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Thursday, 29 November 2012
Page: 10346

Senator BOYCE (Queensland) (18:17): I was about to congratulate Senator Cormann for his ability to fix the legislation that was so poorly put together by Minister Shorten in the first place. We have, yet again, a piece of incompetent legislation. The only thing we can say about this legislation is that in the form it is now in, with the coalition's amendments to it accepted, it is a far better attempt at legislation than the unclaimed moneys legislation was.

But I would like firstly to look at a couple of the points that Senator Thistlethwaite made. As I pointed out, this bill in its original draft would have changed the investment strategy of many Australians by forcing the transfer of potentially very large amounts of money from funds where individuals had made a clear and active choice about their superannuation to a MySuper default product without the need for prior approval from the individual concerned. The coalition has now got some amendments to resolve this and other issues.

As for congratulating Minister Shorten, we need to keep in mind that this legislation, Superannuation Legislation Amendment (Further MySuper and Transparency Measures) Bill, was originally introduced in September this year into the House of Representatives. It was only that Minister Shorten was forced to look at how bizarre some of his suggestions were, how anti-competitive they were and how they were quite likely to lead to constitutional challenges that forced him, finally, to have a look at the amendments that we were suggesting. We have a timetable on this legislation, the stronger superannuation legislation, of which this is the third tranche, which started with regulatory impact statements being done in September 2011. Long before any of the final versions of the legislation were available, some aspects of the legislation were quite deliberately exempted from the regulatory impact statement. The Office of Best Practice Regulation points out:

The Prime Minister granted exemptions from the requirements for regulatory impact analysis in relation to the ability of funds to offer tailored MySuper products to employees with more than 500 employees, and extension to the date by which trustees will be required to have transferred the balance of existing default funds into MySuper products.

So we have the regulatory impact statements in September 2011, long before original legislation of any type was available—particularly in relation to this third tranche. This bill was brought into the House of Representatives on 19 September 2012 and now, on the last day of sitting, we have bills being gagged so that Minister Shorten can get this piece of legislation through to please his friends in the industry funds.

I do not think any of that is a matter for congratulations. Nor is the fact that, as deputy chair of the Parliamentary Joint Committee on Corporations and Financial Services, there was an attempt made for an inquiry not to be held into this legislation on the basis that we had already had lots of inquiries into Stronger Super. Every time a new piece of legislation with new requirements in it is brought to this house, I believe that the corporations and financial services committee, which has in the main had a long and proud reputation of examining legislation in a bipartisan way, should review it.

Certainly our review of this legislation, very brief as it was given the highly truncated reporting period that Minister Shorten allowed on the bill, found serious flaws, which finally the government has acknowledged and has now acted on with these five to midnight amendments. At least they are earlier than the 10 past midnight changes that need to occur with the unclaimed money bill. Minister Shorten should have done his homework from the start. This is a mess.

I was somewhat displeased to hear Senator Thistlethwaite doing a free advertisement for industry funds and recreate the fable around the cheapness, efficiency et cetera of industry funds. He probably belled the cat in terms of the fact that this government would love to force everyone into industry funds. That would be their optimum way of proceeding, because that way there would be so much more money available for unions to conduct business however they like, not what is in the best interests of employees or employers—or in fact the economy of the country.

The mistake that was going to come through under the original 'accrued default amount' definition in this legislation was that all existing default fund accounts, as well as the balances of individuals who had previously exercised choice of fund but who remained in the default investment option of their chosen fund, would be swept up into the new default MySuper product. Minister Shorten and others initially claimed that this is because this is what the Cooper review has said. But the Financial Services Council submission to the very brief inquiry that the Corporations and Financial Services Committee held pointed out that in fact what the government was proposing had gone way past what was proposed in the Cooper review. I quote from the FSC submission:

Through the Cooper Review and the Stronger Super … consultation in 2011, it was not contemplated at any time that choice superannuation funds would be subject to default/MySuper transitional arrangements.

According to the Cooper Review:

The major difference in the choice architecture model is the clear distinction to be made between MySuper and choice products, as either may be offered by large APRA funds. The Panel's broad starting point in relation to the choice architecture model is that, as far as is reasonably possible, if the trustee of a large APRA fund does not wish for a product to comply with MySuper or ERF criteria, the product should continue to operate much as it currently does.

We are talking about APRA approved funds. The FSC submission continued:

A choice product trustee would be able to determine the extent to which it differs from a MySuper product in relation to the offer of investment choices, intra-fund advice or retirement products, among other features. This is appropriate and will allow the creation of a competitive choice sector.

Well, the last thing this government wants is competition in this area or for people to have the ability to make their own choices about where their superannuation goes. It is just obscene the efforts that are being put into forcing as much of employees' superannuation funds as possible into the industry funds and therefore into the supporters of the Labor government.

We only need to look at some of the current cases to suggest why this is not a good idea. For example, we have the CFMEU telling Cbus, CFMEU's superannuation vehicle, that if they do not stop investing in Grocon the CFMEU will go and find a different superannuation provider. Well! Every individual shareholder in Australia has the right to look at the ethics of the investment strategy of the body that they are involved in and choose to pull out their funds. But it is quite a different matter when a union attempts to blackmail an industry fund because of what they choose to invest in. It is quite fine for a shareholder to look at the ethical propositions put in terms of investment by a superannuation fund or any other body, but only to look at the ethical framework, not to start saying, 'If you invest in company A or company B we will pull our money out.' Of course, the CFMEU directing that all their members' funds come out and an individual shareholder pulling out of a company are quite different.

It is one of the many, many reasons that we currently need far better legislation to look at industry funds and look at the way they are regulated—and to consider that in fact they should have the same need to be overseen as public boards. It is a really serious problem that we currently have in this area. It just adds to the concerns that are raised by other problems that have developed within the Health Services Union and the AWU in recent weeks that suggest that we really do need to have a full judicial inquiry into the way the unions and industry funds run their association at the present time. There is just too much room there for corruption and for lack of transparency.

This government legislation, before it was amended, certainly was in no way assisting in developing transparency; it was only designed to assist the growth of industry funds and to do it—believe it or not—without even the approval of individuals being sought when their superannuation was moved out of one fund into another. It is beyond belief that the government thought they would get away with this.

Some people have suggested that this is very rushed legislation on Minister Shorten's part. I think in fact it was quite a deliberate strategy that he hoped no-one would pick up. I am pleased to say that he was completely wrong in that and that there has been a lot of concern, particularly about the constitutionality of what he initially proposed in this area.

Sitting suspended from 18:30 to 19: 00