THE Australian Retailers Association (ARA) said December trade figures released by the Australian Bureau of Statistics (ABS) represents a reputable Christmas trade with a 2.75 percent total year-on-year growth in 2018, compared to 2.49 percent in 2017. 

While media commentary will inevitably focus on the -0.38 percent drop in month-on-month figures, Russell Zimmerman, executive director of the ARA, said retailers focus on the more representative year-on-year numbers, which more accurately reflect the seasonality of retail trading. 

Mr Zimmerman said although the ARA and Roy Morgan predicted a 2.9 percent increase in pre-Christmas sales from November 9 to December 24, 2018, the year-on-year figures released today are close to the estimated sales forecasted in November for December. 

“Although the month-on-month figures from the ABS display a conservative December trade, retailers tend to focus on year-on-year growth for a more concise depiction of how their stores are faring,” Mr Zimmerman said.

“Each year the ARA and Roy Morgan work together to produce the only professionally industry researched Christmas predictions in Australia, and we believe the figures released today are broadly in line with the figures forecasted in November.”

December saw the industry record impressive year-on-year growth across the Food retailing category at (3.98%), while Cafes, Restaurants and Takeaway (2.92%), Clothing (3.21%), Pharmacy/Cosmetics (5.03%) and Other retailing (7.84%) also showed a substantial increase. 

“Food retailing performed exceptionally well this season, with specialised food in particular posting a 3.1 percent year-on-year growth, while Other retailing proved to be the real standout for this month,” Mr Zimmerman said. 

“Pharmacy and Cosmetics was a real highlight in the December figures as expected, fragrances, bath and body products and cosmetics gifts proving popular again in the lead-up to Christmas.”

While department stores recorded a 0.53 percent year-on-year jump, weakness in the Electrical (-2.9%), Newspapers and Books (-6.31%) and Recreational Goods (-4.81%) categories were sobering. 

“Although these figures are disappointing, it is important to note that there are a variety of factors that have contributed to these soft figures, including the decrease in consumer sentiment caused by rising household costs and low wage growth, which continues to plague the industry and overall economy.” 

Across country, Tasmania (4.66%), the Australian Capital Territory (4.61%) and Victoria (4.50%) led the charge with the strongest year-on-year growth, while Queensland (3.47%), New South Wales (1.73%) and Western Australia (1.23%) recorded respectable growth. Unfortunately, South Australia (0.87%) was flat and the Northern Territory (-1.50%) received negative figures in December.

“Tasmania, Victoria and Queensland have remained fierce contenders across the States and Territories, showing consistent and reliable year-on-year growth for the 2018 calendar year,” Mr Zimmerman said.

“It is pleasing to see that Western Australia has shown its strongest year-on-year growth this month since July 2017, which is a promising preview for trade into 2019, while the upcoming New South Wales election may have also contributed to their results.”

On a bright note, the retail industry recorded an average year-on-year growth of 3 percent for the 2018 calendar year, compared to 2.76 percent for the previous year, on the back of a significant improvement for the apparel category.

“Despite the ominous commentary announced by multiple media outlets regarding a subdued Christmas trade, today’s figures prove that there has been reasonable growth across some categories,” Mr Zimmerman said.

“The consumer-led nature of the Australian retail sector signals the importance of strong, accurate leadership and the ARA is the only retail association constantly working to move retail forward.”

Monthly Retail Growth (November 2018 – December 2018 seasonally adjusted) 

Cafés, restaurants and takeaway food services (1.07%), Food retailing (0.53%), Other retailing (-0.10%), Department stores (-1.09%), Clothing, footwear and personal accessory retailing (-2.36%) and Household goods retailing (-2.82%).

Western Australia (0.12%), Queensland (-0.15%), Tasmania (-0.16%), South Australia (-0.25%), Northern Territory (-0.35%), Victoria (-0.52%), New South Wales (-0.55%) and Australian Capital Territory (-1.80%).

Total sales (-0.38%).

Year-on-Year Retail Growth (December 2017 – December 2018 seasonally adjusted)

Other retailing (4.25%), Food retailing (3.98%), Cafés, restaurants and takeaway food services (2.92%), Clothing, footwear and personal accessory retailing (2.38%), Department stores (0.53%), and Household goods retailing (-0.54%).

Tasmania (4.66%), Australian Capital Territory (4.61%), Victoria (4.50%), Queensland (3.47%), New South Wales (1.73%), Western Australia (1.23%), South Australia (0.87%), and Northern Territory (-1.50%).

Total sales (2.75%).

