Luke Hartsuyker (Cowper, National Party, Assistant Minister for Employment) Share this | Hansard source

I welcome the opportunity to speak on the Tax and Superannuation Laws Amendment (2014 Measures No. 1) Bill 2014. Superannuation is a very important area, and I think that both sides of the House would agree that we need to encourage as many young people as possible to get into investing in superannuation. One of the problems we have had over many years is to encourage that contribution very early on in the working life of young people. The more that they can invest in the early stages of their career, the greater the nest egg there will be upon their retirement. I guess that, when a young person is under the age of 25, retirement seems a long way off. But, as we wake up and find ourselves on the wrong side of 50, retirement does not appear quite so far away. It is vital that young people make as much of a contribution as possible early on in their career. It is the compounding of those early contributions that will ensure that young people will have a sizeable retirement nest egg.

Regrettably, with the ageing of the population, many people who are currently moving into their retirement years grew up in an era where superannuation was not considered. Many of those people have insufficient savings to provide the sort of retirement that they would enjoy and require the use of pension benefits to supplement the retirement savings they have. I think education is incredibly important, to impart to young people the wisdom and the benefit of saving early in their working lives so that those savings, with the benefit of compounding, will amass to a significant sum later on, in their retirement. Education is a very important part of that process.

As legislators, we have to ensure that legislation surrounding superannuation is consistent. One of the great barriers to people at a young age putting money into a superannuation fund—money that will be in a superannuation system for perhaps 40 years—is certainty. People need the certainty to invest. When they put their money in, they need a degree of certainty—they need to feel confident that the rules are not going to change. On both sides of the House, we have had a tendency to change the superannuation rules. There are often good reasons at the time, but, regrettably, the impact of that is that it diminishes the amount of confidence that people have in the system. That is a very important point. When you invest money in super, you should do so with the reasonable expectation that the rules that apply when the money goes in will stay the same during the life of that investment. Regrettably, that has not been so. As legislators, we need to be mindful of the fact that we need to keep the number of changes to the system to an absolute minimum.

The world is a changing place, and there will always be requirements that legislation be amended to reflect the issues of the day. But we should always be focused on ensuring that those changes are kept to a minimum. I note that the Treasurer is very focused on the importance of superannuation and very focused on the importance of a strong and stable financial system. I noted that the final terms of reference for the financial system inquiry were released on 20 December 2013. I know, Deputy Speaker, that you would be interested to note that the terms of reference include a wide range of matters. Item 1 in the terms of reference is:

The Inquiry will report on the consequences of developments in the Australian financial system since the 1997 Financial System Inquiry and the global financial crisis, including implications for:

1.how Australia funds its growth;

2.domestic competition and international competitiveness; and

3.the current cost, quality, safety and availability of financial services, products and capital for users.

Item 2 of the terms of reference is:

The Inquiry will refresh the philosophy, principles and objectives underpinning the development of a well-functioning financial system, including:

1. Balancing competition, innovation, efficiency, stability and consumer protection;

2. How financial risk is allocated and systemic risk is managed;

3. Assessing the effectiveness and need for financial regulation, including its impact on costs, flexibility, innovation, industry and among users;

4 .the role of Government; and

5. The role, objectives, funding and performance of financial regulators including an international comparison.

Terms of reference No. 3 is:

The Inquiry will identify and consider the emerging opportunities and challenges that are likely to drive further change in the global and domestic financial system, including:

1. The role and impact of new technologies, market innovations and changing consumer preferences and demography;

2. International integration, including international financial regulation;

3. Changes in the way Australia sources and distributes capital, including the intermediation of savings through banks, non-bank financial institutions, insurance companies, superannuation funds and capital markets;

4. Changing organisational structures in the financial sector;

5. Corporate governance structures across the financial system and how they affect stakeholder interests; and

6. Developments in the payment system.

The fourth item in the terms of reference is:

The Inquiry will recommend policy options that:

1. Promote a competitive and stable financial system that contributes to Australia’s productivity growth;

2. Promote the efficient allocation of capital and cost efficient access and services for users;

3. Meet the needs of users with appropriate financial products and services;

4. Create an environment conducive to dynamic and innovative financial service providers; and

5. Relate to other matters that fall within this terms of reference.

The fifth item in the terms of reference is:

The inquiry will take account of the regulation of the general operation of companies and trusts to the extent this impinges on the efficiency and effective allocation of capital within the financial system.

