Victorian Government response
to Victorian Competition and
Efficiency Commission’s
Final Report
December 2011
An inquiry into regulatory impediments
in the financial services sector
Victorian Government response to Victorian Competition and Efficiency Commission’s Final Report
An inquiry into regularory impediments in the financial services sector
i
The Secretary
Department of Treasury and Finance
1 Treasury Place
Melbourne Vic 3002
Australia
Telephone: +61 3 9651 1111
Facsimile: +61 3 9651 5298
Website: www.dtf.vic.gov.au
Authorised by the
Victorian Government
1 Treasury Place, Melbourne
© Copyright State of Victoria 2011.
This publication is copyright.
No part may be reproduced
by any process except in
accordance with the provisions
of the Copyright Act 1968.
ISBN 978-1-921831-47-8
Published December 2011.
Victorian Government response to Victorian Competition and Efficiency Commission’s Final Report
An inquiry into regularory impediments in the financial services sector
Foreword
The Victorian Government welcomes On Sound Commercial Terms, the final report of the
inquiry into regulatory impediments in the financial services sector by the Victorian
Competition and Efficiency Commission (VCEC).
The VCEC confirmed that the financial services sector is a major contributor to the State’s
economy – the largest industry sector in Victoria in terms of output – and, importantly, is an
enabler for other economic and social activity.
The Coalition Government’s productivity and competitiveness agenda will support the
financial services industry to expand and further strengthen Victoria’s position as a leading
financial services hub in Australia and the Asia-Pacific region.
The Coalition Government is committed to assisting the financial services industry to
propser and expand their businesses in metropolitan and regional Victoria.
Victoria’s financial services industry has significant growth opportunities to increase delivery
of financial services for the rest of Australia, the Asia-Pacific region and the world. The
Government will work closely with the financial services industry to realise the potential of
these growth opportunities and build the sector’s competitive strengths.
This Government response to the VCEC’s report provides details on some of the ways in
which the Government works to promote the financial services sector. It also identifies a
number of areas for immediate action and a set of broader competitiveness priorities for
ongoing consideration.
The Victorian Government will:
 support the development of an Asia Region Funds Passport to assist in reducing barriers
to Victorian fund managers providing services in Asia, and offer assistance in facilitating
international business development (VCEC Recommendation 3.1);
 engage with the sector and the Commonwealth on the importance of implementation of
changes to the Investment Manager Regime, with a particular focus on the practical
realities of accessing the benefits (VCEC Recommendation 3.3);
 assess the viability of Islamic finance concepts in the Victorian financial services market
(VCEC Recommendation 4.2);
 work to gain Victoria greater prominence in national promotions of the sector through
Austrade (VCEC Recommendation 4.3);
 initiate a pilot financial services sector industry capability survey to identify employment
opportunities and skill shortages (VCEC Recommendation 4.4);
 investigate the feasibility of establishing a small pilot targeted at postgraduate students
in occupational areas that are in high demand by the financial services sector (VCEC
Recommendation 5.5);
 encourage the take-up of training across the sector, showcasing successful outcomes
from the Upskilling Demonstration Project (VCEC Recommendation 5.6); and
 promote and facilitate the development of industry advisory mechanisms to tertiary
education institutions (VCEC Recommendation 5.8).
Victorian Government response to Victorian Competition and Efficiency Commission’s Final Report
An inquiry into regularory impediments in the financial services sector
1
The implementation of these initiatives will provide valuable support to the Victorian
financial services sector as it takes advantage of growth opportunities and enhance the
sector’s flexibility to respond to opportunities.
The Report makes a valuable contribution to Victoria’s competitiveness and productivity
agenda. The Government thanks the VCEC for its excellent work.
KIM WELLS MP
Treasurer
December 2011
Victorian Government response to Victorian Competition and Efficiency Commission’s Final Report
An inquiry into regularory impediments in the financial services sector
Response to VCEC recommendations
Recommendation 3 Regulation and taxation
Recommendation 3.1
That the Victorian Government support and
encourage the Commonwealth to implement the
recommendations from the Australian Financial
Centre Forum (AFCF) report on removing
regulatory barriers to the growth of funds
management and Islamic finance. This would
mean supporting:
 AFCF Recommendation 4.3: The Asia Region
Funds Passport; and
 AFCF Recommendation 4.8: Removal of
regulatory barriers to Islamic finance.
