Senator Williams’ stance on the broad ranging public inquiry also puts him at odds with close ally and Nationals leader Barnaby Joyce who knocked the idea on the head.

“I’m glad that Labor is actually supporting my idea,” Senator Williams said.

“For years I’ve called for a Royal Commission into white collar crime in the finance sector.

“I stand by what I’ve said for the last five or six years.”

Other Nationals in George Christensen and Luke Hartsuyker have expressed support for the banking inquiry.

But yesterday Mr Joyce said the Australian Prudential Regulation Authority (APRA) and Australian Securities & Investments Commission (ASIC) already had investigative powers to call evidence and prosecute, which gave them powers beyond that of a Royal Commission.

“I always want to make sure that we don’t step away from the powers we already have before we start discussing other things that we may do,” the Agriculture and Water Resources Minister said.

Mr Turnbull said Mr Shorten’s Royal Commission “thought bubble” was a “classic overreaction” to very measured and constructive criticisms he’d made earlier in the week.

“They've said the word ‘Royal Commission’ and said the word ‘banks’, they don't know what the focus of the inquiry is going to be,” he said.

“They overlooked the fact that they, in six years in office, didn't have any inquiry into the financial services sector.”

Argument has also erupted over the potential $50 million cost of a Royal Commission against $120m in budget cuts by the Abbott government to ASIC over four years.

Mr Turnbull said if ASIC needed to do more to address white collar crime then it was up to Chair Greg Medcraft to identify where more resources were needed – but legislation was changed and improved constantly.

Mr Shorten said it wasn’t fair to make ASIC the meat in the sandwich but Mr Turnbull and Treasurer Scott Morrison weren’t serious about doing anything about the string of scandals seen in banks.

“I think ASIC does a good job, but a Royal Commission into banking is the most serious form of inquiry that a Government can commission on behalf of the people of Australia,” he said.

“It has broad ranging powers and it can look at systemic issues which ASIC simply can't.

“What I've said is what millions of Australians think - that we need to see a better standard of ethics and culture within our banking sector.”

Senator Williams has an extensive list of actions he’s pursued in holding banks to account on lending practices or lack of integrity on financial products.

“I think I’ve done my bit to try and bring peace to battlers in the bush,” he said.

He said he’d held mediation sessions between farmers and banks but stressed the finance lenders had behaved “very good in the majority of cases” including in Queensland where they’d resisted foreclosing on farmers struggling in drought areas.

“Some banks have performed very good - but of course others have performed very bad at times,” he said.

Senator Williams said he’d also instigated the Storm Financial crash inquiry in 2009 by the Parliamentary Joint Committee on Corporations and Financial Services which led to the Future of Financial Advice regulations

He’s investigated concerns about the quality of financial products and instigated another parliamentary inquiry into the role played by ASIC and its oversight powers, to protect investors which recommended a Royal Commission into the Commonwealth Bank but it did not go ahead.

He said he’s also amended an inquiry into the scrutiny of financial advice inquiry by the Senate Economics References Committee to include the life insurance industry after the joint Fairfax and Four Corners exposure of CommInsure

Senator Williams said he’d also taken up the challenge over the collapse of managed investment schemes TimberCorp and Great Southern.

He said another Corporations and Financial Services inquiry into the forced impairment of loans – driven by accusations that people never missed payments but were sold-up – would make its report in the near future.

Senator Williams said senior ALP leaders were now calling for a Royal Commission into banking but the terms of reference they wanted were unclear.

However, he said his terms of reference would see rural lending practices looked at and sensitive interactions between farmers and banks, during droughts.

His terms would also investigate; the behaviour of banks towards their customers; a banking industry code of conduct; whether ASIC was sufficiently resourced; the treatment of whistle-blowers; the Director of Public Prosecution’s capacity to adequately handle ASIC referrals; and the severity of financial punishments for any wrongdoing.

“I’d also look at crap financial products like TimberCorp and Great Southern where people have invested in these tree-growing managed investment schemes but done their backsides,” he said.

“The terms of references would be pretty wide-spread to focus on the finance sector and whether it performs properly and in a decent fashion, while eliminating as much risk as it can and treat customers with the respect they deserve and so on.

“Those who have done the wrong thing should get punished for doing the wrong thing and those who have been on the wrong end of it and have been done over because of people or institutions doing the wrong thing should receive proper compensation.

“Those who have had the guts to come out and become whistle-blowers to report the wrong doings need to be protected and compensated; a code of conduct must be put in place which in my opinion is mandatory; and there must be someone who scrutinises financial products before they just get out there and people invest in it, like the $8 billion in managed investment schemes, and do their dough.

“I’m sick of hard working Australians mortgaging their houses, and borrowing in other regards and putting together their life savings, to then have it blown apart by some stupid bloody financial product.”