Senator CONROY (5:38 PM) —In this debate on the Taxation Laws Amendment Bill (No. 3) 1998 , I rise to speak mainly about the choice of fund question but also about the savings rebate—and possibly Senator Parer may also get a mention.

Senator Calvert —Don't forget Mr Keating: he didn't send in two tax returns.

Senator CONROY —He did not owe any money, Senator Calvert—he was owed money by the tax office. But let us stick to the topic, which is to do with superannuation. The context of the whole debate on choice of fund is: why was compulsory superannuation introduced in the early 1990s by the Labor government? It was introduced because this country had a national savings problem and it had a potential problem down the track of coping with the aging baby boomer generation. Those were the twin objectives; that is what superannuation was about. Probably the most malicious policies that have been followed by this government since it came to office have been in superannuation and they have been put in place on the surface to improve national savings and deal with these issues. But when you strip them down and actually have a look at them, you find that each of these proposals has actually sabotaged those aims and objectives.

First we saw RSAs—retirement savings accounts. If ever there was a crock, it is an RSA. If ever there was a payback to their mates who financed them in the last campaign—the banks—it is RSAs. They are a low return product guaranteed to leave you hundreds and thousands of dollars worse off if you are a young worker and you are put into an RSA and you stick with it. There was no attempt to give what was known as a `health warning' to try to cap it so that if your RSA got to $10,000 you would be given real information by the supplier of that product. No, you could just sit there for your working life and at the end of the day find yourself hundreds of thousands of dollars worse off.

Senator George Campbell —That even had visions on the pension.

Senator CONROY —That is exactly right, Senator Campbell. Then we have as part of this bill today the savings rebate. This is a reverse Robin Hood mechanism; this is $4 billion of moneys that was going to go into ordinary workers' superannuation accounts. What did this government do? It came up with the savings rebate—it called it its `alternative vehicle' of delivery. That was its election promise: `we reserve the right—

Senator George Campbell —It was its debt truck.

Senator CONROY —Exactly.

Senator George Campbell —Maybe it's the same vehicle.

Senator CONROY —It could be the same vehicle, Senator Campbell. You saw $2 billion go immediately into consolidated revenue—back into the pocket of the government—and $2 billion to be given to the rich—those who already have the money; those who already have the savings. They do not need to save any extra. They can actually dissave and receive the savings rebate.

We saw the surcharge. Ordinary workers' superannuation funds paying; their returns reduced because of the extra administrative costs introduced by this government—reducing the returns to funds and the retirement incomes of ordinary working Australians. Again, coming up soon to the Senate we have superannuation to be taken out as an industrial matter—an attempt by the government to again reduce the impact on national savings. As shown in information given to the Senate Committee on Superannuation by the Institute of Actuaries, if you move from the award obligation of monthly payments to the minimum SGC requirement of annual payments you are, on average, three to four per cent worse off just by the stroke of a pen—that is $20,000 to $30,000 worse off at the end of your working life just because the government have a fixation. That is less national savings yet again.

And now we have choice of fund. After all this time you might begin to ponder why the government is actually pursuing this policy. Mr Miles, the Parliamentary Secretary to the Prime Minister, when introducing the first of the backgrounds on this bill, which was the implementation date, said, and I am quoting from Hansard:

It is clear that the opposition amendments are all about denying Australian workers the choice of superannuation funds. This really is the Labor Party's agenda, similar to what the agenda was many years ago when these other funds—

other funds—

which the Labor Party set up came in.

That is what this really is about. This is about a mean spirited, ignorant understanding and an attack on industry funds.

What sort of national policy premise is the vindictive approach of this coalition—an approach to undermine and destroy industry funds? That is what it is all about. Mr Miles is the one who has finally let the cat out of the bag. We all knew it in here. We have talked about it before. That is what it is about: the Labor Party's other agenda. I would like to talk about that other agenda item, industry funds. Since their inception in the early 1980s, industry funds have provided for rapid and sustained reductions in costs to their membership. In that time weekly admin fees have fallen from an average of $4 to less than $1 today. These charges compare most favourably with those imposed by banks on, for example, their business transactions. According to Christopher Butler, managing director of Sedgwick Noble Lowndes, in the Financial Review dated 9 January 1998, page 19, the average charges for non-profit industry and corporate funds are half the average of those funds that are in the market for profit—half of the profit. I plead guilty to that agenda. We have halved the costs in that area alone in the few years since industry funds were created. I plead guilty to that agenda any day of the week.