Response
AFCF Recommendation 4.3: Asia Region Funds Passport
Support
The Victorian Government supports growing the
State’s financial services sector through
improving efficiency, competitiveness and access
to overseas markets.
Accordingly, the Government recognises the
value of an Asia Region Funds Passport to assist in
reducing barriers to Victorian fund managers
providing services in Asia.
The Government notes that the Commonwealth
Government is progressing this initiative through
APEC.
The Government will advocate its support to the
Commonwealth Government for the
development of the Asia Regional Funds
Passport.
Additionally, when the initiative is implemented,
the Government, through the Department of
Business and Innovation, will encourage Victorian
financial services businesses to take advantage of
the new international opportunities that emerge
from these reforms.
AFCF Recommendation 4.8: Removal of regulatory
barriers to Islamic finance
Support in principle
The Government will review actions that can be
taken pursuant to the Commonwealth
Government’s response to the recently
completed Review of the Taxation Treatment of
Islamic Finance Products by the Board of
Taxation.
Victorian Government response to Victorian Competition and Efficiency Commission’s Final Report
An inquiry into regularory impediments in the financial services sector
3
Recommendation 3.2
Response
That the Victorian Government support further
harmonisation of regulation of the standards and
conditions covering mandatory insurance
requirements on the national Council of
Australian Governments (COAG) agenda when
future COAG priorities are being identified.
Support in principle
The Government recognises that there are
significant differences between jurisdictions with
respect to mandatory insurance requirements
and that these differences generate costs for
businesses operating in more than one
jurisdiction.
In many cases these differences have emerged in
circumstances unique to individual states and
territories.
Victoria will only consider the feasibility of
harmonisation within the context of maintaining
the effectiveness of regulations that apply in
Victoria.
Recommendation 3.3
That the Victorian Government support and
encourage the Commonwealth to implement the
recommendations from the Australian Financial
Centre Forum (AFCF) report on clarifying and
reforming the tax treatment of funds
management and Islamic finance. This would
mean supporting:
 AFCF Recommendation 3.1: Investment
Manager Regime;
 AFCF Recommendation 3.3: Funds
management vehicles; and
 AFCF Recommendation 3.6: Islamic finance
products.
Response
AFCF Recommendation 3.1: Investment Manager
Regime
AFCF Recommendation 3.3: Funds management
vehicles
Support
The Victorian Government notes that, on 16
August 2011, the Commonwealth Government
announced the release of draft legislation that
would implement part of Recommendation 3.1 of
the AFCF report with changes to the income tax
treatment of investment income of foreign funds
to encourage foreign based funds and investors
to use Australian based fund managers.
Given Victoria’s strength in funds management,
these recommendations could, as identified by
the VCEC, deliver benefits through growth in
funds management activities.
Victorian Government response to Victorian Competition and Efficiency Commission’s Final Report
An inquiry into regularory impediments in the financial services sector
The Government also notes that the Board of
Taxation has recently completed its review for
the Commonwealth Government into other
aspects of this recommendation as well as AFCF
Recommendation 3.3.
Given the significant positive impact
implementation of these recommendations
would have on the State’s financial services
sector, the Victorian Minister for Innovation,
Services and Small Business will engage with the
sector and the Commonwealth on the
importance of implementation. A key aim will be
to ensure that practical realities of accessing the
benefits of the reforms, particularly for boutique
fund management businesses, are fully
understood by the Commonwealth Government.
AFCF Recommendation 3.6: Islamic finance products
Support for Commonwealth review
The Government will review actions that can be
taken pursuant to the Commonwealth
Government’s response to the recently
completed Review of the Taxation Treatment of
Islamic Finance Products by the Board of
Taxation.
Recommendation 3.4
Response
That, in light of the findings of the review of
Australia’s future tax system (Henry Review), the
Victorian Government takes a lead role in
negotiating reduced reliance on specific
transaction taxes, such as stamp duty on
insurance.
Support in principle
The Government recognises that taxes on
insurance can act as a disincentive for businesses
and households to take out insurance.
The Government supported all recommendations
of the Victorian Bushfire Royal Commission,
including replacing the current insurance based
funding model for Victoria’s fire services with a
property levy. Removing the statutory
contributions from insurers will reduce costs for
insurance companies which are currently passed
on to policy holders as a fire services levy on
insurance premiums. The Government has
released an options paper and conducted public
consultations on the design of the property based
levy. The Government intends to introduce
legislation in early 2012. There will be a transition
period that will commence on 1 July 2012 to
allow insurers to phase out the existing
insurance-based levy prior to full implementation
from 1 July 2013.