About the Australian Retailers Association:
Founded in 1903, the Australian Retailers Association (ARA) is Australia’s largest retail association, representing the country’s $310 billion sector, which employs more than 1.2 million people. As Australia’s leading retail peak industry body, the ARA is a strong pro-active advocate for Australian retail and works to ensure retail success by informing, protecting, advocating, educating and saving money for its 7,500 independent and national retail members throughout Australia. For more information, visit www.retail.org.au or call 1300 368 041.

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THE Financial Services Council (FSC) has released a statement on the final report of the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry.

“The Financial Services Council welcomes the release of the Royal Commission’s Final Report,” FSC CEO Sally Loane said today. 

“Financial services is Australia’s largest industry sector, employing 450,000 people and managing almost $3 trillion of consumers’ savings.

“It must be free of misaligned incentives, mismanagement and poor governance, and focused solely on protecting the savings and growing the wealth of all Australians. Our financial services system must also be efficient and competitive.

“With the release of the final report and the Government’s response, we can now move even faster to repair the sector’s damaged reputation and ensure that consumers are able to trust each and every one of the people, products and services in our sector.

“Today all of us have an opportunity to rebuild the trusted relationship and the ties between financial services and the community that were once a bedrock of Australian life.

“We acknowledge it will take significant time and effort, and cultural change to effect thorough reform.

“Now we need to get on with the task of strengthening Australia’s financial services industry for the future so that we never end up in this situation again.”

The FSC strongly endorses the following recommendations, including:

• A person should be defaulted once into a superannuation account (rec 3.5)
• Retention of the twin peaks regulatory model (rec 6.1)
• Greater clarity around the co-regulation of superannuation by APRA and ASIC (rec 6.3)
• Industry wide reference checking of financial advisers (recs 2.7); and
• Regular reporting of serious compliance concerns to ASIC.
• Entities having a stronger focus on culture and governance (recs 5.6, 5.7)

There are number of recommendations and Government proposals which require further consideration and discussion with government and regulators. These include:

• An industry funded Compensation Scheme of Last Resort (Rec 7.1) This will only work if the underlying licensing system is strengthened to ensure licensees meet their obligations. We support stronger professional indemnity and capital requirements for licensees. These should be in place before any further consideration of a scheme of last resort. If this is not done it may even encourage inadequate products and services coming into the market that lead to poor consumer outcomes.

• Extension of the BEAR regime to all APRA regulated financial services institutions and extending it to non-prudentially regulated financial services firms (rec 6.6). While we agree with the Commission that there should be appropriate consultation on any extension, we would like to see how BEAR works for ADIs in practice before we consider any extension to the existing regime.

“The FSC will continue to consider the report in the coming days.”

www.fsc.org.au

About the Financial Services Council

The Financial Services Council (FSC) is a leading peak body which sets mandatory Standards and develops policy for more than 100 member companies in Australia’s largest industry sector, financial services. Full Members represent Australia’s retail and wholesale funds management businesses, superannuation funds, life insurers, financial advisory networks and licensed trustee companies. Supporting Members represent the professional services firms such as ICT, consulting, accounting, legal, recruitment, actuarial and research houses. The financial services industry is responsible for investing almost $3 trillion on behalf of more than 14.8 million Australians. The pool of funds under management is larger than Australia’s GDP and the capitalisation of the Australian Securities Exchange, and is the fourth largest pool of managed funds in the world.

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SCOTTISH PACIFIC CEO Peter Langham has commented on the 76 recommendations of the Hayne Royal Commission that the Government has said it will implement, and their potential impact on the SME sector and brokers.

BROKER REMUNERATION

"We have real concerns over the drastic changes flagged for the residential broker sector," Mr Langham said. "We work closely with commercial brokers to organise funding for thousands of SMEs - while the Royal Commission recommendations focus on residential brokers, we are concerned about the impact this will have on the viability of the whole broker sector and consequently on small and medium business owners.

"Adding a broker fee for service is likely to be detrimental to anybody who can't get funding from the banks. Brokers play a major role in putting non-bank lending alternatives to their clients, providing real solutions for business owners when the banks can’t or won’t lend to them.

"Fee-for-service is likely to drive borrowers straight to those with the biggest advertising budget.

"Brokers have helped drive lending competition and increased the visibility of non-bank lenders – Australia’s ability to provide diverse lending options for consumers and SMEs could go backwards if the fee for service is implemented. Whatever happens to brokers will be critical to the whole consumer and SME lending space. 