The most significant improvements in service delivery are the adoption of member protection of small account balances, the administration of the extremely complex `surcharge' arrangements and the implementa tion of member investment choice within the one fund. That is right; industry funds are at the cutting edge of member investment—not holding back, trying to keep members' funds. Fund asset management charges have been halved, from 0.6 per cent of assets under management to about 0.3 per cent today. Industry funds have introduced bulk death and invalidity insurance, and they have also provided these at about half the cost of the same retail insurance product. Half the management fees gone and half those on death and disability gone. I will plead guilty to that any day of the week, because that is what industry funds have done.

Before Senator Kemp comes into the chamber and says, `But, Senator Conroy, you have not mentioned where you used to work,' I proudly state that I used to work for an industry fund, the TWU superannuation fund. I am absolutely proud to declare that I have been a part of reducing those charges. `What about returns?' you might say. `Those industry funds run by unions must be not delivering to their members in terms of investment returns.' At the same time industry funds have credited members with investment returns in excess of 10 per cent on average each year since their inception. This demonstrates that industry funds have delivered superior returns to their membership by comparison to other super vehicles. The AMPs and the National Mutuals have not been able to deliver that sort of return. National Mutual practically went broke and gave $100 million to John Elliott to go and play with in a little frolic with Elders.

Senator George Campbell —AMP is too busy turning itself into a bank.

Senator CONROY —Exactly, Senator Campbell—a bank. So what we have seen is a vicious attack by this government on workers' retirement incomes because it is paranoid about industry funds. It does not matter that these funds have improved national savings; it does not matter that they pay out hundreds of thousands of dollars back into retirement incomes; it does not matter that they have introduced competition—what the government says it is about here today. Industry funds are the competition in this issue.

But who has asked for choice? Have employees asked for choice? Have employers asked for choice? The answer is no. There is no demand for choice, except from one sector. No prizes: banks and life insurance offices.

Senator George Campbell —The finance sector.

Senator CONROY —The finance sector. Exactly. No prizes for guessing. That is who has been after them. This legislation about choice is not employee choice. It is not the choice of the person who owns the money. This legislation gives employer choice. You may think, because it is called choice of fund, that in actual fact employees are going to get to choose their fund. Well, they are not; they are quite specifically not. It is their money but, despite the deception of the name of this bill, they are still not going to get choice of fund.

Probably the most vital question, though, that has to be dealt with by the chamber and by the government is the question of an informed choice. There was not one witness, not even the government itself, that was prepared to say, `We don't want informed choice.' That is the nub of the argument if this legislation gets passed in its current form: informed choice. We have got a situation where this choice is going to have onerous administrative costs and possible legal action down the track. It has attempted to take away some of the liability. Whether that is able to be achieved is still a matter of some discussion. There was plenty of evidence before the committee that it was not going to be able to take away the liability. Even the government admitted that there is still the common law. There are legal aspects that cannot be legislated away.

The government have failed on all counts on this bill to deliver to Australian workers. Choice will not lower the costs. Probably the biggest furphy in this debate is a claim that choice, through their competitive process, will lower the costs to ordinary Australian workers. We had the Commonwealth Bank come before us and I asked them, `After choice has been introduced, the winds of competition, can you guarantee me that your RSA product will be one cent cheaper in one year's time than it is today?' They had to say that no, they could not. The banks could not even promise that an RSA would be cheaper after the winds of competition have swept through.

Who is benefiting, then? It is certainly not the workers. It is the competition that we introduced that has forced down the costs—not the bogus competition that this government are introducing.

Senator George Campbell —Real competition.

Senator CONROY —Real competition. We introduced it into this area, not the government. Many of the submissions illustrated to us the increased costs, especially in marketing. There is no question that marketing is going to have to massively increase. One industry fund said to me that they are going to have to double their admin budget just to cope with the possible marketing extras. They are going to be up against the AMPs and the National Mutuals and all the TV advertising, and they are still going to be competing. I have got a prediction for the government and their narrow-minded agenda here: not only will industry funds survive choice but they will prosper. Down the track, when the government sits back and thinks, `How much damage have we done to industry funds?', they are going to say, `We have failed.' Industry funds will grow under this legislation. Industry funds are not afraid of this legislation. Industry funds are happy with choice, but they want employee choice, not employer choice.

