Senate debates

Thursday, 16 November 2017

Bills

Treasury Laws Amendment (Improving Accountability and Member Outcomes in Superannuation Measures No. 1) Bill 2017, Superannuation Laws Amendment (Strengthening Trustee Arrangements) Bill 2017; Second Reading

1:05 pm

Photo of Sam DastyariSam Dastyari (NSW, Australian Labor Party) Share this | | Hansard source

As I stated last night, it is obviously on the public record that Labor will be opposing the Treasury Laws Amendment (Improving Accountability and Member Outcomes in Superannuation Measures No. 1) Bill 2017 and the Superannuation Laws Amendment (Strengthening Trustee Arrangements) Bill, the STA Bill. As my colleagues have said before, we don't support the superannuation laws amendment bill. We'll be voting against it at the end of the second reading speeches. If it is still to proceed, I understand there is a substantial list of Labor amendments, many of which have already been foreshadowed, with which we will be trying to improve what we believe is a bad piece of legislation.

Again, we think this is a bad piece of legislation and it should be stopped immediately. But if it were to proceed to the committee stage, I want to urge the crossbenchers not to be railroaded by the government into a timetable or a time frame that isn't going to give the opportunity for proper consideration. I note that it appears that the Senate's business will almost entirely, in our next week of sitting, be taken up by dealing with the marriage bill. Again, that is something I support. I think that's a good thing to be doing. As a Senate, I think that's important work and it's important for us to reflect the will of the people in the postal survey. But it does mean that the amount of time we're going to have to be able to deal with what are, I think, quite extensive and detailed amendments is going to be quite limited. So I urge the crossbench not to feel the need—it's a bad bill and there is no need to rush a bad bill like this. There is no need for this to be done now, and it doesn't have to be done in this way. If you're going to pass this type of substantial legislation, especially flawed, substantial legislation, then I think it is important that you take as much time as possible to give it proper consideration.

I want to run through a little bit of history here, because we have been here before when it comes to legislation like this. At the heart of it is an ideological agenda being run by the government that is about the interests of the banking sector over the interests of the superannuation sector. You're dealing with an ideology here of conservativism that has always opposed superannuation in one form or another, and has always taken steps to oppose superannuation measures and proposals, as they've been outlined in the past. The proposition really is quite simple: do you keep the money in the pockets of mums and dads saving for their retirement, or is this simply more money that is going to be available to Australian bankers? Fundamentally, this legislation, and the ideology behind it, comes down to that simple question. It's banks or battlers.

The government has shamefully been on the side of the banks every step of the way. I want to remind the crossbench that we have been here before. In 2014, when Senator Cormann wanted to roll back the Future of Financial Advice laws, a crossbench coalition turned around and said, 'No way.' In 2015, when this issue last came up—it was the freshly minted Minister O'Dwyer from the other place who wanted to give superannuation to banks—the crossbench said, 'No way.'

And we've been here many, many times. Maybe the details change a little, but it's always the same battle—first from the Abbott government, now from the Turnbull government. It's always about them wanting to put more money in the pockets of bank shareholders and taking it away from a superannuation system that, despite being the envy of the world, is something they've never ideologically supported—more money into the pockets of bank executives, more money into bankers' bonus cheques.

When Minister O'Dwyer was first appointed to cabinet from the other place back in September 2015, it appeared that this policy which was going to result in boosting the incomes of bankers had always been on her priority list. Frankly, on top of her list of things to do was this legislation. Again, it all sounds reasonable and looks reasonable, but, when you look at the heart of what the legislation will do, it's about making it easier for banks to get their sticky fingers into retirement savings. And they do this by attacking industry superannuation funds, by attacking the superannuation industry.

Minister O'Dwyer was scurrying around the Senate in 2015 from office to office, introducing herself to the crossbench, most of whom had obviously never met the member for Higgins. She'd never previously given them the time of day—I'm not even sure whether she'd ever set foot on the red carpet—but she went around reading the names on the doors and introducing herself. She introduced herself to Senator Leyonhjelm and those that didn't make it into the 45th Parliament in 2015: Senator Muir, Senator Madigan, Senator Wang and Senator Lazarus. She went around trying to convince them that they should make it easier for banks to get their hands on our retirement savings and that, of all the issues facing the financial services sector, this somehow was a priority.

