Wednesday, 16 June 2021
Treasury Laws Amendment (More Flexible Superannuation) Bill 2020, Treasury Laws Amendment (Self Managed Superannuation Funds) Bill 2020, Treasury Laws Amendment (Your Future, Your Super) Bill 2021; Second Reading
Thank you, Mr President. Firstly, on the Treasury Laws Amendment (More Flexible Superannuation) Bill 2020: this bill is yet another in the growing list of little fiddles to the superannuation system that this government wants to make that are simply designed to make the rich richer in this country. I want to be very clear that all of these small and apparently boring tweaks to superannuation only help those who have enough money to benefit from them. I will go into more detail on that legislation if I have time in the 14 minutes remaining to me.
On the Treasury Laws Amendment (Self Managed Superannuation Funds) Bill 2020, which would allow the size of self-managed super funds to be increased from four members to six members: again, it's yet another little tweak to the super system that will be of benefit to the wealthy and next to no use to anyone else. That's perfectly to type for this government, because they are very fixated on the rich getting richer in this country—the rich getting a bigger slice of the pie, which means, of course, poor people in this country get a smaller slice of the pie. This government wants the wealthy to get wealthier, because the wealthy are their mates and the wealthy are their political donors.
I want to make a more detailed critique of the government on the 'Your Super, Your Future' bill. It wasn't so long ago that the Liberals were all for superannuation, because the game plan was clear: jerry-rig the system so that the vertically integrated banks could get their hands onto a good chunk of the nearly $3 trillion in retirement savings which exist in this country. The money-grubbers were very eager for a big compulsory super system. This view was espoused by people like Senator Bragg, in his former life as a lobbyist for the Financial Services Council. There, Senator Bragg openly advocated for a rise in compulsory super contributions, not just to the legislated 12 per cent but all the way up to 15 per cent. At that time, Senator Bragg was all for super because he was working for the banks and the banks saw an opportunity to get their hands on a large chunk of money. But then the facts got in the way.
Firstly, the Productivity Commission review found that not-for-profit industry funds performed better than for-profit retail funds, including those run by the banks. Secondly, it found that keeping super in a default product was likely to yield a better return than if you exercised choice. In other words: the government's own economic rationalist think tank found that most people were better off not playing the market because their default super fund was being well managed by a not-for-profit industry body with union and employee representation on the board.
Then we had the banking royal commission, to which superannuation was added with a view to providing some cover for the absolute walloping that the banks were expected to get, and did in fact duly receive. But that backfired too, with a procession of misdeeds uncovered in bank-run and other for-profit super funds, mostly in the form of excessive fees and keeping people in underperforming funds, with there being not much more than some lavish marketing by one industry fund uncovered because—heaven help us!—industry funds might woo clients in the same way as the rest of the corporate world. So after the Productivity Commission and the banking royal commission, the Liberals had to change their tune—openly spruiking bank-owned super wasn't working for them anymore. So now what did they try to do? That's right: white-ant the entire superannuation system.
The likes of Senator Bragg, who has gone to the trouble of writing a book to demonstrate his mea culpa, are now pushing ideas such as super is the reason wages aren't rising, super should be voluntary for young people and—this is one of his best efforts—there isn't enough money in the housing market already so why don't we let people spend their super on housing too? Of course the super-for-housing push is just a reinvention of the aforementioned goal of allowing the banks to get their hands onto super. The trouble for the government is that the public aren't buying this rubbish. By and large, Australians understand and support the system of compulsory retirement savings funding long-term investment. And, secondly, they simply don't trust the likes of Senator Bragg. It's not surprising, given their total about-face and the unpalatability of their actual aim, that this government has served up yet another half baked, bits-and-pieces investment-seminar-buffet piece of legislation. It's all in the name: 'Your Super, Your Future'—signed copies available at the door.
Schedule 1 of this bill seeks to eliminate duplicate accounts by stapling workers to a single superannuation fund. So, instead of automatically getting a new account when you get a new job, you'll keep your existing account unless you make an active choice to change accounts. This was a recommendation of the Productivity Commission and was agreed to by the royal commission. But, importantly, the Productivity Commission also recommended changing the system of how workers are allocated to a default fund. But this legislation doesn't propose any changes to the way that workers are allocated to a default fund. It is absolutely half baked.
The Australian Greens are not suggesting that the existing system of creating a new account every time someone gets a new job, unless they choose not to, should be kept as it is; it shouldn't. A lot of people don't know what super they've got where or what to do about choosing a new fund, because—believe it or not—most people don't spend very much time thinking about superannuation. People don't tend to exercise choice with superannuation, which is why introducing stapling, while keeping the existing system of allocating default super through industrial awards, is a back-to-front way of dealing with account duplication.
