Stephen Jones (Whitlam, Australian Labor Party, Shadow Assistant Treasurer) Share this | Link to 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.

Barnaby Joyce (New England, National Party) Share this | Link to this | Hansard source

Usually, in the parochialism of parliament, it can just become quite tribal, but sometimes you actually do listen to what people say, and I acknowledge—I don't know whether you're the member for Throsby or the member for Whitlam; I'm going to go for Throsby—

Mr Stephen Jones interjecting—

the member for Whitlam—

Mr Stephen Jones interjecting—

Gough-like! I acknowledge what the member for Whitlam said. Obviously, we believe that the intent of our side is always right, but this issue that he brought up, as to schedule 3, is not going without question. Later on, I'll be having a meeting with the minister; I've heard that she wishes to discuss it, to discuss precisely that. I acknowledge, and so do other colleagues, that we have a real problem with the discretion of a third party to determine, on their views, where things should be invested in and where they shouldn't. I note that the member for Hunter is here. I'll give you a classic example. We're pro coal and we believe that coal is one of the vital mechanisms that underpin the wealth of this nation. It might be politically incorrect; it might be despised, I would say, in some areas. But, without it, we would be a much poorer nation. We have a very recent example of banks making so-called value judgements, where the ANZ bank pulled out of financing for Newcastle's port. This is not how it works. I can understand, implicitly, that if someone is investing in something and it's just losing money hand over fist, then of course you've got a duty of stewardship—as you do in corporate law. There's a duty of stewardship, to try to get the best returns for your shareholders. But you don't have a duty of moralising on where you think they should and shouldn't invest. If they have found an investment and it's legal, then that should be where it basically finishes.

So, on this issue, it's going to be important—and I'm not declaring which way I would vote, and, with others, I'm not walking into this thing blind. We haven't been asleep at the wheel. We have been going through this and trying to decipher it. We are looking for better comfort to be brought forward by the minister as to why this cannot be exploited. We are very aware of the fact that, when the time comes that we're not the government and someone else is, we can hardly argue against something the other side does when we brought in the laws for them to do it. That's the issue here. And that's why I favour a generic and clinical approach to investments, which is: if an investment is legal and prudent and it makes money, then it is a good investment. But, if you start saying: 'Well, I don't like coal. I don't like gas. I'm not going to support people who do fracking. I don't like the live cattle trade,' and all this, as they inevitably would, because the Greens would put pressure on the Labor Party to do precisely that, then we're in trouble. We're in trouble, so how do we do a workaround on this?

Superannuation is so powerful now. I think the member for Whitlam might nod or cross, but I think it's about $3 trillion we now have in it. So $3 trillion gives you immense power. If you start moralising about where that $3 trillion goes, you can have an immense sway on the economy of the nation and you can have an immense detrimental sway on the economy of the nation if you start casting $3 million to political hobby horses by reason of not saying you must invest in the political hobby horse but naturally enough just excluding anything else but the hobby horse to invest in. That is not the efficient flow of funds. An economy must have the efficient flow of funds to their best return for it to prevail.

We have only one job in this nation. I'm going to say this ad nauseam, because it's so important: this nation must become as powerful as possible as quickly as possible. That is the No. 1 job. As important as COVID is, it's not the No. 1 job. As fervently as people might hold to every tenet of the climate debate, it is not the No. 1 job. In the changing circumstances of our region and the rising power of China, and we hope it remains a peaceful place—we all hope and pray for that—but, if that is not the case and we are all alone here in the South Pacific, then the only job we have right now is to become as powerful as possible as quickly as possible. To that matter, we must at times show that we have become hardened and, to be honest, a little bit more ruthless, that we put aside other benevolent ideas and focus on the main game. The main game is precisely that and this, until it has an erring towards focusing on another game, focusing on another priority. I know that when I go back to my office, people will be calling me, so I'd best get back to my office.

(Quorum formed)

Matt Thistlethwaite (Kingsford Smith, Australian Labor Party, Shadow Assistant Minister for the Republic) Share this | Link to this | Hansard source

Last week, the Australian Prudential Regulation Authority released some data about funds under management in Australian superannuation funds. It was really instructive data about where Australians are investing their retirement savings, and it once again proves that industry super is the sector that Australians trust and are investing in. Since 2018, the net value of assets held in retail superannuation funds has increased by 3.2 per cent, to $645 billion. Over the same period, assets held in industry super funds grew by 30 per cent, to $814 billion. Australians know which sector of the super industry has the better track record and which performs better, and that is of course the industry super funds sector. These funds consistently have lower fees. They have better performance in terms of returns, and their insurance options are much better and more tailored to the industry in which a particular person works. On the other hand, the retail superannuation sector has had its problems, and many of these problems were highlighted in the Hayne royal commission.

