CSIRO – Senate Estimates

, ,

I am shocked that the CSIRO came so unprepared to Senate Estimates when I gave them my questions in advance. For an organisation who claims to have been studying climate science for 60 years, their responses were truly embarrassing.

I will prepare a more detailed response in the next few days, but to be clear, the government should not be relying on the CSIRO’s climate division for advice on climate science.

Transcript

[Senator Roberts]

Thank you chair, and thank you all for being here today. My questions chair, were sent in advance about two weeks, a little bit under two weeks ago, and deal with past presentations by CSIRO. And so my first question is that, as I said in the letter, number one, do you stand by CSIRO’s implied claim that Marcott and Lecavalier, are the best evidence CSIRO has for showing that the rate of temperature change today is unprecedented in the last 10,000 years.

[Chair – Sen. Paterson]

I’ll just very briefly say this Senator Roberts, ’cause there’s obviously been an exchange of correspondency. You’ve written to CSIRO and I’ve just received a copy of their response to you and Dr.Marshall–

[Senator Roberts]

I haven’t seen CSIRO–

[Chair – Sen. Paterson]

I think it’s just about to be circulated to the committee. Dr. Marshall we are intending for that to be tabled by the committee?

[Dr Marshall]

Yes.

[Chair – Sen. Paterson]

Hopefully? Okay, all right. Well then in that case we’ll circulate copies to committee members for tabling. Sorry, Senator Roberts.

[Senator Roberts]

No, Dr. Marshal was about to answer.

[Dr Marshall]

And Senator, I’ll let Dr. Mayfield answer the detail of your questions.

[Dr Mayfield]

So Dr. Peter Mayfield, Executive Director for Environment, Energy and Resources. So Senator, yes we have prepared a response to the letter that you sent us. I do have copies of that here and electronic copy was provided to the secretary. So, there’s an opportunity to sort of look at our response and data. In regard to Marcott, yes we do stand by the conclusions of that paper.

[Senator Roberts]

Stand by Marcott.

[Dr Mayfield]

Yes.

[Senator Roberts]

Okay. And what about Lacavalier?

[Dr Mayfield]

Yes, both papers.

[Senator Roberts]

Lacavalier too?

[Dr Mayfield]

We believe our best evidence.

[Senator Roberts]

Okay, thank you, that’s good. Why did… Second question, what did CSIRO rely on before Marcott 2013? Say in the 1980s, when Bob Hawke was the first Prime Minister to raise the issue of anthropogenic climate change, said to be due to carbon dioxide from human activity.

[Dr Mayfield]

So Senator, so the state of the science in the Australian context is being provided by the volume in greenhouse, planning for the future, which is published by CSIRO in 1988. And it’s still available. And it was already very evident in the 1980s that anthropogenic emissions of carbon dioxide were altering the chemistry of the atmosphere.

[Senator Roberts]

Excuse me, the chemistry of the atmosphere, but not the temperature the earth?

[Dr Mayfield]

Chemistry of the atmosphere is at that point in time and temperature record is also changing.

[Senator Roberts]

Okay, thank you. Third question. At what stage did CSIRO start giving significant advice to governments on anthropogenic climate change?

[Dr Mayfield]

So CSIRO has been providing advice to government in relation to greenhouse matters for more than 60 years. So it’s been a long history of us providing advice in this area.

[Senator Roberts]

Thank you. Then I had my fourth question was to Dr. Mayfield. I need Dr. Mayfield to specify one, a slide or slides and specific data to which he refers and on which his answer relies when I asked my previous question, which you’re familiar with, Dr. Mayfield.

[Dr Mayfield]

So Senator we’ve provided the details many, many times to you. You’d appreciate that in each of these papers which have been published by a peer review. The analysis around statistical substance of the various measurements.

[Senator Roberts]

No, no, no, I’m not gonna let you off the hook. That’s a dodging of the question. The question is, to which of the specific slides or specific data in the presentations do you refer to when you stood up last time, at senate estimates and said, “It’s in the presentations.” Which of the slides, I want, specifically contain the statistical analysis that proves that carbon dioxide from human activity has the… Sorry, that there is a change in the climate, in any factor of climate.

[Dr Mayfield]

So, as you’re aware of Senator, there’s a number of papers, multiple ones–

[Senator Roberts]

No, no, no, no. I’m asking you for this specific slide and the specific data to which you refer. I’m not gonna take any more of this vague nonsense. I want this specific slide, specific data.

[Dr Mayfield]

In the slides, you’ll see, there’s a number of different references. Obviously we work with work from Marcott, more recently there’s the work of, it’s coming from… Kaufmann sorry.

