Mathias Cormann (WA, Liberal Party, Shadow Assistant Treasurer) Share this | Hansard source

The Superannuation Legislation Amendment (Further MySuper and Transparency Measures) Bill 2012 is another case study on how this government can seriously mishandle something that is actually a pretty good idea in principle. The concept of legislating basic consumer protection requirements that are important for superannuation products for people who have not made active choices in relation to superannuation arrangements is appropriate. The coalition have supported it in principle for some time. But of course with matters superannuation the devil is always in the detail. If you do not get your set-up right, it can have pretty devastating and significant consequences and significant implications for Australians who are saving for their retirement.

The Cooper review recommended the creation of a legislated default superannuation product, which the government has called MySuper. So far, so good. We have been critical in the past of the disjointed nature in which the government has pursued this pretty significant reform. Rather than introduce one package in one go so that we can assess the merits of this particular change as a whole package, we have had tranche after tranche after tranche dealing with various bits. Some of the bits in this tranche are pretty significant, certainly in the way the bill was initially introduced.

We are talking here of a bill which is more than 100 pages long and it will make some pretty fundamental and, in parts, controversial changes to Australia's superannuation retirement system. The Minister for Financial Services and Superannuation introduced a bill initially, which was in terrible shape and which included provisions which would have had some terribly devastating consequences for people in superannuation funds across Australia. For example, more than one million Australians would have been exposed to an automatic transfer of their superannuation funds—about $43 billion worth of superannuation savings—out of their chosen fund, into the government's legislated MySuper default fund product, without being asked for their prior approval.

That is of course entirely inappropriate. No government should be able to shift people's money out of their chosen superannuation fund into a legislated MySuper default fund without, in particular, seeking people's prior approval, given some of the costly adverse consequences that can flow from that.

Just to start at the end, yesterday in the House of Representatives Minister Shorten completely and totally backed down from the most controversial change in this legislation, which the coalition criticised from the outset, which was the proposal to force super fund trustees to shift people's superannuation savings, including out of funds where they had exercised active choice, into legislated MySuper default fund products without seeking people's prior approval. He totally backed down. He moved a comprehensive amendment which protected the interests of those Australians, an amendment which had been sought by the coalition as a condition for us not opposing this legislation.

But why did Minister Shorten get it so fundamentally wrong? Minister Shorten got it so fundamentally wrong for a range of reasons. Firstly, there is his general ideological blind spot, which means that he does not see straight when it comes to superannuation. He takes advice from one segment of the superannuation market when he puts these things together initially and then, when things come apart, he is forced to fix things up as he goes.

But let me talk through the lack of process here, because we have the Minister for Finance and Deregulation in the chamber here. One of the areas of responsibility that Minister Wong has relates to the Office of Best Practice Regulation. One reason why Minister Shorten gets things wrong, whether it is with FoFA, with MySuper or with a range of other things, is that he does not follow proper process.

I will give you one example: whenever there is a significant regulatory change that is unlikely to pass the government's procedural requirements around regulatory impact assessments, what does he do? He seeks an exemption from the regulatory impact assessment process. Whenever there is a piece of legislation that imposes inappropriate excessive red tape, inappropriate excessive costs, inappropriate and excessive adverse consequences for people across Australia, which should be scrutinised through a proper regulatory impact assessment and a proper cost-benefit analysis, what does Minister Shorten do? He writes to the Prime Minister: 'Can you please give me an exemption from having to submit this piece of legislation through the process that we promised the Australian people we would go through'—and this bit is not written—'because, essentially, I don't think this legislation would pass that sort of scrutiny.'

Minister Shorten introduces flawed legislation. If he had gone through proper consultation with appropriate and representative organisations—not just his friends in the union-dominated industry super funds movement but across the board—and if he had sought proper advice in an unbiased fashion, then he would have been able to pick up some of those flaws much earlier.