"Brokers provide an essential service for anyone looking for help finding the right funding solution, whether they want a home loan, a way to finance a piece of essential equipment, or a working capital facility that allows their business to grow. Without the independent broker, the consumer might lack the ability to see all the options open to them and end up picking funding that isn’t right for them."

SME SECTOR

"Treasurer (Josh) Frydenberg points out that affordable access to finance is critical to the economy," Mr Langham said. "The success of the SME sector is vital for the economy. It’s important that the changes flagged in today’s Royal Commission report don’t negatively impact the flow of funding for SMEs.

"To keep SME funding flowing, there should be broad business and political sector support for promoting viable alternatives to the banks that are available for small business funding. Scottish Pacific has teamed with ASBFEO to work on a guide to small business lending to be widely distributed later this year, so that more business owners – and vitally, the accountants, brokers and business consultants who advise them – know where to turn to and what their options are. Ideally, we'd like the banks to hand out this guide to their business customers so that if the banks turn down a loan, the business owner knows their other options.

"Small business owners must be prepared to seek out alternative financiers to the banks - there are a range of funding options already available to them if they look beyond the banks. Interest in alternatives is already increasing – Scottish Pacific saw a doubling in SME funding enquiries in December 2018, compared to the previous year. Business owners are looking to do things differently, in light of the Royal Commission," he said.

"Australia’s cooling property market, along with more stringent lending conditions introduced due to the Royal Commission, will definitely impact SME owners who need to use their home as security for their business loan," Mr Langham said.

www.scottishpacific.com

About Scottish Pacific

Scottish Pacific is Australasia’s largest specialist working capital provider for SMEs. For more than 30 years Scottish Pacific has lent to small, medium and large businesses with revenues ranging from $500,000 to more than $1 billion.

INDUSTRY Super Australia (ISA) said the Banking Royal Commission has shone a welcome light on serious conflicts within the financial services system and validated the important role industry and other profit-to-member super funds play in safeguarding Australians’ retirement savings.

ISA said the Royal Commission’s final report had correctly diagnosed the root causes finding: “in almost every case the conduct in issue was driven by the relevant entity’s pursuit of profit but also by individuals’ pursuit of gain…” (p1 Volume 1).

ISA said the structure of industry and other profit-to-member super funds has avoided such conflicts resulting in scarce evidence of misconduct or conduct falling below community expectations.

"However in assessing the recommendations they appear to stop short of systemic reforms suggested by some to address conflicts of interest at the heart of most misconduct," the ISA said.

"Instead, the report has opted for a series of changes to existing laws and stronger enforcement.

"Taken as a whole the proposed changes should in most cases lead to better outcomes for consumers but only time will tell whether ongoing conflicts of interest and remuneration settings will result in problems re-emerging.

"Turning to the specific recommendations on super, ISA agrees they should improve outcomes by prohibiting unsolicited sales of super, stronger penalties for trustees, annual renewal of advice fees and ceasing grandfathered commissions to stop fee for no service gouging.

"Industry super funds also support steps to reduce multiple accounts and development of mechanisms such as automatic rollover to prevent more than one default account being created for members.

"Surprisingly the final report does not appear to recommend any specific prosecution action arising from the evidence and case studies it explored. It would appear it is in the hands of ASIC to determine if misconduct is pursued through the courts."

ISA deputy chief executive, Matt Linden, said that by shining a light on the system’s deeply entrenched problems, the findings could prove the vital catalyst for long overdue reform. 

“That not-for-profit industry superannuation funds have emerged from the process relatively unscathed, is vindication of our governance structure and member-first ethos,” Mr Linden said.

“As a whole, the system must be more transparent and more accountable – it shouldn’t take a Royal Commission for workers to see whether their retirement savings are in safe hands or not.

 “The onus is now on the Parliament and industry to ensure superannuation works in the best interest of fund members – not that of shareholders or bank executives,” Mr Linden said.

Industry Super Australia provides policy, research and advocacy on behalf of 16 not-for-profit industry superannuation funds with around six million members.

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AFCA chief executive and chief ombudsman, David Locke said, “AFCA welcomes the recommendations in Commissioner Hayne’s final report and the Government’s response. We believe these measures are critical to ensuring that consumers and small businesses are treated fairly.”

Specifically, AFCA noted Commissioner Hayne’s recommendation and the Government’s response on the establishment of a compensation scheme of last resort.

“AFCA and its predecessor schemes have long advocated for the establishment of a compensation scheme of last resort,” Mr Locke said.

“A compensation scheme of last resort is a really important back-stop that ensures that people who have been the victims of misconduct, and lost out through no fault of their own can finally be properly compensated. We look forward to working with the government to implement this important reform,” Mr Locke continued.