Victorian Government response to Victorian Competition and Efficiency Commission’s Final Report
An inquiry into regularory impediments in the financial services sector
5
The Government supports national tax reform,
and will advocate Commonwealth-State tax
reforms that are in the long-term interests of
Victorians.
Recommendation 3.5
Response
That, in the absence of the conditions necessary
to achieve a national agreement that facilitates a
significant reduction or elimination of stamp duty
on insurance, the Victorian Government improves
the competitive position of insurance in Victoria
by decreasing the State stamp duty on insurance
to the lowest rate among Australian jurisdictions.
Support in principle
The Victorian Government has directed the VCEC
to conduct an inquiry to identify the main
elements of a State based reform agenda.
The VCEC’s draft report was released in
November 2011. The draft report included a
benchmarking exercise that compares Victoria’s
competitive position with other jurisdictions in
areas including State taxes. Taxation was
identified as a priority area for reform.
A final report and Government response are due
to be completed in 2012.
Recommendation 3.6
Response
That the exemption for land rich duty be changed
so that the criteria set the minimum standards
needed to achieve greater transparency,
consistent treatment of exchanges, and protect
the integrity of the tax base.
Support in principle
The Victorian Government has announced that it
will adopt a landholder model for the application
of duty to indirect acquisitions of land in Victoria.
This will reduce the complexity of taxation on the
indirect transfer of interests in land and bring
Victoria closer into line with other jurisdictions.
As part of the implementation of the new model,
the Government will examine the treatment of
exchange listed entities.
Victorian Government response to Victorian Competition and Efficiency Commission’s Final Report
An inquiry into regularory impediments in the financial services sector
Recommendation 4 Government operations and other matters
Recommendation 4.1
Response
That the Victorian Government encourage and
support applications by suitably qualified
Victorian organisations to access funding made
available in the 2010 Commonwealth budget to
fund a financial services research centre.
Support
The Victorian Government concurs with the
VCEC’s view that having a well recognised
capacity for financial sector research can
contribute significantly to the reputation of
Victoria’s financial institutions and of Melbourne
as a financial centre.
This funding is no longer available.
Recommendation 4.2
Response
That to take a forward looking strategic approach
to identifying innovative markets, the Victorian
Government commission an assessment of the
viability of Islamic finance concepts in the
Victorian financial services market, including:
 identifying potential impediments to Islamic
finance as a source of funding for
infrastructure projects, in particular,
identifying any State policy or procedural
changes that would be necessary to
accommodate such investment; and
 developing the institutional framework to best
support practices and products consistent with
both Australian and Shariah practice.
Support
The VCEC has identified Islamic finance as a
potential opportunity for Victoria and has made a
number of recommendations on this matter: this
Recommendation, 3.1 (part) and 3.3 (part).
The Victorian Government supports the analysis
of the financial services sector to identify the
areas where it could assist more effectively. It
agrees with the VCEC that improving access to
Islamic finance could provide a range of benefits
that would support new investment and improve
Victoria’s productivity and competitiveness.
Consequently, the Government will assess the
viability of Islamic finance concepts in the
Victorian financial services market. This work will
then provide the basis of consideration of future
actions by the Victorian Government.
Victorian Government response to Victorian Competition and Efficiency Commission’s Final Report
An inquiry into regularory impediments in the financial services sector
7
Recommendation 4.3
Response
That to promote the strengths of Victoria’s
financial sector in changing global environment,
the Department of Innovation, Industry, and
Regional Development work with Austrade to
ensure that appropriate weighting is given to the
financial services sector based in Victoria in
national promotional activities.
Support
The Victorian Government agrees with the VCEC’s
view that the State should continue to
collaborate and communicate at a national level
to ensure that appropriate weight is placed on
Victoria’s interests.
Consequently, the Victorian Minister for
Innovation, Services and Small Business will write
to the Commonwealth Minister for Trade
advocating for Victoria to have a clear profile in
national promotions by Austrade and advising
that Victoria, through the Department of Business
and Innovation, will work in a complementary
manner.
