The Turnbull Government appears to have adopted a ‘lesser of two evils’ approach in succumbing to political pressure both from the Labor Opposition and from its Coalition partner the National Party by establishing a Royal Commission into the financial services sector.
The Royal Commission, which is expected to cost the taxpayer at least $75 million, will cover the nation's banks, big and small, wealth managers, superannuation providers and insurance companies.
The Commission will have 12 months to do its work and while such inquiries are notorious for seeking extensions of time, the Government has set 1 February 2019 for the delivery of a final report.
The Government will be determined to hold the Commission to that deadline given the next federal election due sometime between May and November 2019. This would then give it time to frame a response and hope that much of the current community angst with the financial services sector might have dissipated as a consequence of the process.
By opting for a Royal Commission, as opposed to a Commission of Inquiry, the Government is endeavouring to maximise, to the extent it can, its control over the breadth of issues to be investigated, who the Commissioners will be and the process for delivering a final report.
Royal Commissions report to the Executive and although recommendations can’t be changed or influenced the process does give a Government some tactical advantage in preparing a formal response and the timing of such a response.
Had the Government not acted, it was likely a Commission of Inquiry would’ve been established. In this case it would’ve been the Parliament that decided the scope of investigation, who the investigators would be and the timing of a final report.
Ceding such a level of control to the Opposition, the Greens, crossbenchers and a couple of National party members would have been a political headache for the Government and potentially far more problematic for the financial services sector. Consider the call today by crossbench MP Bob Katter for social justice campaigner Tim Costello to lead the Royal Commission and that headache could quickly turn into a migraine.
Even the ‘Big Four’ banks appear to have recognised this. They collectively called for a ‘properly constituted’ inquiry in a letter that pre-empted Mr. Turnbull’s announcement of a Royal Commission.
Today’s announcement is politically embarrassing for the Prime Minister but had he not acted he ran the risk of losing total control over any process and opening himself up to further opposition claims that the Government is adrift, leaderless and out of touch with community expectations.