Wednesday, 2 June 2021
Treasury Laws Amendment (Your Future, Your Super) Bill 2021; Second Reading
Labor is the party of superannuation. We invented it, and today Australians have $3 trillion in nest eggs for retirement, $3 trillion of economic security for Australians to enjoy after decades of hard work, $3 trillion of investment in the economy, $3 trillion of planning for the future by the Australian Labor Party and $3 trillion defended by the Australian Labor Party. This defence continues in the face of absurd ideology by members of the Morrison government. Why doesn't the Morrison government want to help Australians set themselves up for retirement? Australia has the third-largest pool of retirement savings in the world. As a share of GDP, our private retirement savings outrank the US, the UK and Canada. Why doesn't the Morrison government celebrate these facts?
This bill implements the government's 2021 budget measure Your Future, Your Super. The government claims these measures will enhance the performance of superannuation funds and reduce the number of duplicate accounts in the system. It also implements the government's commitment to action on one of the recommendations of the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry, which recommended that a mechanism be developed to staple members to a single superannuation account. Fundamentally, these aims are commendable and should be pursued. Many Australians lose money due to multiple super accounts established in their name. The government can and should do more to respond to this issue. But, of course, the devil is in the detail, as it so often is with this government, and I'll speak more about that later.
Likewise, improving the performance of super funds should be pursued. No system is perfect, and we should always be looking for ways to make such an important system more productive for Australians who rely on the system to retire well. We know from the Productivity Commission that underperforming funds are costing Australians $3 billion a year. We must fix this. We must ensure Australians are getting the most out of any investment they make in super. But this bill does not do that.
Labor supports the implementation of an objective performance benchmark for superannuation funds, but Labor cannot support this bill being put forward today. As drafted, this bill will damage the superannuation accounts of Australians. It is not in the interests of Australians with a super balance. As usual, Labor has had to put forward amendments to make this bill better. We want to fix this bill. We want to ensure an improved version of this bill succeeds and assists all Australians with superannuation. We want an objective performance test and we want to close down issues with multiple accounts, but we cannot support a bill that staples members to underperforming funds. Treasury has estimated that 21 out of 77 default MySuper funds, covering three million Australians, will fail the benchmark on day one. This means that, if this bill passes, up to three million people will be stapled to a dud fund for life. This is typical of the Morrison government: heralding something as a fix and an improvement but leaving behind millions of Australians—three million Australians, in this case.
The information I just referred to is Treasury's own information—the government's Treasury. But the government have ignored that relevant piece of information in the creation of this bill. And, for the party of liberalism and for the free market, it is very strange that the Morrison government has included in this bill the power for the Treasurer to cancel any investment made by a super fund. Labor cannot support a bill that enables the Treasurer to cancel the investment decisions of a super fund. This destructive move by the government is astounding. The government is frivolously playing with the retirement savings of Australians and also putting at risk the ability of super funds to make prudent investment decisions in the interests of their members. As the member for Grayndler said earlier, this is what you see under totalitarian regimes, not here in Australia.
A clause contained in schedule 3 of the bill gives the Treasurer the power to make a regulation to declare any particular payment or investment made by superannuation fund as not being in the 'best financial interests' of members. This power is not subject to any sort of test and could be used to ban payments that are in the best financial interests of members. This power could be used by any future Treasurer to prevent any particular investment they oppose, and this power has been opposed by Australia's business community, including the Australian Institute of Company Directors. This power will also introduce a sovereign risk element into Australian investment decisions. Investors may be reluctant to invest in Australian assets alongside superannuation funds, with the knowledge that commitments made by superannuation funds could be cancelled at the behest of the Treasurer. Australian superannuation schemes are seen as safe bets by investors around the globe. By taking this power, the Morrison government is putting this at risk. Global investors will look to make investments elsewhere if they know the Treasurer can cancel the investments.
It continues to astound me that the Morrison government hold themselves up a strong economic managers. In fact, they are strong economic meddlers, and this is exactly what they want to do with your super—with the super of all Australian retirees and Australian workers. They are not on your side. The Morrison government want you to lose the vaccine race and now they want to lose the super balance race too. It is astounding and disgraceful.
There are several other problems with this bill. The bill attacks the basis of insurance in superannuation, the industrial default system, meaning that workers in high-risk industries will miss out on insurance tailored to their profession. Non-industrially determined funds often include exclusions in the default insurance packages for high-risk occupations. Our truck drivers, construction workers, police officers, firefighters and health workers deserve better than this move by this regressive government. The government's bill will take effect from 1 July 2021, requiring Australian employers to scramble to implement new systems in less than a month. It's astounding that a government with such a tiny legislative agenda couldn't get its act together to get this through the parliament. The government's bill has huge gaps in coverage. It will only cover default MySuper products, when the vast majority of underperforming funds are concentrated in the choice sector.
The bill introduces new administrative burdens on superannuation funds, tying funds up in red tape, which will ultimately be paid for by fund members through increased administration fees. This comes from a government that goes on and on about eradicating red tape but can't help but create red tape in sectors that they have an ideological aversion to. Why does the Morrison government hate super? It should tick all their boxes—it boosts investment in the economy and enables people to prepare for their own retirements so as to decrease their reliance on the government via the pension and other supports. Instead, this government trashes the super system while also refusing to prepare the pension system so it can support people without adequate superannuation in retirement.
