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Tuesday, 25 March 1997
Page: 2348

Senator SHERRY (Deputy Leader of the Opposition in the Senate)(1.00 p.m.) —Could I just contend, Senator Kemp, that you are incorrect when you say that, if RSAs were extended to a complying superannuation fund, they would be subject to two regulatory regimes. Our advice from the industry is that that would not happen, because the complying superannuation funds would establish the RSA product separately to ensure that they are not covered by the two regulatory regimes, if that was indeed a problem.

Secondly, one of the great advantages of a complying superannuation fund having the ability to offer an RSA is that it is a low return product—no-one has disputed that—and if a person is in an RSA, a lower return product, and if that RSA is indirectly linked to a complying superannuation fund, a traditional fund, we would contend it would be easier for a member of an RSA to move their money when it is convenient to them out of the low return RSA product into a complying superannuation fund, which will carry a higher rate of return. We contend it would be easier practically to do that than it would be for a person in an RSA product offered by a bank to shift their money out of that RSA offered by a bank into some other product. We would argue that, practically, the individual in the RSA will find it easier to move their money into the complying superannuation fund, where the return is greater.

I would contend that it is in a bank's best interests to ensure as much money is locked up in a low return RSA type product because it is to the bank's financial advantage to do so. Whilst the bank can issue a health warning or various advice to a member in an RSA bank product that it is to their disadvantage, I do not believe they will pursue that approach with any enthusiasm whatsoever, because RSAs will become for banks effectively like the old passbook account—a very low interest product that the banks will seek to obtain the maximum return on by reinvesting the money, albeit it has to be in a capital guaranteed product. So we really cannot understand your opposition, Senator Kemp, on practical grounds and on principle grounds. It is in the best interests of RSA members to end up with a RSA product with a complying superannuation fund who offers the product.

The other point is that it is consistent with your election commitment but somehow between the cabinet submission before the budget last year it slipped out. You have given us some reasons, but I will not ask you what happened in cabinet. I suspect the banks had a word to the Treasurer in the meantime, but I do not want to be unduly provocative.