Andrew Bragg (NSW, Liberal Party) Share this | Hansard source

I rise to address the Superannuation Amendment (PSSAP Membership) Bill 2020. Superannuation is actually a good idea, but it has been poorly executed. What I mean by 'poorly executed' is that its very birth was, frankly, a chaotic birth, because who can think of any other fundamentally intergenerational scheme that hasn't even got a framework or an objective?

There are two schools of thought as to how this scheme came to life. The first school of thought is that it was developed by Bill Kelty and Iain Ross, who were staffers at the ACTU in the late eighties and early nineties. They advised the Keating government on formalising the accord arrangements on superannuation into legislation. The other school of thought is that the Treasury was asked to do some basic modelling at a pub in Canberra, on the back of a coaster, which was, sadly, thrown out and lost to history. Either way, the scheme was not put in place with the sort of economic rigour with which it should have been born so that over time it would actually be effective. By 'effective' I mean that what this scheme should be doing is getting people off the pension and saving the government and the taxpayer money. It is a demonstrable failure because it costs the budget vastly more than it saves and it gets very, very few people off the pension.

The other thing it does, which is a very real issue for a lot of low-income Australians, is damage people's prospects of securing a first home. Now, many factors have led to the lack of home affordability in Australia. I should take this opportunity to correct the record. I have not said that superannuation has increased the cost of housing ever. What I have said is that, if you are a low-income earner and you are forced to save into a superannuation scheme, it is harder, by definition, to secure a deposit for a first home. This is real money. These trade-offs are real. You can have a debate about the superannuation guarantee rate; the money doesn't fall out of the sky. The money, which is a cost of employment, is part of workers' wages. So your super guarantee increase is a trade-off against a wage increase, just as it is a trade-off against any other financial judgement, like pulling together a deposit for a first home.

This is an important issue for legislators to consider carefully. It is one of the biggest things that we do to the Australian people. We compel people to put almost 10 per cent of their own wages and salaries off away into these opaque funds, and we hope for the best, effectively. It is a lightly regulated industry.

People have said that I'm a socialist. People who know me know that that is not true, but I have advocated a higher level of regulation in this space because the way that this scheme was set up by the Keating government is that it was gifted to the financial institutions and the unions to run and they have run it poorly. You can look at the behaviour of the industry funds during this COVID crisis, when they have put their interests ahead of the national interest every single day—shocking, disgusting rent-seeking. You can see the even more appalling behaviour of the retail funds, who were exposed by the royal commission as always putting the shareholders ahead of the members and therefore breaching their fiduciary duty. This is a disgustingly administered scheme. Why is it so poorly administered? Because of the money. Each and every year, $32 billion in fees is sucked out of people's accounts. Australians spend more on super fees than they do on power bills. The only response we ever hear from the other side is effectively that there should be more and more super, more and more super, more and more super. There is not enough focus on the outcomes of the scheme.

Over the course of its 30 years, it has failed, really, on three fronts. As I said, it costs more than it saves. This year alone we're looking at almost $40 billion in forgone tax revenue. The industry says, 'We've probably saved the budget about $9 billion.' I know that you can't net those figures off, but you're a long way behind. Secondly, pension reliance is stubbornly high. Seventy per cent of people are on the pension today, and that will be the same in 2050. Yes, there will be more part-pensioners, but who can think of a scheme that after 50 years and 70 years of operation is getting virtually no-one off the pension? Thirdly—and this is a real issue for many lower income Australians—it is damaging the prospects of people pulling together a deposit for a first home.

The vested interests here are very, very strong. As I said, it was gifted to the banks and the unions, and the problem with the characterisation of the debate around unions and industry funds is that it's not just the unions that are the guilty parties; it's also the large employers. The large employer groups and the unions have been in bed together for the whole time that super has been in existence, and they will always put their own narrow interests ahead of the workers, just like they do on penalty rates. Just as they will cut workers' penalties rates to feather their own nests, they will always advocate for more and more super because of the board positions and associated revenues which flow into the employer groups and the unions.

Senator Ayres said that I have been making misleading statements about the Australian Electoral Commission data on payments to unions. The fact is that in this calendar year $13 million will flow from super funds into unions. That is not my data; that is the Electoral Commission's data. I have projected, based on a nine per cent growth rate over the past 10 years, that it will hit about $31 million by the end of this decade. By 2030 there will be $31 million flowing from super funds into unions. That is a significant amount of money. As someone who spent some time as a party director, I can assure this chamber that $31 million will pay for a lot of campaigns. And this is only the money that is captured under the AEC's definition of a political payment. It doesn't include the enormous expenditure, through advertising and other means, of the funds on promoting themselves. You can turn on the TV and watch a footy game, and all you'll see is super fund ads: 'How good is super?' 'Fantastic. It must be a great deal.' So the vested interests are a real problem. As I said, the financial institutions are just as bad. They have had their colours lowered by the banking royal commission; too often they have put their own interests ahead of the workers. But who could blame them? This is the only industry in Australia where they open the door and the money just piles in.

