Stephen Jones (Whitlam, Australian Labor Party, Shadow Assistant Treasurer) Share this | Hansard source

As we debate the Treasury Laws Amendment (Your Future, Your Super) Bill 2021, it is worth us contemplating what is at stake here: a $3 trillion superannuation system; superannuation set aside for millions of Australians to ensure that they can build a safe and dignified retirement. It is important that that money is managed properly, ensuring that members get the most comfortable retirement possible, taking the greatest possible pressure off them but also off the public purse. The stated aim of the bill is to do exactly that. If you believe the government's announcements, it seeks to improve the performance of super funds through lower costs and more efficient systems. Regrettably, this laudable objective of the bill falls very short on the detail. It has been confounded by politics. If the failures and the faults in this bill are not remedied, it will wreck its stated purpose.

We cannot as a parliament let the opportunity pass to deliver better returns for millions of Australian workers who are counting on us. We absolutely have to get this right. It is why Labor has circulated and will be moving at the third reading stage detailed amendments which will improve the operation of this bill. We are determined to get this right. I want to be quite clear to every member of this House and to members of the government: our objective is to save this bill, not to sink it—but that will be on the government's head. If they do not remedy the faults that have been identified right across the political spectrum, by business, by professionals, by lawyers and by eminent Australians, no person of good conscience can vote for the extraordinary measures that are contained within this bill.

In a few weeks time Australian workers will receive an additional 0.5 per cent in their superannuation contributions. Although legislated eight years ago and promised before the last election, delivery of this increase has been anything but certain. The government's war on superannuation has raged since the writs were in after the 2019 election results. The budget handed down two weeks ago represented a temporary ceasefire in that war, as the government acknowledged the absolute obvious. It is impossible for them to countenance cutting workers' superannuation when they promised before the last election to do the very opposite.

Industry Superannuation Australia has estimated that the July increase will deliver a 30-year-old worker on a median salary an additional $19,000 in retirement. This is a good thing, as workers themselves increasingly understand. Polling conducted by the same organisation shows a sharp rise in the opposition to the government's plans to freeze superannuation contributions, especially among workers approaching retirement. Two-thirds of Australians overall now support an increase in their super contributions to the legislated 12 per cent against just one-third of Australians who support a freeze.

It would be refreshing, as government members come and make their contributions to this debate, if they affirmed the promise that they gave at the last election not to cut workers' superannuation and to leave the superannuation guarantee levy in place. That would be a refreshing contribution from government members to this important debate. Unfortunately the Treasurer is not leading by example. Last week he pointedly refused to back the legislated 12 per cent contribution rate as the coalition's forever policy. He's been briefing journalists up and down the gallery—in fact, anybody who will listen, while the recorder is not turned on—that he himself opposed the increase to the SGL but the Prime Minister leant into him and make him do it. Frankly, I don't care why the government arrived at doing the right thing after exhausting every other alternative. The important thing for Australians is that they are getting the superannuation increases that they were promised. That is a good thing.

Superannuation has been an Australian success story. We've come a long way in a relatively short period of time. In 1985 just one-third of Australians had occupational superannuation. These were the fortunate few, most of them employed in the Public Service or as well-compensated corporate executives. The average worker, by contrast, was entirely reliant on the age pension in retirement. It was even worse for women. Less than 15 per cent of Australian women had superannuation. It was the Accord, agreed between the Hawke and Keating governments and the ACTU, which changed everything. The final agreements saw a two per cent wage rise for workers, a one per cent tax cut and, importantly, a three per cent superannuation contribution. When the Australian Industrial Relations Commission incorporated the Accord into all awards, the proportion of workers covered by superannuation immediately jumped from 30 per cent to 60 per cent of all Australian workers. Such was the success of that single move that, within five years, Australian workers had amassed over $123 billion in retirement savings.

It was the starting of a revolution that has helped pave the way for decades of economic growth and a better life for millions of Australian workers. It also began to crack the nut on one of the nation's greatest economic challenges, and that is the challenge of our ageing population. I say 'challenge', not 'problem', because indeed it has been a great part of the Australian story that we are living longer. But we have to ensure that we also live better. If you go back to the mid-1980s, there were around seven workers for every Australian retiree. Today the number is closer to four workers for every Australian retiree, and we are rapidly approaching one in three. 'Rapidly approaching,' I say, because the immigration restrictions—imposed necessarily as a result of the COVID pandemic—have accelerated that ageing trend. To who the gene of complaint This is not a trend that Australia can afford to ignore. Clearly, without change, we would have seen an economic disaster. The choices were stark: higher taxes or poorer living standards for Australian retirees. Can you imagine how the budget would have looked today if we still had two-thirds of an ageing population entirely reliant on the full pension?

