"WE NEED BANKS to fuel the economic engine of recovery and back households and small business," said chair of the House of Representatives Standing Committee on Economics, Tim Wilson MP, in the lead up to the forthcoming hearing with ANZ and CBA.

THE Queensland Resources Council (QRC) has welcomed member company Rio Tinto’s decision to build a new solar farm and battery storage project in the state’s far north.

The project will generate even more renewable energy for Rio’s bauxite operations at Weipa – tripling the local electricity network’s solar generation capacity.

Under the plans, QRC member company EDL has been contracted for the build with construction of the whole project expected to be complete by late 2022.

QRC chief executive Ian Macfarlane said Rio’s move to incorporate more renewables into its operations and boost local access to green power was part of a resource industry-wide commitment to lowering emissions.

“Resources companies understand they have an important role to play in lowering global emissions to meet the challenges of climate change and the expectations of the community,” Mr Macfarlane said.

“Investments in renewable energy projects like this is great news for Queensland and will help our industry lower its global carbon footprint, and add value to the Weipa community in a reliable, sustainable and cost-effective way.”

Rio Tinto already operates a 1.6-megawatt (MW) solar farm in Weipa which generates 20 percent of the town’s daytime energy demand, saving up to 2.3 million litres of diesel and 1,600 tonnes of carbon dioxide each year.

“This will be the biggest battery on the Western Cape – and that’s great news for expanding Rio Tinto’s use of solar energy,” Mr Macfarlane said.

The new plan announced today will extend the project’s capabilities to a 4MW solar capacity, and the 4MW/4MWh battery will provide approximately 11 gigawatt hours of energy annually.

In a statement, Rio Tinto Aluminium Pacific Bauxite Operations general manager Michelle Elvy said the expansion of the company’s renewable energy capabilities would further reduce diesel consumption at its Weipa operations by around 7 million litres per year, and lower its annual carbon dioxide emissions by about 20,000 tonnes – the equivalent of taking more than 3,750 cars off the road.

Mr Macfarlane said renewables provided an important new source of long-term demand for Queensland’s minerals.

"There's two and half times more copper in solar PV per kilowatt hour of generation capacity compared with conventional thermal generation fleet. That's good news for Queensland's copper miners – we're growing our own demand," he said.

“Queensland’s economy was built on reliable access to low-cost energy and it remains a vital ingredient for the success of the resources sector.

“As we manage the transition to our low emission future, QRC members are showing how to ensure that Queensland’s energy mix remains affordable, and reliable while still driving down emissions.

“Today’s announcement from Rio Tinto and EDL ticks all the boxes – lower emissions, more jobs, and more demand for Queensland’s minerals. Win. Win. Win.”

www.qrc.org.au

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THE Financial Services Council (FSC) has urged the Federal Government to amend the proposed Compensation Scheme of Last Resort (CSLR) to prevent the 'moral hazard' of shifting costs onto companies and consumers who have done nothing wrong.

The FSC also calls on ASIC to strengthen enforcement of existing laws to prevent the source of unpaid determinations resulting from advice failures.

The proposed design of the CSLR does little to reduce the risk of unpaid Australian Financial Complaints Authority (AFCA) determinations and simply shifts the cost, via levies, to financial services companies that have done nothing wrong.

EY economic modelling commissioned by the FSC demonstrates the future cost of advice failures for the CSLR is likely to be $59.2 million, significantly higher than the $8 million forecast by the Government, once ‘black swan’ events, such as a financial crisis, are taken into account.

The FSC is recommending:

• ASIC introduce minimum capital requirements for advice licensees;
• ASIC has proactive oversight of Professional Indemnity Insurance (PI) held by advice licensees;
• Provisions in the CSLR are introduced to prevent phoenixing;
• Retaining the $150,000 cap on claims proposed by the Federal Government; and
• House the CSLR in Treasury to remove conflicts of interest and reduce operational costs.

The FSC’s recommendations would lower costs and protect all advice businesses that act with integrity from those that are unable to meet compensation demands and instead push the cost of failure onto the broader industry

FSC CEO Sally Loane said, “For the CSLR to genuinely be a scheme of last resort for consumers ASIC must strengthen its oversight of existing requirements for advice licensees to have appropriate capital, professional indemnity insurance and compensation arrangements in place.

“Weak enforcement has been a significant contributor to the current scale of unpaid determinations and the future cost of the scheme, and a more proactive approach to enforcing the law is essential.

“Why put a safety net under a leaky bucket? Mandating that sound financial services businesses to fund consumer compensation for those businesses which have failed is moral hazard writ large.

“The FSC recommends ASIC undertake risk-based reviews of a representative sample of advice licensees to encourage good practice and reduce the risk of consumer unpaid determinations arising from those businesses that are undercapitalised and have inadequate insurance,” Ms Loane said.

“The CSLR should also be amended to prevent phoenixing, where an operator abandons a company to avoid compensation and shifts the cost onto the CSLR, only to start a new company in the same sector. In the UK phoenixing has contributed to the ballooning £700 million cost of their compensation scheme.”

EY economic modelling demonstrates that if the FSC’s recommendations are implemented by the Federal Government, future costs arising from the CSLR can be reduced from $59.2 million to $7.8 million through the following measures:

• Introducing capital requirements and stronger ASIC oversight of PI insurance, in addition to requiring the scheme operator to comprehensively pursue third party recovery, would reduce the cost of the scheme by $46.4m; and
• Introducing measures to prevent phoenixing would reduce the scheme by $5m.

Simplifying the governance of the scheme would be expected to have a modest impact on reducing the operational costs of the scheme over time but were not included in the EY modelling.

These measures show that sensible scheme design measures, as well as concurrent reform to strengthen advice licensees, can significantly lower future CSLR costs whilst also providing a significant safety net for consumers.  

For a copy of the key findings of the EY Report: https://fsc.org.au/resources/2267-ey-economic-analysis-cslr-summary/file

About the Financial Services Council
The Financial Services Council (FSC) has over 100 members representing Australia's retail and wholesale funds management businesses, superannuation funds, life insurers, financial advisory networks and licensed trustee companies. The industry is responsible for investing almost $3 trillion on behalf of more than 15.6 million Australians. The pool of funds under management is larger than Australia’s GDP and the capitalisation of the Australian Securities Exchange and is the fourth largest pool of managed funds in the world.

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THE House of Representatives Standing Committee on Economics will hear from super funds and fund managers about common ownership and capital concentration at a public hearing on Monday, September 20, 2021.

Committee chair Tim Wilson MP said, "Super funds control vast assets within Australian listed equities and unlisted assets, often across competing entities. The committee wants to discover whether such concentration of capital and common ownership structures causes negative outcomes for smaller retail shareholders and consumers more generally.

"At our previous hearing, the committee was able to hear from the world’s foremost experts on the theoretical underpinnings of this issue. This hearing gives the committee a chance to question the super funds on the real-world impacts of how the sector’s control of $760 billion in Australian citizens’ retirement savings impacts competition within the Australian market.

"Regulators have raised questions about the consequences of common ownership, and academics have raised concerns about the role of hedge funds, index funds, proxy advisers and super funds in supressing competition and the risks of inaction," Mr Wilson said.

The full Terms of Reference for the inquiry into common ownership and capital concentration are available on the committee’s website.

Public hearing details

Date: Monday, 20 September 2021
Time: 9am to 2pm

A program for the hearing is available on the committee’s website.

Due to health and safety concerns relating to the COVID-19 pandemic, this hearing is not currently scheduled to be open for public attendance. Interested members of the public will be able to view proceedings via the live webcast at aph.gov.au/live.

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