Murray Watt (Queensland, Australian Labor Party) Share this | Link to this | Hansard source

I rise to speak on the Treasury Laws Amendment (Improving Accountability and Member Outcomes in Superannuation Measures No. 1) Bill 2017 and the Superannuation Laws Amendment (Strengthening Trustee Arrangements) Bill 2017. They are both bills that Labor will oppose. In relation to one of these bills, we will also be moving some amendments. What these bills amount to are a continuation of the rather sad attack that we continue to see from this government on the independence of superannuation funds and the right of workers to have some control over their own retirement savings. I understand that there was a rather brief Senate inquiry conducted into these bills, and I noticed from the dissenting report from Labor senators that this was a very rushed exercise. The bills were introduced late in a sitting week, and then a very short amount of time was provided for the inquiry. So I thank all senators, whether they be Labor or other senators, for their work on this inquiry—no doubt under significant time pressure. Thank you to the committee secretariat as well for their work.

At the outset I want to put on record that we on the Labor side of parliament are very proud of our nation's superannuation system. It is obviously a great Labor achievement from the Hawke-Keating days, in partnership with the trade union movement and employers. All observers would recognise that our retirement scheme, particularly based on compulsory superannuation, is an incredible social justice measure, making sure that all working people, no matter what their background, no matter what their income, are able to enjoy a dignified and secure retirement as a result of the superannuation contributions that they make and that their employers make on their behalf.

Not only is compulsory superannuation a critical social justice measure in Australia; it's also become a really key component of our economic wellbeing as a nation. Superannuation funds are obviously large investors in Australian companies, in property and in infrastructure projects, which all go on to create more jobs for Australian working people as well. There is no doubt that some of the prosperity that Australia has seen over the last 25 years is based on the introduction of compulsory superannuation by the Hawke-Keating Labor government a couple of decades ago. We are extremely proud of our role in having established compulsory superannuation, and we will always fight to preserve it and to preserve workers' ability to have some control and influence over their own retirement savings.

There was a very clear decision made by the Labor government when we set up compulsory superannuation that it needed to be a bipartisan exercise between employers and trade unions on behalf of working people. A very deliberate decision was made to ensure that boards of superannuation funds reflected the interests that both employers and working people, through their unions, had in the preservation of good retirement savings and a decent retirement for all working people. That's why, when this system was established, it was created on the basis that there would be an equal place for employers and trade unions on the boards of superannuation funds to ensure that those interests were properly reflected. So it's very sad to see this government now wanting to change that, to change a system that has been extremely successful for working people, for social justice, as I have said already, and for the health of the Australian economy.

It's worth observing that industry superannuation funds, which are the primary target of this legislation, have consistently out-performed retail and corporate superannuation funds over many, many years. We see a government which claims to be about the free market, about prosperity, about lifting economic growth and about making everyone wealthier. It's ironic, then, to see this very government introduce some legislation which interferes with the operations of the most financially successful superannuation funds around—being industry superannuation funds. I could understand the government wanting to take some action if there were a demonstrated poor record from industry superannuation funds, which are run by a combination of employer and union representatives. I could understand it if there were problems there and if members of those funds were essentially being dudded out of their own retirement savings. But it is quite the contrary. If you look back on the record of industry superannuation funds—the funds that do have employer and employee representation on their boards—you see that they have outperformed retail and corporate funds. So, if anyone needs a bit of a look at them, it's surely got to be the retail and corporate funds rather than industry superannuation funds.

We know that, over a long period of time, large banks have lobbied this government very heavily to get their hands on the massive and growing pile of retirement savings that has been built up by these industry funds on behalf of ordinary working people. We know that lobbyists have been in and out of the doors of ministers' offices and government departments, putting the case for why banks should be able to have greater control over those funds. I don't understand why they've been given much consideration by this government, when, again, if you look at the record of funds that are run by banks, they have a much poorer financial record than the industry funds, which, now, this government wants to tinker with. I would've said to them: thanks; but why don't you go and get your own house in order before you come knocking on the door, seeking to get your hands on the funds which have been run highly effectively on behalf of working people through a combination of employer and employee membership?

I noted that this bill, the strengthening trustee arrangements bill, essentially replicates a similar bill that was brought forward and introduced by this government back in 2015—before I was here, but I remember the debate on it occurring at the time. At that time, Labor senators also put forward a very strong dissenting report on a similar argument—that the right way to go about building up retirement savings is to have them administered by a combination of employer and employee representatives. The government was not able to get that legislation through at the time, and they should've read something into that: this Senate, and the opposition, does not support this attack on industry funds and the retirement savings of working people.

Labor's position on this 2017 bill is very similar to the position that we took back in 2015, and we continue to have the same primary concern, which is that this bill seeks to impose a corporate governance model on funds which operate under a trustee governance model. You've got to acknowledge that the way these industry superannuation funds operate is fundamentally different to the corporate approach taken by retail and corporate superannuation funds. It's quite appropriate that retail and corporate funds have imposed on them a governance system that is based on what happens in the corporate world, but industry superannuation funds effectively run as trustee arrangements, and they need a different approach, accordingly.

Some of the problems of the imposition of this corporate governance approach were highlighted in the Labor senators' dissenting report on this bill, where they acknowledged, at paragraph 1.13, that:

Corporate governance—

the model that's sought to be imposed here—

faces particular issues which need to be addressed and include:

As I say, it was a fundamental principle in the Hawke-Keating government's embarking on this approach that the administration of industry super funds would be done on a cooperative basis, with agreement reached, hopefully, between employer and employee representatives. It is important that working people have confidence that their retirement savings are being managed in a way where their interests are paramount, not the interests of shareholders in a company. We know that we have a corporate law system where, in large corporations, the interests of shareholders are paramount. That's fine. That's appropriate for a corporate environment. But if we're talking about a system that is designed to protect and grow workers' retirement savings, surely the biggest priority should be to make sure that the interests of those working people who've made their contributions—and employers who've made contributions to these funds as well—remain paramount over the interests of any particular shareholder. That's what's at risk here if these amendments do go through. Similarly, it's not appropriate that the fiduciary duties that directors of corporate funds have, again, primarily being to a shareholder, be simply transferred across and put onto a trustee based fund, when other considerations are important—the needs of the employers and working people, who this system is designed to benefit. Those are the kinds of considerations that are much more appropriate for a trustee based system. But, unfortunately, if this bill is passed, that's what will be removed.