What gets me about this bill, the Treasury Laws Amendment (Your Future, Your Super) Bill 2021, is: why would you want to nobble the part of the industry that is performing the best? Why would you want to put further restrictions on the sector of the industry that gets better performance and better returns and has lower fees for Australian workers? But that's exactly what this bill does. That's why Labor is seeking to amend the bill, to ensure that it is a better piece of legislation and that it actually delivers on the objectives of making super better for Australian workers and ensuring that they have higher returns and lower fees.

This bill continues an ideological attack that the coalition has been pursuing ever since super was put in place by the Labor Party. Those opposite have never got over the fact that workers and employers, working together cooperatively through industry superannuation funds, do a better job at managing workers' retirement savings than the retail sector. It's something that irks them to their bones, and they've never got over that fact. Every opportunity they get, they try and attack industry superannuation on this ideological bent against workers managing retirement savings funds.

Schedule 1 of this bill introduces a system for stapling individual members to a single superannuation account. It applies to anyone who started employment after 1 July this year who has a staple fund and has not chosen a fund through the choice-of-superannuation legislation. This, of course, was a royal commission recommendation. Labor came into negotiations on this issue with an open mind. We were willing to have a look at the issue, and the test that we applied was whether or not workers would be better off. Given what the government has done with this piece of the bill, it's questionable whether someone who is stapled to a fund will be better off, particularly if they're stapled to a badly performing fund, which they have to stick with for the rest of their working career if they don't make a choice to get out of that fund. And let's face it: there are plenty of workers in Australia who don't make active choices about their superannuation.

Some of the problems that we have with this bill go to the mere definition of 'stapled fund'. The bill doesn't outline what a stapled fund is. As with a lot of things this government does, it's saying on this: 'We'll put it in the regulation. We won't put in the primary legislation something that's an important change to the workers retirement savings regime.' The regulation at this stage is only an exposure draft. The regulation contains an obscure definition of a stapled fund, how you determine whether or not someone has a stapled fund and tiebreaker requirements when someone has two funds that could be stapled funds and how that is worked out. As I mentioned, it's part of a trend by this government, which the member for Whitlam has outlined many times in this House, of putting important details, particularly in relation to superannuation and financial services, in regulations, outside the parliamentary ambit and the discussions that we undertake in this chamber.

The other point about this element of the bill is that it's up to the employer to seek information from the tax commissioner about whether a stapled fund exists for an employee. This also is in the regulations. It's more red tape and more inconvenience for employers. The obligation comes onto employers to consult with the Taxation Office about whether or not someone has a stapled fund. Finding out how you do that is not easy, given that it's not even in the law that we're discussing here today but in an obscure regulation that hasn't been written yet. Yet this government expects us to agree to something like that when that particular detail hasn't been provided to any of the parties yet.

The second issue around schedule 1 relates to insurance coverage. This is particularly important for people who work in high-risk professions. What the government is proposing may prevent an industry fund from being the default option for people who work in certain industries, particularly in high-risk industries like the construction industry or the transport industry. The insurance they may be stapled to may not be appropriate for their industry and may not contain some of the protections that workers who ordinarily work in that industry get by being in a superannuation fund that relates to their industry. That's why I mentioned earlier that industry funds do it better, because they have that expertise and because the fund is tailored to the workers who work in that industry, particularly when it comes to insurance. This is a fault in the bill that the government has no solution for.

