The agency the government is invoking as its justification for not holding a royal commission into the banking sector has had its budget slashed, lost 14% of its staff and faces more funding cuts in real terms in coming years. And the Australian Securities and Investments Commission admits the cuts have already significantly diminished its capacity to pursue corporate crooks.
“ASIC has the powers of a royal commission. In fact it has greater powers,” Treasurer Scott Morrison said on Friday, dismissing the case for Labor’s proposed royal commission into banks. This “tough cop on the beat” line was repeated by Resources Minister Josh Frydenberg and Immigration Minister Peter Dutton on the weekend.
Despite whatever powers ASIC might have — and the separate issue that ASIC has, for many years, been reluctant to use those powers against the big end of town, in favour of going after targets less likely to fight back, and has been extraordinarily incompetent on the few occasions it has gone after the big banks — the regulator has suffered massive cuts in recent years that have materially degraded its activities.
Labor started the cuts: in 2012-13 it reorganised ASIC’s Outcome-Output structure, the framing for its appropriation, and the organisation had to budget for 31 fewer staff out of 1851 people. Its main suite of regulatory activities were now clustered under what was called Program 1.1 , and while its budget for that year rose from $427 million to $433 million, it was planned to be reduced via efficiency dividends across forward estimates to $415 million by 2015-16. However, the following year, in the last Labor budget, ASIC was actually given a small increase again: its funding for Program 1.1 would instead only fall to $426 million in 2015-16 and $417 million in 2016-17; four of those 31 lost staff would be restored.
But when the Coalition was elected, it not merely kept Labor’s scheduled reductions, it doubled down and dramatically cut ASIC. The 2014-15 budget cut ASIC staff to 1573 staff and its Program 1.1 appropriation for 2014-15 was cut by $20 million to $415 million and the 2015-16 budget was cut to $395 million. Last year, the bloodletting was temporarily slowed. ASIC’s Program 1.1 budget went back up $401 million, but it actually lost four staff and its funding is still scheduled to fall, every year, across forward estimates. Nor had the cuts stopped. In this year’s Portfolio Additional Estimates Statement, ASIC’s 2015-16 budget has been cut again to $391 million, with around $5 million moved into next year’s appropriation.
It means that between now and 2018-19, ASIC faces a further 9% funding cut compared to if its funding had been held steady in real terms.
The cuts have had a very real impact on ASIC. Chair Greg Medcraft outlined the impact to Senate estimates in 2014, explaining “our proactive surveillance will substantially reduce across the sectors we regulate and, in some cases, it will stop”. Later, he told Labor Senator Sam Dastyari:
“We are basically adjusting our discretionary activities, and proactive surveillance is a discretionary activity. We are doing it on a risk based approach; we have had to adjust our risk appetite. So those areas we regard as medium risk we will no longer pursue, and those that are medium-high and high are the ones we are focused on… the answer is that we will not undertake the same level of proactive surveillance that we did previously, and we will have to be more careful in selecting those matters which we do pursue … rather than us going out and finding the committing of white-collar crime, we have to rely more on Australians letting us know where they see it.”
This was at the same estimates session when another ASIC executive described the current corporate environment as “a target-rich environment” for the regulator. But despite the large number of targets, the government has not merely savaged ASIC’s resources, the cuts are going to continue for years to come. ASIC may indeed have royal commission-like powers, but is unable to use them to proactively pursue corporate crooks — and that’s a deliberate choice by the Coalition.
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