Equal representation of employers and working people, through their unions, on superannuation boards has been a very longstanding arrangement. It's served Australians well and it is something that Labor believes absolutely needs to be maintained. I just don't understand why the government is so hell-bent on changing a system that works, changing a system that has consistently delivered better financial returns to members than the returns provided by retail and corporate funds. Even if you look away from the benefits to the individual members of these funds, the system that we have in place for superannuation at the moment, the legislative architecture that we have in place, has not only served the members of those funds well but it's actually served the nation well. It's built up a massive, world-leading pot of funds across superannuation that has been effectively invested to the benefit of members of the funds but also to the benefit of the nation, through investments in infrastructure, property and other Australian companies, as well as overseas companies, but there has been a direct benefit to Australia and the Australian economy through the very system which this legislation now seeks to undermine. Over the last 10 years, the analysis conducted by APRA shows that not-for-profit superannuation funds have outperformed bank-owned super funds by, on average, more than two per cent. That's something that we should be encouraging. We should be encouraging the actions and operations of not-for-profit superannuation funds which are overseen by joint employer-employee directors. We shouldn't be trying to undermine them, which is what is sought to be done here.

As I mentioned, there is only one explanation I can come up with for why the government would want to ignore the evidence, ignore the economic benefit to the nation, ignore the financial benefit to members and ignore the many benefits that flow to employers who participate in industry super funds as well. The only explanation I can come up with is that they've been worn down by the lobbying of big banks and big financial services companies. Indeed, Minister O'Dwyer, who oversees this legislation, let slip what this legislation is really about in November last year, when she said the government needed to 'lift superannuation funds to at least the same standard as other financial services organisations like banks and life insurance companies'. That came from a report in the Financial Review on 23 November 2016. Clearly there is an agenda at play here from this government and from this minister to ignore the proven track record of industry super funds based on a cooperative approach between employers and employees, throw the baby out with the bathwater, copy what's being done by their mates in the banking industry and throw that into the mix as well.

This is the real aim of this bill. It's to make the governance of superannuation funds the same as that of the big banks. You really have to wonder why any minister would want to put forward a change to our internationally successful superannuation system to make it more closely modelled on what happens with the banks. You would have to wonder why any minister would want to do that, after the litany of scandals that we have seen from Australian banks over the last few years. I've lost count of the number of scandals that we've seen, particularly involving the Commonwealth Bank but across our banking system more generally, with insurance and other products being sold to people who didn't need them, the tying of commissions to the number of sales of products, which perversely incentivises people working in the banking system to sell people products that they don't necessarily need, because that's the only way they're going to get their bonuses.

We know very well that the Australian public have had enough of this, and that's why the calls that Labor has made for a banking royal commission, backed in by some members of the government and crossbenches as well, has resonated with so many people out there. They're sick of seeing the scandals that we see day after day, month after month, year after year from the big banks. Despite that, despite all the evidence that there are some serious culture problems in our banks, this government now wants to take the approach that banks use, apply it to a successful industry superannuation scheme and provide an avenue for the banks to come in and get their hands on workers' money. I think that the banks, before they're given that opportunity, need to get their own house in order. They need to show that they actually have changed, that their culture has changed and that they recognise their responsibilities to look after their customers as well as their shareholders before we even give any consideration to giving banks a greater opportunity.

It's going to be very interesting, when the House of Representatives comes back in a couple of weeks time, to see where a number of government members of parliament stand on the issue of a royal commission. There have been a number of lower house members from the government, particularly from my home state in Queensland, who've been very vocal about the need for a banking royal commission. But every time there's been the potential for them to vote it in they've either gone missing in action or voted with their own government colleagues. The member for Dawson is probably the best known example. He's an absolute champion of rights for people against the banks when he's back home in Mackay, but the minute he comes down to Canberra he gets taken aside and told what to do, because we all know that he isn't independent of mind and he takes his writing instructions from Canberra and then runs back to Mackay to do what he's told.

I can't remember whether it's on this issue—the banking royal commission—or one of the other many issues that the member for Dawson has grandstanded about, where he has actually said he won't be voting against the government while the former Deputy Prime Minister, the absent Deputy Prime Minister Barnaby Joyce, is campaigning. That's how strong the commitment of the member for Dawson is to a banking royal commission. It's a perfect example of the fact that he's actually got his own government's interests at heart rather than those of his constituents, who want to see something done about the banks.

I wouldn't be at all surprised if we see some sort of a debate about the need for a banking royal commission in the last two weeks of the House of Representatives, and it's going to be a real test for the member for Dawson to show where he stands. Does he actually believe the things when he's out there back in Mackay or running around the Bowen Basin beating up the banks, saying that they need a good talking to and they need a royal commission, or is he going to come back down to Canberra like he's always done and fold and lose the chance to put in place a banking royal commission?

It's not just him. The member for Capricornia is another. We know that there are many problems that her constituents have been experiencing with banks. It's a great opportunity for her as well to actually flex her muscles and show her government that she's going stand up for her constituents, when her vote could actually make a difference and could actually drive a banking royal commission.

In conclusion, I don't understand why we would want to tamper with a world-leading superannuation system. It has served us, its members and the Australian economy very well, having that cooperative approach between employers and employees. The last thing we should be doing is letting the big banks get their hands on this before they fix up their own problems.

David Fawcett (SA, Liberal Party) Share this | Link to this | Hansard source

I, too, rise to address the Treasury Laws Amendment (Improving Accountability and Member Outcomes in Superannuation Measures No. 1) Bill 2017 and the Superannuation Laws Amendment (Strengthening Trustee Arrangements) Bill 2017. I'm glad Senator Watt has remained in the chamber. I trust he's going to stay here for a bit longer, because he put the question to the chamber and to the Australian people: why would we change something that is working well? But the question is: who is it working well for? He also said that if there was any evidence that this was not working well for members then, perhaps, he might reconsider. Can I draw his attention to some of the cases that have been raised in recent years where we have seen members' funds, which they have put into an industry fund for the benefit of their own retirement, used on things that the members are just not aware of and, certainly, are not for the members' benefit. Let's take the disclosures that we see from the Australian Electoral Commission of the financial statements of industry super funds, and you get an estimate that around $8 million was paid last year alone to unions in unexplained payments. Other reports call them 'dark payments'. The industry fund CBUS, for example, chaired by former Victorian Labor Premier Steve Bracks, looks after some 732,000 members working in the construction industry. CBUS paid over $1 million in sponsorship fees to unions, including the ACTU, the CFMEU, the AWU, the AMWU, the ETU and the PTU.