Schedule 2 of the bill will require APRA to conduct an annual performance test for MySuper products and trustee directed products against benchmarks determined—you guessed it!—by the regulations. If the product fails the performance test, a trustee is required to give notice to beneficiaries that it has failed the test. Again, these are more obligations on trustees that will be passed through in costs to the employees. If a fund fails the test over two consecutive years than that fund is prohibited from accepting new beneficiaries into that product. Again, the details about this are in the regulations, including the circumstances in which APRA has a discretion to depart from the assumptions about comparisons between actual returns and benchmark returns. There is little detail about that. You could drive a truck through it, but no detail about has been provided by the government. There is also the issue of a potential penalty in respect of investments—an Australian-investment penalty, as the member for Whitlam put it—where the government's proposed benchmarks for its performance measures may actively penalise funds for investing in unlisted Australian assets such as venture capital, private equity or infrastructure assets. So there are problems with schedule 2 of this bill in relation to the performance of particular funds and their investment. Again, there is very little detail in the bill; it's all in the regulations.

Schedule 3 introduces a requirement for super fund trustees to act in the best financial interests of their members. This is the schedule which the member for New England, who spoke before me, mentioned he has some issues with. The member for New England gave a very balanced and reasonable speech about the problems with this bill and what it does. It's actively forcing trustees into situations where they may be investing—may be forced to invest—in products that aren't in the best interests of their members. It purports to introduce a requirement that super fund trustees must act in the 'best financial interests' of members. Trustees, we already know, have an obligation to act in the best interests of their members. And guess what? Generally, overwhelmingly, industry funds do a better job of that than the retail funds. It's quite often the retail funds that we see getting into trouble for breaching this duty—we saw all the evidence that was given in the royal commission about that—rather than the industry funds.

Yet this particular schedule of the bill is aimed squarely at the industry funds. Why? It goes back to what I said earlier: their ideological bent against workers managing their own money and their retirement savings. The mob on that side don't like that. They don't like it. This extends that duty again—guess what?—by regulation. It comes through in regulation, and that regulation allows the Treasurer to determine that a particular type of payment is not in the best financial interests of the members of the fund. This is unbelievable. This is really extraordinary, and it sets a very, very dangerous precedent for this parliament to be reaching into the boardrooms of Australia and telling those trustees of superannuation funds—if you extrapolate that out, they can do it in other areas like the boards of companies—where they should be investing the members' funds. That is extraordinary, and that is coming from a Liberal-National government: politicians determining how businesses should be run and, worse still, what the businesses can and can't invest in. It is rather extraordinary for this parliament to be looking into that, but that's exactly what this bill does.

Imagine that applied to companies more generally. Rightfully, there would be an uproar. Yet this government expects the workers of Australia, through the trustees of their superannuation funds, to cop this. It's simply not justified. As I mentioned earlier, industry funds on the whole perform better than retail funds. The proof is in the growth of those funds under management in industry superannuation funds over recent years. So to direct a superannuation fund to invest in a certain area—in a preferred business that fits the ideological ideal views of the coalition—is, when it comes to superannuation, a new low. And it sets an awful precedent for government to be looking into this.

The other element of this section of this particular bill is the reverse onus of proof. Schedule 3 applies a reverse onus of proof, requiring the trustees to prove that they're acting in the best financial interests of their members. This provision was opposed by the Law Council, and is more commonly found in terrorism legislation—not in this sort of financial services legislation. It will create a huge administrative burden for industry funds, and the costs of that burden are likely to be passed on to members, not only for industry funds but for retail funds as well. They'll pass those costs onto members. Retail funds have, on the whole, extraordinarily high fees as it is, and this is another cost that's going to be passed onto those members.

The final point to make about all of this is that these provisions are due to come into force on 1 July 2021. So employers have literally about six weeks, if this bill is passed, to get it into place and to undertake all of these new tests and changes.

When you talk about administrative burden, so much for reducing red tape, which this government claims it's all about. This is a massive red-tape burden that they're imposing on the employers of Australia, every single one of them, from 1 July this year. And guess what? When you try to find out what those obligations are and where the details are, you won't find those in the bill. No, those details are not in the bill. Then you go to the regulations. They're only exposure drafts at this stage, so they're not written either. They're not finalised and they have these obscure definitions that are quite complicated and quite difficult to understand. Yet the government is going to foist this on employers on 1 July this year. It doesn't make sense. It's not practical. It is not living in the real world, and if the government were to be sensible and reasonable about this, they would accept Labor's very reasonable amendments that make this bill workable.

