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Tuesday, 26 June 2012
Page: 8086

Mr CIOBO (Moncrieff) (21:00): It is a pleasure to get up and speak after the member for Shortland's very passionate speech on the Superannuation Legislation Amendment (MySuper Core Provisions) Bill 2011. It is clear the member for Shortland has a great and abiding interest in MySuper and I congratulate her on the passion with which she delivered that speech.

More broadly, I want to talk about MySuper and what it is the government is attempting to do. We know that at the core of this issue is the government's consistent approach to what it has been doing lately with the array of websites and government initiatives that are all about 'my health', 'my education' and these kinds of things. We know that this reflects an approach to policy development consistent with the big government approach of this government, which places it at the epicentre of every decision that an Australian family or indeed a single person would ever need to make.

This is the latest iteration, and it deals with MySuper, which is this government's way of saying, 'We're going to provide a single whole-of-government approach to dealing with superannuation so that people can know that they can go into a so-called low-fee, low-frills superannuation package which will provide for their retirement.' At least, that is what the packaging says. In reality it is important to read the fine print, and this proposal, like most of those we have seen from the government, actually betrays the best interests of Australians when it comes to the development of superannuation. The question is: 'Why?'

There are a number of reasons. First and foremost, this legislation in no way addresses the single biggest betrayal of Australian workers when it comes to their superannuation, which is the entire way that the government has structured the industrial relations system and, in particular, the awards system so that there are non-transparent approaches adopted by Fair Work Australia when it comes to default funds.

Superannuation is not a particularly sexy issue. Most Australians are not that interested. I do not know why, because I think superannuation is kind of interesting—but that's me. That notwithstanding, many Australians do not take an interest, on poor advice, about what is going on with their superannuation when they should. It is clear that they should, because for 30 or 40 years of their working lives—and who knows, maybe even 50 years—they will be making contributions as mandated by law into a super fund, or into super funds, with the expectation that when they retire they will able to draw out an annuity from those funds and provide for their retirement.

That is a laudable policy goal. On both sides of the political aisle we support that notion. But the fundamental difference is this: at a time when many Australians lose track of their superannuation as they shift between different jobs, and end up with four, five or six different superannuation accounts—and we consistently see advertisements from both industry and the government highlighting how much money is lost in unclaimed superannuation that should be consolidated—we see the government's approach in this particular bill is to say, 'We're going to require that there be a MySuper product.' Essentially, this seeks to deliver to Australian workers a default fund proposal. I expect, from a policy rationale point of view, that the government's rationale for this is to say, 'We will, hopefully, achieve consolidation in the industry so fewer Australians will have multiple accounts and, in fact, will end up with only one superannuation account.'

Again, on the surface that sounds laudable. But the reality is that is not what is going to occur under this legislation. The reality is that under this legislation we will continue to have Fair Work Australia, under our once again heavily regulated industrial relations framework, making decisions in a non-transparent way about what the default funds will be when it comes to so-called modern awards. We already know that fewer Australians will have jobs under this government—and I contend that fewer Australians have jobs under this government, and that is why the unemployment rate has gone up—because it has been forcing up labour costs under its so-called modern awards program. But rather than dealing with increased labour costs, or with the fact that there is still no transparency when it comes to default funds—despite running 180 degrees in the other direction to the government's focus under the so-called future financial advice legislation—the government is not tackling that issue when it comes to this particular bill.

What is it the government has to hide? Why is it the government will not allow a situation to arise where there can be transparency when it comes to a choice of superannuation funds and when it comes to the default funds that apply under modern awards? Why is that too much to ask? Why should Australians, who are forced in many instances to operate under award conditions, not know that the choice of superannuation fund that their contribution is being paid into is, in fact, the best value fund for them? Why should it be a decision taken behind closed doors? Why should it be a decision that is not readily transparent and that people can then make an assessment about? The government should provide a policy rationale for that but it has failed to do so.

It is my contention that the reason the government does not do that is the single biggest stakeholder group, which is a beneficiary of the current system and has indeed benefited more than just about anybody else as a consequence of the heavy reregulation of the labour market, has been the industry superannuation funds. We also hear many rumours about the significant extent to which industry superannuation funds make contributions to the Labor Party. On that basis, I certainly do not agree with the generic approach that has been adopted with respect to default funds, because it is unfair to Australian workers and especially to the lowest-paid Australian workers. It is unfair that they should not be able to have transparency when it comes to their choice of superannuation fund.

In addition to that, what we see under these provisions in this piece of legislation is the opportunity for funds to provide intrafund advice. Amazingly intrafund advice is not defined in the bill. Likewise under the Future of Financial Advice there is no definition of intrafund advice. Intrafund advice is an interesting issue, because under the bill that is before the House there is opportunity for intrafund advice to be charged for—that is, superannuation funds will be able to charge for expenses incurred in the provision of intrafund advice as part of their overall administration fees charged to all fund members of a MySuper product. In other words, if you are in a MySuper product, even if you do not take advantage of obtaining advice from that fund, you will still be paying for it and you will still be cross-subsidising other fund members who are obtaining advice.