[Senator Roberts]

How do you spell that?

[Dr Mayfield]

So it’s K-A-U-F-M-A-N-N.

[Senator Roberts]

Okay.

[Dr Mayfield]

So it’s a paper that’s been produced in 2020, which also undertakes an analysis of a wide range of methodologies, looking at both the–

[Senator Roberts]

2020?

[Dr Mayfield]

Historical record and the current record of temperature change.

[Senator Roberts]

So I asked you on Thursday, the 24th of October, 2019 a year ago, to provide empirical scientific evidence that shows quote, “Statistically significant variation “that proves there has been a process change.” That is variation that is beyond our outside natural inherent cyclical or seasonal variation over the last 350 years. You stood up and said, “It’s in here, “we’ve given it to you.” That is not correct. I wanna know specifically what the data was and is in those presentations that–

[Dr Mayfield]

Senator, we provided you with a number of references. Those are the references that we believe showed that.

[Senator Roberts]

I don’t know where–

[Dr Mayfield]

You don’t agree with us, but that’s what we believe.

[Senator Roberts]

You have never presented, CSIRO’s, never presented any response to that question, because the first time that question was asked was in the Senate estimates last year. CSIRO’s has never addressed that question. Your statement is false, if that’s what you’re implying.

[Dr Mayfield]

That’s incorrect Senator. The data is in the papers that we refer to.

[Senator Roberts]

No, no, no, I said show me—

[Dr Mayfield]

Part of pulling that science together is about undertaking that sort of statistical analysis, So that it show meaningful trend.

[Chair – Sen. Paterson]

So I’ll just briefly intercede here. Senator Roberts, could I ask that you allow the witness an opportunity to finish the answers your questions before you interject or ask a follow up question.

[Senator Roberts]

Chair, he’s not answering the question.

[Chair – Sen. Paterson]

Well, Senator Roberts you may be unsatisfied with the answer that he’s giving, but that doesn’t give you a right to interrupt him. You have to allow witnesses to conclude their answers and then you can ask a follow up question to challenge that answer if you wish.

[Dr Mayfield]

So as I said Senator, those various papers is part of doing peer review process you go through the statistical analysis. You show what is a meaningful trend versus what is not a meaningful trend, due to the uncertainty of those measurements. And we stand by those papers and those measurements and those peer review processes.

[Senator Roberts]

I want on record that never has CSIRO in any of the presentations to me, made any reference, any statement about statistically significant variation in climate. Not at all. I asked it for the first time, this time last year.

[Woman]

You can ask to read the paper to you.

[Senator Roberts]

Yeah, could you specify the paper?

[Woman]

But let’s not…

[Senator Roberts]

Could you specify the papers?

[Dr Mayfield]

I’ve already specified the papers.

[Senator Roberts]

The exact papers? Because you have never referenced them in any way in any of the presentations. So I wanna know the specific papers.

[Dr Mayfield]

So I’m giving you the papers, Senator.

[Senator Roberts]

Which ones?

[Dr Mayfield]

So it’s Marcott, it’s Lecavalier.

[Senator Roberts]

Okay.

[Dr Mayfield]

And more recently Kauffman.

[Senator Roberts]

So let’s go on to the second part, now that you’ve come on that. Specify the statistical analysis techniques that we used.

[Dr Mayfield]

So Senator there’s many techniques that are used, there’s thousands of papers.

[Senator Roberts]

No, the ones that you rely upon to make the statement that there is a statistical significant change. I wanna know the specific ones.

[Dr Mayfield]

Well, that’s part of the peer review process that’s undertaken for each of these papers Senator. So, if you choose to track the authors.

[Senator Roberts]

All right, thank you.

[Dr Mayfield]

They will be able to talk you through this specific work.

[Senator Roberts]

We contacted the author of Lecavalier which you recommended, and he will not divulge his information. That’s what you rely upon? People who do not divulge their information. So let’s go to the third one then. The relevant statistical levels of confidence from the analysis of the climate factor that you’ve identified. So what is the level of confidence in the analysis?

[Dr Mayfield]

So Senator again, I’ve just refer to my previous answers.

[Senator Roberts]

Thank you. Could you specify the time interval of data for which this statistical analysis was applied?

[Dr Mayfield]

Senator, I can’t answer that question. It’s a question that should be directed towards the author of the paper.

[Senator Roberts]

Thank you. Question five.

[Dr Mayfield]

Very much to detail sir.

[Senator Roberts]

Yes, it certainly is.

