Jason Falinski (Mackellar, Liberal Party) Share this | Link to this | Hansard source

I move:

That this House:

(1) notes that:

(a) the final report of the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry highlighted widespread misconduct across the financial sector;

(b) the Commissioner, the Honourable Kenneth Madison Hayne AC QC, made clear that primary responsibility for misconduct in the financial sector lies with the institutions concerned and their boards and senior management;

(c) the final report made specific note that the transparency and internal governance processes of a number of financial institutions did not meet community standards;

(d) after a request from the Treasurer on 1 August 2019, the House of Representatives Standing Committee on Economics has run an inquiry into the review of the four major banks and other financial institutions which seeks to review the financial sector's implementation of

recommendations from the Royal Commission; and

(e) IFM Investors is an Australian investment management company which is wholly owned by 27 Australian superannuation funds and which manages $148 billion as of September 2020;

(2) is disappointed that IFM Investors has refused to provide information to the House of Representatives Standing Committee on Economics, including the:

(a) reported $36 million bonus to a single fund manager;

(b) severance payment and terms for staff alleged to have engaged in sexual harassment;

(c) details and terms of bonuses paid by IFM Investors to their executives and fund managers, paid from Australian's compulsory superannuation; and

(d) deliberate attempt to launder transparency and accountability of the use and misuse of Australian's compulsory superannuation by keeping information confidential from the Parliament of Australia; and

(3) calls upon the House of Representatives Standing Committee on Economics to use its power to compel evidence and documents from IFM Investors to ensure transparency and accountability and to ensure that IFM Investors is acting in the best interests of ordinary Australians, not fund managers.

The banking royal commission was called by this government some 24 months ago. I must confess that, while some people love Beethoven and others a good ballet, I've always loved finance. My first job was lifting reinforced metal for Smorgon, now ARC, but my second job was at the Credit Union Services Corporation. I always from that point forward remember marvelling at the extraordinary contribution that finance has made to our modern society. The payment system and credit creation alone create 90 per cent of our financial sector in our economy.

The financial services sector remains one of humanities great achievements. It has driven more growth, more innovation and more prosperity than any other invention that we have managed thus far to come up with. So many of our achievements can be traced back to finance. Often we find that inventions—for example, the telephone—were invented hundreds of years before they became commercialised. The difference was not that the invention was better 100 years later but rather that the inventor had access to capital. The steam engine has a similar story.

When Pitt the Younger was asked how it was that Great Britain prevailed over Napoleon in the Napoleonic Wars, the parliament expected him to reply, 'It was Nelson.' Instead he replied, 'It was the government bond market.' Literally, the bond market allowed the United Kingdom to outspend Napoleon and the French.

In The Wisdom of Finance, Mihir Desai is able to demonstrate better than I ever could that the modern world in which we live would not be possible without modern finance—everything from insurance to hedges, forwards and leverage. All these things make our lives inextricably better and possible. We would not be able to drive a car without insurance, because without insurance we would be in the prospect of being responsible for the financial outcome of an accident or a crash every time we had one. Insurance allows us to derisk our lives.

Most of the protections that existed for customers in engaging with their banks have been systematically undermined, however, by modern society over the years. Common law rights that existed for customers are now encoded in law. Even ASIC, which quite frankly is very much part of the problem that consumers now face in the financial sector, admits that the consumer law reforms of the late 1990s under the Howard government were counterproductive. Who would have guessed that laws such as CLERP 8 and CLERP 9 that force financial sector providers to produce hundreds of pages of PDSs would not be read by consumers and would be taken by them as signs of important examples that the product that they were using or that they were about to purchase must be credible because the paper on which it came was glossy and thick enough.

We know now that the laws that we introduce to protect consumers have actually done the opposite. So, when some in this place insisted that the answer to the problems in banking was more lawyers, I was slightly sceptical. What is another few hundred million dollars thrown at a royal commission to see if lawyers that created this problem could somehow undo it? After all, those Portsea mansions don't pay for themselves.

What was uncovered at the Hayne royal commission was disturbing. We saw a culture that had developed under the very laws that we had sought to use to protect consumers that allowed bankers and the financial sector to instead rip consumers off. They were no longer working in the interests of their customers but were working in the interests of themselves and their bonuses. But what was not uncovered was even more disturbing.

