The Turnbull government has put consumer, aka voter, interests uppermost with its first significant tranche of economic and financial reforms since coming to power last month. The prime minister made it clear he sees the New Zealand model, developed so successfully by neighbouring prime minister John Key, as one worth following. Key has reduced Labor to a party of rotest, lowered taxes, and restored his country’s budget to surplus through judicious cuts and sensible policies like increasing sales taxes.
While not the most significant of the Turnbull government’s changes, the one that will resonate most with the electorate is likely to be legislation to prevent retailers and service providers putting a surcharge on credit card purchases, often well in excess of that charged by the credit card provider. In many instances, particularly in the case of American Express, outlets often use the surcharges to make substantial extra profits.
Generally, supermarkets and retail shops do not add a surcharge, though some either do not take American Express or charge more for its use. Restaurants, travel agents, and airlines are major offenders. Flight Centre, a public company, not only charges customers $28 per person for on-line booking of international flights, but also imposes a credit card surcharge of 1.98% of the fare for those paying with Visa or Mastercard, and a whopping 2.97% for those paying by American Express. The cost to retailers of using cards by MasterCard and Visa works out at an average of 83¢ for every $100 spent, for American Express it’s $1.75.
The government accepted most of the 40-plus reforms recommended by the Murray inquiry into Australia’s financial system. Another important move is to block the way compulsory and other contributions to superannuation are steered into so-called industry funds, which are largely in the control of trades unions. The Turnbull government intends to give individuals the freedom to choose the fund into which they want to put their savings, including the wide variety of retail managed funds available, or, as is increasingly popular, into a fund they run themselves, known as SMSFs, or self-managed super funds. The government rejected a Murray recommendation that SMSFs be prevented from borrowing in order to invest in property.
Because of the complexity of a system which requires Australians to make compulsory savings for their retirement in a country which offers great flexibility of choice, the government is tightening the rules under which financial advisers or planners work. From next year, subject to transitional arrangements, advisers will be required to hold a degree, pass an exam, undertake continuing professional development, subscribe to a code of ethics and undertake a professional year before they can advise clients. There will also be a review of remuneration practices and issuers of financial products will be made responsible for their safety.
The Government is also tightening capital adequacy rules for major banks, in anticipation of which Westpac has already increased home loan rates. Others may follow suit.