The priority was not the issues at the time with the corporate regulator being asleep at the wheel. It was not the problems with whistleblowers coming to politicians because of the regulator's silence. It was not the crisis in the life insurance sector—a huge crisis that is still ongoing to this day. It was not the enormous rate-rigging scandal that was going on. And it was not even, at the time, the issue of credit card interest rates. The first priority of this government back then was complaining about what was happening around superannuation.

The disconnect between that and what senators themselves were facing at the time was stark. Senators' offices back then were hearing, and to this day still keep hearing, about dodgy financial advisers, about bank rip-offs, about insurance scams. And the minister was marching around the Senate declaring that attacking industry superannuation funds should really be the priority and that the banks should be able to get their hands on worker retirement savings.

These were the same crossbenchers who, time and time again over the previous year, had stood up to the banks, stood up to the big end of town, and absolutely made the right call to protect consumers from predatory behaviour, acting in the best interests of bank consumers and in the best interests of their savings. The crossbench of the 44th Parliament can hold their heads high about the way they acted, behaved, and respected an industry that was working, an industry that was effective. I think it's important that we recognise the success of those crossbenchers, many of whom are no longer here with us, in being able to prevent bad legislation like this on financial services matters from actually passing.

When the coalition were elected in 2013, they published a policy document called Our Plan. I'm sure those in the chamber will remember it. It had a mugshot on the front cover of then Minister Turnbull, Andrew Robb, then Minister Hockey, then Prime Minister Abbott, Julie Bishop and Warren Truss. It was a vague 20 pages. There was nothing in that at all about the Future of Financial Advice reforms. And yet, a few days before Christmas 2013, former financial services minister Senator Sinodinos issued a press release announcing that the government would be consulting on reforms. By March, Senator Sinodinos had created a new coalition: the consumer group Choice, the Council on the Ageing and National Seniors had all come out against it.

Once his portfolio had been handed to Senator Cormann, he announced a pause. And then, in the end, Senator Cormann waited for a new crop of senators. On 1 July 2014, the senators elected in the previous September arrived in parliament. I'm sure we all remember; it feels like so long ago now. There was the Palmer United Party, the Motoring Enthusiast Party, Family First and our remaining friend from that period, Senator Leyonhjelm.

But before we were even able to actually start looking at this legislation, Minister Cormann insisted that the most pressing issue was winding back FOFA so banks and financial advisers again could take more money in fees and commissions. Thankfully, by November 2014 the crossbench senators had gained some confidence, and with Senator Xenophon, who was also here at the time, we formed what we called the 'coalition of common sense'—an acronym that we later regretted!—and were able to defeat that piece of legislation.

Senators are here in this place to do everything we can to make sure people who earn money are able to see it when they retire. There's something quite fantastic about the idea behind superannuation and the Australian superannuation model. It's an idea that says there will be a savings pool for the nation, that it will take pressure off the welfare system when it comes to retirement savings and that this is all going to occur by having a system in which workers, during their earnings period, are able to put money aside for a later period.

And it's been incredibly successful. It's the envy of the world—the type, model and bipartisanship that's been experienced on superannuation for so long at a practical level. Even the Howard government, which in opposition, and certainly in government, had demonstrated ideologically a dislike for the superannuation model, and for the industry superannuation model in particular, weren't as brazen as this government has been in trying to destroy a sector that has been so effective and successful, and that has been able to provide the savings that the nation has needed.

In October last year Minister O'Dwyer invited the industry funds to a press conference held here in parliament to talk about how people's retirement savings could be used to invest in Australian jobs. Instead, at that conference she told the industry super funds that they should be more like the banks. And this was ridiculed; it was laughed at. Industry super funds consistently outperform banks. They deliver returns to their members instead of profits to bankers. APRA publishes tables year in, year out and nothing changes. Industry funds have the same investing mindset as the old mutual funds. They're not-for-profits delivering steady, patient returns over very long time frames. Industry funds consistently outperform bank owned super funds. Yet, again, the ideology that keeps creeping into this debate is that you end up getting the banks, and those that support them, simply trying to legislate to give the banks an artificial advantage when it comes to competing.

In November 2014, the crossbench worked together to defeat one long line of the Abbott government's disasters, which was the FOFA laws we spoke about. What we're seeing now is another attempt, a later attempt, for us to deal with an unnecessary attack on industry superannuation. This year, 2017, marks 25 years since the introduction of compulsory superannuation in Australia. In 25 years the industry has grown to $2.3 trillion, and it's projected to grow to $4 trillion shortly. Industry super funds are a large part of the success of the growth of the Australian super industry fund. The question we have to ask is: what is the rush with this legislation? What is even the need for this legislation? It's diagnosing an illness that currently does not exist.

