Treasury expects regulators to do the heavy lifting

Treasury has released new Statements of Expectations (SoE) for the Australian Prudential Regulation Authority (APRA) and the Australian Securities and Investments Commission (ASIC), with an emphasis on how the regulators should promote a more sustainable and secured financial ecosystem.

The government has laid expectations on regulators to promote the "sound functioning" of the financial system, reminding both to consider the regulatory impact of its activities on affected industries, especially on small businesses and market entrants, "ensuring its actions are proportionate and promote the advancement of consumer interests via competition, growth, and economic dynamism."

Both were also advised to adopt a proportionate and risk-based approach, and seek to support efficiency, growth and innovation in the parts of the economy it regulates.

Treasurer Jim Chalmers said the SoE is focused on building a more productive, resilient economy that works in the interests of Australians.

"This is all about enabling our financial regulators to unlock more productivity and more growth in our economy," Chalmers said.

"These statements will ensure our financial regulators can help support productivity, unlock investment and grow our economy while preserving financial stability and market integrity and protecting consumers from harm.

"We're striking the right balance between supporting productivity and investment, reducing the regulatory burden on businesses, promoting stability, and safeguarding our financial system and markets."

Supporting the agenda, ASIC will prioritise consumer and retail investor protection from serious harms and ensure its enforcement priorities and efforts are calibrated accordingly. It will also promote innovation and competition, especially in digital finance and emerging digital technologies, while the use of artificial intelligence (AI) will be monitored.

Additionally, ASIC will work with be working closely the Australian Competition and Consumer Commission (ACCC), Australian Financial Complaints Authority (AFCA), and other agencies to reduce the harmful impact of scams and facilitating necessary changes to AFCA's rules and jurisdiction.

Meantime, the laid expectation on APRA is almost identical to ASIC's, but as regulator for the superannuation and insurance sector, APRA should continue to maintain a core focus on the ongoing resilience for both industries.

In response, APRA will also require continued improvement transparency and efficiency across the super sector, where super fund should avoid exposing their members to underperforming funds and funds with sub-standard practices including in relation to expenditure.

The prudential regulator will also aim to bear expertise on insurance affordability and availability, including through insurer data, to support informed decisions.

The intent was welcomed by the Council of Australian Life Insurers (CALI), where chief executive Christine Cupitt said the new expectations were a strong message to signify protection and confidence.

"Strong, effective regulation protects Australians and gives them confidence that their life insurer will be there when they need it most," Cupitt said.

"At the same time, better regulation doesn't mean more regulation. It means making pragmatic choices that support customer protections, while simplifying or removing rules that are outdated or duplicated.

"A regulatory environment that supports innovation and competition will give Australians greater choice and help ensure life insurance remains affordable and accessible.

"These settings are especially important as our industry looks to provide affordable and sustainable cover that responds to the challenge of rising mental ill-health in the community."

Further, Chalmers noted the expectations are all consistent with the directions set by the Economic Reform Roundtable last year.

"Our financial regulators play a crucial role in protecting businesses and consumers, but they can also play an important role when it comes to tackling Australia's long-standing productivity challenge," Chalmers continued.

"Boosting productivity, unlocking investment and growing our economy while preserving financial stability and consumer protections are high priorities for the government and now, they'll be reflected more prominently in the work of the regulators too."