Senator CHRIS EVANS (6:19 PM) —My remarks on the Taxation Laws Amendment Bill (No. 3) 1998 will go mainly to the question of the choice of fund provisions contained in the bill. In the short time available to me this evening, I would like to make some comments on that issue and I will also make some comments during the committee stage of the bill.

It is important to say at the outset that superannuation in Australia is compulsory and the Australian population is ageing. So superannuation is a particularly important issue, and it is particularly important that parliament deals with it very seriously and provides not only good laws in terms of superannuation but also clear policy that allows people to have confidence in the superannuation system and to plan for their retirement in a secure environment.

The shemozzle that we have seen in relation to the government's plans for choice has worked against confidence in the superannuation system in Australia and has provided people with reasons to be concerned about the future of the superannuation industry and about their retirement income. I think that is unfortunate. The government's decision to defer some of the measures proposed in terms of choice is a good one, but it would have been much better if, in doing so, the government had dealt with a range of other concerns—some of which I will allude to tonight—that have been raised by people in Australia involved in the industry.

I think it would be a good thing if the national superannuation policy encouraged real choice so that people could choose investments which were as secure and as rewarding as possible so as to provide them with the best possible retirement income. It is very hard for anyone to oppose the principle of choice, but when you try to implement the principle it is much more difficult to ensure that you give effect to the very laudable motives that it represents.

The government is very keen on the theory of competition, which will make for lower prices in superannuation and greater efficiency. It says, `If you give choice, the market will apply those pressures and we'll all be better off as a result.' I think that is far too simplistic a notion. It does not take account of a range of issues like the costs of advertising and other competition costs that will be built into profit margins. The government really has to make the case for its model to prove that it is more efficient and that competition will deliver some of the things that the government claims. I do not think the government has made that case out.

We in the Labor Party think that a good superannuation policy should be based on a range of key principles. They include: availability to all workers; real choice through education, freedom from employer pressure, and dispute resolution; secure, higher returns; and administrative simplicity. When you apply those sorts of criteria to the government's proposal in this bill, it really fails the test. What the Labor Party has been arguing for in recent months provides sounder principles on which to build a choice regime in Australian superannuation policy and, obviously, we will be seeking support for amendments to reflect what we think is a sounder basis for a choice regime.

Tonight I will not have time to cover all of the issues I would like to in this debate, and obviously we will do that in the committee stage. However, the first thing I would say is that this bill ought to deliver a real choice of products to people who are on superannuation in Australia and that the government would have been better off taking an evolutionary, rather than a revolutionary, approach in dealing with this policy.

I believe that requiring choice internal to funds would have been a better first step. It would have allowed for a more gradual introduction of a choice regime which, in turn, would allow for education and for monitoring of the take-up and the experiences of providing choice to people. As I say, I believe an evolutionary approach rather than a revolutionary approach would have been a far sounder way of dealing with this very major change to superannuation in this country.

As we have seen in the international experience, competition and the opening up of superannuation do not necessarily lead to the sorts of outcomes that we all think are desirable. You only have to look at the British or Chilean experience to know that there are real pitfalls in this area if we do not proceed with caution. So, while one can agree with the theory and the principle of choice, one does have to take very responsible attitude to the implementation of that theory. I believe that the government has allowed its ideology to override proper, sound principles and caution in the development of the choice regime.

One of the real ironies of this whole thing is that the government's proposition, as it has finally evolved, gives most of the choice to the employer. The employee does not enjoy the widest choice available; in fact, they get to choose between schemes offered by their employer, schemes chosen by their employer. So this is very much a question of employer choice as much as employee choice. That is the government's reaction to the very real difficulties of providing unlimited choices.

No-one pretends that there are not real administrative and other difficulties associated with providing an open choice of any fund to any employee. But the government, in responding to that difficulty, has very much taken the availability of choice away from employees and put that choice in the hands of employers. That is of great concern because I think it gives too much ability to the employers to apply pressure to employees, and it upsets the balance that I believe should be established in terms of the choice regime.

Coming from Western Australia as I do, I have seen this choice theory applied in industrial relations by the Western Australian state government. The experience there has been that a regime of offering choice in terms of award or workplace agreements to employees has, in fact, now seen the state government implementing a system where they only provide the choice of workplace agreements to new starters. The choice that supposedly surrounded the rhetoric of the new industrial relations regime has been replaced by conditions that remove any choice of the employee. So I am a bit cynical about the Liberal Party's attitude and understanding of choice. As I say, the industrial relations experience in Western Australia means that that has given power to the employer rather than the employees. I believe that that is a real concern also in this area of superannuation.

There is also the question about prevention of the pressure on employees from sorts of high pressure sales techniques. One of the good things about the development of superannuation in this country over the last 10 years is that a lot of those practices that were evident in the personal superannuation and life insurance area 15 to 20 years ago have gone. The complaints you used to get about people buying products they did not want, the lack of understanding by people purchasing products not delivering what they thought they would deliver—all of those complaints about insurance sales and superannuation sales—have not been eradicated totally but have been greatly diminished as the superannuation regime and proper accountability measures have been put in place by this parliament.

I very much worry about what this choice regime will do in terms of the reintroduction of commissioned selling agents and the pressure for people to go out and sell various schemes in competition with other schemes. We should be very concerned that we do not take a backwards step to the days where that sort of pressure, manipulation and coercion really hurt people in very serious ways and resulted in people making very poor choices about their financial affairs, as I say, in terms of superannuation and insurance.

That leads me to a whole range of issues like education—which has been talked about by other speakers and which is obviously very important—about disclosure and the need for the key feature statements to be a key part of any regime. The government still has not provided satisfactory progress on the key feature statements, in my view and in the view of a number of senior commentators in the financial area. That is a very important part of any regime of choice—that people are able to make an informed decision between various products and have standard reporting of fees and conditions. That is not, I think, satisfactorily in place at this stage.

There is a range of other issues, which we will debate in the committee stage, regarding the likelihood of employees choosing the appropriate investments. The theory that people will necessarily choose the best investment option for themselves is, I think, not supported in practice. My own personal experience of trying to encourage people in a fund that I had some responsibility for was that they often took very conservative choices—particularly women—which did not result in their getting the best benefit at the end of their time. These are serious issues that will impact on people's retirement incomes and lifestyles; they will affect the whole Australian community.

So there is a whole range of issues that I believe really needs to be taken much more seriously by the government and the parliament. The fiasco regarding the timing of the introduction of the choice and the concern about the government failing to respond to industry criticisms have led to a sapping of confidence in superannuation and a confusion about where we are going. The government really has to step back from its sort of neo-liberal idea of choice at all costs and work with the parliament and the industry to have a much more constructive outcome than the one it currently proposes.

Sitting suspended from 6.30 p.m. to 7.30 p.m.