Federal Treasurer Scott Morrison has defended the Turnbull Government's policy reversal on a banking Royal Commission, describing the move as a "regrettable but necessary" response to political pressure.
"There was a lot of politics in this, and that politics was damaging our economy, it was damaging the credibility of our banking system," Treasurer Scott Morrison told Channel Seven's Sunrise on Friday morning.
"Sometimes in politics you've got to take the least worst option," he said.
"That's what leadership requires."
Kenneth Hayne, a retired High Court judge, was appointed on Friday to lead the Royal Commission.
Opposition leader Bill Shorten had previously expressed concern the government would appoint a Comissioner who would go soft on the banks, but on Friday the Labor party welcomed Mr Hayne's appointment.
"A former High Court judge is an appropriate level of appointment, an appropriate level of experience and expertise for a Royal Commission," Labor MP Chris Bowen said.
"If Labor was in office we would have more than one Royal Commissioner," he added.
Labor, the Greens and several in the Nationals had been pressuring the government to conduct a sweeping investigation into the banks.
Maverick backbench Nationals MP George Christensen, who had threatened to cross the floor to vote for a Commission, said the government had been "dragged kicking and screaming" to the Royal Commission.
Opposition Leader Bill Shorten described the government's policy change as a "bank-flip".
Mr Turnbull ruled out a Royal Commission as recently as Tuesday. "We have made it clear that we are not going to establish a Royal Commission," the prime minister said at the time.
But on Thursday the prime minister announced the major policy reversal after the Treasurer received an open-letter from the heads of the big four banks, themselves requesting an inquiry.
Cabinet agreed on the proposal on Thursday morning and a draft of the Terms of Reference, which define the scope of the investigation, had already been prepared.
The Commissioner, once appointed, would have a fixed timeline of 12 months to investigate banks, wealth managers, superannuation providers and insurance companies.
The prime minister said the inquiry would be given a budget of $75 million.
Labor accuses Turnbull of ignoring victims and working with the banks
Labor has lashed the timing of the government's announcement falling on the same day as the letter from the Big Four banks requesting an inquiry.
Labor has long advocated a Royal Commission into the banks and promised to set one up if elected.
But shadow treasurer Chris Bowen said the Turnbull Government could not be trusted to define the scope of the inquiry.
"It’s becoming clear that the Turnbull Government worked with the banks to help develop its terms of references, not victims or their representatives," Mr Bowen said.