Item 6 of the terms of reference is:

The inquiry will examine the taxation of financial arrangements, products or institutions to the extent these impinge on the efficient and effective allocation of capital by the financial system, and provide observations that could inform the tax white paper.

Item 7 is:

In reaching its conclusions, the inquiry will take account of, but not make recommendations on the objectives and procedures of the Reserve Bank of Australia in its conduct of monetary policy.

Item 8 of the terms of reference is:

The inquiry may invite submissions and seek information from any persons or bodies.

Item 9 is:

The inquiry will consult extensively, both domestically and globally. It will publish an interim report in mid-2014 setting out initial findings and seek public feedback. A final report is to be provided to the Treasurer by November 2014.

This will be a very important inquiry, and it shows the importance the government places on the financial system, but I know the members opposite see that the value of a strong financial system is one of the things that got us through the global financial crisis. We had strong regulations and strong banks, and the system basically held together as such. I think it is absolutely important that members of the public have confidence in the banking system, and an inquiry such as this just reinforces that confidence.

The bill before the House today relates to superannuation. I think the superannuation system is very much an important part of our financial system. The member for Bradfield may wish to make a comment on these bills as we progress throughout the evening. It is absolutely vital that we have a strong superannuation system and that the superannuation system meets the needs of young people and older Australians alike. I think one of the benefits we have seen in recent years is that we have had coming into the market a wide range of different products that can better meet the needs of investors. Investors can choose to have a more risk-averse approach to their portfolios. If you go back many years, it was very much a black-and-gold product that was on the market, and people did not think very carefully or intensely about the superannuation options they may have chosen. They may have gone to an adviser but not have taken a very proactive role.

I think that has changed a lot in recent years; people have become much more actively involved in the sort of superannuation fund in which they invest. They may go for a balanced fund or a growth fund or perhaps confine their investments to one particular sector of the market. Perhaps it is a fixed-interest investment where the investor seeks the perceived security of a fixed-interest fund so that they are not exposed to the wider vagaries of the property market, the international markets or the equities market. It is an interesting option being put forward. People have the opportunity to get more actively involved in their super, and I think that is a good thing. I think it is a good thing that people watch their investments more closely and are very active in managing them, perhaps choosing to shift from one particular type of investment to another—perhaps moving from a balanced fund to a growth fund if that follows their investment wishes. It is good to have that degree of engagement. I think it is a level of engagement that did not exist many years ago, when it was much more a set-and-forget option.

We have a range of quality investment funds out in the market. I think investors can generally be quite assured that we have a range of fine market funds. We have the industry funds and the private sector funds. All contribute to a very diverse range of options for investors in this important area of superannuation.

I said at the start of my contribution that it is vitally important that we get young people engaged and investing very early in their working lives so that they can ensure that they have the sort of lifestyle they want into the future. As living standards in this country have increased over the years, people's expectations of the quality of life they wish to enjoy in their later years has certainly increased. People expect a much higher standard of living in retirement than they once did. People are also living much longer. At the time of Federation, life expectancy was 20 years or more lower than it is today. So it is vital that we have an investment fund that when we retire is sufficient to meet our needs over the years ahead. One of the things that worries many people is that they simply do not have the amount of money in their superannuation fund that once they reach retirement will be sufficient to see them through all of their years.

Another factor in that is that people tend to travel when they retire. Many people are retiring at a younger age, living to a ripe old age and enjoying travelling the world, something our grandparents did not do nearly so much of. People have an increasing expectation that they will be able to travel the world in retirement and enjoy a range of experiences after work. That is certainly expensive, and something for which we have to ensure that we put as much money as possible into superannuation.

Superannuation is a very important area of financial services. I note the terms of reference by the Treasurer in relation to the financial system inquiry, which very much look at ensuring that we have a very strong financial system so that people can be assured that the various financial institutions in the country are operating efficiently and effectively, keeping our deposits and superannuation savings safe. I must say it is a very interesting area and one that I know is occupying the time of people on this side of the House as well as those on the other side of the House. They may choose to interject at some point in time—I am quite happy to accept an interjection—

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