This bill also offers up a more sinister possibility. Don't put it past the banks to contrive a way to sign up children, potentially 12-year-olds, to their first superannuation account just so they can be stapled to a bank owned fund for life. This bill could usher in Dollarmites for super.
Schedule 2 introduces an annual performance test for default products. There's a two-strike process for products that fail the test. When the first strike happens they inform their members, and when the second strike happens they're closed off to new members. But they still get to keep existing members, who will continue to remain in an underperforming fund that they are now stapled to, thanks to schedule 1. Again, it's a half-baked scenario where schedule 1 and schedule 2 are basically not talking to each other.
Stepping back, how is underperformance actually being determined? The bill sets out that it is an eight-year average of the fund's investments, measured against relevant benchmarks. The relevant benchmarks named in the regulations are mostly indexes created by two giant global investment firms, the FTSE and the MSCI. Both are massive cogs in the global financial system and have become enormously powerful in the wake of the GFC. The indexes and their creators are anything but unvested, apolitical or free from corruption. If nothing else, the Australian super system, and industry super in particular, has provided a store of patient capital in a world that is trying to flip returns at an ever faster rate. But, instead of trusting the existing long-term investment approach for a retirement savings system that spans a person's working life, this bill will force Australian funds to follow the rest of the herd, including straight over the edge of whatever cliff the London and New York index fund managers might lead them to.
Finally, schedule 3 seeks to require super trustees to make decisions not just in the best interests of members but in the best financial interests of members. This one is not half cooked or half baked; it is simply and purely bad legislation. Even with the government's amendment to knock out the investment kill switch, this one is an absolute shocker. To start with, it's in direct contradiction to the royal commission. Are we starting to see a pattern of ignoring royal commission recommendations emerge here from the Liberal and National parties? Yes, we certainly are. As usual, Commissioner Hayne was abundantly clear about his findings. He said:
I consider that the existing rules, especially the best interests covenant and the sole purpose test, set the necessary standards. Those standards should be applied according to their terms and—
this is the important bit—
without more specific elaboration.
Remember, this government didn't want the banking royal commission to start with and, to be frank, it's not really interested in its recommendations. The inclusion of the word 'financial' in the best interests duty implies that money is all that matters. Just how this will affect a super fund's decision to make investment decisions on a moral basis is unclear. For example, could a fund choose not to invest in tobacco or arms manufacturing or fossil fuels, or, if it does so, are trustees then liable for civil penalties? The bill also reverses the onus of proof in civil proceedings against a trustee. If APRA were to decide that a trustee wasn't acting in the best financial interests of the fund's members, the trustee then has to prove that they were. This is bad legislation, and it could have significant impacts on ethical investment.
This bill continues the time-honoured tradition of the Liberals doing whatever they can to funnel money towards the rent-seekers in the financial system. This government positively detests that not-for-profit industry super funds, with worker and employer representatives on the board, have been successful and are now seen as the natural managers of the country's retirement savings. But they can't go at it head on, so they have to try and undermine the whole system with bills like this.
In conclusion, this bill introduces a bodgie way to get rid of duplicate accounts. It puts investment management in the hands of global indexes and it outlaws impact investing or any other decision by a fund that is not purely for the greatest financial gain. Senators will have heard this saying before: a person who knows the price of everything, but the value of nothing—
An honourable senator interjecting—
Thank you. That was, indeed, Oscar Wilde. I was paraphrasing there, I hasten to add. But the point here is that there is more to life than money. I've made choices in my superannuation, whereby I know that my retirement savings are going into things that I support and are not going into things like arms trafficking or tobacco sales or fossil fuels and a range of other things that I don't want my superannuation going into. That is actually freedom of choice, and here we have the government trying to take it away and trying to say that a super fund has to manage funds only in the best 'financial' interests. Well, I don't want my super managed that way. I want my super to be managed in an ethical way so that my investments are made into ethical products that help drive the transition out of fossil fuels, rather than continue to invest in them.
Honourable senators interjecting—
Boy, oh, boy! You know when you've hit a nerve in this place because the hard Right arc up from their seats. I am just going to say very clearly that I know I have found a nerve in this government in what I am saying today.
We are aware that Senator Patrick has amendments to this legislation, as does the opposition. We will be supporting those amendments because they go a long way towards fixing the problems in this bill, so much so that, if they are successful, the bill will barely resemble what the government has served up. As such, we'll be reserving our position on this legislation until we see how those amendments travel tomorrow, or whenever they ultimately end up getting put to the Senate. But we will not support the bill as it currently stands. I simply say to the government: could you please get with the program and understand that superannuation is critical for this country.