The government's model increases costs. It sees employees possibly forced into expensive entry management and exit fee regimes. That is what the choice is here. You could see employees forced into funds, especially new employees, that in actual fact are far more expensive with lower returns. And they do not have to be in RSA. We have already had Senator Sherry give us some excellent examples, tabled in the chamber, of how much more expensive, with poorer returns, master trusts can be. One example that I have, based on an eight per cent return and a range of other figures, is that you can be, over your working life, $30,000 worse off again by being forced into a master super trust instead of your industry fund. Another $30,000 of national savings gone, of a worker's retirement income gone, just because the government want to be narrow-minded.

We will be asking Senator Kemp or Senator Ellison, if he is here for the committee stage, some questions about the education campaign. If the government is really fair dinkum about this bill, they will tell us what sort of budget they are looking at—what sort of education campaign. We introduced what at the time was the biggest change in superannuation in years, in the early 1990s, and we spent about $14 million on the money tree campaigns. There were a couple of them. Most people would remember them nowadays—the little growing money tree you saw on telly. That was a national campaign, on prime-time television, just to educate people that compulsory superannuation was coming. It was the most basic of concepts. But this shake-up we are seeing is even bigger. If you looked at our campaign in the early 1990s, which in today's dollars was probably about $16 million or $17 million, you would think that this was a bigger change and that you would therefore need a bigger campaign. What have we seen so far from this government? Four million dollars. You could not run any decent sort of advertising campaign anywhere with $4 million on even the simplest of concepts.

This government is not fair dinkum about this issue. Key feature statements are probably the most critical part. Where is the government at on key feature statements? We had all sorts of evidence, some of which has been referred to—the literacy question, for example. Forty per cent of people cannot even read a bus timetable.

Senator Ellison —Thirty.

Senator CONROY —They are going to be handed, by their employer, up to six pages of a key feature statement from four different funds.

Senator Calvert interjecting—

Senator CONROY —Those are the facts, Senator Calvert. It is horrifying but true. And you are going to give them six pages times four of detailed financial information to compare. These are ABS statistics. These are not made up, these are the facts. These are what you do not want to look at.

You have a situation where, with calling number display, you are prepared to say, `If 75 per cent of the community do not understand the implications of calling number display, then we will not do it.' Are you fair dinkum about this education campaign? If you go out there and test your education campaign, and still 50 or 60 per cent of the people do not understand the choice they are going to have to make, are you prepared to not introduce choice until enough people understand so that they cannot do themselves long-term damage? Are you prepared to do that? Those are the questions you are going to have to answer when we get to the committee stage.

I could go on extensively but I am running out of time and I did want to get to the savings rebate. As has already been mentioned, the great lie of the savings rebate is that it will improve national savings. It will not. Why do I say it will not? Because Ted Evans, the Secretary to the Treasury, has admitted it will not. He has admitted that it is possible to obtain the full rebate if you have not only not increased your savings but also if you have decreased your savings. You still get the rebate. How can you justify, on equity grounds or even economic efficiency grounds, a rebate that is completely contrary to your policy, on the admission of your senior bureaucrat?

In my last minute I would like to turn to an article in the `Smart Money' section of the Financial Review on 2 May 1998. The heading is `Rebate can be milked for more'. The report is by Alison Kahler and it reads:

At first glance, $225 seems a trifling amount but the new savings rebate can be milked for much more. Conceivably, a family of four with a sufficient income flow could receive a total rebate of $900—without saving a cent.

Income—not savings—is the sole criteria for the rebate, according to Annamaria Carey of the Taxation Institute of Australia.

`In reality, the savings rebate is a tax cut for any income generated outside of wages and salary. If you receive rental income, for example, you qualify for the rebate. The income does not have to be saved, just received,' she says.

Carey says the income can come from just about any source, including bank accounts, share dividends, trust distributions, partnerships or business interests and contract or consulting work.

After-tax superannuation contributions also count towards the rebate, as do some pensions . . .

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