Take the independence and the power they want to give to APRA to decide who is independent. Australian capital markets and the business community enjoy high esteem. There is no shortcoming in the existing definition. The government has a preoccupation with the word 'independent', when it is really skill that serves the director. As former ACCC head Professor Graeme Samuel says, a director needs to be 'cognitively independent, with a dispassionate view, an objective view'. Former Reserve Bank governor Bernie Fraser told the committee that skills and values are more important than independence.

And yet here we are again debating another piece of legislation that is a veiled swipe at an industry that does not need to have this. All of this comes back to a blatant refusal of what is really needed in this sector, and that is a full-blown royal commission into Australian banking. If we're going to start diagnosing the problems that exist in our financial services sector then we have to start looking at the big issues like the vertically integrated model, like the dodgy advice that has ripped people off time after time. I would urge the Senate to have a look at the work of the Senate Economics Committee, a committee that I chaired for a period and now is being chaired by Senator Ketter.

Photo of John WilliamsJohn Williams (NSW, National Party) Share this | | Hansard source

We recommended a royal commission, and you wouldn't do it.

Photo of Sam DastyariSam Dastyari (NSW, Australian Labor Party) Share this | | Hansard source

I will take that interjection from Senator Williams.

Photo of Cory BernardiCory Bernardi (SA, Australian Conservatives) Share this | | Hansard source

Order! Ignore the interjections.

Photo of Sam DastyariSam Dastyari (NSW, Australian Labor Party) Share this | | Hansard source

Senator Williams makes an observation, and I want to acknowledge Senator Williams here. He's right: I had a committee recommendation to support a royal commission. I did not cross the floor on a vote that Senator Williams put before the Senate. Senator Williams did cross the floor. As he's well aware, our party structures are very different in what the consequences for that are. I felt at the time it was better to stay within the Labor Party and be an outspoken voice, which I was, and to change Labor Party policy on the issue, which I was able to achieve. I note that Senator Williams made a different decision and chose to cross the floor. I commended him for it at the time and I commend him again for it now. Hopefully he will have the same success I was able to have in changing his party's policy, so that they have a policy of supporting a royal commission into Australian banking, but the magnitude of what you did, Senator Williams, and how much you have spoken up on this issue for such a long period of time, deserves the respect and admiration of those perhaps younger senators in this chamber who haven't had the opportunity to have served as long as you have.

Labor senators are concerned that these bills, which claim to improve governance in the superannuation sector, are being rushed through the committee by this government. Equal representation on boards is a longstanding arrangement which has served Australians well, and we believe it's something that should be maintained. Funds that operate with an employer and employee representative board—the not-for-profit industry funds that are attacked by the Turnbull government—have significantly higher returns for members. You have to question what is it the minister has in mind when she said:

… lift superannuation funds to at least the same standard as other financial services organisations like banks and life insurance companies—

as she told the Fin Review on 23 November last year. Is the minister really referring the example set by a place like the Commonwealth Bank, which now has its own investigations into it for money-laundering, as what we should be doing? Or the bank bill swap rate culture at ANZ and Westpac, who, as I understand, have now all settled and accepted responsibility? I don't know if CommInsure at the Commonwealth Bank, Commonwealth Financial Planning and NAB financial planning are the standard that is going to be set. The real aim of this bill is to make the governance of superannuation funds the same as the banks, and I can't understand or comprehend why that would be an approach for a successful industry that, unlike the banking sector, has not been plagued by scandal. Why we would want to set a standard and an example by those that have? This isn't a bill that will raise the standard of governance in superannuation; it will lower the standard of governance to that of the banks and the problems that we see time and time again—problems that only a royal commission will ever properly get to the bottom of.

1:23 pm

Photo of Linda ReynoldsLinda Reynolds (WA, Liberal Party) Share this | | Hansard source

I too rise to commend this government on both of these bills, the Treasury Laws Amendment (Improving Accountability and Member Outcomes in Superannuation Measures No. 1) Bill 2017 and the Superannuation Laws Amendment (Strengthening Trustee Arrangements) Bill 2017, although, after speaking first of all on the Marriage Amendment (Definition and Religious Freedoms) Bill 2017 this morning, it does almost seem like a bit of a let-down, talking about Treasury and superannuation—that is, until you realise just how important these bills actually are. In 2017 the superannuation system has grown exponentially. Today it is a system now worth around $2.3 trillion. That is $2.3 trillion of money from millions of hardworking Australian men and women who absolutely deserve to know that their money is being spent in a transparent and accountable manner and in a way that is always in their best interests to probably the highest possible standards of any governance regime.