Super is improving our retirement system. Last financial year—this is an important point to make—Australia's government funded pension payments were $53 billion, while superannuation benefits were over $100 billion. Put another way, our superannuation system is already contributing more than twice the amount of money in retirement income that the pension system is. It is easy to take for granted the solutions that were put in place a generation ago, but those solutions were never easy. I've talked about our $3 trillion system of superannuation savings. That's an amazing story—$3 trillion making retirement a better thing, making retirement more dignified, making our economy stronger.

What many in this place might find extraordinary to know is that the government parties, the coalition parties, have voted against every single dollar of universal superannuation. Not once has a bill come before this House to improve the occupational superannuation of ordinary Australians that has enjoyed the support of government MPs. That is something that all Australians need to remember and so be very suspicious of any proposition that comes to this place with the stated purpose of improving superannuation. They are the mob who have voted against every single dollar of superannuation that has gone into workers' retirement incomes. The Keating government's decision in 1996 to make superannuation compulsory and raise the contribution rate to nine per cent was built upon by the Rudd and Gillard governments to improve that rate to 12 per cent. It's absolutely fundamental to achieving the goal of a dignified retirement. Without the 12 per cent rate, the taxpayer is still on the hook for the pension and for workers who don't have enough to live on in retirement.

Today, Australia has the third-largest pool of retirement savings in the world. I'll say that again: Australia has the third-largest pool of retirement savings of any country in the world. That's not bad for an economy that is ranked 13th in the world for overall size. As a share of GDP, our pension-saving system, a privately funded pension-saving system, outranks the United States, the United Kingdom and Canada. This is something we should be celebrating. It's a remarkable achievement that is improving retirement and making us stronger as a nation. Of course, the system is not perfect. We acknowledge there are things that need to be improved. I could identify the gender pay gap as one example. Today, the median superannuation account at retirement for men is approximately $188,000, and for women it is $118,000. Those are median figures, which means there are lots and lots of women who are below even that number. It is a huge gap, unacceptable and something we need to do something about.

Superannuation has also played a critical role in helping Australia through the pandemic. It has been at the core of a strong, sustainable recovery. Prior to the pandemic, our $3 trillion pool of national savings helped build airports, roads and bridges, and it kept our economy moving. During the pandemic the long-term patient nature of superannuation investments provided a reliable backstop during a time of extreme uncertainty. Yes, there are also those who benefited from being able to access their super savings to see them and their families through the financial crisis brought on by the pandemic.

As the economy climbs its way out of the deepest recession in almost a century, super will be there again to ensure that we build back stronger and more inclusively as a society. It's investing in renewable energy plants, low-emission technologies and the low-cost energy of the future. It's providing capital to build affordable housing and addressing social needs while supporting construction jobs. Right across the economy, it would be difficult to point to a sector, whether it's agriculture, infrastructure, finance, housing, energy generation, ports, roads or transport, where superannuation is not making a significant contribution or doing the heavy lifting. Most importantly, however, it's giving workers confidence that their future is secure and the savings will continue to grow through thick and thin.

This is undeniably a good story, but superannuation's critical role in our economic rebuilding is far from certain. There are threats to our world-class system. The bill before the House, in its current form, is one such threat. It's supposed to improve superannuation performance, an objective we support, but sadly this legislation is deeply flawed. Labor and crossbench MPs and senators have foreshadowed significant amendments to what the government has proposed. I don't expect an easy passage for this bill in this place or the other place. Labor alone has identified eight substantial amendments, but for now I'd like to focus on two of the most significant.

The first is the stapling provisions in schedule 1, the impact of which if unamended will see three million workers defaulted into an underperforming fund for life. The second is the directions powers in schedule 3, which give the Treasurer the power—an extraordinary power—to cancel an investment that he does not like. This is an extraordinary power for this parliament to given an Australian Treasurer of any stripe. It's never before been done in Australian peace time. It is something that we should be very, very careful and very, very wary of, and something that I call on all members of this House to reject. It's absolutely inconceivable that a member that enters through the doors of this parliament calling themselves a political liberal or a political conservative could vote for a power which gives the Treasurer the power to cancel a private sector investment. I call on all members of the House to read this schedule carefully. That is exactly what this bill does. I find it extraordinary that this got through the coalition party room. I draw your attention to schedule 3 of this bill. It gives the Treasurer the power to cancel a private sector investment. It's not on and it can't stand.

