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Thursday, 26 September 2002
Page: 5037


Senator HOGG (5:37 PM) —I rise in the debate today to address this most important issue for many people in Australia. My recollection of superannuation goes back to the 1980s, when superannuation became the battle of the eighties. It was the battle for the money that workers were rightfully claiming to be theirs to be put aside for their retirement. When that claim was made it was resisted in a very rigorous manner by employers throughout Australia. It was claimed by means of award superannuation and it saw its way through a number of processes in the courts before it finally became a matter that was arbitrated by the Australian Conciliation and Arbitration Commission.

Superannuation had always been a privilege for executives—it had never been available to the average worker, with the exception of those in the Public Service. The vast mass of people had been excluded from superannuation. They had been excluded from a benefit that would ease the pain of retirement and give them an adequate and reasonable retirement benefit to live on. The people excluded particularly were low-income people and, of course, women—that is one group who were severely disadvantaged by the lack of superannuation. Superannuation had, reasonably, been made available to a wide range of males, but had not been made available to a wide range of females—they were excluded from superannuation. The superannuation they had been excluded from would have formed an important part of their retirement income. They were not able to access it—it was not even something that they were entitled to—yet there were people in privileged positions receiving the benefits of superannuation and living in reasonable retirement with the rest condemned to live on the age pension.

In my first speech in this place I spoke about three important aspects of security in people's lives: security in youth, security in work and security in retirement. That last aspect has been achieved to some extent— but not a great extent—by superannuation. Of course, those who have accessed superannuation since the 1980s are not going to reap the full benefit. It will only be over the full working life of a person that they will accumulate the benefit that comes from superannuation; until that happens, people will only receive a part-benefit.

As a member of the Senate Select Committee on Superannuation it has been interesting to participate—and I have always been a very strong participant in that committee—in a hearing on the adequacy of superannuation. The adequacy hearing traversed a wide range of issues: whether the current nine per cent is adequate or whether it should be 15 per cent, whether the tax should be up-front or at the back end, what effect moving the tax from the front end to the back end would have, the issue of the surcharge and so on. A range of issues have been canvassed, including how much will superannuation, if it remains at the level it is at now, contribute to the retirement of people further down the track.

A wide range of evidence has been given to the committee, including that by, say, 2032, a person having some 30 years in the work force and in receipt of twice the average weekly ordinary-time earnings—approximately $85,000 per year—will still be relying on some contribution from the pension. As one goes back further towards less than average weekly ordinary-time earnings, one finds that there is still going to be a fair degree of dependency on the age pension to supply an adequate retirement benefit for those people to live on. That is, of course, a most unfortunate thing. One hopes that we are heading down the path, through the compulsory superannuation that we have, of contributing in a significant way to the retirement benefit that people will enjoy in their later life. That is not necessarily going to be the case, and that is an issue that will confront not only this government but a Labor government when it is in power at some time in the future. Regardless of their political persuasion or ideologies, governments will have to look at proper retirement policies that deliver to people dignity in retirement. At this stage this government has not adequately done that.

Going back to the first three per cent award super, that was bitterly fought by the employers, whether they were large or small. They drew the battle lines and they resisted in every way that was humanly possible to stop the advance of superannuation to the vast majority of the work force who had no access to it whatsoever. It was arbitrated at length in both federal and state tribunals. I have a vivid memory of being involved in a number of those arbitration processes where the matters were canvassed over a lengthy period. It was not as if the industrial tribunals made a rushed decision, nor did they make a rash decision, in determining the funds that would operate within a particular award. As a matter of fact, some of the hearings were very protracted indeed. But of course, at that time, the life insurance companies and the banks saw the new honey pot emerging and realised that they wanted to be in for their share of the honey pot.

They were both vigorous and active in the marketplace in trying to secure what they saw as a share for themselves, which they saw as serving their own purposes rather than necessarily the people who needed to benefit from the ultimate retirement benefit that would be paid from the superannuation. The employers saw the super as their money and, at that stage, tried to malign and taint the industry funds that were emerging as being union funds. They wanted the employee entitlements to be put to use for their financial purposes rather than the employee's best interests—that is, the retirement benefit for the employees. Some awards that I worked with did have a range of funds arbitrated or put into those awards by agreement, so there was a choice of funds in some sense there for employees.


Senator Ferguson —Yes, industry funds.


Senator HOGG —No, they were not industry funds. Some of those funds were there at the behest of the employers, and people found themselves in those funds because of the wishes of the employer rather than because of the wishes of the employee. I know this to be a fact, because I had great trouble with one particular company in Queensland, where they had basically railroaded the employees into a particular fund. This was a retailer that ultimately went bankrupt. We were lucky at the end of the day that we were able to extricate those people out of the fund early enough to have their funds placed into a reliable, legitimate fund and their retirement benefit was ultimately protected. But the struggle was there.

There were some single funds in some awards and, of course, where they were industry funds, there were equal employer and employee representatives. They were not union funds, as they were often characterised. That was just part of the rhetoric that was thrown around at the time and, unfortunately, persists today. The government policy today is to claw back the situation that emerged in the 1980s. They want to claw it back so that friends in the life insurance area and friends in the banks can get their fingers into what they see as a very lucrative money pot and honey pot indeed.


