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Monday, 19 March 2012
Page: 2175

Senator CORMANN (Western Australia) (19:48): I want to make a couple of comments on behalf of the coalition in relation to the Superannuation Legislation Amendment (MySuper Core Provisions) Bill 2011 and Superannuation Legislation Amendment (Trustee Obligations and Prudential Standards) Bill 2012 inquiry by the Parliamentary Joint Committee on Corporations and Financial Services. Let me say upfront that, yes, we share the concerns of government members and senators with aspects of this legislation, but we go a little bit further. We support some of the recommendations for amendments that were made by government members and senators of the committee but we think that they do not quite go far enough.

Let me say at the outset that coalition members and senators agree that the default superannuation industry, like the superannuation industry overall, needs reform to enhance competition, transparency and comparability in the system. We recognise and acknowledge, of course, that the objective of the regulatory framework ought to be that the system will maximise retirement savings for Australians with superannuation and, in particular, matters before the Senate hearing in relation to default superannuation. Only the most efficient, the most transparent and the most competitive superannuation system will lead to a circumstance where returns and retirement savings for all Australians with superannuation will be maximised.

Having said that, it is the coalition's view that the current anticompetitive closed-shop arrangements in relation to default superannuation under modern awards must stop with MySuper. The government must use the introduction of MySuper to lock in the important benefits of competition for Australians in default superannuation funds now. The government should not use the current Productivity Commission review, which it finally got around to asking for, as an excuse to do nothing for another year. The current closed-shop anticompetitive arrangements for the selection of default superannuation funds through Fair Work Australia, set up by the Labor Party, are a national disgrace. The current process is not transparent, not competitive, inappropriately favours union dominated industry super funds and should be fixed as soon as possible.

Bill Shorten has been far too slow as minister to act, and it is Australians and default super paying the price for that. Not only did Labor have to be shamed into making a commitment to sort out this situation, which they created themselves, of closed-shop anticompetitive arrangements through a secretive and discredited process through Fair Work Australia, but Bill Shorten also took more than 18 months to start fixing it by the Productivity Commission review to get this process underway. The minister has been more focused on protecting the vested interested interests of his friends in the union movement for as long as he possibly could get away with it than on standing up for the public interest and the interest of Australians in default super.

Coalition members of the Parliamentary Joint Committee on Corporations and Financial Services recommend that any authorised MySuper product should be able to compete freely in the default fund market. Any authorised MySuper product by definition has to comply with the consumer protection requirements enshrined in law by the government. As such, there is no need for an additional, secretive and discredited process to further determine through Fair Work Australia which MySuper products should be included as default funds under various modern awards and which products, for some reason or another, should not be. Only with genuine competition in an efficient and transparent default superannuation market will fund returns and retirement savings for Australians in default super be maximised.

Those are just some of the conclusions that were reached by coalition members of the parliamentary joint committee which inquired into those two bills. The coalition also made a series of other well-considered recommendations to improve the MySuper bills, going beyond the recommendations of government members and senators. These include clarifying the definition of a large employer to be any employer with 500 or more employees and removing the need for individual registration for each tailored MySuper plan. We think that just imposes additional unnecessary red tape and costs. Once a provider has been licensed and registered to provide MySuper products then a reporting and auditing arrangement in relation to any specific tailored MySuper plans at a workplace level would be a more appropriate, more cost-efficient and less administratively burdensome way to go.

We also believe the government should remove the confusing and unnecessary scale test. The government clearly things that trustees of super funds have to be bullied into a position where they recognise that biggest is necessarily best. Biggest in super can be better, because there can be benefits of scale, but biggest is not necessarily better. To impose a very vague and very unclear additional obligation on trustees is not an appropriate way to deal with this particular issue.

We call on APRA to release standards and forms required for the MySuper registration process at least 12 months prior to commencement of the implementation of these provisions. We also call for the provision of a comprehensive definition of intrafund advice in both MySuper and FOFA legislation to ensure such advice is general only and that any personal advice provided through a super fund is paid for by the person accessing the advice, with transparency of fees and without forcing fund members to pay for the personal advice of others which they have not accessed. That is entirely consistent with the requirements the government says it is pursuing through FOFA; but, for some reason, for advice provided by industry super funds to their own members the government seems to believe that hidden fees are appropriate and that it is appropriate to force super fund members to pay for the personal advice of other members even though those members may not have access to that advice. We in the coalition do not think that is appropriate. We think there ought to be a very specific and very narrow definition of what intrafund advice constitutes—narrow in the sense that it should be limited to general advice.

The latest version of the MySuper proposal is an improvement on where the government started. The government started with a highly rigid, one size fits all default MySuper proposal which would have led to great disadvantage for many Australians. In fact, research by Chant West proved that many Australians would have been forced to pay higher fees and that a small drop in fund returns as a result of lower risk profiles, even for those superannuants who paid lower fees, would very quickly wipe out any benefit.

The government still has some way to go, and as an absolute minimum must address the current highly inappropriate, closed job, anticompetitive arrangements for default superannuation as soon as possible. If the government continues to delay actions to fix the highly inappropriate situation it has created it will prove once again that this government is more interested in looking after the best interests of its friends in the union movement rather than focusing on the public interest.

Minister Shorten is the most conflicted Minister for Financial Services and Superannuation in the history of the Commonwealth. He is the minister for unions and the minister for union super funds, and all of the actions that he is taking and all of the actions he is not taking on superannuation are driven by his vested interest in relation to his involvement with union dominated industry super funds. With those few words, I seek leave to continue my remarks.