AFCA was established on November 1, 2018 and is a one-stop-shop that consumers and small business owners can use free of charge, for fair, independent and effective solutions to their financial disputes.

“The announcement from the Government today that AFCA will now be able to consider some of the legacy disputes excluded by the predecessor schemes going back to January 1 2008, means that many more people will be able to get access to justice and have their matters properly considered. This is a really positive step for consumers and we will be issuing guidance shortly to assist people to bring these disputes to us,” Mr Locke said.
 
AFCA also welcomed the Commissioner’s recommendation in respect of section 912A of the Corporations Act 2001, to require that Australian Financial Services Licence holders take reasonable steps to cooperate with AFCA in its resolution of complaints, by making available to AFCA all relevant documents and records relating to issues in dispute. This will enhance AFCA’s effectiveness as an independent external dispute resolution scheme for consumers and small businesses.

The Government announced that AFCA will also play an increased role in relation to remediation schemes that are run to compensate consumers. Mr Locke also welcomed this: “AFCA already has considerable experience of working on remediation schemes, and where we are involved at an early stage we are able to ensure that these are designed and implemented in a way that delivers fair outcomes for consumers. We welcome an increased role in this important work.

"AFCA will continue to work with our members to improve standards and minimise disputes, improving practices and achieving fair, timely outcomes for consumers and small businesses.

"AFCA is firmly on the side of fairness and we believe that ensuring fair outcomes for consumers is a critical first step to rebuilding trust and confidence in financial services."

A full statement can be found on the AFCA website: https://www.afca.org.au/news/latest-news/afcas-response-to-the-royal-commission-final-report/.

 
About AFCA
The Australian Financial Complaints Authority (AFCA) is a free and independent ombudsman service that resolves complaints by consumers and small businesses about financial firms. AFCA was established following the 2016 Ramsay Review into how Australia’s external dispute resolution framework could be improved to deliver effective outcomes for all Australian consumers and small business. On 1 November 2018, AFCA replaced the Financial Ombudsman Service, the Credit and Investments Ombudsman and the Superannuation Complaints Tribunal as the one-stop-shop for financial dispute resolution. Consumers and small businesses can lodge a complaint to AFCA online at afca.org.au, via email to This email address is being protected from spambots. You need JavaScript enabled to view it. or by phoning 1800 931 678.

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GREATER consumer protections, increased penalties for law breakers, expanded enforcement powers for regulators and industry-wide legislative simplification are among sweeping changes recommended by the Royal Commission into the Banking and Financial Services Industry.

The Law Council of Australia has welcomed the recommendations, which will have a far-reaching impact on the banking and financial services sector, ensuring consumers are treated fairly and honestly, in accordance with key principles of the law.

Law Council President, Arthur Moses SC, said the Royal Commission had shone a light on misconduct – some potentially criminal – in the banking and financial sectors, providing a unique and important opportunity for reform and renewal.

“Australians were rightly shocked by some of the stories heard during the extensive Royal Commission hearings – of profit being put before people and in some instances the rule of law,” Mr Moses said.

“The recommendations put forward by Commissioner Kenneth Hayne have placed consumers first and established a roadmap with the potential to set the path straight into the future, ensuring banks and those providing financial services are held to account.

“Central to the Law Council’s submission was the call for simplification of complex laws, making them easier to understand and administer and we are pleased by the recommendations supporting this shift.

“The ‘clear need’ for the disadvantaged to access financial and legal assistance to deal with disputes on equal footing with large financial entities was highlighted in the final report.

“Many of the cases before the Royal Commission involved matters where individuals were unable to pursue their rights because of an inability to access legal assistance. This resulted in injustices occurring and wrongdoers going undetected.

“We reiterate our calls for the Federal Government to ensure predictable and stable funding for the legal assistance sector, so all Australians can access justice,” Mr Moses said.

The Law Council summed up the recommendations as:

Changes designed to protect consumers, meaning

• banks would be prohibited from paying commissions to mortgage brokers, which would be paid by home loan borrowers;
• brokers failing to 'act in the best interests of the intending borrower' would be liable to civil legal action;
• prior to giving advice financial advisers will be required to disclose conflicts of interest in a written statement; and
• a compensation scheme of last resort for those with a 'viable claim' would be established in congruence with a government-appointed panel reviewing external dispute resolution and complaints arrangements. 