[Dr Marshall]

Senator Robert, sir might have been remiss last time I think I promised to send you a copy of this and I don’t know if I did or not from my office to you, but if not I bought a copy.

[Senator Roberts]

No, you didn’t.

[Dr Marshall]

And I’ll leave this here with you. It does have a map of the projections for temperature.

[Senator Roberts]

No, I’m after empirical scientific evidence, that’s what I’ve been through all the way along. Not on projections.

[Dr Marshall]

It’s based on data since 1950 and successfully predicted the last 20 years.

[Senator Roberts]

I wanna know statistically significant change Dr. Marshall.

[Dr Marshall]

Well, I think you’ll get it from here and the references here in Senator, but, I’ll leave this to you if I can.

[Senator Roberts]

Thank you, good.

[Dr Marshall]

Hopefully be helpful.

[Senator Roberts]

Now, Dr. Marshall, I also said in my letter that I hope you agree that the only valid analysis for such policies, climate change and supporting of renewable subsidies, is specific empirical scientific evidence with a logic proving causation and quantifying the effect of carbon dioxide from human activity on climate factors, such as atmospheric temperatures. I hope you understand the need to justify such policies on solid scientific evidence, quantifying cause and effect. Such quantified evidence is needed to implement such policies and to monitor the effect of such policies. Without the specific quantified relationship between human carbon dioxide output and climate factors, it is not possible to do cost benefit cases nor track progress. So my question to you, number five was, if you disagree with this reasoning, please provide me with what you see as the alternative basis for policy.

[Dr Marshall]

So Senator we base our work on the measured changes in climate since about 1950. We have, for example, directly intervened by breeding different strains of wheat to prevent the wheat yield from going down, because we don’t want the impact of drought or increased temperatures or the shifts in rainfall to reduce the productivity of Australia’s weed industry. So, we have data since 1950 that shows these effects are happening. We know that the nation has become drier in the South, weather in the North. And we know that the temperature has come up, that’s not projections, they have been measured. But, because we’ve known that, ’cause we predicted that some years ago, some decades ago, we were able to successfully intervene to help the industry navigate those changes without a loss in their profitability. And that’s why we do the modelling Senator, to try and understand how to help industry navigate changes in our investment.

[Senator Roberts]

So let me put it bluntly, do you or do you not believe that policy should be based on a quantified specified relationship between cause and effect? In other words, this much carbon dioxide with the amount specified leading to this much temperature change.

[Dr Marshall]

Senator, I think policy should be based on the best science available and it should be data-driven, data-driven. And I’ve just given you the data that drive us to make the interventions,

[Senator Roberts]

No you haven’t given me the data. You’ve talked about having…

[Dr Marshall]

Senator it’s in here.

[Senator Roberts]

And so do you agree on or not that policy should be driven by specified quantified relationship between cause and effect?

[Dr Marshall]

I think policies should be data-driven and it should be monitored and measured and evaluated using data.

[Senator Roberts]

Okay, thank you.

[Dr Mayfield]

So Senator, if I can add to that. So science, peer reviewed science does provide that foundation which policy can be built. In terms of the papers that we’ve talked to you about.

[Senator Roberts]

Marcott and Lecavalier?

[Dr Mayfield]

We note that there’s been at least 265 other papers which have referenced Marcott as part of the peer review process. And to date, no one has come up with an argument that says that paper is not valid. So the peer review process is at play there and has basically reinforce that that paper is correct.

[Senator Roberts]

We’ll come back to that but Marcott himself, said that the 20th century temperatures on which you are relying are not robust. Marcott himself. So much for–

[Dr Mayfield]

I disagree with your statement.

[Senator Roberts]

So let’s move on to question six. Australia has already done much to destroy its energy grid, yet, as an overseer of taxpayers’ funds, taxpayers’ resources. I need to know whether this has shown up in atmospheric carbon dioxide levels. And if so, how has it shown up and to what extent? Please provide empirical scientific evidence on the effect of carbon dioxide levels and temperatures from Australia’s cuts to human carbon dioxide output. In other words all the pain we’re going through economically where is it showing up in the global carbon dioxide levels?

[Dr Marshall]

So Senator, as I think you and I have discussed before, Australia is barely 1%, 1.2, 1.3% of the world’s emissions. Therefore, any direct changes we make in this country are unlikely to have any impact on the global levels of carbon dioxide.

[Senator Roberts]

So are we not gonna have any impact on the temperature then?

