Paul Fletcher (Bradfield, Liberal Party) Share this | Hansard source

It is a pleasure to rise to speak on the Fair Work Amendment Bill and to follow the member for Throsby. As it happens, I find myself following a former union official—but that is not a statistically unlikely thing to happen when one stands up to speak following a Labor member of this place. However, it is somewhat unlikely to find oneself following a member who was actually speaking about the wrong bill and who spent some 13 minutes telling us about the transfer of business provisions, which are not dealt with in this bill at all. They are dealt with in a bill which is to be debated two bills later on. But I suppose he would argue that it is 'the vibe'.

I do want to speak about the bill that is before the House this afternoon. In particular, I want to focus on the provisions in this bill which supposedly reform the arrangements under which modern awards specify default superannuation funds. The provisions in this bill dealing with those matters are a classic example of this government looking after its mates in the union sector—union officials who run superannuation funds at the expense of the broader community and going in completely the opposite direction to that which sensible procompetitive economic reform would dictate.

In the time that is available to me I want to make three points. Firstly, the current default arrangements for default superannuation funds are a cosy and anti-competitive racket. Secondly, the present introduction of the low-cost, generic MySuper product is a perfect opportunity to introduce more competition by saying that any MySuper product can be a default fund. Thirdly, the Minister for Financial Services and Superannuation has in this bill squibbed the chance to introduce increased competition. In fact, he has made the process less competitive. He has handed even greater power to the cosy club of retired union officials who run Fair Work Australia.

Let me turn firstly to the proposition that the current arrangements for default superannuation funds are a cosy and anti-competitive racket which serves the interests of a cabal of union officials. The superannuation system has grown enormously. There are now some $1.4 trillion under management in that system. In 2011-12 some $90 billion of funds flowed into the sector largely because of the compulsory superannuation arrangements. Of this, nearly two-thirds went into two classes of funds: industry funds and public sector funds. These two classes of funds generally use the so-called equal representation model, with half of the directors appointed by a union and half by an employer association. If you look at the statistics put out by APRA, the industry regulator, you find that in February 2012 there were 76 funds listed as industry or public sector for the 2010-11 financial year. If you analyse the annual reports of all of those funds, what you find is there was a total of 575 directors on the boards of whom 180 were appointed by unions.

The Labor Party over many years has consistently used the compulsory superannuation system to increase the power, influence and financial position of the union movement and its key personnel. Indeed, the current Minister for Financial Services and Superannuation and Minister for Employment and Workplace Relations is a former secretary of one of the largest unions in the country, the Australian Workers Union, and a former director of the largest industry superannuation fund, AustralianSuper. The default fund arrangements—or, I should say, the union involvement in superannuation—were specifically designed into the superannuation fund system when it was set up by the Hawke and Keating governments in the early 90s. Today the boards of industry super funds are stuffed with union bosses including: AWU boss, Paul Howes; Queensland ALP heavyweight and AWU strongman, Bill Ludwig, who is the father of the present minister for agriculture; TWU secretary Tony Sheldon and; until recently, Health Services Union officials Kathy Jackson and Michael Williamson.

Under the Fair Work Act, the so-called modern awards must contain a clause specifying the superannuation fund into which the employer must pay the employee's superannuation contributions. To be nominated as a default fund under a modern award is very valuable because it guarantees a stream of contributions. The current process for the selection of default funds lacks transparency, is littered with inherent conflicts and quite inappropriately favours union-dominated industry superannuation funds. Analysis conducted by the Institute of Public Affairs in 2010 found that across 166 modern awards approved by Fair Work Australia, there were a total of 566 superannuation funds specified. Of these, 513 were industry funds or public sector funds. AustralianSuper was specified as a default fund in over 70 awards.

Why is it that Fair Work Australia so readily signs off on modern awards which entrench the flow of contributions to union-friendly superannuation funds? It might be that Fair Work Australia is stacked with ex-union officials. Between December 2009 and December 2011, 10 people were appointed as Fair Work Australia commissioners by the Rudd-Gillard government and, of these people, eight had union backgrounds. These arrangements give the unions a degree of control of superannuation which goes much further than the small and shrinking share of the workforce who are union members. Union membership is now down to about 18 per cent of the workforce and around 12 per cent of the private sector workforce. But these arrangements serve the interests of unions very well because, amongst other things, it means a large number of well-paid directorships to be allocated amongst the union mates. The annual report of one industry fund, Cbus, revealed that two directors—presumably one was the chair—received over $90,000 a year and that several other directors received more than $50,000 a year.

In some cases these fees are pocketed by the individual union nominated directors; in other cases the fees are paid to the union. But in either case the arrangements suit the union movement very nicely.

The Cooper review into superannuation recommended that the current equal representation model should be comprehensively reformed. Curiously, former union official Bill Shorten has ignored that particular recommendation.

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