I was grossly disappointed to hear the contribution just now from Senator Dastyari and to hear that Labor are not supporting this bill. I'm disappointed but, unfortunately, hardly surprised, listening to Senator Dastyari trying his best to shadow-box against big business and big banks, and pulling out all of these absolutely spurious reasons to avoid greater governance, accountability and transparency for millions of Australian superannuation holders. I find it somewhat ironic that he and those on the opposite side, who are the biggest defenders of big unions, in this place, in recent committee inquiries, have heard that the biggest offenders of all in terms of sticky fingers are the big unions who have gone into absolutely atrociously bad secret deals with big businesses to ensure that unions keep their sticky fingers on union members' fees. Under these deals they get the big businesses to make sure that their workers' only option is to sign up with union superannuation-related funds. These bills absolutely provide greater accountability and transparency in governance. That cannot possibly be a bad thing, despite Senator Dastyari's rather clever—actually, it wasn't even that clever—or heroic attempts to find some way of demonstrating how greater accountability for those who manage our superannuation funds could be. All I'd say is, 'Good try, Senator Dastyari, but I think that's a big, fat F.'

These bills do provide greater transparency and accountability. They are unashamedly focused to ensure that Australia's superannuation system delivers outcomes for its members above the vested interests of the industry and those who manage $2.3 trillion of Australians' money by introducing a stronger regulatory framework and by assuring that a portion of the directors of these funds are independent. Just think about that. Those opposite are arguing against having a board that has a portion of the directors as independent. It is frightening that anybody in this place would argue against having independent directors. I would hope that people listening and members of the public would actually get on to the Labor Party and actually say to them, 'What is wrong with ensuring those who manage my superannuation funds have the greatest possible transparency and accountability?' Having independent people on their boards who come from a range of sectors in the community brings diversity of thought and opinion and also, I might say, a diversity of gender, which I will come back and talk about shortly.

The first of these bills, the Treasury Laws Amendment (Improving Accountability and Member Outcomes in Superannuation Measures No. 1) Bill 2017, is a bit of a mouthful but an important bill. This bill provides comprehensive measures focused on protecting members' money and members' interests. It still just astounds me that anybody opposite could actually get up in this place and say, 'No, we don't believe in creating greater accountability and protections for you Australian mums and dads who have invested a lifetime of savings in your superannuation.' It's a package along with another suite of measures that has been developed with a very clear objective: to improve the outcome for Australian consumers of these products.

As the minister indicated in the second reading speech, this is what the bills will do:

… help deliver all Australians a strong and modern superannuation system with a stronger prudential regulator that is solely focused on delivering outcomes for all Australians who rely on these funds to secure their retirement.

It is pretty simple and pretty clear. Read the bill. That is clearly what it does. Yet we have Senator Dastyari coming into this chamber today to say, 'We don't support those principles. Opposition crossbenchers, go slow, don't think about these things.'

Photo of Glenn SterleGlenn Sterle (WA, Australian Labor Party) Share this | | Hansard source

You sound just like him!

Photo of Linda ReynoldsLinda Reynolds (WA, Liberal Party) Share this | | Hansard source

Sorry. This bill achieves these objectives by also amending the Superannuation Industry (Supervision) Act, and it does so through the following eight schedules. Again, I will actually read these schedules out because any objective observer, listener or reader of these could not help but to think: 'That's exactly what I want from my superannuation funds. That's exactly the sort of accountability and transparency I want for my superannuation funds.'

The first schedule amends the SIS Act to strengthen the obligation on super trustees to consider the appropriateness of their super products and how these products deliver appropriate outcomes to their individual members. What a terrible thing those opposite must think it is that there is actually greater governance for super trustees to consider the appropriateness of their packages for individual members, not for the unions who are associated with these superannuation funds but for the members themselves—outrageous, Labor!

What is the second outrageous proposition that we want to introduce for people with superannuation accounts? We actually want to give the regulator enhanced powers and capacity to enforce and regulate super funds. Yes, Labor, I can see how it is such a terrible principle to give the regulators greater powers to enforce and regulate these super funds.