Increased penalties for those breaking the law, including

• criminal penalties for financial services and credit licensees for failure to report a contravention as and when required;
• the introduction of additional civil penalties for financial services and credit licensees for failure to report a contravention as and when required;
• breaches of industry codes of conduct would constitute breaches of law; and
• civil penalties for breaches of superannuation trustees’ and directors’ covenants set out in the Superannuation Industry (Supervision) Act 1993.

Expanded enforcement powers, meaning

• ASIC should first consider the viability of court action before other enforcement tools such as infringement notices or enforceable undertakings;
• the establishment of a new disciplinary body for financial advisers, requiring registration, reporting of “serious compliance concerns”, and allowing reporting by clients and other stakeholders;
• ASIC would become the conduct regulator for the superannuation industry; and
• ASIC enforcement staff would be required, where possible, to avoid informal contact with members of the banking and financial services industry.

The Law Council noted that measures to simplify existing law require clearly definition of generally applicable norms of conduct to ensure the removal of exceptions and qualifications in law are appropriate. 

"We reiterate our recommendation for a referral to the Australian Law Reform Commission to develop propositions for simplification and related matters," a Law Council spokesperson said.

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THE Financial Planning Association of Australia (FPA) is currently examining the findings of the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry, and intends on working proactively with the government to address its recommendations.

The final report highlights the need for strong consumer protection and oversight that build trust in the financial planning profession. The FPA acknowledged the examples of poor advice and misconduct identified by the Royal Commission were of deep concern and must be resolutely
addressed.

FPA CEO, Dante De Gori said, “The FPA is committed to a better outcome for people that have not received professional, sound and ethical financial advice. People want to know who they can trust with their money; they deserve trusted and transparent financial advice that is unequivocally in their best interests as the client.

“The FPA expects its 14,000-plus members to demonstrate the highest standards of conduct and ethical practice, and of course abide by every relevant letter of the law. We provide a wide range of ongoing opportunities for our members to learn, improve and advance in their
professional capabilities and knowledge for the benefit of their clients.

“We will continue working with our members towards further improving education and professional standards of financial planners. We have recently conducted a voluntary internal audit of our Conduct Review Commission disciplinary processes and made them more transparent.

"Reflecting Commissioner Hayne’s concerns, a separate legal entity has been established called Code Monitoring Australia to ensure true disciplinary independence.

“We believe change in the financial planning profession will ultimately result in better outcomes for all Australians,” said Mr De Gori. “It is our objective to help create the environment that will enable all Australians achieve a more secure financial future.

"It will take time to review and absorb the full implications of this final report, but in principle, the FPA is committed to working cooperatively with the government and its current and future representative bodies to support the growth of our profession for the benefit of consumers,” Mr De Gori said.

www.fpa.com.au

About the FPA

The Financial Planning Association of Australia (FPA) represents the interests of the public and Australia’s professional community of financial planners. The Association is unrivalled in its reach of the financial planning market, influence on government and regulators, standards set
through a world-class Code of Professional Practice, unique position as the certification body in Australia for the global Certified Financial Planner designation, and reputation for quality professional development. With a growing membership of more than 14,000 members and affiliates, the FPA is home to Australia’s 5,700 CFP® professionals. Building on a 20-plus year legacy, the FPA represents the changing face of the financial planning profession.

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“THE VOLUME of new apartment building is smaller than at any time since July 2012,” according to Master Builders Australia’s chief economist Shane Garrett. 

Just released figures from the ABS show that new home building approvals lost another 8.4 percent during December 2018. Detached house approvals were down by 2.1 percent but approvals for new apartments/units dropped by 18.6 percent during the month. 

“Today’s ABS figures complete the full 12-month picture for 2018. For the year overall, the volume of new home building approvals was pretty strong with over 212,000 permits issued for new dwellings. This was down only modestly (-5.6%) compared with the 2017 total,” Shane Garrett said. 

“More worrying is the pace at which approvals have been falling back over more recent months. During the final three months of 2018, total approvals were 23.7 percent lower than a year earlier – with apartment approvals suffering a 40.1 percent reduction over this period.

“Faltering new home building activity has been occurring against the backdrop of falling house prices, the Royal Commission’s work and uncertainty about what housing policy will look like after May’s Federal Election,” Mr Garrett said. 

“Clearing up some of these uncertainties would help get the housing market back on its feet." 

During December, new dwelling approvals increased in three markets including South Australia (+5.6%), the Northern Territory (+1.7%) and Western Australia (+1.1%).

The largest reduction in approvals hit Tasmania (-24.3%) followed by the ACT (-21.3%). The volume of approvals also declined in New South Wales (-8.6%), Victoria (-8.1%) and Queensland (-5.8%).

www.masterbuilders.org.au

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