Recommendation 4.4
Response
That the Victorian Government, in partnership
with the education sector and industry, promote
the establishment of multi disciplinary national
centre for excellence in infrastructure
development (particularly Public Private
Partnerships (PPPs)) located in Victoria.
Support in principle
A centre for excellence in infrastructure
development, involving academia, industry and
government, could conduct multi disciplinary
research in the infrastructure sector and leverage
Victorian expertise in PPPs. Establishment of such
a centre is likely to benefit Victoria, other
Australian jurisdictions, and industry more
broadly, but would require financial support from
a number of key stakeholders.
Victorian Government response to Victorian Competition and Efficiency Commission’s Final Report
An inquiry into regularory impediments in the financial services sector
Recommendation 5 Skilled labour
Recommendation 5.1
Response
That the Victorian Government publishes the
results of the mid-term review of the reforms to
Victoria’s training system, and further evaluate
the reforms after they are fully implemented,
with the results of the evaluation being
published.
Support in principle
Several reviews of the training system have been
undertaken following skills reform.
In August 2010, the previous government
released the 2010 review of the implementation
of Securing Jobs for Your Future – Skills for
Victoria conducted by Ernst and Young.
The Government publishes quarterly reports on
the Victorian Training Market. These reports
present an ongoing analysis of the key features,
responsiveness and emerging market trends in
the training market.
A review by the Essential Services Commission
(ESC) of vocational education and training fee and
funding arrangements in place following the
implementation of skills reform was
commissioned by the Government in 2011.
The ESC’s report was publicly released in October
2011 and an Expert Panel carried out a public
consultation process during October and
November 2011.
The Expert Panel’s final report will also be a
public document.
These reports will inform government
deliberations regarding the future shape of the
system.
Recommendation 5.2
That the Department of Innovation, Industry, and
Regional Development improve the usefulness
and reliability of the information collected on the
financial services sector by the Workforce
Victoria skills surveys, including by:
 identifying the likely uses of the surveys;
 clarifying the purpose of the surveys;
 addressing methodological issues (including
considering increasing the sample size and
frequency of surveys); and
 reframing some survey questions to obtain
quantitative estimates of skill shortages.
Victorian Government response to Victorian Competition and Efficiency Commission’s Final Report
An inquiry into regularory impediments in the financial services sector
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Response
Support
In Recommendations 5.2, 5.3 and 5.7, the VCEC
has identified the need for participants to be well
informed about skills needs, training options and
employment opportunities.
The Victorian Government agrees that it is
important to have high quality and timely
information about future skills and labour needs
in the financial services sector.
Workforce Victoria’s Regional Skills and Labour
Needs Surveys undertaken by the previous
government are not comprehensive (it did not
include Melbourne) or detailed enough to
provide the required data for the financial
services sector.
Consequently, the Government will initiate an
industry survey that includes a focus on the
financial services sector that will identify
employment opportunities, skills shortages and
employment and training forecasts. However, the
Government expects that as the market for
Vocational Education and Training matures, there
will be less need for government facilitation.
The initiative will be managed by the Department
of Business and Innovation in close consultation
with financial services employers and the
Department of Education and Early Childhood
Development.
Recommendation 5.3
Response
Recommendation 5.4
That the Department of Innovation, Industry, and
Regional Development prepare and publish, as
soon as is practicable, employment and training
forecasts for the financial services sector in
Victoria, and establish a practice of updating and
publishing forecasts at least annually using the
latest available information.
Support
Response as for Recommendation 5.2.
That the Victorian Government, through its
representative on the Australian Statistics
Advisory Council, report the limitations of the
Australian and New Zealand Standard
Classification of Occupations in the financial
services sector, and seek, as a matter of urgency,
the updating of classifications in that sector to
reflect current occupations.
Victorian Government response to Victorian Competition and Efficiency Commission’s Final Report
An inquiry into regularory impediments in the financial services sector
Response
Support
The Victorian Government will write to the
Chairperson of the Australian Statistics Advisory
Council suggesting that the Council may wish to
request that the Australian Bureau of Statistics
update financial services classifications in the
Australian and New Zealand Standard
Classification of Occupations.
Recommendation 5.5
That the Department of Innovation, Industry, and
Regional Development develop and conduct a
small scale, one year trial and evaluation of an
internship scheme involving universities and a
sample of employers in Victoria’s financial
services sector, in order to establish the benefits
and costs of key design options.