Let's have a look at the third schedule that Labor thinks is so dreadful. Schedule 3 reinforces the purpose that the funds must always deliver for their members through appropriate, transparent and accountable means by imposing both civil and criminal penalties. Labor, I can really understand why you don't want that to happen for the millions of Australian superannuation holders. How disgusting that we actually want to make sure that superannuation funds deliver for their members by more transparent and accountable means. Shocking! I can see why you're not supporting it.

What do the Labor Party think about schedules 4 and 5? Well, let's have a look: sections 4 and 5 strengthen the regulator's supervision and enforcement powers specifically to include the power to issue directions when a change of ownership or control of registered superannuable superannuation-entity licences take place and when the regulator has prudential concerns. That is a lot of gobbledegook to most of us, including myself, probably; however, it just means greater powers and ability to make sure that those who have their fingers on your superannuation account do the right thing.

The Labor Party clearly have concerns about those four things. What else do they have concerns about? They have concerns about schedule 6, which amends the Corporations Act to include requirements for portfolio holdings to be made publicly available. Oh, dear. Labor don't want these accounts and these portfolio holdings to be made public and to be held accountable so that people with these funds can actually see—goodness me!—who's involved in their superannuation funds. Dearie me!

Schedule 7 refers to funds to hold annual general meetings for members to discuss key aspects of the funds and provide members with a forum to ask any questions in relation to the fund's performance and operations. I can see why the Labor Party don't want this. Just imagine members of superannuation funds actually having the opportunity every year, like shareholders of other companies, to hold those who hold their money in their trust accountable and transparent. Shocking!

What is the final schedule that the Labor Party is so opposed to? Schedule 8 relates to reporting standards and provides the regulator with the power to inspect and obtain information on expenses incurred by the funds. Oh, dearie me; I can see why Labor doesn't support this either. How terrible to have those who have their fingers all over our superannuation having a regulator to inspect and obtain information about expenses incurred by the funds. That translates to the people who manage your accounts actually being accountable for the parts of your money they are spending on themselves. I can understand why the Labor Party and the unions would certainly not want this.

I commend the government on all eight of the provisions in the schedules, because, unlike those opposite, we think there should be greater accountability and greater transparency for every single Australian who has a superannuation fund to know what those who are managing their funds are doing with their funds.

What does industry say about this thing that the Labor Party finds so objectionable? The Financial Services Council stated:

… the reforms are a cohesive package and are designed to deliver better outcomes for consumers.

Oh, dear! 'Better outcomes for consumers'. The Financial Services Council said:

We urge the Senate to pass the package of reforms as they are clearly designed to act cohesively, put the interests of consumers first and apply evenly without fear or favour across the entire superannuation industry.

I have to say, Mr Acting Deputy President, those on this side of the chamber could not agree more—that this is essential legislation.

So what have Industry Super Australia said about this? They've also provided their support and, in a media release on 24 July, stated that they would welcome the emphasis on transparency and accountability and that they would also urge the regulator to use powers to investigate the cause of bank-owned super funds' chronic underperformance. So, contrary to all of the shadow-boxing that Senator Dastyari has just attempted to do in this chamber on this legislation, Industry Super Australia themselves have said, 'This is a good thing.' Not only is it a good thing, they're not shadow-boxing at some big industry or big banks; they have said it will allow the regulator to use powers to investigate the cause of bank-owned super funds' chronic underperformance. Again, we on this side of the chamber think that is a uniformly good thing.

Even a senior ASIC executive leader indicated that ASIC was supportive of initiatives that enhanced transparency for members and that the disclosure of information for consumers will allow them to make better and more informed decisions. How those opposite could think that is, in any way, not a good thing for all working Australians looking to save for their retirement, I still cannot understand.

The second bill being debated here is the Superannuation Laws Amendment (Strengthening Trustee Arrangements) Bill 2017. This bill further reaffirms this government's commitment to the appropriate, transparent and accountable management of Australian workers' superannuation funds. The Cooper review—now, this is actually very interesting because this was a Labor-initiated review by the Gillard government, as I understand. So this is not a review commissioned by those on this side of the chamber. This was your own review. The Cooper review into superannuation—again, as I said, which was initiated by those opposite—had some very interesting things to say. The Cooper review's report stated that governance structures had not kept up with development of the industry and that there had been difficulty for trustees and their trustee directors in understanding what was expected of them. Think about the implications of that. This is saying that those men and women, the trustees and their trustee directors, are having trouble in understanding the governance requirements for them managing all of our superannuation funds. If that doesn't keep Australians awake at night, I don't know what should. So that was the Labor Party review and report that said that.

