FOFA in the sights of new Finance Minister

Australia’s new Finance Minister has been confirmed and he says the legislation to reform FOFA is already drafted and ready to go.

Western Australia Senator Mathias Cormann beat out well-respected colleague Arthur Sinodinos to take the Cabinet post. Cabinet is expected to be sworn in today.

In a recent speech, Cormann says reducing the regulatory burden on business will be a top priority.

“Our starting position is that regulation should only be imposed where absolutely necessary. Our preference is for industry self-regulation where ever that can successfully be done,” he says.

To that end, a new unit will be created in the Department of Prime Minister and Cabinet expressly focused on deregulation and the remuneration of senior public servants will be directly linked to success in reducing regulation.

Cormann says the Abbott Government will also overhaul FOFA, including the Best Interests Duty.

“Not everything in FOFA is bad. There was much in FOFA we supported and the financial services industry at large supported. The bad bits in FOFA were and remain very bad,” he says.

“It has significantly increased red tape and costs for both business and consumers, while – as we predicted – reducing choice, competition and diversity across the financial services industry.”

He says the Coalition will move quickly to introduce amendments.

Treasurer Joe Hockey has also flagged a financial system inquiry, along the lines of the Wallis inquiry. The ‘son-of-Wallis’ inquiry is likely to cover high-level finance, such as funding for governments and major infrastructure, as well as superannuation.

NIBA CEO Dallas Booth says it is not clear whether the inquiry will cover the operation of the general and life insurance sectors, or the roles of financial advisers and insurance brokers.

Insurance Council of Australia CEO Rob Whelan called on the new government to place a strong emphasis on disaster mitigation and tax reform to discourage state government reliance on insurance taxes.

“One of the most important issues for the Federal Government is considering how best to reduce the risk to communities that are regularly exposed to extreme weather without imposing further layers of regulation, taxation or bureaucracy on the insurance sector,” he says.

“The ICA and its member companies have an important stake in making sure governments and their agencies, business and the wider community work together to resolve issues of national importance.

“The insurance industry is encouraged by the Coalition’s belief that excessive regulation stymies innovation, investment and more employment.”