[Dr Marshall]

Well, 1.3% impact. Senator, however, our science can have an impact. For example, future feed which has solved what seemingly was an impossible problem and reduce the emission from–

[Senator Roberts]

I wanna know the effects of Australia’s carbon dioxide. Because people are paying an extra $1,300 per household Dr. Marshall. On your salary, that’s trivial, but on someone on the median income of 49,000 that is painful, extremely painful. Dan McDonald, a farmer in Queensland and many farmers have lost the rights to use their property because of policies enacted by this government and previous governments. On $800,000, that’s easy for you to wade through but these people are suffering.

[Dr Marshall]

Senator. I’m not sure I understand your question here. Are you saying that there’s some connection between things that CSIRO has done and these people suffering

[Senator Roberts]

Your advice.

[Dr Marshall]

Is a concern if that’s the case

[Senator Roberts]

Your advice has been cited by many ministers, both labor and liberal national for the painful impositions of policies on our country. And people are paying for that through the hip pocket and through the loss of the rights to use their property that they own and have paid for. Your so-called support, according to ministers is the reason for that. And I’m not getting evidence of quantified impact of our carbon dioxide. And you’ve just said, you can’t see any evidence in the carbon dioxide levels in the atmosphere because of Australia’s carbon dioxide cuts.

[Dr Marshall]

Senator I’ve just said that Australia has a relatively small direct impact on the carbon dioxide levels because–

[Senator Roberts]

Can you show me the evidence that says we are reducing carbon dioxide levels in the atmosphere?

[Dr Marshall]

The evidence that Australia is reducing.

[Senator Roberts]

Australia’s impacts on energy, on agriculture are resulting in a reduced temperature, reduced levels of carbon dioxide.

[Dr Marshall]

So the reduction in emissions has been reported by the department of the environment. So that would be a question for them senator.

[Senator Roberts]

You’ve just answered my question. Thank you very much.

[Dr Mayfield]

If I could add to that as well. So global CO2 levels are measured through the global carbon project which works from data from their resilience.

[Senator Roberts]

In part they’re measured, in part they’re residual. So my last question have global attempts. So we forget about Australia’s little minuscule contribution. Have global attempts to cut human production of carbon dioxide shown up in atmospheric carbon dioxide levels. And if so, and to what extent.

[Dr Mayfield]

So again, Senator the global carbon project measures or captures various–

[Senator Roberts]

Didn’t answer my question Dr. Mayfield

[Dr Mayfield]

Various divisions that are made around the globe.

[Chair]

Give him some time.

[Dr Mayfield]

And that is the numbers that are being captured, when they show that emissions are increasing.

[Senator Roberts]

Chair, when someone’s asked a question and they say something but don’t answer the question that is not answering questions

[Chair]

Order Senate Roberts. In that case, Dr. Mayfield would have been five to 10 seconds into his answer. So it’s pretty early to form a strong view about what he was giving you. And Senator Roberts, I don’t seek to dictate how you ask your questions or what questions you ask, but only that you show courtesy to officials so they can answer your questions to the best of their abilities.

[Senator Roberts]

With respect chair, I deserve the respect of being answered properly when I’m asking questions on behalf of my constituents who had gone through a lot of pain.

[Chair]

Senator Roberts if you’re not satisfied with the answers that you receive, please ask another followup question, but don’t interrupt officials in the middle of their answers.

[Senator Roberts]

I’ll ask it again. Have global attempts to cut human production of carbon dioxide shown up in atmospheric carbon dioxide levels. And if so, how, and to what extent?

[Dr Mayfield]

So Senator in terms of the emissions being made whether there’s attempts to cut them or whether that’s how they are naturally, they are captured through the global carbon project. That’s the accounting process that’s worked to do that. And that shows that emissions overall are still increasing.

[Senator Roberts]

How- emissions are still increasing? We’d just been through–

[Dr Mayfield]

Globally.

[Senator Roberts]

COVID depression and we’d just been through a 2009. We had lower use of carbon dioxide then in 2008 in the recession that was global except for Australia. And in both cases, the levels of carbon dioxide in the atmosphere have continued to rise, despite human production falling dramatically especially in the last nine months. And yet you’re telling me, you can see it. They’re going up. Dr. Mayfield. So I’ll ask again for the third time, then I’ll leave it. Have global attempts to cut human production of carbon dioxide, particularly in the recession that was in 2009 when global production of carbon dioxide from human activity decreased and have decreased considerably in the last seven months, shown up in atmospheric carbon dioxide levels in the atmosphere? And if so, how, and to what extent? Please answer how they show up and to what extent.

[Dr Mayfield]

So Senator the measure is the CO2 signal that’s in the atmosphere. It’s a well-mixed system so it’s represented well across the globe. If you wanna refer to periods like 2009 which is at the end of the global financial crisis, there were slight changes in the rate of climb of these measurements. So you can see inflexions like that. I don’t have the details on the specific numbers on how that changed, but there are inflexion points. But in terms of the longer term trend, it’s still on the up.