Coming back to the point that was made by Senator Watt and those opposite about directors appointed by unions, guess where their fees go? In many cases the fees are going directly to the unions, not to the directors themselves. In some cases they get paid a small retainer, or a percentage amount. Essentially there is a flow of cash to the unions both in grants and in other payments, and even the directors' fees go back to the unions. TWUSUPER, which covers transport workers, paid almost $1 million to the TWU last year and over $126,000 in directors' fees. It doesn't publicly release its financial statements, but it is clearly not using those funds for the benefit of its members. Australian Super, one of the largest industry funds, with nearly $92 billion in assets, only declared one payment to the ACTU, of over $225,000, but other unions have declared to the AEC that they receive sponsorship payments from Australian Super.

What we see here is a clear pattern of industry super funds paying money to the unions. When Senator Watt says it's a system that's working well, I think the Australian people and members of industry funds are well placed to be asking the question, 'But who is it working well for?' Looking to the future, with the growth in the investment value of funds—it is already at $2.3 trillion and it is expected to grow to around $4 trillion over the next 10 years—union payments, if not scrutinised, can be expected to rise to $22 million a year. That's $22 million that should be going into the retirement savings of Australian workers but, instead, is being diverted into the political campaigns and other activities of unions—and that is the question that we need to raise.

I'm disappointed Senator Watt has left the chamber. He said that it would be dreadful to upset the relationship on the board between employers and employees. The government is not proposing to say you can't have equal representation. You can still have equal representation—people appointed by the employers, people appointed by the unions—but what we're saying is that good governance requires independence, and that is not just in the financial sector; there are many sectors where good governance has a requirement around transparency and independence. The government is saying by all means have your union appointees, by all means have an equal number of employer appointees, but you must have a minimum of one-third independent directors to make sure there are no conflicts of interest and that there are no dark payments, as have been proven, with millions of dollars flowing out of the retirement savings of employees and into the coffers of unions. So the two points that Senator Watt raised are clearly disproven by the facts.

We have introduced these bills to strengthen the foundation of Australia's compulsory superannuation system, in particular for the default MySuper members. That's an important thing to grasp. There are two elements to that. It's compulsory. This is us taking some of the gross earnings of workers in Australia and putting it into super. It was a Labor idea, we grant that, it has worked well, and we fully support it. But it is compulsory, which means we must make sure the governance around that process is absolutely squeaky clean, is transparent and works in the best interests of employees.

Because it's the default MySuper program, we're talking here about a whole range of workers, including young people who've just come into the workforce who perhaps have no background in financial planning or management, or thought for their retirement, and what do they do? They just take the default fund that is offered as part of their agreement or what the employer has as the default fund as part of MySuper. In terms of financial literacy, these people are probably some of the most vulnerable in our community. They need the protection of a governance system that not only is effective but is transparent to make sure that the workers are the people who benefit from the growth in that system.

The superannuation sector has grown to over $2 trillion as a result of the mandatory nature of it. These reforms are consumer based reforms. They're focused on the consumer to make sure that it's more accessible and more understandable, and that the providers are more accountable for how they use their members' money. It's aiming to have stronger prudential standards—that is, the enforcement and the transparency which gives people who are putting their money compulsorily into these funds the confidence that it's being managed in their best interests. This is not something that's just been cooked up overnight. There have been a series of reviews that have recommended these kinds of measures and these bills put them together.

There are three bills: Treasury laws amendment improving accountability bills that I mentioned, Treasury laws bill No. 2 and the accountability bills. They aim to increase choice, increase independence on the trustee boards and increase transparency. It includes new measures to strengthen the supervision of the superannuation sector, boosting the trustee accountability and improving member engagement. I've had a crack at the unions here, but importantly it also closes a legal loophole that has been used by some unscrupulous employers, a minority, to short-change employees who choose to make a salary sacrifice contribution into their accounts.

Contrary to what those opposite would tell you that this is all about the government trying to disrupt and tear down the system, we're actually trying to make it more transparent and effective, and to increase the governance of the framework for the benefit of the employees. The protests that come from the other side, particularly when you hear them say, 'It's working well,' should ask the question, 'Who's it working well for?' Currently, it's working well for the unions.

Is this just something that comes from the conservative sides of politics? Let's go back to Mr Jeremy Cooper, who was appointed by the ALP as the chair of 2010 super system review—and Labor was in government then. This quote comes from the Senate Economics Committee inquiry hearing. Mr Cooper said, 'Providing for independent directors shouldn't diminish the representation of members but actually enhance it.' He goes on to say, 'How we can make people who are forced to save into it feel confident that the standards of governance is at or near world's best practice.' That is from someone appointed by a Labor government to do a review into super who is saying that transparency is a good thing and will actually enhance the benefit for members.

Professor Graeme Samuel was appointed by the board to conduct an independent review into the governance arrangements at the CFMEU-backed industry fund, Cbus. This quote comes from the Senate Economics Committee inquiry hearing. Professor Samuel said: 'I don't draw a great distinction between the structures of corporate governance. I'm more concerned about the reality of it. When you've got proprietors or sponsors that are heavily involved in the board and are appointed as representatives of proprietors or sponsors, there's a tendency for the skills metrics to be less relevant. That's where independent directors then become much more relevant and where the skills metrics and qualities that they can provide become far more relevant.'

What we hear there is that where it's just jobs for the boys—or girls, as the case may be—the members are actually getting a disservice because the people on the board are there because of who they know not what they know. It is not their skills or competence that results in them getting the appointment; it is because they've been a long-term member or secretary of a union, or they're part of the employer's group. What we've seen from two eminent people who have presented evidence to the Senate committee is that those are not in the best interests of the members of the fund. Members of the funds are members of the Australian public who expect transparency when it comes to money that is theirs, whether it is their savings or their taxes.