Senator Ferguson —Are you suggesting the life funds are no good, John?


Senator HOGG —I am not suggesting that at all, Senator, if you listen to what I say. On the super committee, we have been faced with the issue of choice of fund. I have been present at all the various hearings of the superannuation committee. I have heard the witnesses and have had a chance to listen to some of the difficulties that have been raised. It would be fair to say that there are witnesses that have supported the government's position; that is natural. But, equally, there have been people concerned about the options that the government are putting forward. In particular, I want to look today at paragraph (c) of Senator Sherry's notice of motion that is being debated. This refers to the government's:

... failure to accurately assess the administrative burden on small business of the Government's third attempt at superannuation choice and deregulation ...


Senator Ferguson —You voted against the first two. There has to be a third because you voted against the first two. You are voting against choice.


Senator HOGG —You are right on top of it today, Senator Ferguson, and I am pleased to see you are. The facts that have come out in the hearings thus far are that small business is going to be affected adversely by the government's decision on choice. The government, once again, have ignored small business. I want to go to some of the facts that have been brought out in the particular hearings. There has been a complaint about the government's move to choice of fund with regard to the model that is being adopted. Let us say now that the previous models have been flawed.


Senator Ferguson —They have not been flawed. You were against choice in principle. It was not to do with the flaws.


Senator HOGG —The previous models have just been no good, Senator Ferguson. You have just got to answer the problem that faces you: the models were flawed.


Senator Ferguson —And you were against it in principle.


Senator HOGG —The models were flawed. Small business people have clearly indicated that the model that is currently floating around will create excessive paperwork for the employers. It would be excessive because the immediately previous model advocated a limited number of funds.


Senator Ferguson —Five.


Senator HOGG —That is right. The current model, however, does not limit the number of funds. So one could quite imagine that in a business where there are 20 employees, if choice prevails, there could be 20 different funds. That is the simple fact that has come out in the hearings.


Senator Ferguson —They only have to offer five.


Senator HOGG —Senator Ferguson, you can get up after me if you have such wonderful words to say. I know you realise we are running out of time.


Senator Ferguson —I have got to get it in there.


Senator HOGG —Do not get it in now. I know you want to have a say. Small businesses realise that there will be real difficulty in terms of the paperwork that is going to be generated out of this whole process. They say that there would obviously be some resistance from employers to the increased administrative obligations, as one of their spokesmen has said. It is interesting that the Motor Traders Association, the National Farmers Federation, the Australian Industry Group and the Queensland Retail Traders and Shopkeepers Association have expressed similar concerns. I happen to have some real experience—


Senator Ferguson —With the shoppies.


Senator HOGG —That is right, with the Queensland Retailers and Shopkeepers Association—a whole host of small businessmen. They are small businesspeople who abhor red tape and the interference of government in their businesses, where they devote more of their time to the red tape that has been created by government than they do to the running of their businesses. They expressed their views quite strongly.

Then, of course, major consultants such as Mercer Investment Consulting, Corporate Super Association and the CPA of Australia have their doubts about it. The CPA have stated:

The additional responsibilities will most certainly place a further compliance burden on employers. This is in addition to other burdens employers currently face, for example, compliance costs associated with the New Tax System and The New Tax Business System.

So we have the CPA expressing their concern. Then we go to Mercers, who say:

... the introduction of Choice as set out in the Bill will result in:

· Significant compliance costs for employers;

· Increased difficulties in meeting payment deadlines for SG contributions resulting in more late payment breaches ...

... the advantages to the member of being able to exercise choice would need to be weighed against potential disadvantages which may include:

· An increase in expenses due to higher distribution costs as well as the loss of employer subsidies that apply in many existing corporate funds;

· A reduced willingness of employers to contribute more than the minimum contribution ...

The implementation of Choice in the proposed form will not only result in considerably greater costs than the estimates in the EM but in addition, many small business operators will be diverted from their business activity for many hours.

Mercers are a respectable group of consultants who have appeared before the committee over a long period of time.

Treasury evidence was given to the committee as well. They said that the slug to small business of the government's latest attempt at choice deregulation would far exceed the estimate of $36 a year ongoing in the explanatory memorandum. The officials confirmed that the cost to a small business with 20 employees, 18 of whom want a different fund of a known clearing house product—touted by the minister as the panacea to the administrative nightmare of choice—will cost a minimum of $128 per year. On top of that, if employers want to pay their superannuation contributions monthly, it will soar to $384. So there are additional and increased costs associated with the model of choice that is being promoted by the government. They are costs to small business that small business does not have the capacity to bear.

Then, of course, one only has to look at the regime of penalties that exist if employers get choice wrong. They face fines of $6,600 per offence on a strict liability basis for each employee. That could be an impost of $264,000 on a small business with 20 employees. So we see that this grab for the honey pot—or the money pot—is going to see many small businesses forking out to pay for the ideology of this government.


Senator Ferguson —This is the first time you've ever shown any concern for employers!


Senator HOGG —The government cannot get it through their head, Senator Ferguson; I thought that you would understand that by now. Come along to a couple of Superannuation Committee meetings and you will find out how concerned these people really are. They are upset that this is going to be foisted upon them and that they are going to have to bear the brunt of the expense associated with offering choice to their employees. Choice is already available through choice of investment. (Time expired)