Assistant Treasurer backs brokers as drivers of competition

Mulino framed the role of mortgage brokers within the broader themes of improving consumer outcomes through greater productivity and competition.

“We want productivity, we want competition,” he said.

“That tends to get better outcomes for consumers through lower prices, but also through better product offerings, through innovation, and through firms and advisers and brokers in competitive markets having to tailor their services to meet the particular needs of consumers.”

He argued the increasing use of mortgage brokers - now writing 81 per cent of mortgages in Australia - had strengthened competition by giving borrowers greater access to a broader range of lenders.

“Your members have seen their market share increase substantially and I see that as a really positive aspect to people getting more access to advice and guidance, but also as a pro-competitive measure where we know that a lot of brokers are providing people with options beyond the big incumbents,” he said.

“And so that has been a very positive trend.”

The Financial Services Minister also highlighted the important role brokers play in supporting groups that can find the financial services sector difficult to navigate.

“Some of those advantages come into play in particular for particular cohorts like younger people, first home buyers who are navigating that system for the first time, but also a lot of other people, often elderly people, or people from a background who just struggle with the complexity of the system,” he said.

“I think there [are] the broader benefits of broking and advice, but there [are] also particular benefits for certain cohorts.”

Regulatory reform in focus

Mulino was also questioned about recent regulatory reforms affecting the lending landscape, including changes to negative gearing and capital gains tax (CGT), as well as its decision to remove the ability to borrow through limited recourse borrowing arrangements (LRBAs) in self-managed super funds (SMSF).

In terms of changes to negative gearing and CGT, Mulino said the government was hoping to strike a “more balanced approach” between investors and first-home buyers.

“There were some big structural changes around negative gearing and capital gains tax. We grandfathered all current negative gearing arrangements. But we said moving forward there could only be negative gearing on new builds,” he said.

“We felt that was a way of trying to encourage a more balanced approach to the housing market overall between people trying to buy their first home versus investors while retaining options for investors to negatively gear new builds. And obviously we also changed the CGT arrangements, returning to the old indexation method.”

While acknowledging the scale of the reforms, Mulino said the government expected them to help around 75,000 Australians move from renting into home ownership over the medium term.

“I think a combination of the things that the government’s doing to provide more access to housing for younger and first-home buyers, but also the rise in services available to them and all buyers to see what options are out there in the market… will together be very positive developments,” he added.

On changes to SMSF borrowing, Mulino argued that the issue had been in the public domain for a long time but acknowledged there was a range of views on the decision.

“It [has] been an issue that has been flagged as needing attention and not everybody has landed on the same position on that,” he said.

“But I would reflect, for example, on some recent inquiries which have looked at that, including the Murray review, which landed on a position of saying that it wasn’t appropriate for that kind of borrowing to occur in the super context, given that super should be primarily about building assets for somebody's financial sustainability in retirement.

“I understand this is an issue where there’s a range of views and we will certainly consult on the way that we implemented it.”

Emergence of AI

Mulino was also questioned about the role of artificial intelligence (AI) and innovation in financial services and where the government saw mortgage brokers fitting into that in the future.

The Assistant Treasurer said AI was already being used in a range of productive ways, but added there is a need to make sure regulation adapts to ensure areas such as privacy and other risks are managed at the pace of innovation.

“I think in terms of how brokers, but also other parts of the financial services sector, can work best with government, is that we need to make sure we fully understand the ways in which you're using AI, in which AI can be used to protect from risk, but also to understand from your perspective how these risks.

“Risks are materialising. Obviously regulators have visibility of that, but it’s always good to complement that with the things that you're seeing both directly and also through your clients.”

Amid sophisticated challenges and risk, industry and government need to work closely together to make sure the system is as resilient as possible, according to Mulino, who described the uptake of the consumer data right (CDR) as a prime example.

“Through that, you’re enabling consumers to use their data to their own benefit,” he said.

“You’re enabling consumers to use their data in a safe way to avoid screen scraping and move to a system where ultimately, I think consumers are going to be much more empowered and get better outcomes. You’re also key to competition.”

“I think the rise in the share of mortgage broking in the mortgage market has been key in providing people with more awareness of the choices that they have.”

He added that while productivity and competition are a focus, trust is the most important piece.

“What we need to make sure, I think, is that some of the advisors, the brokers, the people that play such a key role in helping people navigate that system, are key, trusted advisers, and that people can rely on them for advice that is that is unbiased, that is unconflicted, that is high quality,” he said.

“I think that that theme is a really critical one and is really central to the financial services sector overall.”

You can view the full interview below:

[Related: MFAA says lending must sit at heart of verifiable credentials]