Looking at South Australia, where I'm from, when it comes to transparency we've had an issue just recently, where the Aboriginal Affairs minister, Kyam Maher, has been embroiled in a scandal about the appointment of a Mr King to the APY Lands, and an FOI has uncovered that it looks like there were backroom deals done, appointments and packages approved by the minister—we're not quite sure what the relationship was—but there's been no transparency. Now they're using taxpayer funds to fight the FOI order which was given by the appropriate authority who said, 'Yes, this should be released.' They're fighting that, and the public are rightly outraged that money appears to be being spent in a way that is not endorsed by the board, even, and it is unrealistic in its terms and conditions.

When it comes to superannuation, people rightly have the same concerns. In South Australia, questions have been asked about the validity of some of the members on the board of Statewide Super in South Australia. People are concerned about this concept of jobs for the boys, or jobs for the girls. Ms Alexandra Overly has recently been appointed as a board member of Statewide Super. She took the position over in March this year, after her husband, Justin Hanson, became a state member of the SA Legislative Council for Labor. Mr Hanson, interestingly, inherited the membership or the directorship from his father. I've got to say, that's a pretty close nexus—from father to son to wife. I think Professor Graeme Samuel's point about whether there is a skills deficit here as opposed to appointment for other reasons is a really valid question that people should be asking. Another Statewide Super director, Mr Ian Steel, was appointed by the South Australian and Northern Territory branch of the Australian Services Union and, according to his LinkedIn profile, he's also been working for Labor ministers. In 2015-16, over 70 per cent of the fees received by Mr Steel for his work as a director were paid to the ASU. There are also current members of the lower house, from the Labor side, who have a history with Statewide Super. Mr Georganas, for example, received $66,000-plus in directors fees for one year, all of which was paid to the ASU. One of our former colleagues here, former senator Anne McEwen, was appointed by the ASU as a member representative on the board of Statewide Super. Katrine Hildyard MP, the state Labor Minister for Disabilities and the Minister Assisting the Minister for Recreation and Sport, was a former secretary of the ASU and also a director on the Statewide Super board and resigned when she went into the parliament.

You have to start asking questions about whether it is all just an in-house thing and what value is being added to the members, particularly when Statewide Super has started sponsoring things in the community that are related to people from the unions who are on their board. On 9 October, there was a $150,000 sponsorship for women's sports, and Ms Hildyard is now coincidentally the Minister Assisting the Minister for Recreation and Sport. It would be interesting to know if there was any declaration of conflicts of interest around that particular one. Also, the Australian Electoral Commission records show the SA branch of the Labor Party received over $16,000 from Statewide Super in 2015-16. Statewide Super asserts that this was a refund for overpayments. That may well be. But, in total, Statewide Super has paid over $600,000 of the retirement savings of hardworking South Australians to the trade unions over the past decade. Yet, if you come back to this concept of 'compulsory' and MySuper, Statewide Super is the default fund in 18 different South Australian industrial awards, including those for children's service workers, hospitality employees and passenger vehicle transport workers. That means that funds are being stripped out of this super fund—a super fund for some of the lowest paid, hardest working people in Australia, who trust their money to this union, to this super fund—not for their benefit but to go back to the unions. And members opposite ask why we think transparency is important. Members opposite made the point, 'It's a good thing if industry super funds outperform other funds.'

Let's look at Statewide Super. They have outdelivered and outperformed for the unions but not necessarily for their own members. Using Industry Super's own advertisement concept, let's compare the pair and see how a Statewide Super member would fare next to a member in another average industry super fund. Take a 30-year-old office worker and look at what she has achieved in terms of the rate of return. What you will find over a 10-year average period is that Statewide Super returned 3.58 per cent and the Industry Super fund returned 5.13 per cent. That means that she would be $116,000 worse off in retirement because she didn't look around and check to see if there was another industry fund that would do a better job. I will pick a fund that I've done some research on, BT Growth. Over a 10-year period there was a return of 5.53 per cent. So all the rhetoric that says industry funds will always get you a better deal is clearly not correct for Statewide Super. They're not getting the best returns and they're streaming money off to the unions, none of which are in the members' best interests.

What the government is looking to do is not just make the funds more user-friendly for the people who are using them but, importantly, put accountability and transparency around the governance—still keeping the model that the Labor Party want in terms of having employee and employer representatives. That's absolutely fine. But what we're saying is that one-third of the directors should be independent so that we can deal with the issues of conflict of interest and we can ensure that accountability and transparency are there, not in our interests but in the interests of the men and women who those opposite and the unions purport to represent. What we see in the facts before us is that around the country, in union after union and industry fund after industry fund, the savings of hardworking Australians are creamed off and paid to unions for their own political benefit rather than the benefit of their members. I will be supporting this bill.

Chris Ketter (Queensland, Australian Labor Party) Share this | Link to this | Hansard source

Here we are again with the continuation of the ideological attack on the trade union movement and any organisation or any person who is in any way associated with the trade union movement. In this instance, we're looking at an attack on the industry superannuation fund sector. Whilst I have a lot of respect for Senator Fawcett, his contribution just continues that attack on the union movement, in terms of the ideology. The premise behind Senator Fawcett's contribution is that union officials should be considered persona non grata. They shouldn't be anywhere near the industry superannuation funds, which, after all, the unions helped to create back in the 1980s, and unions should not receive any payments from anybody, ever.

John Williams (NSW, National Party) Share this | Link to this | Hansard source

Order! Senator Ketter, resume your seat, please.

David Fawcett (SA, Liberal Party) Share this | Link to this | Hansard source

On a point of order: in fact, I made the point that they are welcome to remain on the board.

John Williams (NSW, National Party) Share this | Link to this | Hansard source

That's no point of order, Senator Fawcett. Continue, Senator Ketter.

Chris Ketter (Queensland, Australian Labor Party) Share this | Link to this | Hansard source

This is an ideological agenda continuing from what we know of the government's attack on the ABCC and the Registered Organisations Commission. This government's obsession with the union movement is on display for all to see.