Labor supports measures for benchmarking and performance measurement of funds. For too long underperforming funds have delivered subpar returns, thus robbing workers of a better retirement. The Productivity Commission itself has estimated underperforming funds are costing workers more than $3 billion in lost savings each year. It's absolutely critical that we fix this. If it takes a robust and independent performance measurement regime to put a spotlight on underperformance then so be it. Schedule 2 of this bill brings forward an architecture to deliver such a performance-testing regime. We support schedule 2 of this bill. But that's not what we have before us in this bill.

Schedule 1 of the bill concerns the stapling of fund members to a single fund for life. Before members opposite interrupt me to say, 'Hang on, wasn't this a recommendation of the Hayne royal commission?' Yes, of course it was, but Commissioner Hayne did not recommend a specific measure for stapling members to a fund. There are at least two ways that we could go about this. We could staple members to their money, which with the assistance of the tax file number and tagging a tax file number to a superannuation fund would ensure that the worker's money would move with them from employer to employer and from one fund to another, addressing the malady that Commissioner Hayne and the Productivity Commission before him identified of unintended multiple accounts. That measure would address that problem, a problem that we acknowledge is a big one. That method has the advantage of ensuring that insurance coverage is appropriate to the workplace and the occupation of the worker. It's important to make this point clear: for many occupations the only life insurance cover they are going to be able to get is the group insurance coverage that is provided through their superannuation fund. Many occupations are otherwise simply uninsurable. If you're a policeperson and you try to get private life insurance, you won't be able to get it. There is no way you will ever be able to get private life insurance at an affordable rate because you're uninsurable. I see the Deputy Speaker perhaps indicating: could that be true? You're effectively uninsurable because of the price of the premium, and police officers are not alone. So the only way certain occupations are able to get life insurance at an affordable rate is through the group insurance that is provided through their superannuation fund. Of course, if you are involved in a superannuation fund which is crafted around the specifics of your occupation or your industry or your calling then the superannuation cover is crafted so that it is appropriate to the risk rating of workers within their industry. A truck driver, for example, is going to have a very different risk rating to somebody who works in an office, a journalist in an office, perhaps, or a clerk in an office, and the insurance product is designed as such.

In fact, if you go into the insurance coverage included within a whole range of funds, they have specific inclusions. I was looking at the exclusions included within the retail fund and the hospitality fund. There are specific occupational exclusions. It is not unusual; it is a way of ensuring that the insurance coverage is appropriate to the workers within that industry. If you think about this: if you staple somebody to a fund which has insurance designed for one occupation and they move to another, as we all do, they would be stapled to a fund with inappropriate insurance coverage. A very, very typical example that can be cited is if your first job is in the hospitality or retail sector, that is the fund you are stapled to for life. If you then subsequently get a job in the police force, as a frontline health worker, in the transport industry or in the building industry—as you used to work in, Deputy Speaker Wallace—you will not have insurance coverage; in fact, you will probably be excluded from the life insurance coverage because of the exclusions that exist within the fund that you originally are stapled to. It is a fundamental flaw. Perhaps it didn't occur to the drafters of the bill when they put it together. I will give them a benefit of the doubt and say it is an unintended consequence but it is one must be addressed. The member for Hughes has foreshadowed concerns in this area and may well bring forward amendments to address this particular issue.

I want to go to another fundamental problem with the stapling measure. Schedule 2 of this bill establishes the architecture for performance measurement. Labor supports performance measurement; I have said why. The Productivity Commission has shown that the difference between a high and low-performing fund can be as much as $500,000 in lost retirement savings. The government's proposals will mandate that an underperforming fund will be closed to new members and existing members will be notified. There is an obvious deficiency with this plan. What happens to members who don't shift their money? What happens if they don't open their mail, if they are not engaged with their superannuation system and they happen to be in one of those underperforming funds? There are about three million workers who, Treasury estimates, are members of underperforming funds. So this is no small problem—three million people. If stapling comes in from 1 July, three million Australians are stapled to an underperforming fund which the government itself is saying, 'This fund is so lousy that no new employee should be allowed to join it. We are red circling this fund and closing the gate to any new employee because it is such a poor-performing fund.' It beggars belief that after identifying a fund that is so poor that you would then in that same legislation staple an employee to that fund. But that is exactly what schedule 1 of this bill does; it staples employees to an underperforming fund. It is why Labor has a simple but effective amendment that we will be proposing in the third reading debate which will mandate that no employee can be stapled to an underperforming fund. It doesn't address or deal with the problem that the government has identified of needing to manage underperforming funds; in fact, it goes a step further and says, 'Yes, we agree you should manage these underperforming funds but, for God's sake, don't staple a poor, unsuspecting worker to one of them. Okay?'