This whole MySuper process has been going on for years. But then Minister Shorten introduced the third tranche of this legislation back in October. Initially, he did not want to have any parliamentary inquiry into it. Initially, he said, 'There is no need for an inquiry.' When we wanted to refer it to the Parliamentary Joint Committee on Corporations and Financial Services he did not want that to happen. When it did happen then, all of a sudden, the Labor members on that committee did not want to have a hearing. They wanted to have it all done within a week.

We had to suggest to them that, if there was not a proper hearing, we would report that to the parliament and seek the support of the crossbenchers to judge the merits of this legislation as a result—and that changed their mind. In the end they rolled over on that. In the end the PJC had a half-day hearing where we were able to hear from very important witnesses like the Financial Services Council and others for just 30 minutes each. There were half a dozen people wanting to ask questions about a bill that is making substantial changes to people's superannuation arrangements, with significant consequences for the way their retirement savings develop into the future, and we had 30 minutes per witness in a half-day hearing. It was completely and inappropriately rushed.

It gets worse. This is all on the public record. Labor members of the committee in their majority report said, 'Just pass the bill.' It came down to coalition members of the Parliamentary Joint Committee on Corporations and Financial Services to identify the many and serious flaws that needed fixing. Yesterday, at the last possible minute, the government rolled over and made the sorts of changes that we were after. This was a significant policy victory for us on behalf of Australians who are planning for their retirement and were at risk of having their savings transferred automatically and without their prior approval to a government legislated MySuper account.

This bill, the Superannuation Legislation Amendment (Further MySuper and Transparency Measures) Bill, requires that trustees transfer so-called accrued default amounts to a MySuper product. These are supposed to be retirement savings where a member has not exercised choice, but the bill as originally drafted went much further than that. It would have changed the investment strategy of many Australians by forcing the transfer of potentially large amounts of money from funds where individuals had made a clear and active choice about their superannuation to a MySuper default product without the need for prior approval from the individual concerned.

Yesterday in the House of Representatives, the coalition secured comprehensive amendments from the government to resolve this and other issues. Why didn't Labor members on the Parliamentary Joint Committee on Corporations and Financial Services see the overwhelming evidence that there were serious flaws in this legislation? Why didn't Senator Thistlethwaite look at the evidence that was before us when we went through this inquiry? Why didn't government members see what we all could see and what the Minister for Financial Services and Superannuation finally had to concede—that what the government was proposing was entirely inappropriate?

Quite frankly, if an individual Australian has made any sort of choice in relation to their super fund arrangements, it is none of the government's business to force transfer of their superannuation savings into any other account without seeking people's prior approval. The only exception to that that the parliament has agreed to in the past is in relation to very small amount accounts—accounts of less than $1,000—where, of course, the issue of fees and so on arises and where there is a public benefit in merging people's accounts in order to minimise the level of fees. But, as a general rule, if in the past somebody has been contributing, year in, year out, with their superannuation contributions paid by their employers into a superannuation fund that they have chosen specifically, it is none of the government's business to interfere with that.

In our view, the truth of the matter is that Bill Shorten has shown once again that he is not on top of his portfolio. Maybe he has too much on his plate. He is the minister for unions and the minister for union dominated super funds. Then, of course, he is the minister who has to run the occasional defence for the Prime Minister and who has to do a whole series of other political things as he continues to climb that Labor ladder of opportunity. He fought against having any inquiry into this bill when the coalition tried to have it referred to the corporations and financial services committee. Despite the rushed inquiry, coalition members on the PJC identified serious flaws which the government now has had to acknowledge and act upon with significant last minute amendments. Bill Shorten should have done his homework from the start. Labor members of the parliamentary joint committee should have recognised that the evidence about massive flaws in Mr Shorten's initial MySuper bill was overwhelming. Minister Shorten had seven weeks from the time the committee reported to draft his amendments. Instead, he has waited until the second last day of sitting for the year to start consulting with industry about an actual government amendment. So there was quite a flurry of activity yesterday to get the amendment right. Why did it take so long? This process has been going on for years. At the last minute, having rejected the need for an inquiry, he has completely and utterly rolled over and fully accepted all of the coalition's sensible and very constructive recommendations to fix this bill, as set out in our dissenting inquiry report.