Andrew Wallace (Fisher, Liberal Party) Share this | Link to this | Hansard source

I rise in support of the Treasury Laws Amendment (Your Future, Your Super) Bill 2021. Australia, like most developed countries around the world, has an ageing population. It's never, ever been more important than it is today to ensure that we have a system which will adequately support Australians in their retirement in the decades to come. The good news is that, on the Melbourne Mercer Global Pension Index, Australia is ranked as having the third-best retirement system in the world. As it stands, the system is pretty good, but it could always be better. The world has changed in the past 30 years—I don't need to tell you that, Mr Deputy Speaker. Today, the average Australian employee changes jobs 12 times throughout their career. In fact, a couple of weeks ago I was telling the chamber about my dear old dad, who became an apprentice mechanic at the age of 14 and he's still a mechanic at the age of 87. In his day, when you went into a line of work, there you stayed. But today we anticipate that employees will change their job 12 times over the course of their working lives.

With each job change comes the need to designate a super fund for the new employer to be able to contribute to that fund. Indeed, thanks to the reforms of this government, more Australians than ever before are able to exercise that choice. Unfortunately, all too many do not nominate their existing fund when changing employers. There are as many as 10 million unnecessary duplicate accounts, making up a third of the entire superannuation system in this country. Every additional account introduces another set of fees, which can be as high as two per cent, costing hundreds of dollars a year at a minimum. Just as damaging, the default funds provided by many employers are far from the highest performing and workers' hard earned money, which ends up in these lower-performing default funds, is not delivering the returns that Australians deserve. This bill will go a long way to solving this challenge and delivering billions in additional super savings to Australians over the decades to come.

Schedule 1 of the bill provides that, where a new employee does not nominate a super fund, the employer will be required to contact the ATO to ascertain what the employee's existing fund is. Those on the other side of the House might call that red tape. We call it sensible regulation, and I'll tell you why. The new employers will then have to make their contributions to the fund that the ATO advise them about. This will prevent millions of Australian employees from accidentally racking up multiple new accounts and it will save each of them hundreds of dollars a year in fees. This is sensible reform, but unfortunately not all super funds are equal—you know that, I know that.

In 2020 the best-performing funds, including UniSuper and AustralianSuper, delivered five-year returns of between seven per cent and nine per cent. The worst-performing funds, like AMP and Zurich, delivered returns of between zero and two per cent. In fact, investors in AMP's Capital Dynamic Markets balanced fund actually lost money. At the end of their career an Australian worker in the worst-performing funds will be hundreds of thousands of dollars worse off in retirement than the same worker in the highest-performing fund, despite saving exactly the same money.

We need healthy competition among super funds to drive down fees and to incentivise maximum return on investment. This is not rocket science. However, at present, unfortunately many Australians end up simply accepting the default fund of their first employer and they never change it. Currently, there are as many as three million accounts in these under-performing funds, totalling as much as $100 billion of Australians' savings. We must do more to ensure that Australians have every opportunity to escape poorly-performing funds and that fewer ever enter funds that are consistently letting down members.

This bill achieves both of these ends by mandating that APRA will conduct an annual performance test of superannuation products to set an objective benchmark for what constitutes an unacceptably poor return for a fund. Funds that fail to perform against this objective benchmark will be required to formally notify the workers whose funds they manage that the fund has done so, and they will have to do that within 28 days. This will ensure that workers will not be able so easily to miss the understanding that they could be going better and getting a better bang for their buck elsewhere. It will no doubt inspire many to overcome what is a problem of inertia and look into the possibility of switching to a better-performing fund.

To further protect new customers from unknowingly defaulting into a severely underperforming fund, the bill provides that funds which fail to meet the objective performance standard laid out by APRA two years in a row will be prohibited from accepting new members into the scheme until their management and performance have improved. In short, this bill will ensure that super funds can no longer rely on the inertia and low involvement of their beneficiaries to prop them up when they are consistently letting Australians down. In total, its provisions will leave Australians $14 billion better off over the next 10 years.

Finally, schedule 3 of the bill will clarify trustees' obligations and make sure that they are doing the right thing. Despite the noise created by members opposite, the bill will, in truth, simply ensure that trustees have an obligation to act specifically in the financial interests of members rather than any other interests—what we call fiduciary obligations. As recommended by the Productivity Commission, it tightens up record keeping and transparency obligations and ensures that APRA can make additional regulations where it's necessary to hold trusties to account. While we're improving the financial performance of super funds and ensuring that workers have more and better choices, schedule 3 of this bill will help stamp out some of the poor management practices uncovered by the financial services royal commission.

