Powerful industries have quietly captured Australia’s regulators, leaving consumers and the public interest paying the price, writes Dr Kim Sawyer.
THERE IS A PROBLEM in Australia that no one talks about, perhaps because the vested interests do not want us to talk about it.
It is the problem of regulatory capture, where those who should be regulated have captured the regulators. Regulatory capture cannot be measured like inflation, but arguably it is more costly. The fact that on a given day in Parliament House, there are 15 paid lobbyists for every politician is one measure of the capture of politicians and regulators. Most do not realise the cost.
Regulatory capture became a problem after deregulation. Economist George Stigler noted that demand for regulation stems from the public interest; but that interest is difficult to define. Justice Hayne in the Banking Royal Commission alluded to the risk of capture in banking, suggesting the Australian Securities and Investments Commission (ASIC) should separate enforcement from day-to-day dealings with those it regulates. It did not happen.
Regulatory capture depends on the culture. Regulators are more likely to adopt the positions of those whom they perceive as being in their in-group. The paid lobbyists are those in the in-group; they are the puppet masters and the politicians are the puppets.
Visit Parliament House on any day and you get to understand; have a look at the diaries of ministers and you get to understand; write to the Prime Minister or any minister; the AI response tells you what you need to know. The voters are second-class citizens, perhaps not even that.
Consider examples. The Senate report, Quality of Governance at Australian Higher Education Providers, highlighted that senior management of universities had captured the regulators.
The report states:
According to the Australia Institute, Australian university Vice-Chancellors are “among the highest paid in the world”, with salaries more than quadrupling since 1985 – when remuneration was partially regulated through the former Academic Salaries Tribunal – from $300,000 per year to $1.3million in 2023 (both figures adjusted for inflation to 2024 dollars).
A report by the NTEU showed that in 2023, the top [five] Vice-Chancellor salaries were:
University of Canberra — $1.785 million;
Monash University — $1.565 million;
University of Melbourne — $1.447 million;
University of New South Wales — $1.322 million; and
Flinders University — $1.315 million.
In all, 21 vice-chancellors earn more than $1 million. The Australia Institute revealed in 1985 that an average vice-chancellor at an elite research-intensive university was paid 3.1 times more than an early-career lecturer. However, by 2022, vice-chancellors were paid more than seven times as much as university lecturers and many times more than the maximum student assistance. Vice-chancellors are in a league of their own.
Regulatory capture was costly in the COVID pandemic. In the first year of the pandemic, there was a need for a national testing strategy involving both PCR tests for viral RNA and serology tests for antibodies and antigens (R.A.T. tests).
However, that testing strategy did not emerge. Private pathology companies extracted monopolistic rents. They demanded that the Government increase the subsidy for each PCR test from $24.40 to $100 and argued against mass testing. R.A.T. tests were available; they could have been used, but it took two years for them to be allowed. Pathology companies persuaded the Government and the regulators to only use the PCR tests. They earned billions of dollars in abnormal profits.
It is in banking where regulatory capture is most costly for Australians. The lobbying of the Australian Banking Association has been so effective that bank customers are the big losers. The banks lobbied both the Morrison and Albanese governments against introducing confirmation of payee, where the customer sees the name on the payee’s accounts to which they are transferring their money. It was recommended by the Australian Competition and Consumer Commission (ACCC) in 2020 and 2022; it had reduced fraud in the Netherlands by 81% and in the UK by 35% and had become mandatory in the UK in March 2020.
Confirmation of payee is now being rolled out at a cost of only $100 million to all the banks when combined bank profits exceed $40 billion. But it could have been done five years ago. Failure to adopt confirmation of payee has cost Australians at least $5 billion in scam losses.
The banks also lobbied the Government not to reimburse victims for scam losses. In contrast, in 2020, a conservative UK government introduced a voluntary scheme where banks would reimburse victims of scams, provided the victims had not been grossly negligent.
The scheme became mandatory in 2024. The result is that in the first nine months of 2025, 88% of the money lost to authorised push payment scams was reimbursed to victims and 82% of claims were closed within five business days, and 98% within 35 business days. Only 3% of claims were rejected due to the customer not taking enough care over the transaction or their claim.
In Australia, most scam victims are reimbursed nothing. For example, there were 17 victims with losses exceeding $1 million in the second half of 2023. They received no reimbursement. The average reimbursement in Australia is less than 10% and most victims have to wait more than two years for their claim to be resolved. Why?
There are several reasons. The UK has placed customers first; Australia has placed customers last. Which? is a UK consumers’ association having the power under an act of Parliament to act on behalf of consumers by making super-complaints to the Financial Conduct Authority.
In September 2016, Which? filed a super-complaint against banks that routinely refused to reimburse victims who had been scammed into transferring money into fraudsters’ accounts. Which? said banks should shoulder more responsibility for such fraud, much as they already reimburse customers who lose money through scams involving fraudulent account activity, or debit or credit cards. As a result, the UK adopted a contingent reimbursement scheme.
The second reason is regulatory capture. Freedom of Information (FOI) documents revealed that the Treasury had opposed reimbursement to scam victims and had opposed the UK model. FOI revealed that if asked whether the Treasury recommended the UK model, they would answer that the Treasury has never recommended a UK model.
The banks have captured the regulators, not just Treasury, but AUSTRAC, ASIC and the Australian Financial Complaints Authority (AFCA). Eighty-eight per cent reimbursement in the UK in five days, compared to 10% in Australia, often not within two years, is a measure of how banks have captured the regulation of Australian financial services.
We need independent regulators, but the politicians are too captured to listen.
Dr Kim Sawyer is a senior fellow in the School of Historical and Philosophical Studies at the University of Melbourne.
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