Support in part
The Victorian Government notes the VCEC’s
support for the State trialling an internship
scheme to increase the work readiness skills of
students to gather information on its benefits and
costs.
Response
The Government will investigate the feasibility of
establishing a small pilot targeted at
postgraduate students in occupational areas that
are in high demand by the financial services
sector. It will be managed by the Department of
Business and Innovation, in consultation with
tertiary education institutions, key financial
services employers and the Department of
Education and Early Childhood Development.
This work will be carried out in conjunction with
the industry advisory mechanisms supported
under Recommendation 5.8.
Recommendation 5.6
Response
That, to assist businesses in making training
decisions, Business Skills Victoria (BSV) develops
representative business cases including expected
benefits, costs and returns and comparison with
other training, for those qualifications in the
Financial Services Training Package that have low
rates of take-up and post those business cases on
BSV’s website.
Support
Skills Victoria is partnering with the Department
of Business and Innovation on a project
promoting training take-up across a range of
Victorian financial institutions, utilising a number
of qualifications from the Financial Services
Training Package to meet the skills needs of these
businesses. Successful outcomes from this
Upskilling Demonstration Project will be
showcased to the industry, including through
Victorian Government response to Victorian Competition and Efficiency Commission’s Final Report
An inquiry into regularory impediments in the financial services sector
11
Business Skills Victoria, to promote to businesses
the benefits of accredited training.
Recommendation 5.7
Response
Recommendation 5.8
Response
Recommendation 5.9
That, to assist current and prospective students
and workers in making training and career
decisions, the Victorian Skills Commission and
Business Skills Victoria publish information in the
consolidated industry information service about:
 the diversity of employment opportunities in
the financial services sector;
 occupations that are forecast to be in shortage
in the medium term future (for example, a five
year outlook); and
 the advantages of the nationally recognised
(accredited) qualifications and training
relevant to the financial services sector.
Support
Response as for Recommendation 5.2.
That, to improve consultation between financial
services employers and higher education and
training providers in Victoria, the Victorian
Registration and Qualifications Authority:
 encourage higher education providers to
strengthen industry advisory committees to
advise on skill needs, qualifications and
curriculum development relevant to the
financial services sector; and
 as part of initial and continuing registration or
as a supplementary audit, monitor and report
on the industry consultation mechanisms used
by higher education and training providers to
the financial services sector and make that
information known to the sector.
Support in part
The Victorian Government agrees with the VCEC
that there is scope to strengthen links and
communication between tertiary education
providers and financial service employers.
However, rather than being the responsibility of
the Victorian Registration and Qualification
Authority as recommended by the VCEC, the
Government, through the Department of
Business and Innovation, will promote and
facilitate the development of industry advisory
mechanisms to tertiary education institutions.
That the Victorian Government propose, in the
Ministerial Council for Tertiary Education and
Employment, that the National Quality Council
amend the conditions of use relating to the
Australian Quality Training Framework Quality
Indicators, which would enable registering bodies
in Australia to publish quality indicators for
individual registered training organisations
(RTOs). Once the conditions of use have been
Victorian Government response to Victorian Competition and Efficiency Commission’s Final Report
An inquiry into regularory impediments in the financial services sector
Response
amended, the Victorian Registration and
Qualifications Authority should publish indicators
for individual RTOs in Victoria on its website in an
appropriate format with interpretative advice.
Support in principle
The Victorian Government supports the principle
of publishing quality indicators for RTOs to better
inform training choices by individuals and
business. The National Skills Standards Council
(which has replaced the National Quality Council)
is planning a broad ranging review of national
standards focused on issues of quality, including
the Australian Quality Training Framework (AQTF)
Quality Indicators and their use. This review will
provide the opportunity for Victoria to encourage
publishing of quality indicators for RTOs.
In the meantime, disclosure requirements
relating to indicative prices and quality indicators
are being introduced in the 2012 contracts for the
delivery of government subsidised training,
including disclosure of performance against the
three AQTF Quality indicators – competency
completion, learner engagement and
employment satisfaction.
Victorian Government response to Victorian Competition and Efficiency Commission’s Final Report
An inquiry into regularory impediments in the financial services sector
13
www.dtf.vic.gov.au
Victorian Government response to Victorian Competition and Efficiency Commission’s Final Report
An inquiry into regularory impediments in the financial services sector