The implications of this bill could not be more wideranging. Almost all of us have a superannuation account. The super pool of $3 trillion is by far and away the greatest investor in this country. In fact, it is one of the greatest systems and most capitalised systems in the world. That is pretty good for a country of 25 million people. More effectively run super funds making better investments means more efficient use of the capital available to us and it means a better-functioning economy. More effective super funds investment means stronger economic growth and it means more jobs today. It means a more comfortable retirement for Australians in the decades to come. These reforms, while subtle, are a critical part of building the Australia that we want to see as we recover from this COVID-19 pandemic. I commend the bill to the House.

Andrew Leigh (Fenner, Australian Labor Party, Shadow Assistant Minister for Treasury) Share this | Link to this | Hansard source

A sea monkey isn't a monkey. A shooting star isn't a star. A koala bear isn't a bear. A firefly isn't a fly. A strawberry isn't a berry. A jellyfish isn't made of jelly. And the modern Liberal Party certainly isn't liberal. If you needed any more proof that the modern Liberal Party has become the illiberal party in Australia, look at this bill before the House, the Treasury Laws Amendment (Your Future, Your Super) Bill 2021, which gives the Treasurer the power to unilaterally cancel investments. As the member for New England, Barnaby Joyce, has just pointed out, this is a measure that could cut directly to the heart of the market system, by giving the Treasurer Chavez-like powers to cancel any investment he doesn't like. It has been called a measure that would 'do more harm than good' and 'create new compliance burdens that would add new costs and risks and would divert management and board attention'. It would represent 'arbitrary powers granted to the Treasurer of the day' that 'would set a dangerous precedent and would add a new and unpredictable source of sovereign risk to the investment process'. Which union leader or Labor member said that? It turns out to have been Innes Willox, the head of the Australian Industry Group, who also said that, if there had been a regulatory impact statement for this bill, then it would not have survived.

The fact is, the member for New England was right: this is a power which the government intends to be used so it can knock off decisions by superannuation funds that take into account climate risk or the gender composition of boards or risky industrial relations practices that might have some short-term gain but a long-term cost. However, once granted, that power could easily be used by a Treasurer of a different persuasion to cancel the kinds of investments that those opposite would hold dear. As the member for New England has pointed out, there is nothing in this bill that would prevent a future Treasurer from cancelling a coal investment just because they didn't like coal.

This bill has been a long time coming. I went back into the archives to look at some of the argy-bargy around this issue. In March 2019 we had AustralianSuper speaking to BHP about whether their work practices ultimately might cause problems for the bottom line. In response to former Australian Industry Group head Heather Ridout's intervention on behalf of AustralianSuper, we had the Statler and Waldorf of attacks on superannuation—the members for Goldstein and Mackellar—come out and put in the media shockingly personal attacks on Ms Ridout. The member for Mackellar described her comments as being 'shockingly partisan'. The member for Goldstein said, 'She's either an apologist for union strangling of industry, or completely captured and foolish.' But the view that you need to look at corporate practice in order to ensure long-term sustainability was backed up by none other than former ANZ chair David Gonski, who said, in reference to the problems that led to the banking royal commission:

There is absolutely no doubt—and we weren't alone in this—in thinking from time to time short term and finding things to fix quickly.. but we didn't think through in the longer term.

Mr Gonski defended the approach of AustralianSuper as an investor, saying that 'every single shareholder is entitled to have their view and put it to us'. That sort of long-term thinking is part of where smart investors are at—considering social, environmental, longer-term governance considerations. If you are a company whose profits are based on the fact that you are channelling profits through a tax haven then that is a real risk to the long-term stability of your investments. Investors are right to look at whether those tax practices are putting their investments at risk. Likewise, if you have an investment which is failing to take into account climate risk, as large Australian companies that are well managed now do, superannuation funds might then consider your practices. There is nothing wrong with those superannuation funds taking a broad view.

This bill contains a political override power which should chill members of the coalition. The member for Whitlam, who has been championing this issue for months now, has written to all members of the coalition, pointing out this risk, just in case they missed it when it went through their party room. We know that crossbenchers are concerned and the National Party is concerned, as we have just heard today from the member for New England. This is a measure which is fundamentally illiberal.