[Senator Roberts]

Could you please send me the inflexion points? I wanna see the data please. Because from what I’ve seen at global atmospheric carbon dioxide levels, they’ve continued to rise relentlessly despite no inflexion whatsoever. So I would like to see the inflexion points. I’d like to see how much and I’d like to see when. Is that clear? How much and when? Is that clear Dr. Mayfield?

[Dr Mayfield]

So what we’ll provide you with is the Cape Grim record which is a continuous record of CO2 content in the atmosphere.

[Senator Roberts]

That’s CO2 Cape Grim, could you give me the global?

[Dr Mayfield]

So as I said, CO2 is a gas that mixes well across the globe. There is minor variations but overall there’s a very good indication of the time series of the CO2 measurement.

[Senator Roberts]

Could you show me the global levels? I wanna know how much it’s changed and when.

[Dr Mayfield]

As I said before Senator, that work is for the Global Carbon Project. They report annually. We will provide you with some of that work as well as the Cape Grim measurements.

[Senator Roberts]

Thank you, thank you chair.

[Chair]

Thank you Senator Roberts.

/by

Questioning Reserve Bank of Australia (RBA) – Cash Ban and Bail-In

,

One Nation has led the fight in the Senate against the Cash Ban bill, which makes any cash transaction over $10,000 illegal. Our efforts stopped the bill from passing, but the Government has not formally withdrawn the bill. At this estimates we started a campaign to have the bill removed from Senate business permanently. Our first questions asked the Reserve Bank if they still thought the cash ban was a good idea.

We didn’t get the answer we wanted, it seems the Reserve Bank is still trying to force people into the banking system and take away their right to decide what to do with their own money. Cash Ban Explanation – https://youtu.be/93EigYTWe5s

Then we asked about our bill coming up later next month to prevent banks using money deposited with them to pay their own expenses in a bank emergency.

What was obvious to Senator Roberts is that the Reserve Bank had no idea they had made a submission on our bail-in bill. The Reserve Bank was not on the list of submissions. Where did their submission come from? Could the Government have written it, not the Reserve Bank? The Reserve Bank is an independent regulator, it would be a scandal if the Government is writing their policy for them. One Nation will pursue this matter further.

Transcript

Senator ROBERTS: Thank you for attending today. I’ve seen reports that the Reserve Bank has printed an extra $12 billion in banknotes this year to keep up with demand. Do you have the accurate figure, please?

Dr Debelle: I do. I can provide you with an accurate figure. Yes, we have printed extra bank notes because there has been additional demand. Between 16 March and 6 August we printed 220 million banknotes worth $12.5 and they were issued into circulation. I don’t have the most up-to-date information to hand, but I can provide that.

Senator ROBERTS: If you could, that would be appreciated.

Dr Debelle: I don’t have it completely to hand. I may have it before we finish this line of questioning.

Senator ROBERTS: That’s impressive. The Reserve Bank’s written answer to my question on notice from the February estimates—it’s reference AET93—included this response—I’m slightly paraphrasing: ‘While cash is used less frequently in Australia, it is still widely held for precautionary purposes and some members of the community really very heavily on cash for their daily lives. Cash remains an important payment method for older households, those with disabilities and those living in rural and remote areas where electronic banking may not function reliably.’ Do you consider that people are voting with their feet and withdrawing cash to get ahead of the cash ban bill?

Dr Debelle: What we have seen is increased demand for banknotes, as you just highlighted in your previous question. I think that is mostly as a store of value. What we’ve seen is around 50s and 100s in particular; actually mostly 50s. I think it is primarily as a store of value, particularly in a world where interest rates are as low as they are.

Senator ROBERTS: So people have an alternative in cash. People need that alternative. Does the Reserve Bank support withdrawal of the widely criticised cash ban bill and instead support the development of a bill that actually addresses money laundering and tax compliance? In other words, is it time to kill the cash ban bill?

Dr Debelle: We’re part of the Black Economy Taskforce and we’re comfortable with the recommendations of that.

Senator ROBERTS: Item 1.27 of the Economics Legislation Committee’s report on the bail-in bill includes this statement:

The Reserve Bank of Australia … indicated the information provided by the Treasury to the committee’s inquiry was consistent with their views.

Is this correct?

Dr Debelle: I have no reason to suspect otherwise.

Senator ROBERTS: How did the RBA communicate with the committee? Because my office saw no submission.