The House committee has been reviewing the financial services sector and post-Hayne implementation. What we have discovered is a cesspool of self-interest and consumers being denied their basic rights. If I did not believe that lawyers and regulators had created these problems in the first place, I would be demanding a royal commission now into those parts of the financial sector that the Hayne royal commission, for whatever reason, decided to ignore. Indeed, Counsel Assisting Rowena Orr's lack of curiosity in this regard was striking. She kept Catherine Brenner in the stand for three days to go through emails sent to and received from ASIC, yet, when superannuation funds presented themselves at the Hayne royal commission and freely admitted to spending tens of millions of dollars on corporate hospitality to benefit no-one but themselves, counsel assisting simply moved on. She did not feel that it was worth investigating any further.

What we have found is a superannuation system that Australians are forced to contribute their money to, without being asked if they would like to do so. The system spends $400 million on advertising, promoting itself, even though it doesn't have a problem actually getting people to buy its product, because we have legislated that people are forced to buy it. We have been told that, if this parliament dares to exercise its sovereign right to change and make laws, the superannuation system will unleash hell upon this parliament. We have found corporate marketing, as disclosed at the Hayne royal commission, to the tune of tens of millions of dollars, and other superannuation funds that feel that they are above the law and therefore do not have to answer those questions. As we stand here today, we have no idea how much money the superannuation sector spends on corporate marketing to the benefit of themselves and their mates and to the disbenefit of their members—they simply refuse to disclose to this parliament how much that is.

We had the unedifying example of a Queensland superannuation fund donating money to a political party. When the regulator, Helen Rowell from APRA, was asked how this was in the best interests of members and therefore not in violation of the law, she answered it was not a material amount of money. So we now have regulators in this space—perhaps some of them have been beneficiaries of the tens of millions of dollars that we have thus far discovered being spent on corporate marketing—who are determining what parts of the law they will and will not actually regulate. They have taken it upon themselves to decide what this parliament meant and what laws from this parliament they will impose on superannuation funds. So the members no longer have the protection of the law, and nor do they have protection of the regulators. One has to ask why. Why would a royal commission not find this slightly curious and worthy of investigation?

We had the unedifying example of the head of Industry Super Holdings, an industry super association, telling us that they don't make political donations. The only problem was that the party that had received those political donations had declared them to the Australian Electoral Commission, so they were caught out. In their answer back to the committee they told us that they don't make political donations, that they didn't think the moneys they had given over to a political party had been disclosed and so therefore their answer stood. That is the attitude of superannuation funds and associations in Australia today. They think they can break the law as long as they don't get caught. And then we have regulators who decide that superannuation funds haven't broken the law enough for them to impose the law on them.

Then we have the situation of Industry Super Holdings. Technically, they are outside the law. They don't have to comply with the best-interests test, which this parliament has imposed on superannuation funds but APRA has decided not to actually enforce, for reasons that they can never properly explain, other than the fact that they feel it's not material. We have ASIC determining that they will persecute—and I use that world advisedly—real estate agents while ignoring the head of Industry Super giving financial advice across Channel 9, Channel 7 and other news. We have IFM refusing to come to a committee of this parliament and disclose how much it paid out an employee for sexual harassment charges.

We have situations where super funds are paying The New Daily and paying the ABC, but they won't disclose how much they pay the national broadcaster and its economics editor. This is— (Time expired)

Trent Zimmerman (North Sydney, Liberal Party) Share this | Link to this | Hansard source

Is the motion seconded?

A government member interjecting—

The question is that the motion be agreed to.

Daniel Mulino (Fraser, Australian Labor Party) Share this | Link to this | Hansard source

What a bogus, ideologically-driven and self-indulgent motion this is. This member for Mackellar's motion is based upon a completely misrepresentative notion that this government called the Hayne royal commission, when in fact the government voted against it 26 times. It was a royal commission this government never wanted, and that is crystal clear from the fact that this government is dragging its feet in implementing its recommendations. What we have in this motion is a complete misrepresentation of the financial services sector by calling to account a part of the financial services sector that is outperforming the average and providing great benefits for its members.

This government, as it has shown through its actions over the last two years, does not want to put into place basic recommendations that the Hayne royal commission made, which are absolutely overdue and which would respond to some absolutely heartbreaking instances of malfeasance, malpractice and abuse of vulnerable people. This government, after two years, has implemented only around a third of the recommendations of the royal commission. Yet we get this motion which calls into question organisations that were given a clean bill of health by that very royal commission. Instead, what we have is a backbench of those opposite which calls into question a core election promise that those opposite made in the lead-up to the last election—to respect the SGL increase that both parties took to the last election. Instead, what we have is every galah opposite with a policy—their own random policy—on superannuation, but no-one with a clue.

