Bernie Ripoll (Oxley, Australian Labor Party) Share this | Hansard source

I, too, am very happy to be speaking on the Superannuation Industry (Supervision) Amendment Bill 2010. I want to congratulate Chris Bowen, the Minister for Financial Services, Superannuation and Corporate Law and Minister for Human Services, for his hard work in this area and his ongoing commitment to ensuring proper, appropriate and timely reform in what could be said to be one of the most critically important areas of the Australian economy—individuals’ superannuation.

Before the member for Robertson leaves the chamber, I just want to congratulate her on speaking not only on this bill but also on the history of superannuation in this country, because I think it is important to remember and note the longstanding commitment that the Labor Party and Labor governments have had, over 100 years, to superannuation in this country.

We sometimes talk about superannuation but forget to mention what it really is, and that is people’s retirement incomes. Superannuation is really about ensuring that people in their retirement have sufficient income to be able to survive—to be able to maintain a reasonable and decent standard of living. That is why it is so important, and that is why it is so important to get the settings right and to make sure there is continual reform and change to keep up with changing financial or demographic environments.

The member for Robertson spoke about that historical perspective. More recently, the Hawke-Keating government era was the one where the major changes to Australia’s superannuation system took place. That system now forms a substantial part of Australia’s financial standing in the world. We have a AAA rating and more than $1 trillion under management in funds—the fifth largest funds under management in the world and in the OECD. A whole range of other accolades have been bestowed upon Australia as having financial expertise and experience and corporate governance in these areas. That it is no small feat and is due in no small part to all of those key decisions that were made during the Hawke years, the Keating years and in Labor governments before those. I think it is fair to say that, for Labor governments, superannuation has always been a priority, and this government, the Rudd government, is continuing the tradition of making it a priority and ensuring that superannuation does move into the 21st century.

That is being done through very much needed reforms. They are being supported by the other side—as they should; these are good measures. Further than that, we are ensuring that there is a continuation in the growth of superannuation. We are doing that particularly through the superannuation guarantee—lifting it from nine per cent to 12 per cent. That is probably a little overdue but, given that we have not been in government for 12 years, you could expect that it would be overdue. It was one of our very first acts—reflecting our continuing commitment in this area to achieve that goal.

I heard one of the opposition members, in fact the shadow minister, speaking before about this area, about the resource tax, and a range of other tax issues, and giving a very poor picture of what that taxation measure would do. I want to speak specifically about that, because I do not know that this message has got through to as many people as should understand it. That resource tax will in large part be the catalyst for the increase in people’s superannuation from nine per cent to 12 per cent, ensuring that people have long-term sustainability in their retirement incomes. That is not something that should be looked upon lightly.

While the shadow minister, the member for Cowper, is back in the chamber, I will take the opportunity to rebut some of the comments he made on the resource tax and look more closely at issues such as share prices, markets and sovereign risk. They think that a tax that had not yet been introduced—that had not even been considered—somehow caused the global financial crisis. There seems to be a bit of a disjointed argument from the opposition in terms of what this means. If I understand them correctly, they believe that all the markets around the world collapsed on the basis of us going to introduce a resources tax.

When we made the announcement we saw opposition frontbenchers buy resource stocks. Obviously they personally see it as a good investment. Mind you, so do the rest of the community. Stocks in resource companies, such as Rio Tinto and BHP, have actually increased since we made that announcement. You will find there has been more of a decline in global markets and where there have been declines in resource companies in Australia they have been less than their counterparts in other markets around the world. I am not sure which ones the opposition were referring to, but all the ones I am looking at show only positive stories and positive increases.

The world is going through a tough financial time. In no way are we through the global financial crisis; it continues. This government took on the difficult job of dealing with it. We not only ensured reform but acted quickly to deal with the necessary issues at the time—we ensured we maintained our economy, we ensured that people remained in work and we ensured we retained our AAA rating. All of those things have been achieved. We ensured that there was not a run on the banks by guaranteeing wholesale finance and retail finance. We made sure that our banking sector would survive and be sustained through this.

This is part of the reason—I will not claim it is all of the reason—why we have not seen the banking collapses that have happened in other jurisdictions overseas, why there remains a high level of confidence with Australian consumers in the Australian market, why there continues to be strong growth in mining exploration, resource companies and their related share prices, and why there remains great confidence internationally about our corporate governance, our general governance and our markets from overseas investors.

There will, of course, be some concern whenever there is talk about a tax in the resources sector, but at the end of the day we are talking about a greater share of what in the end is a resource that belongs to all Australians being more appropriately distributed. I am more than comfortable to talk about this issue, but it is quite disingenuous of the opposition to come into this place and try to wrap up every ill in the world into the resources tax. That is completely disingenuous.