In relation to these particular bills, I want to start by talking about my concerns regarding the rushed process with these bills. As set out very clearly in the Senate Economics Legislation Committee's dissenting report, we note that these bills were introduced into parliament on 14 September this year, on a Thursday morning, on the last day of a two-week sitting period. This was made worse when very short reporting dates were set for the bills. I note that the Manager of Opposition Business in the Senate, Senator Gallagher, moved a motion to extend the reporting dates on the superannuation bills to give proper time for scrutiny. It is unfortunate that we lost that vote. As I look at the bills in more detail, the more concerned I become. The committee managed to review four bills over a two-day period and, for that, some credit is due to the chair, Senator Hume, for her cooperation, despite the unreasonable reporting dates set by the government.

I'll use my time today to go through two major aspects of these bills: firstly, the policy aspects of these bills and how the government continues to confuse corporate governance and trustee governance; and, secondly, the politics of these bills and the government's incessant desire to destroy the union movement. So the first is the policy issue. I'll begin by talking about the Superannuation Laws Amendment (Strengthening Trustee Arrangements) Bill 2017. Let's be clear: this is a recycling of the same bill that was defeated in 2015. Since that time, no clear evidence has been received to show that there was any deficiency in the funds with equal representation boards that warranted this bill, and that's notwithstanding the contribution that Senator Fawcett made. He identified a number of areas, but, again, it's all about throwing mud at the industry funds and, when it comes to the retail banks and their performance, it's all: 'There's nothing to see over here. Let's move on and attack the sector of the superannuation industry which is performing at a higher level and, at the same time, charging much less in fees to members of the superannuation funds.' There's no evidence which would warrant the establishment of a minimum of one-third independent directors or to warrant abolishing the requirement for equal representation for the remaining board members.

We have seen the scandals in the major banks. If we take a step back, I think we can all agree that superannuation is now a vital part of our public policy landscape. That wasn't always the case, and I'll talk a bit more about that later.

It's Labor and the union movement that have a proud record of establishing the superannuation sector—$2.3 trillion now—for the benefit of all Australians, not just the privileged elite. Labor and the union movement have a proud history of establishing industry funds or profit-to-member funds. We have capital and labour at the same board tables, working together to enable workers to have a decent retirement. The history—and I know Senator Watt has touched on this—is that it was the unions that won superannuation as an industrial matter back in the 1980s. Then, through the accord with the Labor government, that was established as an industrial matter that could be put into industrial instruments. Of course, employers opposed that at the time. In fact, the employers took the matter to the High Court, and it had to be determined there. Then, having won that battle, Labor introduced the concept of universal superannuation in the 1990s. Where was the coalition at that time? It was opposed to that. When it came to increasing the initial three per cent superannuation to nine per cent, that was something that Labor voted to do. Where was the coalition? Again, it opposed that. When it came to increasing the superannuation level from nine per cent to 12 per cent, again, this was something that Labor voted for and the coalition opposed.

Let's be quite frank about this: the coalition expects us to believe that it is acting in the best interests of the members of the nation's superannuation funds. If it were left to the coalition, we wouldn't have the $2.3 trillion superannuation benefit for Australian workers. In fact, the superannuation system wouldn't exist. If this were a reform package truly designed to focus on improved accountability and member outcomes then the sort of things we'd be looking at would be the underperformance of bank-owned super funds. Why is this happening? It's within our competence to find out what is going on there. Why is it that the bank-owned funds are continuously underperforming compared to industry funds? Why don't we have a look at the vertically integrated structures of the retail banks, the potential conflicts that exist and whether members' interests are being safeguarded there and not bank interests? Why aren't we looking at the lack of visibility of profits and margins in retail funds and their related entities and how much the retail fund is spending on related party transactions, which impact the net return to members? Why aren't we looking at whether all super funds are run only for the benefit of their members? Of course, we know that the elephant in the room is that retail funds are inherently conflicted because they operate in the environment of return to shareholders as well. We should be looking at things like transparency and accountability measures being sector neutral. This is a package of measures which is aimed, fairly and squarely, at the industry fund sector, and it is an instance of the government running, basically, a protection racket for the banks.

We know that industry funds, according to the analysis of APRA data by a number of stakeholders, have outperformed retail and corporate funds on average, and they've done a better job of making their customers rich. The competitive tension between industry funds and the trustee governance structure and other financial services firms with their corporate governance structure is a good thing for the sector. Ideally, it should be a race to the top to offer the best outcomes for working Australians.

In that context, looking at the Superannuation Laws Amendment (Strengthening Trustee Arrangements) Bill, it remains flawed in that it seeks to impose a corporate governance model on funds which operate under a trustee governance model. Corporate governance faces particular issues which need to be addressed. These include board members having a fiduciary duty only to their shareholder owners, which can put at risk the needs of a company's customers, and executive directors—that is, management of the company—having a presence on the board, where decisions might be taken that advantage management over the needs of shareholders. The inquiry found that profit-to-member funds do not normally face these same issues. As the Australian Institute of Superannuation Trustees notes, 'Profit-to-member funds do not face the shareholder-customer conflict, and also do not have executive directors on their boards.'

This bill seeks to prescribe independence in legislation. Stakeholders such as the peak body ASFA said that the ASX principles based approach would be the preferred approach. In seeking to mandate a minimum of one-third independent directors, the government is claiming that board decision-making will be improved and that member outcomes will lift in the long term as a result. However, in our inquiry, witnesses such as Mr Cooper, whom Senator Fawcett cited, and Mr Samuel stated that what should really be desired in board member selection is the concept of cognitive independence—that is, that each board member is able to think independently of other board members, with diversity of thought leading to better group decisions. Mr Bernie Fraser, who is well known to most Australians, also appeared before the committee. He stressed that the skills and values of board members are paramount in good board member selection—not labels such as 'independence'.