Dr Debelle: I will have to take that on notice. I did not have direct involvement with this. Michelle, I don’t know if you can answer this?

Ms Bullock: I didn’t have. I know we had someone on the Black Economy Taskforce but I’m not aware of this particular bill.

Senator ROBERTS: Could you also send me the full comments that you made to the committee.

Dr Debelle: Sorry, the committee on the bail-in bill?

Senator ROBERTS: Yes, please. Your views to the committee include this statement: ‘The Financial Sector Legislation Amendment (Crisis Resolution Powers and Other Measures) Act 2018 did not include a statutory power for APRA to write down or convert the interests of depositors as unsecured creditors of a failing ADI.’ Is this correct?

Dr Debelle: Yes. Michelle, I think you can confirm that.

Ms Bullock: Yes, our view is that it does not include those sort of provisions.

Senator ROBERTS: The G20 Financial Stability Board’s Key attributes of effective resolution regimes for financial institutions, adopted by Australia in October 2011, states: ‘Powers to carry out bail-in should enable authorities to convert into equity’—meaning shares of the bank in this case—’all or parts of unsecured creditor claims.’ And elsewhere it says that means deposits. We have a clear obligation, then, under this agreement, to provide a bank bail-in mechanism. If the 2018 act did not do that, where else is that provision?

Dr Debelle: We have depositor preference, as you may be aware, and a deposit guarantee—sorry, we have a deposit guarantee scheme, which guarantees bank deposits.

Senator ROBERTS: I understand the timing of that doesn’t quite back up what you’re saying. Let me look at that more closely. New Zealand responded to the Financial Stability Board’s instruction to pass bail-in laws with their open bank resolution system. The New Zealand Reserve Bank explains this is a follows: ‘If a bank fails, it is placed under statutory management and closed. If losses cannot be covered by shareholder funds, then a proportion of depositors’ funds are set aside and frozen for the purpose, then the bank reopens.’ That could not be clearer. New Zealand has a bail-in law. The UK and Canada have the same bail-in laws. I ask you again, if the crisis resolution act did not establish bail-in laws, where are ours?

Dr Debelle: As I just said, we have a depositor protection scheme in Australia. Michelle, do you want to add anything to that?

Ms Bullock: No, only that our understanding of the bail-in laws, and I think APRA’s understanding of the bail-in laws, is that they apply to certain hybrid instruments which may be bailed in, not depositors. Depositors have depositor preference and also the Financial Claims Scheme. My understanding, and I think it’s the common understanding, is that bail-in does not apply to deposits in Australia.

Senator ROBERTS: I put it to you that it is our obligation under the G20 agreement to conduct a bail-in if a bank fails, that the 2018 act was specifically written to allow a bank bail-in, and that the wording chosen in the 2018 act was deliberately obtuse to hide that fact.

Dr Debelle: I’d like to confirm that we have depositor protection. You can take this issue up with APRA when they come later on, but that’s the state of play in Australia.Senator ROBERTS: Thank you. I have some more questions to put on notice.

/by

Questioning Australian Prudential Regulation Authority – Debanking

,

De-banking is the process of banks closing accounts for businesses or individuals. All the big banks are now de-banking clients and claiming that this is for Anti Money Laundering reasons, but it is just not true. At our Senate Estimates questions, APRA agreed they had authority in this area and also agreed they were doing nothing about this scandal.

The companies being de-banked are bullion dealers, bitcoin exchanges and cash handling companies working to keep ATMs in clubs and pubs full and so on. All of the companies that have been de-banked that my office has looked at are legitimate, long-established companies that are following the law.

The only explanation for de-banking is this – banks are shutting down their competitors. This is an abuse of their market power that will prevent competition in banking and reduce freedoms Australians enjoy as to the choice of what to do with their own money. This is bank greed and the supposed-regulator the Australian Prudential Regulation Authority are facilitating this by looking the other way.

The Cash Ban Bill produced by Treasury works with the banks by de-banking their rival businesses and then preventing those businesses to move over to cash payments. This effectively puts these banking rivals out of business.

Transcript

Senator ROBERTS: Moving onto the practice known as debanking, is the regulation of debanking practised by the banks your responsibility?

Mr Byres: I don’t know that I can talk about a regulation for debanking. The concern is that various customers no longer get banking services. It’s certainly not a primary issue for APRA. We understand the issue exists. In many cases, it relates to banks being able to comply with anti-money-laundering and counterterrorist-financing regulations.