What else did the Labor review have to say? It also said that governance structures had not kept up with developments in the industry and that there had been difficulties for their trustees in understanding what was required under these new arrangements. While Labor did not implement measures that would put tighter governance and transparency requirements over trade union superannuation managed funds, this side of the house, this government, is doing it. This bill addresses that by legislating for the definition of 'independent' and provides a clear governance structure which many key industry stakeholders have supported.

One of the things that I particularly like about this bill is that it will implement new board governance structures in addition to mandating that at least one-third of trustee directors and the chair be independent from the superannuation funds. I think most Australians would probably be incredibly shocked to learn the composition of some of the boards that actually manage their retirement income. What did the Labor Party's review say about this measure we're now proposing? Guess what: the Cooper review actually endorsed mandating this very requirement. Again, this bill addresses many of the Cooper review's reforms that the Labor Party, because of their union ties, simply would never implement. What utter hypocrisy that is—but, again, as I said, it's hardly surprising.

Some of the industry funds who are members of the Australian Council of Superannuation Investors have no shame when they threaten to wield their enormous economic power as active shareholders against public companies with a poor record of gender diversity on their boards. These guidelines stated in February in 2015: 'ACSI proposes a target for women comprising 30 per cent of all ASX 200 boards by the end of this year.' Additionally, they also recommended to vote against the re-election of directors in those companies which performed poorly on board gender diversity where attempts by them to engage at senior levels had been ignored and/or the board could not articulate a clear strategy to address gender diversity in the near term. They've also announced that they will recommend their members vote against the re-election of company directors who sit on boards with no members.

Guess what? What do you think the situation is on the boards of our superannuation funds? Before they start moralising about other companies—and more gender diversity and more diversity generally is a uniformly good thing—some of these superannuation funds should look to practise what they preach. There are three industry superannuation funds that have no women on their boards whatsoever—not a single one. Guess what? ACSI and TWUSUPER both have no women on their boards despite women making up 62 per cent of their total accounts as of June last year. There are others. The Australian Meat Industry Employees' Superannuation Fund and NESS Super also have not a single woman on their boards. As at July 2017, there were five further funds where women made up less than one-fifth of their boards. These funds were Maritime Super, REST Industry Super, Prime Super, Intrust Super and Cbus. The REST board was only 11 per cent female, despite 60 per cent of its accounts belonging to women as of June last year. Intrust was in a similar position, with female directors making up only 17 per cent of its board despite women making up 54 per cent of its accounts.

It is unfathomable that funds representing a majority female membership do not have a single female on their boards of directors. Clearly, these union blokes think they still know what's best for their female members. The same unions that dominate these super funds are the same unions that are religiously and continuously supported by those opposite, including in their opposition to this bill which their own Cooper review recommended and which this government is now implementing. Every single Australian working man and woman who is saving for their retirement deserves the highest possible transparency, governance and assurance that those sticky fingers, supported by those opposite, aren't on their superannuation funds. So it is for all those reasons that I commend the government on these bills and commend them to the Senate.

1:43 pm

Photo of Jenny McAllisterJenny McAllister (NSW, Australian Labor Party) Share this | | Hansard source

The Treasury Laws Amendment (Improving Accountability and Member Outcomes in Superannuation Measures No. 1) Bill 2017 and the Superannuation Laws Amendment (Strengthening Trustee Arrangements) Bill 2017 seek to fundamentally alter the governance arrangements that have been in place for superannuation since it was first put in place by a Labor government. The legislation does that by requiring that registrable superannuation licensees have at least one-third so-called independent directors and that the chair of the board also be one of those independent directors. It also abolishes any requirement that the remaining directors comprise 50 per cent employers and 50 per cent representatives of the workers who are members of that fund. In doing that, it creates the possibility that a board could be entirely controlled by these independent directors and employers only.

This is a profound intervention into the Australian superannuation system, and what is particularly troubling is that there is absolutely no justification provided for why this is occurring. Normally in public policy we ask, 'What problem are we trying to solve?' Where is the problem here? For all of the previous speaker's references to sticky fingers and scary ideas, I challenge people to identify a significant national scandal involving an industry super fund. I challenge them to do so, and I then ask them to think carefully about the scandals—scandal after scandal after scandal after scandal—that have plagued the retail banking sector. And I ask: why is it that before the parliament now is this bill and not a bill that goes to the problems in the banking sector and not a bill that would establish a royal commission so that we could finally get to the bottom of these problems? In the absence of any clear description of what problem we're trying to solve, I can only conclude one thing: this is just one more intervention by a government that is absolutely determined to use the power of the state, the power of government, to go after its political opponents.