When poor consumer outcomes were being considered during the inquiry, Industry Super Australia tabled a document which noted that $480 million in compensation, reimbursements, refunds, payments, remediation and consumer loss for alleged misconduct has been made by the big four banks plus Macquarie and AMP. And this is only in the past two years. This document included details of the ANZ paying an additional $10.5 million in compensation to 160,000 superannuation customers, CBA paying $16.3 million to staff after a review of superannuation guarantee arrangements where they were not paying their part-time staff, the National Australia Bank's superannuation trustee company paying $35 million in compensation for two breaches involving failures in relation to provision of general advice, and Westpac's BT Financial Group paying $12 million to customers whose life insurance claims were knocked back. This document is an absolute eye-opener. It goes for pages. As I said, going forwards two years from 16 September 2015 it details $480 million. If you put that up against the types of issues that Senator Fawcett was raising, we are looking at chalk and cheese here when it comes to failure of governance. That is quite clear. This list continues to evolve.

As time goes on, we know things are happening. You are well aware of these matters, Mr Acting Deputy President Williams. We know that ASIC is pursuing the banks when it comes to attempted unconscionable conduct in relation to the BBSW rate-rigging scandal. So $50 million has been agreed to by the ANZ in respect of a settlement there. It's expected that the National Australia Bank will have a similar settlement. We have seen that the Commonwealth Bank has been in significant breach of anti-money-laundering laws—53,000 breaches. That could potentially lead to billions of dollars in fines.

Although those matters don't directly relate to superannuation, the $480 million figure certainly does. It's also worthwhile noting that just today we see reports of ASIC now probing how banks and super funds stiffed customers of billions of dollars. This is in relation to what is supposed to be happening with the transition of legacy superannuation products into the low-fee MySuper environment. This is supposed to be happening under reforms introduced by the Gillard government in 2012. There was a four-year period to enable all funds to transition to offering the MySuper product. We saw the industry super sector moving across to the MySuper environment much quicker. This ASIC investigation is into the fact that a number of bank-owned super funds have taken until the eleventh hour of the four-year transition period to transfer these funds.

Why have they done that? This was the subject of a Rainmaker report instigated by Industry Super Australia. Rainmaker concluded that the slow retail transition was most likely a deliberate strategy by retail wealth managers. The transition has had a material impact on the profit margins of some of the major banks. One UBS analyst has said that the profit margins on revenue for the major banks over the past six months fell 8.5 per cent year on year and the MySuper transition was one of the major drivers of the falling profit margins. We see billions of dollars of extra fees being gouged from members as a result of the banks dragging their feet in moving to the low-fee MySuper environment.

We know that there are many other scandals, but I think this just illustrates the point that, when it comes to governance issues and misbehaviour, no credible observer could say that there are genuine governance issues on the industry fund side in comparison to what's been happening with retail banks. We see the ridiculous situation where the minister has said that the purpose of these bills is to lift the standards of all funds to this level. If that's the purpose of it then it really is misdirected, at best. In fact, this is a protection racket for the banks.

We know that, two years on from the previous attempt to pass these types of bills, the profit-to-member funds have not been idle in reviewing their own governance arrangements. The AIST Governance Code, which applies ASX corporate governance principles to the superannuation and trustee governance context, will be in force on 1 July 2018. Mr Fraser also delivered his review and made recommendations to strengthen the selection process of board members and to ensure that boards had the right mix of skills that they required.

I want to say that I'm not against independent directors as a principle. A number of industry funds have already moved down that track, but it should be left to trustee boards to suit their own circumstances. Where they believe that independent directors would enhance board decision-making then they should be appointed. Many profit-to-member funds, as I said, have adopted such appointments. However, I don't agree with prescribing an arbitrary quota of independent directors and defining 'independence' in legislation. I welcome the work of AIST in developing a governance code and endorse the idea that cognitive independence is what policymakers should strive to achieve. Given all these findings, the Senate should reject this trustee arrangements bill once again.

A number of the submitters to our inquiry—including, I think, Choice—were very concerned about the fact that the government was throwing the baby out with the bathwater by abandoning the employer and employee governance model and basically leaving a vacuum there. Apart from the one-third director component of the board, the rest of the composition of the board is left open. I think that is very much a backward step. Once again I want to illustrate the difference between what we've got on the industry super fund side and on the bank side. We know that many of the retail bank funds do have a majority of independent directors, but that's in an environment where they've got banking executives sitting on the board of superannuation funds, making decisions about the interests of members—and who is appointing these banking executives to these boards? Of course, it's the banks themselves. Not only do the banks appoint the banking executives; they also appoint the so-called independent directors. When it comes to concerns that we should all have about governance, the focus should very much be on what is going on in the retail super sector.

When it comes to member outcomes—I have a brief period of time to address this issue; this is a very dense piece of legislation and I won't go through all the details—I am concerned this legislation will not improve protections, accountability and outcomes for members across the sector. In particular, the need to strengthen outcomes for choice products and to improve reporting and accountability of retail RSCs with a large financial firm parent company has not been given due consideration in these bills. In closing, these bills are misdirected; they are a protection racket for the banks and should be rejected.

Ian Macdonald (Queensland, Liberal Party) Share this | Link to this | Hansard source

It is always a pleasure to follow my Queensland Senate colleagues from the Labor Party in debates such as this. I have to say, Senator Ketter, you tell a good story. You sound like a banker, you look like a banker and some of your arguments could almost be convincing for someone who didn't understand them. I have to say your colleague from Queensland wasn't quite so urbane. I think I would have purchased a litre of snake oil from him. I think he could sell anything to you if you just go for flowery words. Unfortunately, in both cases, you need to develop some facts about these matters.

I do agree with Senator Ketter in one aspect—that is, there must be transparency and accountability. There's got to be. I heard Senator Watt say that it was important that the representation of workers and employers was maintained. Hang on. We're not talking about a parliament. We're not talking about a football match. We're not talking about a workers' representative and an employers' representative. We're actually talking about people's savings and what the superannuation company can do with those savings. It's not a question of representing one side or the other. It's a question of getting the best financial return.