On the one hand the Labor government has taken the policy approach under Future of Financial Advice, FoFA, that beneficiaries of advice when it comes to financial services should have to pay for it and there should be transparency under FoFA. But on the other hand, when it comes to the Industry SuperFunds network, when it comes to those who are big supporters of the Australian Labor Party, the Australian Labor Party turns a blind eye. It is not interested in transparency and it turns a blind eye. It is not interested in making sure that only those who are obtaining advice are paying for advice. No, instead the Labor Party deliberately leaves it as a very grey, murky area, so that people are able to obtain financial advice within the fund and have that cross-subsidised by others who are not beneficiaries of that advice.

Again this is not the kind of issue that is going to get people rioting on the streets, and I acknowledge that. They are not going to be chanting up and down George Street complaining about the fact that under this piece of legislation they are going to be cross-subsidising others, but it does not make it right. It does not make it right that the government would implement legislation which says, 'You're not accessing financial advice from a super fund, but we don't care about that and you're still going to cross-subsidise somebody else's.' The sheer hypocrisy between the positions of FoFA and this piece of legislation is glaring.

I think it is important that the government is pulled up for it, because its inconsistent approach with respect to FoFA and MySuper could not be any more obvious. Industry knows about it, talks about it and is concerned about it. The only ones who do not are the Australian Labor Party and the Australian Industry SuperFunds. That is the reason why Australians have the right to be very cynical about this government's approach to MySuper and in particular to intrafund advice.

The coalition is also looking at moving amendments with respect to other aspects of this bill. In particular the coalition amendments will look at clarification of the charging of fees for the provision of intrafund advice, because we want to address the very issue I have just spoken about. We will look at improving the definition of the large employer threshold. We will also look at replacing the additional authorisation requirement for large employer funds with a reporting requirement to APRA. The reason we are dealing with the second limb, improving the definition of large employer threshold, is that significant concern was expressed to the Parliamentary Joint Committee on Corporations and Financial Services, which undertook the inquiry into this bill, about the benchmark as it is currently envisaged above which large employers can tailor funds for their employees. The provisions of the bill allow for such tailoring when an employer contributes to a fund on behalf of 500 or more members. Yet the submissions from many industry participants made it clear that they were concerned about the operation of these provisions. They contend the current threshold is complex, unworkable and may have a large number of unintended consequences.

The coalition is simply seeking to amend the bill by replacing the complex and unworkable threshold with a simple, easily quantifiable and effective test that defines the large employer threshold as any employer that has 500 or more employees at the relevant time. This is a much more straightforward approach and one that industry is happy with, both those that are Industry SuperFunds and those that are other private superannuation providers, as are employees. We urge the government to adopt this approach, because it is a much more straightforward approach.

Likewise the coalition's approach with respect to the reporting of large employer funds to APRA is that you only need to be licensed to operate in an industry once. We find it ludicrous that the government would seek to have large funds applying to APRA each and every time they seek to approach a large employer. It is entirely inconsistent with the so-called bread-and-butter approach of APRA, which is as a regulator and not as a rubber stamp that superannuation funds have to approach prior to approaching a large employer. In the coalition's view, what is needed is that we simply have those superannuation funds being required to report that information to APRA and not having to seek approval from APRA in the first instance.

In summary, the most concerning aspect of the current Superannuation Legislation Amendment (MySuper Core Provisions) Bill is the fact that it does not deal with the most glaring aspect of the inconsistent approach of the government with respect to FoFA and MySuper legislation—that is, the selection of default funds. Australians should not have to tolerate this government's heavily re-regulated approach to the labour market and the selection of default funds for employees behind closed doors. Australians should have the right to know the basis upon which default funds are selected. We should never lose sight of the fact that if one of the so-called MySuper funds, the so-called low-frills funds which are meant to provide cost savings for employers, is performing poorly then the actual reduction in return to a member's money might very easily exceed any so-called advantage that flows from being a low-frills, low-cost approach to the administration of the fund. The government is concerned about the costs associated with fund administration. The government is concerned about not having too many bells and whistles if they need not be there, and yet the government simply does not recognise that a reduction in return in a fund like that could actually very easily result in members of that fund receiving a lower return on their invested money. And that lower return could easily outstrip the so-called extra administration expenses and fees associated with a more tutti-frutti fund rather than a plain vanilla fund, which is what the industry jargon would be for a MySuper fund.

I think that government members have an obligation to spell out to the Australian people why they continue to hide behind Fair Work Australia's approach to the selection of default funds and why they continue to not require transparency and why they continue to have such a gross discrepancy between their approach to MySuper and FoFA.