Let's look at IFM and some of the bizarre accusations made by those opposite. IFM came out of the Hayne royal commission, as did the industry sector overall, with a clean bill of health. That was not the area of the financial services sector that the Hayne royal commission said needed attention. Indeed, IFM has cooperated greatly with the House economics committee. They've answered dozens and dozens and dozens of detailed questions. They have appeared before the committee multiple times. Have any other fund managers been called? No. That reflects the fact that the House economics committee is being used for ideological fancies.

Let's look at the industry sector as a whole. Let's take a step back. Industry super funds delivered an average of two per cent long-term outperformance over retail funds. Yet those opposite spend all their attention on little ideological ploys to try to bring—

Mr Tim Wilson interjecting—

Trent Zimmerman (North Sydney, Liberal Party) Share this | Link to this | Hansard source

Order. The member for Goldstein will cease interjecting.

Daniel Mulino (Fraser, Australian Labor Party) Share this | Link to this | Hansard source

the industry funds into the public eye. ISFs have performed outstandingly in terms of short-term and long-term returns. So this is not based on any kind of substance. This motion is based upon those opposite trying to use the House economics committee and trying to use this chamber to misrepresent a significant part of our financial services sector, to try to hide the fact that this government has done almost nothing to implement royal commission recommendations that are absolutely essential and overdue when it comes to those parts of the sector that were found to be most in need of reform.

What are they looking at instead? They're looking at this bizarre, fanciful notion of housing instead of super. Those opposite are obsessed with the rhetoric of choice, but what they're really creating is not choice. They're setting up a false choice—that you can have a house or you can have super—when, sensibly, the Australian public understands that they deserve both.

What about public policy experts? What about those who see this as an absolute joke of a policy not founded in any kind of commonsense microeconomic analysis?

What about Sally Loane, CEO of the FSC, who said early release for housing would be 'counterproductive and further inflate house prices' and would 'simply mask the underlying cause of unaffordability'? Is there a holistic approach? Is there a demand side approach? No. What about Michael Sukkar—who I don't usually agree with—who said that this is a classic example? The classic example was the Howard government's $7,000 First Home Owner Grant, which may as well have been given straight to developers. So what we're going to have is those opposite trying to get first homeowners bidding against first homeowners, cashed up to the gills in an economy where there's too much credit. What a joke of a motion. (Time expired)

Tim Wilson (Goldstein, Liberal Party) Share this | Link to this | Hansard source

I'm proud to support the member for Mackellar's motion on this important subject, because in the House Economics Committee we look at issues that directly affect Australians, and what we know is that we have had a royal commission led by Kenneth Hayne into misconduct in the banking and financial services sector. He did a job, but he didn't do the whole job. Sadly, after he handed down his report, we have seen time and time again clear consequences of where there wasn't a full investigation into some parts of the financial services industry, where there has been conduct that's been covered up and where there has been a failure to take action. Now we are simply seeking to shine a bright light in dark places.

Let's look at the simple facts. While the royal commission gave so-called industry funds a clean bill of health, that isn't now the view of ASIC, who is taking direct action against REST Super for engaging in misleading and deceptive conduct. Laws have to be brought before this parliament to change the requirements, because industry super funds were deliberately reactivating low-balance inactive accounts. As a consequence, they were rolling over money, taking insurance premiums and fees for members with money that should have been rolled into the Australian Taxation Office. And of course we see the ongoing laundering of money through one of their major wholesale funds called IFM Investors. I don't dissuade or discourage the use of such funds, but when they are directly connected to the retirement savings of Australians they have the same degree of accountability as, of course, super funds of all persuasions—retail, industry and government funds. But when we have put questions to IFM Investors about simple information, like those on the reports and the allegations of bonuses, paid for by Australian retirees and retirement savings of Australians, of up to $36 million—which is not a number I came up with but the number that one of their former employees boasted about as part of legal proceedings—and when we simply want to know what are the structures of those payment systems, IFM Investors will not answer to this parliament. We want to know: How much money? What are the maximum bonuses paid? This parliament has asked the question; IFM Investors refuse to answer it. When we ask the big banks, they give us that information. When, to their credit, we ask industry super funds or retail funds, they give us the information. But IFM Investors will not, and it's simply unacceptable. We know on the public record that at least bonuses of nearly $13 million have been made, and what we know is that the structure of their bonus systems are directly proportionate to their activity, so where does it end?

Members on the other side of this chamber come into this parliament and complain about the bonuses of other corporates, and that's fair enough—there should be a proportionate relationship between the activity and the outcome. It takes money to hire people of talent, but can anybody say that out of the retirement savings of millions of Australians a single fund manager could be given $36 million in bonuses and that that passes not just a pub test but even the Labor Party's own test they impose on the rest of the community?

