Wednesday, 24 July 2019
Statements by Senators
I am very pleased to be back here in the 46th Parliament. Welcome to all those new senators on the other side and on our side. I look forward to continuing the good work of the Senate. I particularly take note of Senator McDonald's recent contributions and applaud her for advocating for safer roads and greater road investment. It's a subject we'll have much cooperation on.
But today I want to speak about an issue which I have a really strong interest in and which I mentioned in my first speech in this place, and that's superannuation. I'll declare an interest upfront: I've been a member of an industry super fund since 1987, I've been a director of an industry super fund, I've chaired an investment committee of an industry super fund, I've chaired a complaints and appeals committee of an industry super fund, and I've also worked on marketing, sponsorship and general duties as a trustee director. Like everything in this place, you come here with a modicum of experience and exposure. I have a reasonable amount of experience and exposure in this sector.
One of the first duties of the new parliament is to form its committees, and I've been fortunate enough to be placed in the role of deputy chair of the Economics Legislation Committee. The first item of business that we got was the reintroduction of a lapsed bill, the Treasury Laws Amendment (Putting Members' Interests First) Bill 2019. Like everything this government seems to touch, it came in in a very disorderly and shambolic way. The referral from the Selection of Bills Committee to the economics committee gave a reporting date of 19 October and an operative date of the bill of 1 October. It's pretty well impossible to report on a bill that is already supposed to be enacted!
So that caused the committee to convene. Debate ensued and the government's numbers ensured that there was an earlier reporting date for submissions and an earlier reporting date for the inquiry. There'll be debate in the Senate after the legislation's introduced and there will have to have a vote of the Senate to make sure that this piece of legislation is dealt with. That's all fine. That will take its normal course through the economics committee and the like.
I want to go back to the business of super. I heard a senator state in this chamber when taking note yesterday that superannuation is broken, that our $2.7 trillion superannuation industry in this country is broken. I could not believe that statement. I'll have to go back and check his CV to see where he gathered that experience, knowledge and exposure to make that statement in this chamber. I am looking forward to the next three years of continual battle on this front, because, far from being broken, it is world leading. We have done it better in Australia than has anywhere else in the world. Despite all of the decries on the other side, within and without parliament, due diligence, governance and the measure of success in industry super funds is exemplar. We are the exemplar. In the royal commission, the retail funds had most of the problems. I'm not saying that we were without a problem but most of the problems are on the retail side of the funds.
Let's go to the simple analogy that's been put in this bill, which is that young Australian citizens under 25 don't need insurance, don't need TPD and don't need income protection. That's the proposition that's being put here, because it will be illegal to put that insurance in without their explicit instruction. Let's go to one of the most reputable funds in industry super, which is Rest, with 1.2 million members. The effect of this bill would be to excise 40 per cent of those 1.2 million members from having access to insurance in case of death, TPD in case of illness and income protection in case of temporary inability to work. So 400,000-plus young Australians, who are probably not looking at superannuation in the way that I certainly look at it, would be moved away from cover.
Group life cover makes sense. It takes about 18 months to negotiate. You've got a 1.2 million membership base. You go to an insurance company and in over 18 months their various actuaries tell you the probability and incidence, and eventually they set a premium—no surprise. That premium was $1.11 a week in the Rest scheme. Comparable products that the worker would need to seek outside of a group life insurance would be $8.12 with one insurer, $7.83 with another, and another insurer has quoted $9.06.
You have a problem here. You have 460,000 young people not looking at insurance, not examining their risk and their profile, who have been covered in a group scheme for $1.11 a week. The alternative, if they're not covered there, is between $7.83 and $9.06. This is not adding up to be good public policy. In fact, it's going to add up to be really bad public policy. When we go through and look at some of the ideological arguments that are being driven here, we're basically trying to increase Australians' superannuation balances. No-one can argue with that. No-one wants dormant accounts, inactive accounts and low-value accounts having excessive premiums taken out. Everybody's in violent agreement about that. It's how you do it that we're not in agreement about.
This is a blunt piece of legislation. It will have unintended consequences in high-risk industries. I've got to say this: suicide has made it into the top 10 causes of death in Australia. I've got to tell you, a lot of those people are young people. In my experience on the TWU fund, we would deal with three suicides a month, and they weren't all old people; there were a lot of young people in that space. You can't get that sort of insurance outside group life.
Anyway, we go through and we say, 'Okay, we all agree on not eroding fund balances.' The impact that this will have on compliance is medium to high. The income will be medium to high. This is from the government's explanatory memorandum for the bill. They'll have a medium to high impact in terms of compliance. That is obviously going to be borne by the funds, ultimately borne by the members. That is also going to erode members' superannuation balances. The ironic thing is that, if the government's right and none of these young people actually need insurance while under 25, they're all going to get to 26 and 27 and, when they get there, they're going to pay higher premiums, so there'll be no net effect over the long haul; there'll be no net gain. You dig in a bit deeper: combined with the amendments contained in the Treasury Laws Amendment Protecting Superannuation Package Act 2019:
The amendments have an estimated annual compliance cost impact of $28.5 million averaged over 10 years.
But the bill is estimated to have a gain to the budget of $605.4 million over the forward estimates. Who's the net winner here?
It's arguable whether this is a good thing to do. APRA's submission says this is not straight up and down; you can't see down the line. APRA, the Australian Prudential Regulation Authority, says in its submission that this is not quantified explicitly. What is quantified explicitly is that this government will have a net gain of $605.4 million over the forward estimates because insurance premiums and the like are tax deductible to superannuation funds and, if you excise a component of that tax deductibility, net revenue to the government. Now, they claim to be low taxing; they claim to be pro worker. This is not a great example of that work. This is a great example of putting their hand in superannuation accounts and taking money out, and the net gain is not clear. In fact, the net gain may be detrimental to millions of Australian citizens with superannuation.