The history of super is this: people on the other side of the chamber have always hated it. They hated the idea that ordinary working people might get access to super—which was, historically, a privilege afforded only to very-highly-paid white-collar workers. They hated the idea that workers might take their admittedly small pool of individual savings and put them together so that they could compete in the investment market on even ground with the big investors—the people with a lot of money. They hate it. They really hate that the boards of superannuation firms are made up of representatives of workers—because that's really what this bill is all about: it is about stopping ordinary working people and their representatives from managing their own money. It's actually pretty clear. It is about taking away positions on existing boards that are presently occupied by truck drivers and nurses and retail workers and handing them to individuals drawn from the finance sector. Doing that is, in the first instance, a deeply unethical use of the power of government. It is simply about going after one's political opponents using the resources of government, rather than acting in the public interest. That is very, very wrong.

But, sadly, it's a set of behaviours that we've seen more and more from this government as it becomes more and more unhinged and more and more preoccupied with its own problems. We need only look to the events of the last couple of weeks, when the Registered Organisations Commission was utilised to launch a raid on the AWU, principally for the purposes of going after the Leader of the Opposition and utilising all the resources of government to do so. This is not proper use of government resources. It's not proper use of the power of government. It is not actually consistent with a commitment to democratic norms, and people ought to be very, very worried about the way this government is behaving.

To go back to the bill before us: this bill seeks to replace the current model of the representation of workers and employers on superannuation boards. Where will these independent directors come from? Well, they'll come from the finance sector—that's very clear. What this effectively means is that this is a bill that seeks to replace the current model of governance with one that looks a lot more like the culture that is present in banking.

Speakers from the coalition here in the chamber have spoken about the virtues of independence. Well, independent directors are very important for listed companies, for corporations, and the main criteria for an independent director in that environment is that they be independent of management. The reason that we want an independent director on a company board is that, in the past, there have been problems with executive directors—people drawing a salary from the company—who've manipulated processes of corporations to support their own needs as employees, their own salaries and their own perks, instead of delivering for shareholders. That's a real dynamic. That's not a feature of industry super organisations. So the question really is: independent from what?

What they really mean is independent from workers' representation.

Senator Williams interjecting

The interjection is 'independent from unions'. I ask the question: why is it that those opposite are so obsessed with preventing working people from organising themselves into a group and having representation at the top table? Why shouldn't they be represented in the parliament? Why shouldn't they be represented in the boardroom? Is it only the children of very wealthy people who ought to be represented in those places? No, it's not. Of course working people should be able to organise themselves and of course they should be in a position to influence control of their own money and their own savings. Superannuation isn't a gift from employers. It's wages—wages that would have been paid to those people, but, instead, workers agreed to have that money put into retirement savings. A condition of that agreement is that they would get to control that money.

Perhaps, the government might argue, there's some problem with the performance of those superannuation funds where workers and employers manage their money. Well, that's just not true. The not-for-profit funds, with the boards that generally contain a majority of representative directors, haven't had scandals and they have out-performed the for-profit funds, including the bank funds, by almost two per cent every year from June 2003 to June 2014. There is actually a link between this model of governance, with employers and workers sitting around the board together, and very good performance in terms of investment. It's worth thinking through why that is.

I put it to you that, actually, people drawn from the real economy make better investment decisions. There are a group of people living in the finance sector who are largely pretty disassociated from the real economy. They are themselves quite wealthy people and they mix with other people who also work in the finance sector. There's actually something very powerful about having a board made up of employers from the real economy and the workers who work there. It makes a real difference in how people approach investment decisions. I think that same composition generates a culture where people are willing to challenge norms that might be accepted norms in the finance sector and are willing to say: 'Hey, why is it that we clip the ticket on this particular transaction? Why is it that we allow a commission that's this generous or has a margin this generous on this particular service?' These people are used to managing their own money; they treat it like it's their own.

