, former treasurer Josh Frydenberg – who conceded his Kooyong seat on Monday – left a stack of live reviews.

Josh Frydenberg on Monday. Picture: Andrew Henshaw

These range from a shake-up of merger rules, official support for cryptocurrencies such as bitcoin, while the big battle remains an overhaul of financial advice rules.

All of these now belong to Chalmers and his financial services minister Katy Gallagher who have the final say on whether recommendations should be implemented, modified or ignored.

In terms of people, Chalmers won’t be looking to spook the markets and the picture of a kitchen table briefing with Treasury secretary Steven Kennedy at the new treasurer’s home in Logan on Sunday was enough to give investors confidence of continuity for now at least. Bond yields barely moved while the Aussie dollar gained ground mostly on US dollar weakness.

Getting to work straight away. Briefed at home in Logan by the Treasury Secretary, discussing the substantial economic and budget challenges our new government is inheriting. #auspol#auseconpic.twitter.com/00ygno68en

— Jim Chalmers MP (@JEChalmers) May 22, 2022

Among pressing issues is next week’s exit of ASIC commissioner Cathy Amour, she oversees a big corner of the corporate regulator. This includes markets and the ASX, climate change, cyber security as well as consumer regulation and after nine years in the role didn’t have her five year term renewed by Frydenberg just before the election. Her looming departure leaves ASIC light on in terms of commissioners and Armour is the only Sydney-based executive for the agency.

The other big fixed regulatory roles have already been filled, including ASIC boss Joe Longo last June; ACCC’s Gina Cass-Gottlieb in March and RBA deputy governor Michelle Bullock in April. Also that month Bruce Miller was appointed the new chair of the increasingly powerful Foreign Investment Review Board.

New finance minister Katy Gallagher with Governor-General David Hurley in Canberra on Monday. Picture:NCA NewsWire/Andrew Taylor

Several RBA terms are ending including board members Mark Barnaba in August and Wendy Craik in 12 months time while governor Philip Lowe’s current term ends in September next year. With a new deputy in place it is very likely Dr Lowe will get some extension to his current seven year term.

Closely contested will be Treasury’s quality of financial advice review which is due to deliver a report to Chalmers by December. With financial advice becoming more expensive and more advisers leaving the industry following the removals of commissions, the Morrison government asked Treasury late last year to take a fresh look at the industry.

A trade-off in some areas such as watering down education requirements for financial advisers and reducing some regulations to lower costs opens a potential battleground for a Labor Government. But the review, overseen by Allens partner Michelle Levy, will canvas options to have quality financial advice become more affordable including options such as robo-advice and protections for consumers.

Recommendations around financial advice rules will be a major battleground.

Liberal Senator Andrew Bragg’s cryptocurrency Senate committee recommendations secured bipartisan support last December with Treasury now canvassing areas including licensing digital currency exchanges and financial backing for custody of crypto assets. Some options on this front are expected to be handed to the Treasurer by the end of next month.

Elsewhere, company directors are waiting for a decision to be made around cyber security and governance. Treasury undertook a consultation last year but is sitting on stakeholder views. Other areas under review include whether to extend rules allowing for virtual AGMs to be held without a physical meeting until the end of this month. Unfinished business remains around allowing for official documents to be signed and sent electronically and whether courts should still have a role to play in approving schemes of arrangements under M&A deals.

Directors are also sweating on safe harbour rules that were endorsed by Frydenberg in March. Introduced during the depths of the Covid pandemic, the rules provide protection for company directors from personal liability for insolvent trading if the company is genuinely attempting to restructure. The changes at the time were argued as crucial for providing breathing space for distressed businesses, but this could come at a cost to creditors – mostly likely employees – where possible returns are diminished.

Up for grabs is the licensing of bitcoin.

Buy now, pay later remains an obvious target whether the section should be brought under the consumer credit umbrella, which means players like Afterpay or Zip Co will be required to abide by tougher responsible lending rules.

Elsewhere, competition regulation remains a major push with former ACCC boss Rod Sims urging tougher rules to prevent anti-competitive mergers. The ACCC will finalise an interim paper by September on tech giants such as Facebook and Google and whether there needs to be new regulatory tools to protect against their massive digital market clout.

With inflation and global growth under pressure, Chalmers on Monday described the handover as the “trickiest” set of economic conditions a new government has inherited. The transition is also a chance to shape the business landscape for years to come.