All sides of the political divide have claimed victory in dragging Malcolm Turnbull “kicking and screaming” to set up a year-long royal commission into financial sector misconduct.
The final straw for the prime minister came when the big four banks themselves wrote to the government calling for a “properly constituted inquiry”, having fought against a sweeping inquiry for two years.
The chairman and CEOs of the Commonwealth, Westpac, National Australia and ANZ banks, in a joint email to Treasurer Scott Morrison, said the political uncertainty surrounding an inquiry was “hurting confidence”.
“The speculation about an inquiry cannot go on,” the prime minister told reporters in Canberra.
“We have got to stop the banks and our financial services sector being used as a political football.”
Shareholders were the initial losers from the announcement on Thursday, with the bank stocks leading the overall market lower, led by a more than two per cent drop in the Commonwealth Bank.
Australian Banker’s Association chief Anna Bligh said a royal commission was “unnecessary and unwarranted” and warned that it could result in higher mortgage rates.
Cabinet had determined the only way to give all Australians a greater degree of assurance was a royal commission, but promised it wouldn’t be an open-ended inquiry.
“It will not put capitalism on trial, as some people in the parliament prefer, and we’ll give it a reporting date of 12 months,” Mr Turnbull said.
“This should not be a commission that runs forever, costing many hundreds of millions of dollars, as would’ve been the case under some of the proposals.”
Mr Morrison is allocating $75 million for the commission which will investigate the nation’s banks, wealth managers, superannuation providers, insurance companies.
The government will appoint a distinguished former or serving judicial officer to lead the commission with instructions to deliver a final report by February 1, 2019.
The decision heads off a parliamentary commission of inquiry being sought by Nationals senator Barry O’Sullivan, who has been in discussions all week with coalition colleagues, Labor and the Greens.
Senator O’Sullivan didn’t think Mr Turnbull had a change of heart.
“I think we’ve got a prime minister who has listened and had the capacity to make and support a decision, and I think that’s a positive thing,” he told reporters.
The opposition said the prime minister had spent 601 days fighting Labor’s call for a royal commission.
“Malcolm Turnbull has let the rorts and rip-offs continue for more than 18 months so he could protect the banks and protect his job,” shadow treasurer Chris Bowen said in a statement.
“It’s becoming clear that the Turnbull Government worked with the banks to help develop its terms of references, not victims or their representatives.”
Greens Leader Richard Di Natale said it was a day of justice for those who have been “shafted by the banks”.