Northern Territory Second Reading Speeches

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TERRITORY INSURANCE OFFICE AMMENDMENT BILL 2005

Madam Speaker, I move that the bill be now read a second time. The bill represents an important step in this government’s efforts to improve the governance and accountability framework of the Territory Insurance Office. It proposes amendments to the Territory Insurance Office Act that will facilitate better prudential regulation of the office, and also a better management of the guarantee that government offers to TIO’s customers.

As an insurance and financial services company, TIO is exposed to a range of financial and operational risks that require regulation. For private insurance and financial services companies, this regulation is undertaken by the Australian Prudential Regulation Authority. For TIO, prudential regulation is undertaken by Northern Territory Treasury.

With the collapse of HIH, APRA has moved to strengthen the National Prudential Regulation Framework to guard against such collapses in the future. It is now appropriate that the prudential regulations framework applying to TIO also be updated to reflect the changes in the APRA framework. This bill will repeal the existing prudential regulatory framework, and facilitate a regime of ministerial directions to apply a new updated framework. It is proposed that the new regime embodied in the ministerial directions will apply an APRA-like regime appropriate to TIO’s unique circumstances.

The insurance and financial service industries are dynamic and it is important that the regulatory framework can respond quickly to industry changes. Because of this, the APRA regulatory framework is constantly being updated and it is desirable that the Territory’s regulatory framework respond quickly and appropriately to any changes in the national regulatory landscape. It is for this reason that the bill provides a framework for prudential regulations to be applied by way of ministerial direction. This will ensure that the Territory can maintain currency in its prudential regulation of TIO. To ensure parity with private sector counterparts, the legislation provides that TIO can also now be charged a fee for the prudential regulation of its commercial businesses.

The second set of amendments relate to the current legislative guarantee of contracts of insurance and deposits held with the TIO. This bill will allow government to charge a fee for the guarantee commensurate with the benefits that TIO receives. This will serve two purposes. First, by charging for the guarantee, government will ensure that TIO receives no nett commercial advantage over its competitors from having a government guarantee. Second, the charging regime that is proposed will be a risk-based regime that will provide government and TIO with a better means of managing the risks that are inherent in providing a government guarantee to a commercial business.

Taken together, the above amendments will significantly improve the government’s supervision framework for TIO and will facilitate improved corporate performance at TIO.

Madam Speaker, I commend the bill to honourable members

Continued from 19 October 2005.

Mr MILLS (Blain): Madam Speaker, the opposition supports this proposed legislation, understanding that there is, from time to time, the need to assess such agencies. However, the issue remains as to why this Treasurer and government are in a position to consider preparing TIO for sale. Whilst we understand the parameters which are established and the arguments to support such a move by government, we do not understand why the government would be in this position to want to proceed down this path.

Those words have been registered not just from the opposition. Those concerns are related to the motivation behind this direction. They have been registered not just by opposition, but by the Chamber of Commerce and a number of people, particularly in the Katherine region. It is that matter which is of deeper concern; however, it does not lie directly within the scope of this debate.

The arguments which have been raised by the minister to support this passage of legislation is understood and accepted by the CLP, but the underlying issues are not, and raise issues of great concern to the opposition - which were the content of significant debate in the Chamber recently.

Madam Speaker, that said, we do not oppose this legislation. However, we register those underlying concerns.

Mr STIRLING (Treasurer): Madam Speaker, I thank the member for Blain and the opposition for their support. We are getting to a stage where, if it rains tomorrow it is a sign we are going to sell TIO, quite frankly. Everything we do has to be seen in the context of this potential sale of TIO.

TIO and the budget are totally unrelated – let me make that clear. Whether TIO is sold, has absolutely nothing to do with our budget. It would realise a one-off, which would always be useful to a government at any time. However, you cannot put any credence on it in fiscal terms as it is a one-off and it is not there the next year - whatever you got. Presumably, no discussion has been entered into because no decision has been made about the sale of TIO. However, if it was to be sold, options and recommendations for what you might do with the proceeds of the sale would then become a focus of discussion and decision by Cabinet. My view would be that, if it was, that would be a golden, one-off opportunity to retire debt because you are only going to get it once and you can only use it once. That, to me, would seem to be the best use of it: retirement against debt in some way.

The bill itself is just a question of timing. This legislation has been a long time in the making - well and truly on the books to come through Cabinet and into parliament before ever a scoping review into the operations of the TIO was ever considered. This will simply level the playing field a little in relation to the way TIO does its business in the marketplace against other competitors. It is fair that government gets a return for its prudential regulation carried out by Treasury, and it is only right and proper that TIO be encouraged, by way of legislative reform, to move closer and closer to the regulatory requirements laid down by APRA, and those regulatory requirements have seen a considerable strengthening, and rightly so, since the collapse of HIH back in 1999-2000.

I welcome the support of the opposition for the legislation. I do not know how clear I can make it that it is totally unrelated to any proposed or potential sale of TIO. This was a proper policy and the right legislation to bring in, regardless of the future of TIO and, really, it does not make any difference in regards to potential or proposed sale, totally unrelated items. I thank the opposition for their support.

Motion agreed to; bill read a second time.

 

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