I'm sorry Senator Cameron is leaving, because I was going to make a very favourable and complimentary comment about Senator Cameron. I hate to admit it in this chamber, because it will be on the record for all time, but I quite like Senator Cameron. If you take him out of this atmosphere and out of the hothouse atmosphere of the Senate committee process, he's a lovely fellow, good to be with. But I'm not quite sure what Senator Cameron's qualifications were for the position he held as a director for a superannuation company. I think I'm right—and, fortunately, he's gone—that I've heard somewhere in this chamber over the years that I've been here that Senator Cameron was a director of a superannuation company. Now, as I say, I like Senator Cameron; he's a great debater. But I had a look on Wikipedia just to get some background to Senator Cameron to see why he would be a director on a superannuation fund that was trying to maximise the return for those who invested in that superannuation fund. Wikipedia says that Senator Cameron:

… left school at 15 to take up an apprenticeship as a fitter at a local chain-making factory. Shortly after completing his apprenticeship the factory closed …

I don't know if there's any connection between Senator Cameron becoming a tradesman and the factory closing, but that's what Wikipedia says! Mr Cameron, as he then was:

… emigrated to Australia in 1973 … He initially worked at the Garden Island Dockyard in Sydney, before moving to the Liddell Power Station in Muswellbrook—

in the Hunter Valley—

… where he worked as a maintenance fitter. After seven years working at the power station Cameron was elected as the Hunter Valley/New England regional organiser for the Amalgamated Metal Workers and Shipwrights Union …

He later became assistant national secretary, was then national secretary of the AMWU for several years and then was elected to the Senate in 2007. I was around at the time. I used to like George Campbell, but I remember how Senator Cameron stabbed poor old George Campbell in the back and came into the Senate.

In that background of Senator Cameron, I'm asking: if that is a union director of a trillion-dollar superannuation fund, what business expertise or financial expertise does he bring as a board member to that particular facility? If I have wronged Senator Cameron—if he wasn't a director—I'll apologise, but I'm pretty certain that's right. I think it became public at one stage. He was on $120,000 a year. I think it only became public because there was a bit of a fight on whether the director's fees, $120,000, belonged to him or belonged to the union that he was representing. I just wonder about someone with that background. I'm sure he was a wonderful fitter and I'm sure he was a wonderful organiser for the union. But does that make him the right sort of person to be a director of a trillion-dollar superannuation fund? Perhaps someone could explain that to me.

Senator Watt spoke a lot about representing the workers and representing the employers. Well, as I say, this isn't the parliament; this isn't a debating society. It's not where you represent someone. What you're there to do as a director is to make sure that the contributions to the fund made by workers get the very, very best return. That's not a question of representing workers or representing employers. It's a question of using every available skill to get the best return for the people whose funds you have control over. I think Labor speakers have this all wrong. It's not a question of representing workers and employers; it's about getting the best result and about accountability and transparency. That accountability and transparency needs to be there and obvious. Senator Watt was saying, 'The union representatives represent all the workers, and so they're there to look after the workers' money.' Can I just alert anyone who might be listening to this debate to the fact that the unions don't actually represent the workers; they represent 10 per cent of the workers. If you've got a union representative on the superannuation company board, supposedly representing the workers because he's a unionist, well, I'm sorry, he's not representing the workers; he's representing 10 per cent of the workers—which means he certainly doesn't represent the 90 per cent of workers who choose not to join a union.

So I think the Labor Party have got this all wrong. It's about the best return for the contributor's money. I would hope that, for whichever superannuation fund I or my wife have, there are directors who know something about high finance, something about international finance, something about exchange rates and something about floating dollars—something really top class. There are many, many people around Australia—very, very good financiers—who understand what money is all about. They should be there—I think that in the retail funds they are there—to get the best return for the contributors to the superannuation fund. They're not there to represent 10 per cent of the workers. They're not there to represent the employers. They're there to get a good deal for those who put their money into the superannuation fund.

I think the Labor speakers on this are simply mouthing the words they've been told to mouth by the unions and the members of the union leadership groups, the union bureaucracy, who, because of their position, happen to be directors of these superannuation companies. They would be drawing in—I don't know—$100,000 or $200,000. It'll all be on the record somewhere, but I do know that $130,000 was spoken about, and that's not a bad return for four or five meetings a year.

Dean Smith (WA, Liberal Party) Share this | Link to this | Hansard source

Better than the award rate.

Ian Macdonald (Queensland, Liberal Party) Share this | Link to this | Hansard source

It is a bit better than the award rate—you're right, Senator Smith. I want my superannuation fund to have people who know what they're doing. Whilst I love Senator Cameron—and I'll live to regret that statement, I might say, but he is a nice fellow—when he did his fitter apprenticeship, he joined a company that immediately went broke and then he spent seven years as a maintenance fitter. I'm not quite sure how that qualifies him to deal with high finance. I'm sure he was a very good fitter. Fitting and turning is a very noble and honourable profession. It's not easy in some instances. I have a nephew who has chosen that trade. They're experts at fitting and turning. I wouldn't have thought they're experts at high finance around the world. That's one issue: directors are not there to represent everyone; they're there to get a good return for the money that contributors invest in the superannuation fund.

The other thing that concerns me about the background that has necessitated this bill is that I understand, and there is factual evidence, that over the last 10 years the so-called industry superannuation funds have contributed $53 million of members' money—I repeat that: $53 million of members' money—to the union movement or to the ALP. It is documented, of course, that the money that goes to a union from sources like this does a sort of round-robin circle: it goes to the unions and it's then immediately paid to the ALP to fund election campaigns and to try to keep them in power with their tentacles. So $53 million of contributions have gone to the unions over the last 10 years. Is that accountable? Is that transparent? Why would a superannuation fund be donating $53 million to the unions? Those unions that receive that money then make equally generous donations to the Labor Party, who then use it to try and win elections—and they're pretty good at that.

I wondered when my Queensland colleagues from the Labor Party spoke on this whether they hadn't been given the gee-up by the unions in Queensland running up to the Queensland state election, because I do know that most of the campaign workers for the Labor Party in the Queensland election are not branch members of the ALP, if there is any such a thing—unlike my party. The people working on the booths for my party are actually branch members—ordinary mums and dads, young people, students and retirees out there because they believe in a cause. But I know through experience in just the last few weeks and over many years that the people running the booths for the Labor Party are—would you believe it?—the union organisers, the union heavies, in every state. They are not only from across the state of Queensland; they ship them in from Victoria, New South Wales, Western Australia or wherever to man the pre-poll booths and man the booths on the day. There are very few local people, ever, at the booths in Townsville. They're all visiting unionists. We know the one or two local unionists. We know the one or two people locally who are Labor Party members, but there's not many of them. Most of them are people shipped in by the union movement.

