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Wednesday, 22 August 2012
Page: 9543

Mr ZAPPIA (Makin) (11:26): I rise to speak in support of the Superannuation Legislation Amendment (MySuper Core Provisions) Bill 2011. Can I begin by commending the member for Banks for his contribution to the debate on this legislation. He has summed up the issues very well.

This legislation arises from the Cooper review of superannuation that was commissioned by this government and which I understand contained many, many recommendations; in fact, if my memory serves me correctly, something like 70-plus recommendations. As the minister said in his second reading speech on 3 November 2011, 8½ million Australians have superannuation funds with the total pool of super funds estimated to be in excess of $1.3 trillion.

The concerning point with respect to those statistics is that 60 per cent of Australians do not actively choose where those funds are placed. We know that with superannuation payments rising from nine to 12 per cent over the next decade the pool of funds will grow, and more Australians will have money invested in superannuation accounts. We also know that currently people who have money in superannuation accounts pay on average $85 in monthly administration fees. Paying $85 per month in administration fees results in less funds at the time of retirement. In fact, I have looked at some statements where, as a result of those administration fees, at the time that the contributors cease working at a particular place of employment, they end up having less money than they started with.

This legislation enables a simpler and less costly super option. An example, as others have said, is that under this legislation a 30-year-old on full-time average earnings could be $150,000 better off at retirement. I said a moment ago that over the next decade superannuation contributions would increase from nine to 12 per cent. Superannuation contributions are not just voluntary contributions—they are compulsory savings and not a matter of choice. They are savings that are, effectively, made by employees who forgo increases in their earnings entitlement on a weekly basis, through productivity gains and the like, that they might otherwise have received through their enterprise negotiations, so that those monies can be put into a superannuation account so that it is available for them at the time of their retirement.

Employers are required to make the necessary contributions with respect to those superannuation payments. For employers those contributions also become tax deductions and that in turn means that the broader Australian public has also made a contribution, through that tax deductibility, for the funds that end up in superannuation accounts. In other words the cost is borne by all Australians. The only choice that the employees have about their super funds is in which fund their money is placed. Let me be clear about who those funds belong to; they belong to the working Australian people who forgo wage rises in order to make the superannuation contribution possible.

Superannuation fund companies are, in turn, regulated by APRA. Can I say in respect to that that I support and appreciate the changes that have already been made as part of the Superannuation Legislation Amendment (Trustee Obligations and Prudential Standards) Bill 2012 to ensure that APRA has more powers with respect to overseeing where those superannuation funds are placed and how the various companies manage the funds placed with them. Having said that, it is still of some concern to me that the regulation does not guarantee that the total funds deposited will always be there on retirement. If bad investments are made by superannuation companies, losses can occur. Those losses are in turn passed on to the individual superannuation fund account holders. In fact, over the last few years we have seen significant evidence of that when, as a result of stock market crashes around the world, people have lost a substantial portion of their superannuation funds. If they have not lost it entirely, they have certainly seen their funds eroded. Hopefully, because the funds are still in those accounts they might rebound as a result of stock market improvements.

The point I make about stock markets, however, is that when funds are placed with the stock market they are put at some risk. It is that risk that is still of concern to me. Passing the blame by claiming that employees choose their fund, and therefore the risk, is in my view an unacceptable excuse by those who seek to deflect blame and responsibility. Personally, I would much rather see less risk taken, and lower returns, than any losses being made at all. I welcome the simpler and easier option brought in by this legislation of allowing employees to choose where they place their funds.

I want to make a comment on some specific matters. The first is in relation to the fees. The basis for calculating fees must be transparent and it must reflect the real cost of managing those funds. In fact, I question why any fees are charged at all and why the fees, totally, should not be deducted from the total earnings of the company and not passed on directly to each account holder. This would be similar to what banks do if you have money invested in a savings bank account. In the past no fees were charged because the fees would have been deducted from the profits accrued by the bank in having those funds.

Secondly, I question why funds cannot be lodged directly with banks in a fixed deposit scheme, with similar withdrawal conditions to those that apply to superannuation companies. It would seem to me that if you are entitled to deposit your money with a superannuation fund, with conditions relating to the withdrawal of those moneys, then you could apply a similar regime to allow someone to deposit their money directly with a bank.

Thirdly, my view is that all super funds should be used to support nation-building public infrastructure, which would in turn justify a government guarantee of funds. One option for investing could be in building houses. I note that former Prime Minister Paul Keating recently made this very point when he suggested that super funds could be used as a source by the banks for the purpose of providing home loans. If super funds could be accepted by banks, that would be possible. It is a view that I share. In fact, I would probably go further with respect to the use of funds to support banks, but I will leave that for another debate on another day.

In the last couple of decades Australian housing prices have escalated. Home ownership has become more difficult. Housing prices are a good indicator of economic conditions, and rising housing prices may be a positive reflection of a strong Australian economy. But for young home owners and home-owning aspirants, high housing prices are not good news at all. Not surprisingly, home ownership rates have fallen in recent years. Between 2006 and 2011 home ownership rates for families with children have fallen from 79.5 per cent to 77.2 per cent. It might only be two per cent, but in reality that is a significant drop when compared with home ownership rates over recent decades in this country. In fact, Australia has always prided itself on the level of home ownership amongst families. Nationally, over the same period, household monthly mortgage repayments have gone from $1,300 to $1,800, and weekly rentals have risen from $191 to $285.

Interestingly, home ownership has become more difficult since the closure or sell-off of public banks like the State Bank of South Australia or the Commonwealth Bank, nationally. The State Bank of South Australia got into financial difficulties, but not because of housing funding, for which it was purposely established. It ran into difficulties because it ventured into non-housing projects and risky commercial dealings. Had the State Bank of South Australia stuck to housing, it would have remained viable and been able to continue to serve a valuable public purpose.

In the absence of government owned banks, the use of super funds to build housing has considerable merit. It would result in more affordable housing, higher home ownership, less demand for rental homes and more stable families and communities.

Turning back to the specifics of this bill, the MySuper core provisions of this bill, I believe, should be welcomed by everybody. This is legislation that, as I said from the outset, enables super account holders to choose with much more ease where those funds are going to be lodged. It enables those funds to be managed much more simply and, hopefully, more cheaply, which ultimately means more funds at retirement for workers throughout Australia. The legislation, I believe, is a vast improvement in managing the $1.3 trillion of superannuation funds that currently exist throughout Australia. I commend the bill to the House.