The bill starts from the principle that we need to reduce total fees in the superannuation sector. I agree entirely with that. The Grattan Institute's report on superannuation fees noted that Australians pay some $30 billion in superannuation fees. That was a 2018 figure, so today's number is surely higher. That amount was then two per cent of GDP. The Grattan Institute pointed out that a household nearing retirement would be paying average superannuation fees of $3,700 a year. The Grattan Institute pointed out that the amount the Australians spend on superannuation fees is more than they spend on energy, which accounted then for $23 billion. They noted that there are a range of duplicate accounts. One-third of all superannuation fund accounts, about 10 million of them, are unintended multiple accounts. They pointed out, too, that there are almost five million super accounts in high-fee funds costing $1.3 billion a year more than low-fee funds. The Productivity Commission's analysis put the difference between choosing a high-fee fund and a low-performing fund at $635,000 for a typical full-time worker in retirement. So that is a massive cost for workers in high-fee funds.

High-fee funds are over-represented in the for-profit sector, which stands to reason. If someone has to take a profit margin out of your investment, it is more likely that you will end up with higher fees and lower returns than if you are in a not-for-profit account. That is not to say that all not-for-profit superannuation funds deliver high returns for their members. Some are clearly too small to get economies of scale and will need to merge in order to do the best for their members. As Deputy Chair of the House Economics Committee, I have been working hard to ensure that we hold the feet to the fire of those superannuation funds who are not doing the right thing by their members. The APRA heat map has been important in this because it gives us the ability to directly say to underperforming super funds, 'Well, why are we seeing so much red in this map here when we look at the performance of your funds?' That is all to the good. But the problem with this bill is that it fails to deliver on the promise of reducing duplicate accounts and reducing superannuation fees. The approach being taken to stapling means that members can be locked into underperforming funds. Treasury's estimate is that up to three million Australians will be stapled to underperforming funds from the first day of the bill's effect. This is a measure which could effectively lock Australians into funds which deliver $635,000 less in retirement. That means a lower standard of living in retirement for those Australians and a higher reliance on the age pension, meaning that the rest of us taxpayers will end up having to pay more to support those people in retirement.

There is a reverse onus of proof, which was criticised by Labor senators when this bill was referred to a Senate inquiry and has been opposed by the Law Council. Such reverse onuses of proof are more commonly found in terrorism-related pieces of legislation than in a bill relating to superannuation. The performance measures proposed don't extend to all choice products and will initially cover only MySuper products, which means approximately a third of all assets managed by APRA-regulated funds will be excluded from the performance mechanism in their entirety.

This is a bill which Labor cannot support in its unamended form. It's a bill which has flowed from the coalition's ideological dislike of superannuation. When universal superannuation was first legislated there were many on the other side of the House that attacked it. I think of former member for Mackellar Bronwyn Bishop—she was then in the Senate—who told a story about how there had already been small businesses forced to close because they had to pay the cost of universal superannuation, prompting the late senator Peter Cook to interject that it was a bit strange that those businesses were closing given that the universal superannuation law hadn't yet come into effect. The fact is that, after we introduced universal superannuation, workers saw strong wage growth, and the pause on increasing the superannuation contribution has not been associated with a surge in wage growth. Indeed, the coalition have presided over the worst wage growth in history and have just brought down a budget which sees real wages go backwards. So, if there's anybody who has no right to talk about wages, it is the coalition.

The fact is workers need that high level of superannuation contribution. Those opposite campaigned hard to stop the increase to universal superannuation. I know the member for Goldstein strongly opposes the increase to universal superannuation. He believes, like so many on that side of the House, that 15 per cent is okay for them but that the workers shouldn't get 10 per cent. That is a position that Senator Bragg takes. Of course it's not always a position that Senator Bragg has taken—

Hon. Members:

Honourable members interjecting—

Ross Vasta (Bonner, Liberal Party) Share this | Link to this | Hansard source

Order! The member for Fenner is in order.

Andrew Leigh (Fenner, Australian Labor Party, Shadow Assistant Minister for Treasury) Share this | Link to this | Hansard source

Thank you, Deputy Speaker. Of course it's not a position that Senator Bragg has always taken. Senator Bragg once argued that we needed to increase universal superannuation contributions as quickly as possible, but he has now changed his tune and joined with those on the other side of the House who want to keep the universal superannuation contribution for workers low but who themselves enjoy the benefit of 15 per cent superannuation. That holds true with the Prime Minister, whose 15 per cent superannuation contribution ends up being higher than the salary for many regular workers. The fact is that Australia's pool of superannuation has meant that we have greater stability in the economy.