I just wonder if the reason that Senator Ketter and Senator Watt are here trying to retain the influence of these union heavies in their board positions on these superannuation funds is they've been given by the union people in Queensland a bit of a hurry up: 'Look, if you guys want us to work for you on the booths, you'd better get into the Senate. Here's a speech we've written for you. You can go and deliver that and say how terrible it would be if this superannuation arrangement was changed.' You could see the passion in Senator Watt's speech on how he wants to retain that privilege for a few union heavies. I repeat: they're not representing the workers, because the unions only represent 10 per cent of the workers—10 per cent! So they're not even representing the workers. They're representing the union heavies, they're representing the ALP and they're representing that privileged group that believe they have a God-given right to be able to interfere with the running of a country or, in the case of Queensland, a state.

I'd like someone to explain where the $53 million from superannuation contributors went. I know it went to the unions, but why? Why would a superannuation fund be making donations to a union? We know that all the unions are there for these days is simply to shovel money through the Labor Party to try and win elections and to keep them in the positions of power and privilege that they currently hold in the state of Queensland and elsewhere around Australia. If there are any more Labor speakers in the debate, it would be interesting for them to indicate why superannuation companies would contribute some $53 million of contributors' money to the unions. Perhaps there is a reason. I've never heard it explained.

The fact sheet is littered with those sorts of things. Charis Mullen has been a director on the board of AusSafe since October 2013, following her nomination by the Australian Workers' Union of Employees, Queensland. She's the campaign coordinator for the AWU's Queensland branch, and she is now the Labor Party candidate for the seat of Jordan in the upcoming election. AustSafe, the superannuation fund of which she's a director, has paid more than $305,000 of members' money to trade unions over the past decade. Why? I would be interested if any Labor speaker could explain that.

Gary Bullock has been chair of the Intrust Super board since earlier this year. He is the state secretary of United Voice and honorary treasurer of the Queensland Council of Unions. Mr Bullock is on public record about United Voice supporting seven successful ALP candidates in the 2015 state election, going so far as to call them 'the United Voice MPs'. I have to say, with some dismay, that they include the current member—not for long, I hope and expect—for Mundingburra, Ms Coralee O'Rourke, who, according to reports, had her living expenses leading up to the 2015 election paid for by United Voice. Where did United Voice get that money from? Perhaps they got it from that donation from the Intrust Super board. One would be interested to find out why Intrust would have paid—I am told—some $618,000 of members' money to trade unions over the past decade.

Time, unfortunately, doesn't allow me to go through a series of these examples. I see Senator Watt has rejoined the debate, which is good to see. I'd be interested, Senator Watt, to know if you were ever a director of a—

Peter Whish-Wilson (Tasmania, Australian Greens) Share this | Link to this | Hansard source

Senator Macdonald, address your questions through the chair, please.

Ian Macdonald (Queensland, Liberal Party) Share this | Link to this | Hansard source

Mr Chairman, I'd be interested if Senator Watt could tell the chamber whether he has ever been a director of a superannuation fund and, if so, what financial expertise he might have brought to the board.

Murray Watt (Queensland, Australian Labor Party) Share this | Link to this | Hansard source

I'm an expert on many things but not that.

Ian Macdonald (Queensland, Liberal Party) Share this | Link to this | Hansard source

Thank you, Senator Watt. That saves me wasting my other 32 seconds on wondering what your expertise is. It hasn't become obvious to me in the time that you've been here. I'm sure it's not financial expertise, but it's not relevant.

Clearly the whole superannuation industry and the industry funds really do need serious looking at. What's wrong with having independent directors—not workers' representatives or employers' representatives but independent directors—who will look after the money well on behalf of the contributors? (Time expired)

Sam Dastyari (NSW, Australian Labor Party) Share this | Link to this | Hansard source

Mr Acting Deputy President, I note that we only have a few minutes left for this debate on the Treasury Laws Amendment (Improving Accountability and Member Outcomes in Superannuation Measures No. 1) Bill 2017 and the Superannuation Laws Amendment (Strengthening Trustee Arrangements) Bill 2017 before we reach 7.20, so unfortunately I'm probably not going to have the opportunity to really get into the arguments that I was going to breathtakingly make that would blow you away. You may have to wait till tomorrow for that opportunity, Mr Acting Deputy President.

Murray Watt (Queensland, Australian Labor Party) Share this | Link to this | Hansard source

What time do we come back?

Sam Dastyari (NSW, Australian Labor Party) Share this | Link to this | Hansard source

I believe they are selling tickets for it upstairs. It's going to be massive; that's all I can say—huge!

I think it's important for us to spend a little time having a closer examination of the real intention of legislation such as this. It is unfortunate that, at the heart of so many of the decisions that get made, or the arguments that get pushed, by the government, there is an ideological agenda. I think that these bills, unfortunately, are not devoid of ideology, when really we should be having a debate about a fairly practical piece of legislation around superannuation laws, around strengthening trustee arrangements. What we have here is legislation that does nothing more, in the opinion of many Labor and crossbench senators, than push forward a strong ideological agenda.

The government, unfortunately, come from a political stream of thought that means they have never really been fans of superannuation. The idea of superannuation is something that the government and the conservative side of politics have consistently opposed in one form or another. Towards the end of the Keating government, there was a proposal to increase superannuation. Over time, this was something that they opposed. The notion that there is going to be a savings base for the nation that is built by workers, protected by workers and controlled by workers is something that, unfortunately, those at their end of town have always argued against. There is a simple proposition at the heart of this. Do you vote to keep money in the pockets of mums and dads saving for their retirement, or do you pursue an agenda that is about increasing and lining the pockets of some of Australia's wealthiest, most successful bankers? That is what the debate here is going to be about—and, in 10 seconds, that's just a snippet.

Murray Watt (Queensland, Australian Labor Party) Share this | Link to this | Hansard source

I can hardly wait.

Sam Dastyari (NSW, Australian Labor Party) Share this | Link to this | Hansard source

You won't be sleeping tonight, waiting to hear what I have to say next!