Thursday, 4 April 2019
Treasury Laws Amendment (Improving Accountability and Member Outcomes in Superannuation Measures No. 2) Bill 2017; Second Reading
It's a great pleasure to speak on behalf of Labor members in parliament about the Treasury Laws Amendment (Improving Accountability and Member Outcomes in Superannuation Measures No. 1) Bill 2019. It's a bit of a dry name for the bill, but it's a bill that does something that's actually incredibly important and which is going to make big improvements to the superannuation savings of Australians. I'm particularly pleased to speak on this bill because Labor was able to take the opportunity in the other place to make enormous improvements to this bill. The bill as it was originally drafted was actually going to leave very large segments of the Australian superannuation market out of these additional accountability measures. Labor has been pleased to fix that problem.
Before I get into the content of the bill though, I need to respond to a little bit of the rhetoric that was coming at us from the minister on the other side of the House. To now hear the government saying that they're the ones that can be trusted to implement the royal commission recommendation is laughable. That is laughable. It was April Fools' Day on Monday. It's Thursday today, and we can't take jokes like that in the House of Representatives. The idea that this government has any moral authority over financial services reform in this country is a complete and utter joke. They did everything they could to avoid calling a royal commission into the big banks. They did everything they could to protect them from proper laws and proper accountability. Indeed, while Labor spent almost two years arguing for that royal commission, the government put its political capital into trying to give $17 billion to the big banks, who we now know were anything but deserving of a big tax cut. So to have the minister come into the chamber and say that they can be trusted on banking—come on, that's just ridiculous!
It's not just up to the point of the royal commission but in the response to the royal commission that we see the government doing everything they can to use weasel words and clever political language to try to get out of implementing the recommendations. In fact they're using this in what they probably think is a clever way, saying that they're going to take action on the 76 recommendations of the royal commission. The reason they're using that language is they're not going to implement them; they're just going to do something, a little bit, about some of those problems. In fact, in large part, the government has said that they'll think about the things that Commissioner Hayne recommended later—they'll do a review in a few years; they might go one-tenth of the way towards doing what Commissioner Hayne recommended. Can I say that I'm so disappointed to hear the minister come in here and put forward the very false premise that the government has any authority to talk about these issues in that way.
The bill before the House is a very good example. In fact, it's the second day in a row in this parliament where I've got up on a bill where Labor has been behind pushing the government further to make those laws good laws and where it's Labor that's been behind bringing in the royal commission recommendations into the laws, which the government's been saying that it can't implement. The minister's right: we've had nine weeks since the royal commission reported. If the parliament had actually been sitting during that time, we could have made real headway on putting some of those recommendations into law. But, instead, here we are with the government flapping around. It doesn't want the parliament to sit because it knows it has to have terrible things called 'Liberal Party caucus meetings' where all they do is yell at each other rather than address the problems facing the country. It's a bit of a joke, but I don't think I really need to point that out.
Returning to the subject of the discussion today, which is about the member outcomes test, I mentioned that the original bill didn't actually do what we thought it needed to do, which is apply more accountability to a broad range of superannuation funds and accounts that Australians are in. The major feature of this bill is the member outcomes test, which would require trustees to assess on an annual basis whether the outcomes that have been delivered by their products are promoting the financial interests of the members. It's a pretty straightforward thing. In fact, I think it's interesting that we weren't already doing it. It's a significant reform, and it's one that Labor in principle would always have supported.
There were very significant issues, though, with the way that this bill was originally drafted. The biggest issue was that it applied only to MySuper products. Superannuation's quite complicated but anyone who is paying even a little bit of attention knows that the biggest issues in superannuation are actually not in MySuper; they are choice products. Here we had the government putting forward a bill that would have taken what is the best-performing part of this sector and introduced more accountability to that part, but the really troubling aspect of the sector was going to be left untouched. It's unfortunately a pretty regular narrative that we see when the government comes in and tries to make changes to superannuation. The changes, as the government had drafted them, would have largely exempted about 83 per cent of the bank-owned and other retail superannuation assets, and that is despite the fact that choice products are consistently delivering poorer returns to members than MySuper products. I should make it really clear that that's not to say that there are no issues with MySuper products—there are. But to leave the choice products out of the outcomes test was not going to fly with the Labor Party.