I'll finish where I started. When I was studying in the United States in 2000, we saw the election of President George W Bush, and the Republicans at that time were campaigning hard for private social security accounts. As an Australian, it took me a bit of time to get my head around this—that the Democrats were opposing private accounts and the Republicans were supporting them. But here we have the strange situation where it was a party of the Left that introduced universal private accounts and that saw the benefits for workers in getting those strong share market and property gains and those strong gains in the value of infrastructure assets. Yet, it's a party of the Right that is trying to white-ant superannuation and that attacks superannuation at every possible turn, whether it's attacking ISA or attacking proxy advisers, who do nothing more than provide independent advice to superannuation funds and, indeed, to other share market investors.

Those opposite won't stop at any turn to attack our effective superannuation policy, which has ensured that our pension is more sustainable than almost any in the world and will deliver dignity in retirement to millions of Australians.

Tim Wilson (Goldstein, Liberal Party) Share this | Link to this | Hansard source

It's a privilege to be able to speak on this bill and make some cursory remarks before the 90-second statements. I begin by saying that there are a number of sections in this bill that I support in principle, but I am concerned about how it will play out in practice. I have deep support for the stapling measures within the bill which will enable duplicate accounts to be removed so that young Australians, when they enter into the workforce, don't have their superannuation eaten away in the fees and insurance premiums and administration fees by, principally, industry super funds, particularly Rest and Hostplus. Having consolidation around those accounts so that the money is saved for young Australians' retirement is of critical importance, and I support that. But, I am concerned about where it might lead, and I draw reference to the recent KPMG Super Insights 2021 report:

On completion of the currently announced merger activity, based on 30 June 2020 data, 76 percent of Assets Under Management (AUM) and 77 per cent of member accounts will be managed by the top 12 funds, all with AUM>$50 billion.

What we are creating by not fixing a broken system, and superannuation is a broken system designed to favour the few at the expense of the many, is a concentration of economic capital and with it power, where people are able to bypass our liberal democracy to impose matters through the imposition on companies and particularly publicly listed companies. That means that individual investors will lose their capacity, their clout and their say within businesses. Of course, unelected boards that run these superannuation funds—unelected, unaccountable boards—will be able to have a disproportionate say on the future direction of our country and the operations of our country in a way that used to come into this place, this place where we pass laws to decide the future direction. They will be able to bypass our liberal democracy.

It's kind of ironic actually, that the Labor Party opposes this legislation or at least claims to, because, frankly, so many of their mates in the industry super fund sector actually get benefit from it. In fact, many of them argue in favour of it for that reason. Instead they want to create a false proxy war, because they want to be seen to be against it because it's proposed by a coalition government, when it will actually cement the power and the influence of many large superannuation funds. As I said, as somebody who is a Liberal, who believes in the decentralisation of power and not in the concentration of economic, social, political or cultural power in the hands of a few, I have deep concerns around that.

There are also things in this bill that the members on the other side of the chamber don't support, and I do understand why that is. They don't support tests being put on how members' money is being spent to make sure it advances the financial interest of those members. I do understand why, because they see superannuation money as their money, as fund managers' money, as money to be laundered through the unions through marketing fees and the like to make its way into the hands of the Australian Labor Party. It is a broken system that needs to be fixed. I can understand why the Labor Party will fight that effort to fix that broken system every step of the way.

We hear that confected outrage from the member for Fenner and his opposition to the Your Future, Your Super legislation because he said the Economics Committee rightly follows up on various superannuation funds and their misconduct, but he actually runs interference in those committees to support those doing wrong.

We see this particularly when we question industry super funds and outline how they're misusing members' money, reactivating low-balance inactive accounts and using those accounts to be harvested for fees and insurance premiums that they are not entitled to. They're not following through their legal obligations to pass that money on to the Australian Taxation Office, so it can be protected. I can understand why the member for Fenner dislikes us calling that conduct out because it means less money, less fees and less opportunity for the Labor Party to launder Australians' money.

Andrew Wallace (Fisher, Liberal Party) Share this | Link to this | Hansard source

It being 1.30, the debate is interrupted in accordance with standing order 43. The debate may be resumed at a later hour.