Helen Coonan (NSW, Liberal Party, Shadow Minister for Human Services) Share this | Link to this | Hansard source

My question is to the Minister for Superannuation and Corporate Law, Senator Sherry. Can the minister advise the Senate by how much the government expects returns on Australia’s $1.3 trillion superannuation funds to fall as a result of the world financial crisis?

Nick Sherry (Tasmania, Australian Labor Party, Minister for Superannuation and Corporate Law) Share this | Link to this | Hansard source

Firstly, if I could correct the figure in the question, the last total balance, as I am advised, for Australia’s superannuation funds is $1.1 trillion not $1.3 trillion—that is, unless APRA in the last day has issued some further data to show that the figure has gone from $1.1 trillion to $1.3 trillion. If it has I would frankly be surprised if the superannuation savings of Australians have gone up in current market circumstances.

As all senators are aware and, indeed, most Australians in the general community are aware, there is a global financial crisis. I have spoken on this matter on a number of occasions. What has occurred in the United States is known as the subprime housing financial crisis. What has occurred in the United States is the mis-selling of mortgage products to millions of Americans who, on any reasonable reading, could not afford those mortgages. In turn those mortgages were securitised and underwritten by a range of financial institutions and given AAA ratings.

As the emerging turmoil, the collapse, the takeover and the effective nationalisation of a number of financial institutions has occurred in the United States, as the debts have been exposed, that in turn has had an impact on the share markets. Australia has not been immune from this. There has been a worldwide impact on all advanced economy share markets including Australia’s. In turn, when share markets fall, given that the predominant investment product in Australian superannuation funds is in equities in the share markets, then the rate of return at any single point in time within superannuation funds will decline if the markets fall.

What we have seen in the last financial year as a result of this turmoil is an average reduction of 6.4 per cent negative rate of return in respect of Australian superannuation funds. This is not the first occasion that we have seen negative rates of return in superannuation fund assets. I am sure Senator Coonan would recall when, I think, she was Assistant Treasurer there was a negative rate of return—not as significant and not as widespread—in the period 2000-01. I am sure Senator Coonan recalls that period.

What is important to emphasise is that the real long-term rate of return in superannuation is an average of five per cent. It is very important to emphasise in these market circumstances, with their impact on superannuation funds, that it is the medium- to long-term rate of return which is relevant in making a judgement on superannuation funds returns. If APRA have not published the latest data on the value of Australian superannuation funds as at the last quarter then I will contact APRA to see what the latest position is as of today. (Time expired)

Helen Coonan (NSW, Liberal Party, Shadow Minister for Human Services) Share this | Link to this | Hansard source

Mr President, I ask a supplementary question. The minister has completely failed to deal with the question which was: by how much the government expects returns on Australia’s super funds to fall as a result of the world’s financial crisis. My supplementary question is: has the government undertaken any modelling on how many self-funded retirees may be forced onto a full or part age pension as a result of the negative effects of the world financial crisis on their super?

Nick Sherry (Tasmania, Australian Labor Party, Minister for Superannuation and Corporate Law) Share this | Link to this | Hansard source

The intersection of superannuation with the age pension, for example, comes about as a result of the means test, the assets and incomes test, of the pension. The value of non-pension assets is important to calculate and that does impact on the level of age pension paid to individuals if the value of their superannuation goes up or down when it is reassessed.

Helen Coonan (NSW, Liberal Party, Shadow Minister for Human Services) Share this | Link to this | Hansard source

Mr President, I rise on a point of order to do with relevance. I appreciate that conventionally the response from the President to a point of order on relevance is to say that you cannot direct the minister as to how to answer the question, which of course we all accept. But you can direct him, in my respectful submission, to be relevant. That is something that you can do and I would ask that you do so.

John Hogg (President) Share this | Link to this | Hansard source

Thank you for the point of order. You have ruled on the point of order before I had a chance to. There is no way in the world that I can direct any minister to answer the question. I can draw the minister’s attention to relevance. The minister has 24 seconds in which to continue his answer and he should bear in mind relevance to the question.

Nick Sherry (Tasmania, Australian Labor Party, Minister for Superannuation and Corporate Law) Share this | Link to this | Hansard source

Thank you, Mr President; I certainly have borne in mind relevance because I am addressing the issue of the intersection in evaluation of a particular individual superannuation at any particular point in time—and other assets for that matter—under the means test provisions with the age pension, and the question went directly to that. I am not aware of any— (Time expired)