This is no way to run a portfolio, especially a portfolio that deals with the retirement savings of Australians. Without the changes secured by the coalition, many Australians with superannuation in affected accounts would have faced costly adverse consequences, including being exposed to transaction costs and fees as assets had to be sold and repurchased in the new fund as the forced transfer was happening, potentially being placed into a fund with lower returns or higher fees, potentially being placed into a fund with a higher risk investment profile, and being exposed to the risk of losing life and/or total and permanent disability insurance.

The coalition succeeded yesterday in forcing the government to amend this bill and so the bill that is before the Senate now is the amended bill, as amended by the House of Representatives, so that a member who has previously exercised choice cannot be automatically transferred into a MySuper product by having previous contributions defined as an accrued default amount. The coalition has also achieved amendments to the legislation to avoid a potentially serious constitutional issue.

The bill as drafted did have the potential to break existing contractual arrangements and there was potential for legal challenge for breaching section 51 of the Constitution, the section that deals with the acquisition of property on just terms. Whilst the government has seen sense at the very last minute, this mess could have been avoided by proper process and proper consideration before the legislation was put before the parliament. It again shows, as I said at the beginning, that Bill Shorten's approach to running his portfolio is rather shambolic and disorganised, and that is why he has to keep fixing things on the run.

There is, of course, another problem with this bill. The government is introducing this MySuper default product but says at the same time—and it was said yesterday by the government in the debate about the changes to the Fair Work Act—that these products are not good enough as default products. I see Senator Thistlethwaite over there looking a bit intrigued and concerned about the fact that somebody on the government side would have said that, but that is exactly what Senator Jacinta Collins said yesterday. She said that to allow employers to choose any MySuper product as a default product for their employees would actually expose those employees to the risk that the employer would not act in the best interests of the employees in the MySuper product of their choosing.

Our argument here is that we support the creation of this default fund product, legislated as we are progressing it here today. But we think any product that qualifies for registration as a MySuper default fund product, because it complies with all the consumer protection requirements the government thought were necessary and that have hence been included in this legislation, should be able to compete freely in the default fund market. There is no need for an additional level of red tape, for an additional level of government intervention on top of that.

If the government believe they got this legislation right, if the government believe that this legislation has in it all the consumer protection requirements that are necessary for a default fund product, then why are they scared of competition between any such product that qualifies for registration as such a default fund product? And of course the reason is very clear. It is because the process the government put in place when the Fair Work Act was first established is a process that inappropriately favours union dominated industry super funds. It is a widely discredited process through Fair Work Australia that is anti-competitive and closed-shop. It is a process that is littered with inherent conflicts, with conflicted parties who act at the same time as delegates for unions for employer bodies and as super fund trustees in the super funds listed on the modern awards.

Even the government, in the lead-up to the last election, had to concede that it was an inappropriate process, which is why they made a promise, in August 2010—and Senator Thistlethwaite, I encourage you to have a look at the Labor Party's superannuation policy in the last election—in the lead-up to the last election that they would change it. They recognised that the system, the way it was, was broken and inappropriate and that there was a need for an open, transparent and competitive process for selection of default funds on the modern awards and other relevant industrial instruments, and that they would do that. It took Minister Shorten forever, but eventually he got around to calling a Productivity Commission review. But of course, as the Productivity Commission was halfway through their process, he intervened and made sure that the Productivity Commission understood that free and open competition was not an option. He stopped them in their tracks after they recommended genuine competition in the interim report. He responded to the review before it had finally reported in order to prevent the opening up of default super fund arrangements to genuine competition.

That is why the coalition will move amendments again here today to ensure that any MySuper product can compete freely in the default super fund market. It is because, strangely, the coalition has more confidence in the MySuper product structure than the Labor Party seems to have. The Labor Party seems to think that Fair Work Australia has to do another check on the MySuper products that are registered under this legislation. It is just a ridiculous proposition, which is why we are moving our amendments.