It goes to the third question. These organisations don't have shareholders; they don't have banking investors waiting for their payout at the end of the year. These are not-for-profit funds that have the ethos that any earnings produced by the funds should go back to members. It's a members-first ethos driven by the representative nature of these boards, and it has produced very, very good results. Why would we disrupt and interrupt that model? These same boards have played a significant role in building the assets in the Australian economy. This is patient capital. This is money that can sit in an asset for a long time. These are pools of funds that are quite stable, and one of the great innovations of the industry super sector is that it's been able to use that money to invest in Australian infrastructure, and it's produced very important outcomes for our country in terms of capital formation. Again, why are we trying to intervene in this particular model when it is doing so well and yet the banking sector, which they're trying to replace the industry model with, is having so many difficulties? What is the real objective here? I go back to my original conclusion. This is not about improving governance in the superannuation sector. This is not about improving outcomes for ordinary people who have their money invested in these superannuation funds. This is simply an ideological obsession with eliminating the role of trade unions from public life in this country. It is about an ideological hostility to working people organising collectively and being recognised and represented. It is a completely unacceptable basis on which to make a substantial intervention into a trillion-dollar industry. It is a completely appalling way to proceed, and I encourage all senators who may be listening to this debate and considering their position on the legislation to vote against the bill that's before us.

1:55 pm

Photo of James PatersonJames Paterson (Victoria, Liberal Party) Share this | | Hansard source

I'm very pleased to rise to speak on this important package of reforms being introduced by the government to Australia's superannuation system. I think at the outset it's really important to remember that superannuation is different. It's not like any other sector. It's not like any other financial instrument. It's not like any other financial asset that most Australians hold. It's different because it's compulsory. We here in Canberra, in this place, force all Australian workers to put aside a proportion of their income for their retirement, and we tell them they must invest it in a superannuation fund that they cannot access until a certain age. I'm not questioning the merits of that. I think it's a very sensible way to ensure that we have adequate retirement income for Australians and that not all Australians are reliant on the pension in the future. I think that's a very sensible thing. But, because it's different, I think it requires a greater level of scrutiny, oversight and regulation than a normal industry or business would, because often, in those industries and those businesses, people's interactions with them are purely voluntary. If a customer doesn't like their bank, they can stop banking with that bank. If a customer doesn't like their milk bar, they can go to another milk bar. But we force them, whether they like it or not, to have their funds in superannuation, and that demands a much higher standard of scrutiny and regulation than any other industry.

Yet a very significant proportion of this industry, the industry super fund portion of the superannuation industry, is in fact regulated even less and even more lightly than most other financial products, financial businesses and financial assets. So we have a bizarre situation where something which really should demand a higher level of scrutiny and regulation in fact receives a lower level of scrutiny and regulation. This is something that those opposite, in the Labor Party, would never normally tolerate. Can you imagine them coming to this place to defend unregulated financial assets? I would find it very hard to believe, and yet they do. I wonder why that is. I wonder why on this issue it's different.

Before I run out of time I want to take up one point in Senator McAllister's speech. She particularly focused on the independent directors aspects of this legislation. These bills—the Treasury Laws Amendment (Improving Accountability and Member Outcomes in Superannuation Measures No. 1) Bill 2017 and the Superannuation Laws Amendment (Strengthening Trustee Arrangements) Bill 2017—do a number of things which perhaps in continuation later I can address. But I'm addressing this issue. Senator McAllister set a challenge for those opposite her: to mention one scandal or one issue which demonstrated that this is necessary. I'm very happy to do so, and in order to do so I'm going to quote an article from the Financial Review published on 18 March last year. It's entitled 'Former Cbus employees escape jail', and it's by Lucille Keen:

Two former Cbus employees have been given suspended jail sentences after pleading guilty to giving false and misleading evidence to the trade union Royal Commission.

In 2014, Maria Butera and Lisa Zanatta appeared before the royal commission into trade union governance and corruption under Dyson Heydon over claims the former superannuation advisors gave the Construction, Forestry, Mining and Energy Union names and personal details of more than 300 members.

In November, Ms Butera was charged with counts of giving false and misleading evidence and Ms Zanatta faced two counts of the same offence.

The indictable offence carried a maximum penalty of five years' jail or a $20,000 fine.

Why would employees of Cbus want to give the private superannuation details of their members to a union like the CFMEU? What could possibly enter their minds that would cause them to do that? Maybe one of the factors that entered their minds was the CFMEU's effective control of the superannuation fund which employed them. Maybe they were influenced by the fact that half of the board were representatives and appointees of the CFMEU.

Senator McAllister said that it's important that we have boards that are representative of workers. I think that's true. But it is not true to say that unions represent workers. Unions represent about 10 per cent of private sector workers, and yet they have 50 per cent of the positions on industry super boards. It is totally out of whack. It is totally out of balance. It needs to change, and this is a very sensible package of reforms to deliver that. I seek leave to continue my remarks.

Debate interrupted.