Weekly Update: 09.09.22

“It is clear, however, that [climate] metrics (and their disclosure) are areas where investors, standard-setters, and regulators are demanding more sophisticated climate risk information. Empirical measurement, rather than a subjective judgement, is going to be needed fairly urgently.” 

–   Wayne Byres, Speech to RMA Australia CRO Conference 7/9/22

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Parliamentary Update:

The federal government’s Climate Change Bill 2022 passed the Parliament. The Bill sets Australia’s greenhouse gas emissions reduction targets at a 43% reduction from 2005 levels by 2030 and for net zero by 2050. 

Bills relating to the two major outstanding legislative measures from the Hayne Royal Commission were introduced by Minister Stephen Jones into the Parliament this week: 

• Financial Accountability Regime 
  • Financial Accountability Regime Bill 2022 
• Compensation Scheme of Last Resort (CSLR) 
  • Financial Sector Reform Bill 2022 (Schedule 3) 
  • Financial Services Compensation Scheme of Last Resort Levy Bill 2022 
  • Financial Services Compensation Scheme of Last Resort Levy (Collection) Bill 2022 

To support the CSLR legislation, the Government has released for public consultation exposure draft regulations. Submissions can be made until 7 October 2022. 

Schedule 4 of the Financial Sector Reform Bill 2022 (introduced this week) deals with enhancements to the consumer protection framework for consumers of small amount credit contracts and consumer leases. 

The Greens have established a new Senate inquiry into poverty and cost of living through the Community Affairs References Committee. Interest rates are noted in Senator Rice’s accompanying media release.

Dr Andrew Leigh announced that the Australian Bureau of Statistics will receive an additional $4 million to better measure barriers and incentives to labour force participation.

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Communications Update:

• To support the launch of the Insurance Council of Australia’s report on Insurance Catastrophe Resilience, the ABA attended a panel discussion on ‘The cost of extreme weather’ held by the Trans-Tasman Business Circle. The event provided the opportunity for the ABA to hear perspectives on why it is critically important to improve the resilience of homes and communities across Australia to ensure we are more resilient to extreme weather events. 
• This week saw the sixth edition of the Intersekt Festival held in Melbourne with representatives from government and industry coming together to discuss all matters Fintech.  Representatives from the ABA attended and contributed to discussion on the future of payments, rollout of open banking, digital identity, the use of AI and much more.   

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Regulatory Update:

• In a speech on risk management and climate change, Wayne Byres articulated the importance of identifying, preparing for and responding to risks. He noted the use of data and analytics as integral to prudential management of operational risk and highlighted the climate vulnerability assessment as a useful tool for industry to translate non-financial risks into financial impacts. 
• Governor Lowe announced he still anticipates long-term inflation to remain in the 2-3% band target, despite increasing inflation and rising wages. He compared low levels of aggregate Australian wage growth relative to the US but acknowledged that consumption has not yet been curtailed by rising interest rates.  
• At the Intersekt Festival 2022 Melbourne, Ellis Connolly, Head of Payments RBA, stated that he was uncertain about the value of central bank digital currency for retail use, but could envision it for wholesale settlements. 
  • “We do see potential for well-designed, well-regulated stablecoins to make a contribution to providing better services for Australian households… the issues we saw earlier in the year with the crypto markets have really emphasised that there is a need for a good regulatory framework.” – Ellis Connolly, Statement at Intersekt conference

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Economic Update:

• The RBA increased the cash rate by 50 basis points to 2.35%. In his announcement, Governor Lowe noted continued economic growth in Australia in contrast to deteriorating global economic growth, a continued lowering of the unemployment rate and a pick-up in wages. 
• Australian GDP grew by 0.9% in the June quarter, taking it to 3.6% in the year to June 2022. This was driven by consumer spending and commodity exports. Australia’s trade surplus was the largest ever recorded, at 7.1% of GDP. 
• Despite costs of living increases, aggregate consumer savings remain at an elevated rate. They dropped to 8.7% from an all-time high of 23.7% in June 2020. However, it remains above the twenty-year average of 5.5%. 

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Weekly Update