Senator ROBERTS: That’s where I’d go. Commander Security is an Australian cash security company. It transits cash, and a large part of that is refilling third-party ATMs. So it’s a competitor to the banking cartel. Commander Security is fully AUSTRAC compliant and operates its accounts lawfully. On 14 October 2020, it received a notice from Westpac cancelling Commander Security’s banking accounts effective from 26 October. It has been refused accounts at other banks. Where is the protection of interests of depositors in this process?

Mr Byres: The depositors of the banks themselves are protected. I’m not aware of the specific case that you’re referring to. We’re happy to look at that.

Senator ROBERTS: Let’s look at another one then. Melbourne Gold Exchange sell bullion to retail investors. It is also AUSTRAC compliant and operates legally. It was debanked by Westpac, then the Commonwealth, then the NAB and now cannot get an account anywhere. Would you categorise bullion as a rival store of wealth to  cash in the bank?

Mr Byres: No, I wouldn’t actually. I think cash in the bank has a very stable value and bullion does not. But that’s a discussion about investment rather than safety.

Senator ROBERTS: Bullion’s not stable? Okay. The point of this question is simple: banks are debanking businesses that they have decided are an unacceptable risk. When my office looks at these businesses, they are bullion dealers, non-bank companies providing rival services to the banks, like Commander Security, and bitcoin exchanges. APRA appear to be turning a blind eye to Australian banks debanking their rivals. Can you explain that?

Mr Byres: I don’t think we’re turning a blind eye to it. We understand the issues there, but banks are making decisions based on their risk profile as to whether they want to take on the risk associated with some of these customers. Clearly what we have seen in recent times is that the penalties for getting it wrong are significant. That’s not to condone the banks but to simply make the point that they’re taking it very seriously.

Senator ROBERTS: When the Melbourne bullion company was debanked, Westpac debanked not only the accounts but also the private accounts of the owners and the private accounts of their employees. APRA is responsible for protecting the financial interests of depositors. Does APRA consider this acceptable behaviour?

Mr Byres: Just to be clear, our obligation to depositors is not a consumer protection obligation, it’s making sure that people get 100c in their dollar—

Senator ROBERTS: I think you’re also responsible for making sure that there’s adequate competition.

Mr Byres: We have to be mindful for competition, but we don’t have a mandate to promote or establish competition. We have to deliver safety and soundness having regard to a range of other factors: competition, efficiency, ability and competitive neutrality. But we’re not primarily a competition regulator.

/by

Questioning Australian Prudential Regulation Authority (APRA) – Bail in Laws

,

Bail-in measures are designed to inject capital into a bank that gets into trouble. The bank is authorised by the corporate regulator – APRA to take money out of the bank accounts of depositors and to use that money to pay their own bills. The depositor loses their money but does get shares in the bank, which will be worthless, but may come good years down the track if the bank doesn’t go broke.

APRA maintain that the emergency banking measures passed in 2018 by the Turnbull Government did not include a bail-in power. Further, if they used the general powers in that act to order a bail-in, that bail-in would be declared “invalid”.

This is because the Banking Act protects deposits. One Nation’s legal advice is that the emergency powers over-rule the general protections in the Banking Act and APRA do have bail-in powers. One Nation have proposed a bill to clear this up by adding one simple paragraph to the Banking Act that says APRA do not have the powers to order a bail-in.

APRA doesn’t want our bill passed because they know they do have bail-in powers and don’t want us to take them away. This round of questions did extract an admission that APRA does have bail-in powers, but not for deposits. So at least we are getting a little more honesty out of APRA on this matter. We also spoke about their emergency bank rescue plans.

One Nation feels these plans will show a bail-in is part of the plan. Getting our hands on those plans won’t be easy.

Transcript

Senator ROBERTS: Thank you all for participating tonight. APRA’s submission 197 to the inquiry into our bank anti bail-in bill—and I am slightly paraphrasing—says that APRA does not have the power to direct Australian authorised deposit-taking institutions to bail in a deposit because that would be inconsistent with the objects of the Banking Act, particularly the paramount objective of protecting depositors, and that such a direction would be found to be invalid. Who would find it invalid?

Mr Byres: It could be challenged by anyone who wished to take it before the courts—that would be the answer. Our direction could be appealed to a court.

Senator ROBERTS: That is my understanding, too—that only a court can find an APRA direction invalid. Can I confirm that it is your position that if a bail-in occurs those depositors who have lost some or all of their money must then take their banks to court at their own expense, with millions of dollars in legal expenses, to seek an order declaring the bail-in invalid? They will have very little in the way of funds to fund that because their deposits have been cleaned out.