The government hates these funds because they are associated with unions. To me, it makes sense that unions would have an association with super, as they know what workers need and how to support them. The numbers speak for themselves. Industry super funds consistently have lower fees and better returns, not to mention better insurance options, which actually insure for the risks that specific workforces face in their work. Since 2018, the net value of assets in retail super funds has increased by 3.2 per cent, to $645 billion. Over the same period, industry super funds have grown by 30 per cent, to $814 billion. Furthermore, industry funds don't pay dividends to shareholders. Their shareholders are their members, and the numbers demonstrate the benefits of setting up super like this.
Our super system is already contributing more than twice the amount to the retirement of Australians than the pension system is. What would this government do if that were not the case? With an aging population, how is the government preparing for an increased call on the pension system? With this challenge ahead, why are those opposite attacking super? It's because the coalition doesn't like super and has consistently voted against progress in this area. Furthermore, despite having an increase to 12 per cent already legislated, this government refuses to commit to it. It refuses to provide certainty to workers and to business, with continued delays to increases. We know that the current 9.5 per cent is not enough and that Australians will fall short in retirement if that doesn't increase. We also know that businesses need certainty when planning for these increases. Yes, the pandemic has been tough for many businesses, but, as the Treasurer keeps telling us, the recovery is strong. Businesses need to be able to plan with certainty when it comes to how much their wages bill will be. The government's dillydallying on super increases means they cannot do this.
I've spoken about super before in this place, but the following is worth repeating. The government will tell you that super increases suppress wage growth. The superannuation minister, Senator Jane Hume, said that last year. But, according to research from Per Capita, freezing super has previously led to a loss of net income for workers. Per Capita has found that, as a result of the freeze on the superannuation guarantee in 2014 by this government, the average worker has lost over $3,400 in super over the intervening five years. At the same time, their take-home pay has declined by over $1,000 in real terms, giving them a net loss of $5,425. Of course, the Morrison government relies on these lies in its rhetoric on super because it wants you to believe that if it doesn't act on super your wages will go up. The Per Capita research demonstrates that this is not true. The government knows this, but those opposite continue with the lies because they hate super. They don't care about your retirement, and they don't care about your wages either.
We must continue with legislated increases to super. Each year, for the next five years, super will increase by 0.5 per cent, and we must ensure that this happens. It is a conservative approach to help business, workers and Australia's pension system. Unsurprisingly, the Morrison government has missed several other key improvements that are required, the key issue being women's super balances. We know that women retire with less super. On average, it is 20.5 per cent lower than men. Last time I checked, women don't have 20.5 per cent less costs than men in retirement. Women don't want to do 20.5 per cent less things in retirement, and I'd hazard a guess that by the time they end up buying they have less to spend in their retirement.
Whilst that last figure has no basis, it points to the problem at hand: the increased caring responsibilities, including time taken to care for children, mean that women earn less super and have less in retirement. We need to think carefully about how we improve the super balances of Australian women. We need to think about how we can mitigate the effects on super balances when women go on maternity leave, when women take time off to care for their children and when women work part-time in order to balance caring responsibilities. This bill does nothing about this challenge. The government's women's budget did almost nothing about this. The government has said that they will remove the $450 per month threshold under which employers are exempt from paying employees super. Good. They should have done this years ago. But it's not going to help women retire comfortably.
For months prior to the budget, the government was briefing out to journalists that they were going to do something about women's super in the budget. And that was all they did—almost nothing. In fact, they wanted to let women trying to free domestic violence raid their own super accounts. What a disgraceful idea that was, that, thankfully, they dropped. In Senate estimates this week it's been shown that that was actually going to be a saving in their budget. That is shameful—absolutely shameful.
Moving onto the administrative elements of this bill, Labor supports the implementation of an objective performance benchmark for superannuation funds. However, the design of the mechanism proposed by the government is concerning. The proposed performance benchmark could penalise trustees for investing in Australian unlisted assets, such as infrastructure, venture capital or privately owned business. The proposed mechanism would benchmark these long-term investments against international indexes that do not reflect the performance of Australian assets.
The bill also ignores administration fees. The proposed initial design of the measure excludes consideration of administration fees. While the government has indicated that they will fix this, without draft regulations it is impossible to be sure that they will address the issues raised. Administration fees make up the largest proportion of fees paid by superannuation members, and the Productivity Commission identified high administration fees as a key factor causing low returns for superannuation members. Of course, the Morrison government hasn't done the work and have not fixed this, despite the fact that they use admin fees as a key reason why they don't support our superannuation system.
The bill only covers MySuper products and choice products defined as being trustee directed products. This definition has been created exclusively for the purposes of this bill and will exclude a large number of choice products from performance measurement. The definition would appear to exclude a large number of superannuation products that have been identified by the Productivity Commission as being likely to have high fees and low returns. Again, this is sloppy work by the Morrison government.
When it comes to superannuation, this government is not on your side. This is another thinly veiled attack on the superannuation of Australians—which is their own hard-earned money. Labor will always protect our superannuation system.