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Shorten pledges finance sector royal commission if government changes

LABOR today pledged a $53 million royal commission into “illegal and unethical” practices in the finance sector as Turnbull ministers pulled further away from the idea.

A change in government would see an inquiry examining banking, superannuation, interest rate rigging, insurance payouts, credit card complaints, Opposition Leader Bill Shorten said.

The policy will be taken to the looming election as a pledge to stand up for consumers.

After scandal after scandal, and with the importance of banking to the lives of everyday Australians, something needs to give, doesnt it? Mr Shorten told reporters in Melbourne.

The fact is all Australians put their trust in banks. It could be your savings account or your credit card. It could be your mortgage loan or your business dealing.

Families and small business in Australia expect a higher standard from our banks. A royal commission is an inquiry by the executive. It is an examination of what improvements can be made. What are the systemic failings?

He said there was a need to rebuild confidence.

Our actions are motivated by our faith in the banking sector to learn, to improve, Mr Shorten said.

But the government is not impressed by the idea and sees the Opposition policy as a distraction from its promise to hunt down corrupt union practices, particularly in the building industry.

And it will be seen as a reprisal for royal commissions into trades unions and the Rudd Governments home insulation program.

Just as current and former union leaders, including Mr Shorten, were questioned by the Trade Union Royal Commission, top bankers could be called before Labors proposed probe.

Treasurer Scott Morrison wants to leave investigations to existing bodies, such as the Australian Securities and Investments Commission. But he is clashing with some members of the Coalition.

I think supports growing, NSW Nationals senator John Williams told Sky News today.

More around all sides of Parliament, we will see we need to scrutinise our whole financial sector, see that they perform properly, see that their culture is correct and see that the regulators such as ASIC (Australian Security and Investment Commission) and (banking regulator) APRA are doing the job to the best of their ability and are financed to do their job.

Mr Morrison accused Mr Shorten earlier today of an out-of-proportion response to complaints about banks, which were being dealt with by ASIC. And he warned a royal commission could harm confidence in Australian banks.

And what do you think that is going to say to investors looking to Australia? Mr Morrison told ABC radio.

Now you need to have a proportional response that deals with the problem. Now, the problems are identified, theyve been identified by other actions in the courts, and actions taken by ASIC.

He accused Mr Shorten of a reckless distraction that puts at risk confidence in the banking system.

But it was only a year ago that Labor voted against a royal commission into the financial sector it was only a year ago, Mr Morrison said.

The budget program that could be the biggest disaster since pink batts

THE government’s new plan for youth unemployment is a beautiful idea. Helping vulnerable young people get jobs is one of the most important social and economic outcomes imaginable.

But this tremendously admirable program could quite quickly find itself in the express handbasket to hell.

This new program is named PaTH and the Treasurer is calling it real work for the dole. Its real because instead of doing mindless tasks for a government agency or council, the young people will work for a real life business.

The business gets $1000 to take on the young person, and the young person gets $200 extra a fortnight in their Centrelink payment. They are supposed to work 10-25 hours a week, so that rate of pay is a pretty lean $4 to $10 an hour.

A cynical person might say that it is giving Aussie business labour at Chinese wage levels. But on the other hand it is probably more practical than work for the dole. Its only 4 to 12 weeks and they could learn valuable skills.

Or they could lose an arm.

What could possibly go wrong when you send 30,000 young vulnerable people into businesses? It surely wont be long until a youth falls off a ladder or puts their hand in a meat slicer, and suddenly this program is going to remind everyone of the pink batts program.

That, if you remember, was also a lovely idea, subsidising people to get insulation in their roofs. It ended after there were four deaths in the space of five months. The similarities are notable. Both are subsidy programs intended to fix economic and social problems in one fell swoop.

And both could attract the wrong sort of fly-by-nighters.

Even if the vulnerable youth of Australia come through this PaTH program unscathed, it is unclear if theyll learn anything. With $1000 on offer from government, might not a ruthless business owner take them on and say Sit in the corner, play Clash of Clans on your phone if you want, but dont interrupt me?

The government made a huge song and dance out of this youth unemployment program. It was one of the first things the Treasurer mentioned in his Budget speech on Tuesday night. But the amount of new money they are providing is $80 million a year, (in Budget terms thats not much) and they are also saving $100 million a year by dramatically reducing Work for the Dole.

The Treasurer kept repeating the phrase that it is not just another training program. OK. What it is, though, is one of very few things the government is doing on social policy which may be way he wants us to notice it.

Any way you look at it, this program is not such a big deal as the government makes out. And they could swiftly regret drawing so much attention to it if it all turns bad.

Jason Murphy is an economist. He publishes the blog Thomas The Think Engine. Follow him on Twitter @jasemurphy.