Mr Byres: Your question is premised on the assumption that there is a bail-in. I think in our correspondence with the committee and in our submission to the committee on this bill we made very clear that our whole purpose is to protect depositors, not to bail them in. A bail in of depositors would be anathema to the way we operate and our statutory purpose. So I think it is a scenario that is entirely hypothetical, because that would not be a direction that we would give.

Senator ROBERTS: The Financial Sector Legislation Amendment (Crisis Resolution Powers and Other Measures) Act 2018 says APRA has a right to enact emergency powers and they are often said to be overruling. Does that emergency directions power have primacy over the general banking directions in section 2A in the Banking Act?

Mr Byres: I’m not sure where exactly you are referring to, but you are right: we have strong powers to deal with an emergency situation where a bank or another financial institution is in severe financial stress. The purpose of that in the case of a bank, to be clear, is to protect the community and depositors.

Senator ROBERTS: The IMF disagrees with APRA on the strength of the section 2A protections. The IMF has stated that:

The new ‘catch-all’ directions powers in the 2018 Financial Sector Legislation Amendment (Crisis Resolution Powers and Other Measures) Bill provide APRA with the flexibility to make directions to the ADIs that are not contemplated by the other kinds of general directions listed in the Banking Act.

If the IMF are correct, you do have bail-in powers. Is the IMF wrong?

Mr Byres: The bail-in powers that we have relate to capital instruments. Again as we put in our submission to this committee when it conducted its inquiry into that bill, the objective is very clearly to have bail-in for subordinate capital instruments. That act and, in particular, the sections of that act which attracted a lot of attention were designed to make sure that there was legal certainty and that the contractual arrangements that are in those subordinated debt and hybrid instruments would work in this.

Senator ROBERTS: Our bill simply clarifies that you do not have bail-in powers, which is what you’re  telling me here today. Why are you opposing our bill when it does nothing more than clear up what the law is saying that you say it is?

Mr Byres: Sorry, Senator. We do have bail-in powers. They relate to certain specific instruments. As the law currently applies to banks, it applies to their subordinated debt or, in the jargon of the bank supervisor, tier 2 capital, and it applies to hybrid capital instruments or additional tier 1 capital. So we do have bail-in power. It was designed to give legal certainty to the bail-in of those instruments if needed. It does not apply to deposits.

Senator ROBERTS: Our bill simply clarifies that it doesn’t apply to deposits, so why would you oppose it? It doesn’t stop the bail-in of other funds, appropriately, but it would stop the bail-in of deposit funds: cheque accounts, savings accounts, small business accounts, private accounts. That’s all it does, so it’s agreeing with you. Why would you oppose it?

Mr Byres: The view we put in the submissions was that it was not necessary because we thought the current law was adequate.

Senator ROBERTS: It doesn’t change anything for you; it complies with what you just stated. I can’t understand why you’d oppose it. It makes two minor changes that are in line with what you’re saying.

Mr Byres: As we said in our submissions, we didn’t think it was necessary.

Senator ROBERTS: Okay. APRA’s 2018 paper titled ‘Increasing the loss-absorbing capacity of authorised deposit-taking institutions to support orderly resolution’ states:

APRA will need to work with ADIs on an ongoing basis to ensure adequate resolution plans are developed and maintained. These plans—

supposedly—

outline how APRA would use its powers to manage the orderly failure of ADIs and identify steps that can be taken to remove barriers to achieving effective resolution outcomes.

Have those plans been drawn up? If so, what are they?

Mr Byres: I’ll start, and then I’ll see if my colleague Mr Lonsdale wants to jump in. One of the things we have to do is prepare for the unexpected. We can never provide a guarantee that a bank—or, for that matter, an insurer or another type of financial institution—won’t get into financial difficulty. We need to have crisis plans, like contingency plans, drawn up for how we would respond in the unlikely—and I stress ‘unlikely’—scenario that a bank was close to failing or was failing. The sorts of plans that we have—we’ve just stepped through what actions we might be able to take and how we would achieve an orderly outcome, but, as I’ve said many times already in my answers to your questions, this is with a view to protecting depositors.

Senator ROBERTS: Just to interrupt there: you said the plans would be drawn up. Have they been drawn up is what I asked?

Mr Byres: We have plans drawn up, yes, but they could always be improved. The institutions themselves are constantly evolving and changing, so the plans always need to be updated to make sure they continue to be current.

Mr Lonsdale: I would just add that this has been a big priority for us this year. In fact, the government has provided APRA with some funding in the budget. A significant portion of it focused on recovery and resolution development, so, as Mr Byres said, there’s a lot of work in continually keeping the plans updated and making sure they’re operationally fit for purpose.

/by