Wednesday, 2 June 2021
Treasury Laws Amendment (Your Future, Your Super) Bill 2021; Second Reading
I rise to speak on the merits of this bill, the Treasury Laws Amendment (Your Future, Your Super) Bill 2021, and to document some ongoing concerns I have with its provisions. As an Independent, I have the privilege of assessing each bill that comes through this place on its individual merits, and this bill is no exception. I've also made sure I've consulted deeply on this bill. I've heard from constituents and small businesses across Indi about super reform, including through an online budget survey which received over 1,400 responses from my constituents just last week. I've met with representatives from various super funds who would be immediately affected by these reforms. And I've met with the minister responsible for this bill, to ask her about the evidence, upon which the government is relying to justify these reforms, from the Productivity Commission, the Senate inquiry, the royal commission and industry consultations.
On the whole, straight up: this is not necessarily a bad bill. It seeks to prevent workers from racking up multiple super accounts and unnecessary fees. It creates an ambitious performance test, to make sure our precious retirement savings are not squandered away in poorly performing funds with no accountability. It also sets up an online tool that would make it easier for workers to assess how well their fund is doing and make an informed choice about whether to invest elsewhere. These are all well-intentioned reforms that I can support. But there are parts of this bill, particularly the directions powers given to the Treasurer in schedule 3, which I simply cannot support, on behalf of the communities of Indi. I know there are members on both sides, including the government back benches, who share these concerns and I commend them for doing so publicly in the House.
I'll now turn briefly to each schedule. Schedule 1 introduces a new stapling system which will ensure that workers keep the first super account they open unless they make a proactive decision to change. Unstapling is a good thing if it's done right. Australians pay $30 billion per year in super fees which are among the highest in the world. More than one in five Australians have unintended multiple accounts, and some estimates have Australians wasting up to $6.5 billion per year on avoidable costs and fees. So we should be doing all we can to stop this dreadful waste. But the fact of the matter is you can't staple people to their existing funds overnight and expect to solve that problem.
The Productivity Commission explicitly recommended that super funds be subject to performance testing before introducing stapling, and there's an important reason for this: we shouldn't be stapling workers to an underperforming fund. Current Treasury estimates suggest 21 out of 77 MySuper products currently held by around three million Australians would fail the performance test. We also know Australians are sticky decision-makers when it comes to their super. If we staple three million people to underperforming funds, we risk keeping them stapled for years to come, especially if performance testing doesn't work out as expected or if people don't end up using the comparison tool, like we've seen with other government-run comparison tools—for example, in the energy market. Sure, the Australian Prudential Regulatory Authority publishes heat maps that show economists and other experts how well funds are performing; but those maps are buried in 1,000-page reports deep in government websites. No worker is looking them up.
At the end of the day, stapling before performance testing doesn't kill this bill, but it sure makes it a risky one. We're essentially banking on a lot of ducks falling into place down the track to make sure that this bill works properly. A better bill would have mandated testing for two years before stapling, and I'll support any detailed amendments to that effect. But I won't oppose the bill on this basis.
I've also heard a number of other concerns about schedule 1, including the administrative burden it will place on the ATO to have stapling ready to go in just four weeks time; the possible impact of stapling on workers in high-risk industries; and the risk that stapling will encourage super funds to engage in predatory marketing, with young people signing up in their first job so that the funds get them for life. I'm less worried about these concerns and, on balance, could support schedule 1, amended or unamended.
Schedule 2 establishes a new performance test that goes beyond the current CPI-plus industry benchmark. If funds fail this new test, they will face a number of consequences. If they fail the test repeatedly, they'll be prevented from signing up new members and eventually driven out of the market. Again, performance testing is a good thing if done right. For example, it wasn't until a few weeks ago that the government decided to include administrative fees as part of the performance testing. This exclusion created a concerning loophole that would have allowed unscrupulous super funds to game the performance-testing system. So I was pleased to see that change.
But my biggest concern with this part of the bill is that the performance test will apply predominantly to industry super funds first, before the retail funds. I've spoken to a few members in this place who are reading the tea leaves here, suggesting that the government wants to create a run on industry based funds. This may be true or it may not be true, but one thing is clear: we can't have rules for some and not for others, not when the stakes and figures are this high. There's over $818 billion in assets under management in industry funds and over $630 billion in retail funds. The data is there right now to performance-test all products. There should be no excuse. I'll be pleased to support any detailed amendments that fix this oversight; and, if it's not fixed, I'll work with colleagues in this place to put pressure on the government to do so through immediate regulations.
But schedule 3 of the bill is a whole other beast. Section 117A has been criticised by members on both sides of the House, and I wish to add my voice to that chorus. That section would give the Treasurer a broad and unilateral power to block certain kinds of investments super funds are making purely because the Treasurer believes they're not in the members' best financial interests. We're talking about pure political decision-making here. This power could be used to strike out clean investments in renewables overnight without justification. It could be used to defund important corporate social responsibility programs that promote women in executive leadership or create cultural diversity on ASX 200 boards. The truth is though we have no idea how this power would be used, and it would create an unacceptable level of sovereign risk in a $3 trillion financial industry that no-one has asked for and could be totally avoided. I cannot find one recommendation, one report, one stakeholder, one local business or even one constituent who supports this provision. Whatever the rationale, it's simply unacceptable to me.
APRA currently has broad powers to intervene when super funds are not acting in their members' best financial interest. APRA makes its decisions based on fiduciary duty, not political whim and opportunity. If the government believes that APRA could be better equipped to enforce that power independently, then it should support it to do so—not call it in and turn independent regulation into a political playground. I've see no reason to support schedule 3, and it's on this basis that I will be opposing this bill.
Before I conclude, I'd like to speak briefly about the superannuation reforms that are not in this bill that the government has floated in recent months. Earlier this year, there was the inane suggestion that women fleeing domestic violence could dip into their super to access emergency funds to help them move into safer temporary accommodation, access psychological support services, cover lost income from time-off and so on. This suggestion is offensive on so many levels. Victims of domestic violence should not have to bear the financial burden of escaping a situation which was not of their doing. That is unnecessarily punitive and callous. It also totally misunderstands the experience of women facing these horrific circumstances. No person fleeing domestic and family violence would have the psychological bandwidth and patience to wade through the necessary paperwork. The average Australian doesn't know who their super is with and what their balance is let alone in the middle of a crisis. And the average woman in Australia retires with 47 per cent less super than men in this country.
A big part of that is the result of the gender pay gap but it's also because the government has missed some opportunities for more productive ways to empower women through superannuation reform. Right now employers are not obliged to make super contributions to women on maternity leave under the paid parental leave scheme. That's a straight up lost opportunity and straight up discrimination. I welcome the government's decision to abandon the $450 minimum threshold super contributions on budget night, but I believe the government could have gone much further for women, and I really encourage them to do so, just like I encouraged the government to take a close look at the deficiencies in this bill and correct them, so that MPs on both sides of this House, including the government's own backbench, can support it.