What we have before us is a bill that makes some very necessary and good amendments. It does relate to the most important of investments for ordinary Australians—that is, their superannuation. This government is making sure that we get on with the job of maintaining confidence. People ought to have the utmost confidence in their superannuation and markets should as well.

The bill enhances the regulatory framework governing superannuation fund investments in leveraged products. We want to make sure that the borrowing exemption under section 67 of the Superannuation Industry (Supervision) Act 1993 is not used in a manner that places the superannuation savings of everyday Australians at undue risk. I think that is a commitment and view shared by everybody in this place. The bill contains a number of amendments that reduce that risk to fund assets from limited recourse borrowing arrangements that would involve personal guarantees on lending or related borrowings, particularly in relation to multiple assets or the replacement of the asset.

When the minister spoke on this bill he detailed in a range of areas what that actually means. The current regulations say that ‘asset’ could be taken as meaning multiple assets. This amendment clarifies that to mean a singular asset. This is very important. It means that, if you are borrowing and there is a guarantee against a particular asset, it is just that asset and not all other assets in a superannuation fund. That is an important amendment.

There has been extensive consultation with the sector, in particular on issues that were raised by the Australian Taxation Office, the Australian Prudential Regulation Authority and also the Australian Securities and Investments Commission, as well as concerns that were raised in consultations with the industry stakeholders. We have acted on that basis. This is good reform. It is timely reform. It continues to demonstrate our commitment to ensuring that we have sound regulatory frameworks surrounding superannuation that are robust and that superannuation funds are prudently managed—managed in a correct way.

If you look at industry numbers, certainly the largest part, about two-thirds of all superannuation funds, are being managed by the large industry players, retail funds or other funds, but a very large proportion, about one-third of all of the moneys, is held in the greatest number of accounts by almost tenfold—that is, self-managed superannuation funds, small funds with an average of about $500,000 across the sector. Those funds are of particular interest to me. While they are on the whole well managed, they are more vulnerable in a range of areas to particular discrepancies or areas of concern in regulation.

We have made a number of changes to ensure the robust nature of self-managed super funds. There is one that came out of my committee’s recent report on financial services and products. We are taking out of the hands of ordinary accountants the ability to set up self-managed superannuation funds and putting it into the area of those who are specifically licensed, who hold an Australian financial services licence, to not only manage but set up a fund. There was an anomaly which entitled people who could not manage funds to set them up. I think that has been one other good reform in this area.

Prudently managing a person’s superannuation funds is of critical importance. I will just mention a recent event which highlights the risks that can be taken and the catastrophic outcomes that can occur. If we look to the not-too-distant past, to the collapse of the Storm Financial business, which took with it the life savings, homes and superannuation savings of thousands of Australians, we can see just how critical it is to get regulation right in this area. Storm Financial had 14½ thousand clients. It used a whole range of mechanisms to invest in funds. In the end, I think the most dangerous thing it did was to use highly leveraged products and use people’s superannuation savings bundled together, putting all of those people’s assets, life savings and superannuation at risk in one lot. The catastrophic outcome, of course, was that an unfortunate number of those people with Storm Financial lost not only their home and their life savings but all their superannuation as well.

This government has not only done a review but taken action to minimise the potential for these things to happen again in the future. It goes without saying but it is obvious to most people that there will always be people who do the wrong thing out there, and you can never prevent all circumstances taking place. But, once you find problems, I think you have a very strong responsibility to fix those matters, and that is what this government has done.

While I commend the amendment bill before us to the House, I add that it is part of a broader agenda that this government has taken on board. In the short 2½ years since we came to power, we have taken on a very serious agenda in financial services reform and are slowly progressing to that end. I believe this reform, in consultation with the sector, has been very positive, even the difficult decisions, because the sector can understand and see our strategy in getting to a sound position, providing certainty, providing strong direction and leadership and providing a basis for where the sector could be in five or 10 years time. We are certainly raising the levels of education and professionalism within the sector, ensuring some timely updating of a whole range of regulatory frameworks that need to be updated and doing that as quickly and efficiently as we can to make sure that the regulatory environment today reflects the changing global environment that exists right now.

I am very proud to be part of a government doing that. We heard before the member for Robertson talking about the proud history and tradition of Labor governments dating back 100 years in ensuring that we provide for people in their retirement either through a pension or through some form of superannuation. Nothing could be stronger than the reforms brought out a little over 20 years ago by the Hawke-Keating governments which ensured that working people in this country would have those two levels of choice, between either a pension and/or their own private superannuation, to help support them in their retirement. I commend the work done by all agencies involved and the minister in bringing this forward, and I commend the bill to the House.

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