That brings me to schedule 3 of the bill. The legislation introduces a new best financial interest duty for superannuation funds and trustees. This, I have to say, runs contrary to a direct recommendation of Commissioner Hayne in the final report of the banking royal commission. I want to make this quite clear to all members opposite. Commissioner Hayne looked at this proposition—it was squarely put before him: should we introduce a new best financial interest duty? Commissioner Hayne said, 'No, it is not necessary and, what is more, it is likely to create a whole range of costly red tape that is not in the interests of fund members.' He specifically recommended against it. Did the government listen? Regrettably, no.

The proposed law goes further, and this is the real sleeper in this legislation. I want all members of the House to listen carefully to this. The proposed law contains an extraordinary power, an unprecedented directions-making power, that makes Josh Frydenberg, the Treasurer of Australia, Australia's superannuation trustee in chief. This power allows him to cancel any investment that he does not like. It's kryptonite for investment certainty. It creates sovereign risk. It's the sort of sovereign risk that is normally associated with a tin-pot dictatorship, not the Australian Commonwealth. It's simply unfathomable that this provision was allowed to pass through the coalition party room. As such, I took the initiative earlier this year. I wrote to each and every member of the coalition party, including yourself, Deputy Speaker Vasta, and I pointed out the problem. I know the way these things work. Often a whole bunch of stuff is coming through a party room. You don't get to read the detail of every bill. I dare say the Treasurer didn't say, 'I want you to vote for this bill because it gives me the power to cancel all private sector investments in superannuation.' I dare say the Treasurer didn't say that. I dare say he didn't point that out to all coalition members, but that's exactly what it does. So I took the initiative of writing to every coalition MP to point out the danger embedded in schedule 3 of this bill. As a result of this, I'm pleased to say that many members of goodwill and good intent are now raising concerns in this place and in the other place.

It is absolutely understandable that many members of this place—not members of the Labor Party; members of the crossbench, Independents and even members of the coalition parties—have cottoned on to this issue that a law made in one context can be implemented in another, that a law made in one set of circumstances can be implemented in another and have far-reaching and unforeseen consequences. I support strong biosecurity measures, but I guarantee each and every member in this place didn't expect that, when we passed the biosecurity legislation a few years back, we were going to be cancelling people's passport rights. We would have had a very different debate in this place, and we would have put terms and conditions around the exercise of that power, if that's what we'd thought we were doing. That's just one example.

We've seen recent examples of how a power such as this could be used. A few weeks ago, the Minister for Resources, Water and Northern Australia used a directions power in the northern Australia infrastructure fund to cancel $300 million worth of investments in wind farms and a battery farm in that state. I'm not raising this to make an implied criticism of Minister Pitt. I certainly am not. I might have a different view to his about the value of that investment, but it just goes to show how investment decisions such as this can be politicised. You might get one government that says: 'Well, we don't like wind farms. We're going to direct superannuation funds to disinvest in a particular asset class.' It might be that a particular wind farm over there has attracted a bit of constituent concern and that a member of the government party or a crossbencher is able to get the ear of the Treasurer and say: 'This is causing me grief. If you want my support for another bill, use your directions power to cancel that investment.' Wind forward another couple of years and somebody might say, 'Well, I don't like coal mines. We've got the balance of power and we want you to cancel investment in coal mines because we don't think superannuation funds should be investing in coal mines.'

Members in this place have raised different views about investment in different energy classes and different assets and used the pulpit of parliament to express their views and their opinions about everything from renewable energy to certain infrastructure projects to investing in certain corporations, whether it be agriculture or whether it be water infrastructure. So members have used this place to express opinions about the wisdom of funds and others investing in those projects. But before this bill came into parliament, they were just that—opinions. This bill will weaponise those opinions and ensure that, henceforth, rudimentary investment decisions of superannuation funds will be dragged into the political fray. And it's very easy to contemplate how they might be used in future. Say there's an industrial dispute in a business somewhere that a superannuation fund is invested in, and say the Treasurer uses the directions power, or the threat of the directions power, to say to that business: 'Resolve this dispute in this way or that way; otherwise, I'll be issuing a direction to the key investor or the key owner of your business to divest themselves of your business. It'll wreak havoc on the share price of your company.' So you can see how a power like that could be used. These are not fanciful examples.

You might say to me: 'Well, you're a Labor shadow minister; wouldn't you love a power such as this, to cancel investment like that or bring a rogue employer to heel?' Perhaps—but, more than that, I'm an Australian, and I believe powers like this should not exist. Therefore, these amendments that we'll be moving should be supported by all good members of this place.

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