The Labor Party are isolated on the question of the superannuation guarantee. The ACOSS advocates for those on low incomes, the independent economists at Grattan and CIS, the Treasury, the Governor of the Reserve Bank—everyone has said this is a bad time to raise the super guarantee. It's a bad time because it will cost workers a wage increase, it will cost people jobs and, by the way, the system doesn't work very well. So, they're all saying, 'Why would you plough more money into this system?'

The Labor Party often likes to lecture us about being the advocates of low-income workers. Well, they're very isolated. ACOSS were against it. In fact, ACOSS were against the scheme at the beginning. And Peter Walsh, a decorated and very capable finance minister in the Hawke government, said that the only reason the scheme is being established by the government is to help the unions, because they want to get their toe into super funds management. That has been a cost-ineffective investment for workers, but it has worked really well for the unions. That's why all the people in this place fall over themselves to defend super. I wonder how many preselections depend on that.

At the end of the day, I am not an advocate for this system's abolition. I think that as a fair-minded person you have to look at the idea of trying to support people to be self-funded in retirement as a good objective and as a good and sound idea. So I would be an advocate for fixing the scheme rather than junking it. I think that it should have an objective and that there should be a clear framework. People should know that this system exists to get people off the pension. We should try to get at least half the population off the pension because we have an ageing population and that will cost the country significantly.

We should also look, as a first order, at trying to cut fees. Seriously, if you're looking at $32 billion being sucked out of this scheme every year, when you're putting in about $100 billion, that's a pretty material amount of money that's being pulled out, effectively, to pay for this largesse that you see in the finance sector and in the union movement. So it would be quite a reasonable idea for there to be significant market intervention here. I see no reason why the government couldn't offer a simple, cheap and cheerful government default fund. That was in fact the recommendation of reviews in the 1970s that looked at the idea of having a superannuation scheme, but, when the Keating government got around to legislating superannuation, they of course gave it to their friends in the union movement and the finance sector.

It is also my view that historically—because I try to be a balanced person—the finance sector has had too much influence over the Liberal Party. I think there is no doubt that, particularly in the financial planning space, there has been too much influence, and people have not come to these issues and looked at them clearly. You would struggle to find a single member of the Labor caucus who would argue against having 12 per cent super, even though that would be argued in the face of all the independent evidence—from Grattan, from the Reserve Bank, from ACOSS. Every fair-minded private sector economist would say it was a bad idea. But there they are, apparently arguing against their own core constituency.

The other thing we should try to do is actually enforce the laws this parliament sets. Why on earth would super have a sole purpose test designed to ensure that the money is managed only for members' benefits? It would be totally undermined, particularly by the regulator APRA—and I have to say, I've lost the great confidence in them that I had for many years. APRA is basically green-lighting super funds and allowing them to make significant political payments. They're also allowing the super funds to break their own prudential rules. There are people who have been on these boards for 10, 20 or 30 years. APRA has a board renewal policy that says you're not supposed to be on a super fund board for more than 12 years. There are people sitting on superannuation fund boards today who have been on these boards for 26 or 27 years. Until last year, there were two directors of super fund boards who had been on these boards for 32 years apiece. Now, 32 years is the age of the newest director of Telstra, Bridget Loudon. That's a good comparison.

At the end of the day we will always try to look at these issues relating to superannuation in a practical way, because we are practical people on this side of the chamber. We will look at the super guarantee rate. We will look at system design. We will always try to get the best deal for workers, because we recognise that this is a significant intervention into people's private affairs. We want the scheme to work, and we'll look at it with clear eyes.

I want to reflect on this very good quote from the House of Representatives on Tuesday, where the Prime Minister said:

Those opposite want to keep the hard-earned savings of Australians away from them when they need it most and have them tucked up in the industry fund by union fund managers as they count their directors fees.

The problem here is that the Labor Party really have no idea who they represent when they come into these chambers. Are they representing the super funds, or the unions, or the people who elected them? I really wish they would come into these chambers and reflect upon that very carefully. People can talk about people's past, their histories and what their prior views were—that's fine. But when you're elected into this place you really should look at every issue through the prism of what's going to be best for the workers, especially now that we're in an environment in which we have not been previously with super: this is the first recession we've had with super. So for people to come in here and advocate to send more and more money off to the banks and the union so they can count their big directors fees and make their significant payments to shareholders in a scheme which is not working is I think a very, very significantly bad judgement, and people will remember this.

I know that the Labor Party think that the super funds will come and campaign for them, that they'll threaten the crossbench and do all this stuff—that they'll use all the bullyboy tactics they have used in years gone by. That might be okay, but I think the Australian people will judge very harshly political parties which are desperate to put vested interests ahead of the national interest and vested interests ahead of their own interests. At the moment, the Australian people want more jobs, higher wages and a secure future. They don't want to see people coming into this place and trying to feather the nests of their mates.