Labor is the architect of Australia's compulsory superannuation system, and that's why we'll always fight for stronger laws to strengthen, improve and protect this sector. There's a lot of really good debate about how we should be regulating financial services and, particularly, how much we should allow consumers to make their own decisions and, in some cases, their own mistakes. Superannuation has a number of very distinctive features which mean the parliament has to play a greater role in making sure that Australians are protected. For one thing, it's compulsory. This parliament actually legislates to force people to put aside part of their income each year for their retirement. So we're requiring people to save. We also know that people tend not to pay a great deal of attention to their superannuation. You only have to look at the number of Australians who have multiple superannuation accounts, up until even their forties and fifties, to see that people are not taking such an active interest in their super until those final years before they get into retirement. The other thing is that it's actually just very complicated. So, for those three reasons, it's really important that the parliament comes in, makes really good laws and makes sure that Australians are properly protected.
What came out of the Hayne royal commission sickened me and it sickened Labor members of parliament. It was just devastating to see the way that financial services firms and superannuation firms, in some instances, really abuse the trust that Australians put in them. It was a royal commission, as I said, that the government voted against 26 times—a royal commission that they never wanted to happen—and it's very clear that they don't actually want to implement the recommendations.
We were also very concerned about the findings that the Productivity Commission inquiry into superannuation made earlier this year. That really told us, for the first time, what the impact is of an Australian falling into a not-very-well-performing superannuation fund. The Productivity Commission showed us that, if someone comes into a fund at the top quartile—one of the highest-performing funds in Australia—at the beginning of their career, they are going to be somewhere in the order of $500,000 better off in their retirement than they would be if they'd been defaulted into a poor-performing fund. What is so outrageous is that, for a lot of people, whether they end up in a high-performing fund or a low-performing fund at the beginning of their career, it just comes down to luck. So right now this parliament has a compulsory savings scheme that allows people, really through a lottery, to end up in a high- or low-performing fund, and the impact on that person is half a million dollars when they retire—a very significant impact on the standard of living of a retiree. So it's absolutely clear that the parliament needs to take significant action on this question, and the member outcomes test is part of helping us do that.
Labor has one primary priority for superannuation, and that is protecting members' interests. What that means is that we need to get as many Australians into high-performing superannuation funds as we can. Labor's amendments to this bill in the Senate will force choice superannuation funds to report on their performance for the first time, like MySuper products. They go beyond what was in the government's initial bill and beyond the government's amendments. We were very pleased to see them get crossbench support in the other place.
This bill, as amended, will shine a light on underperformance and ensure that we have tough benchmarking of high and low performance. We don't want to let under-performers continue to be left alone in the dark with our money, as we saw in the royal commission. Labor's amendments successfully passed the Senate. They will also allow us to crack down on dodgy directors of super funds and trustees by significantly increasing penalties for misconduct to more than $500,000.
Labor also moved amendments to schedule 5 to strengthen APRA's directions power so that it can extend it to related parties. Many superannuation fund trustees delegate the operation of the fund to related parties. That's why that was such an important measure. If the directions power did not apply to related parties, APRA would need to rely on contractual rights—which, in some instances, wouldn't have even existed—to ensure that actions that the related party needs to take, in APRA's view, would be done. Those amendments are important additions to APRA's powers.
The biggest problem facing Australian superannuation today is poor-performing funds and the many millions who are defaulted into them each year or who are stuck in them. If elected, Labor will act to address this issue. We can't stand by while millions of Australians have their savings eaten up by poor performance or fee-gouging. Labor is proud to have strengthened this bill to crack down on these funds and hopefully ensure a better retirement for the many Australians stuck in them. There are big issues in our superannuation system. The government has had almost six years to address them but has failed to take action. There is unpaid superannuation, which the best evidence we have tells us is actually a bigger problem in this country than wage theft. There is the superannuation gender gap. Australian women are retiring with roughly half as much in their retirement accounts as men. We just can't continue like that. There are chronic under-performing funds and dodgy funds that are misusing workers' money and ripping off people in retirement.
We want to make sure that superannuation is working better for all Australians. And that's why, if elected, Labor will introduce a raft of measures that will work towards closing the superannuation gender pay gap. This includes paying superannuation for the first time on Commonwealth paid parental leave and dad and partner payments, because it's just wrong that someone who takes time out of work to look after children essentially pays this enormous financial penalty later in their life for doing so.
Labor also has a plan to address the enormous issue of unpaid superannuation. That includes placing the right to superannuation within the National Employment Standards, strengthening the ATO compliance regime and increasing penalties for employers for underpayment or non-payment of superannuation. And Labor will take significant steps to lift the performance of funds. Standing up for ordinary people is the core mission of our political party. We're very proud to have created superannuation with our friends in the union movement. And we're very proud of what it's come to today—almost $3 trillion in savings, which provides huge economic benefits to us more broadly and, most importantly, provides a more comfortable retirement for millions of Australians. But this system relies on public trust, and we need to do a bit of work, I think, to restore that public trust so that we can make sure that millions more people benefit from it in the future. Thank you.