We know that the former member who spoke went on—and I'm sure the ones who will follow will go on—long rants of defence trying to distract, because they don't want a proper focus or scrutiny on these organisations because they're part of the structure, the ecosystem, that funds the modern Labor Party. But the reality is we need accountability in this place. If centralised and organised capital being used for ends and they want to make a virtue of it then they need to back it up with responsibility and accountability.

Finally, I know that the former member for Fraser gave a lengthy criticism of the principle that we want to prioritise homeownership. Make no mistake: I absolutely support homeownership for all Australians. Nobody is saying homeownership should come at the expense of superannuation, but we are saying that the biggest financial decision any Australian makes is to buy their own home. If anybody in this chamber wants to make an argument that that isn't the case, they're free to do so. The second-biggest decision is superannuation, but, currently, the law is socially engineered in favour of super at the expense of homes. Young Australians are paying the price, and those opposite ought to be ashamed of themselves.

Andrew Leigh (Fenner, Australian Labor Party, Shadow Assistant Minister for Treasury) Share this | Link to this | Hansard source

I'm the current member for Fenner and the former member for Fraser, unlike Daniel Mulino, who is the current member for Fraser. It's a matter which sometimes causes confusion in this place. Confusion is also clearly present in the minds of those listening to Liberals taking credit for a banking royal commission that they voted against 26 times. The coalition speakers on this bill have all cast votes against a banking royal commission. The current Prime Minister called it a 'reckless populist whinge'. At least Malcolm Turnbull had the honour to stand up and say that he was wrong in opposing a banking royal commission. I haven't heard that from the current Prime Minister. The delays in the banking royal commission caused excessive pain for the victims of misconduct in the financial sector, and no-one now thinks that the banking royal commission was a mistake.

Yet now we have the coalition attempting to go against the first recommendation of the banking royal commission, which was that responsible lending laws not be watered down. We've seen the House Economics Committee delay hearings with the major banks. The committee put the hearings off for almost six months when the pandemic hit, a time when the banks were deserving of increased scrutiny. Now we have this ridiculous motion on IFM, which has been assisting the House of Representatives Economics Committee since 2019. IFM appeared on two occasions over 12 months, and its parent company, Industry Super Holdings, has appeared once. IFM answered almost 100 questions for the committee in writing and responded to many more during its appearances. That, of course, comes at a cost to IFM. The cost of complying isn't paid by the individual Liberal members; it is paid by the Australian mums and dads who have their money in investments held by IFM. That's an administration cost. The party that rails against red tape has ended up imposing an administrative burden on superannuants.

There are many asset managers out there—BlackRock, Perpetual, JP Morgan, AllianceBernstein, First Sentier, Pendal, Credit Suisse—but the committee hasn't called any of those. Why not? Because they're not part of industry super. What we have here is a motion which symbolises the Liberals' continued culture war against industry super, a system set up not only by unions but by unions working with employers. If there's one thing those opposite hate more than unions, it's unions working collaboratively with business. That's what industry super is. Industry super has managed to achieve much better returns than its retail counterpart because of one simple fact: it's not paying a profit. All of the returns are going back to members. IFM has worked with the committee, despite the fact that the Hayne royal commission made no findings against IFM and did not call on it to appear. IFM's chair, Greg Combet, was appointed by the Prime Minister to the government's National COVID-19 Commission. IFM meets all of its regulatory requirements. As has been repeatedly explained to the committee, if IFM were to provide commercially sensitive information, which its competitors are not required to do, it would be placed at a competitive disadvantage. The losers from that wouldn't be the staff of IFM. The losers would be the people whose money is being invested by IFM.

This is not about the royal commission. This is about a petty, vindictive, ideological campaign by the Liberal members of the House of Representatives Economics Committee against industry superannuation. I'm not sure they have thought through what the impact would be if they were to go to their friends in the private sector—if they were to go to some of the commercial funds managers that I've mentioned—and ask them for the sorts of commercial-in-confidence information.

I close on the member for Goldstein's continued campaign for Australians to have to choose between owning a home and retiring with dignity. He has been attacked most recently by former Prime Minister Malcolm Turnbull, who said:

"Diverting even more savings into housing is simply just going to bid up the price of housing … I mean, that is, honestly … the worst possible argument."

The former Prime Minister has said:

"Politicians and public servants have a compulsory 15.4% super contribution …

…   …   …

… isn't it … somewhat patronising … to say that working people … should … settle for nine and a half?"

Trent Zimmerman (North Sydney, Liberal Party) Share this | Link to this | Hansard source

There being no further speakers, the debate is adjourned and the resumption of the debate will be made an order of the day for the next day of sitting.