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Transcript of speech to the Financial Services Council: Sydney: 23 August 2013

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Campaign Speech

Treasurer Chris Bowen


It’s great to be joining you this morning, bringing together the Financial Services Council and the Industry Super Network, which to me underlines the fact that what unites the superannuation industry is much more important than whatever may occasionally divide it - the importance of the superannuation industry and financial services to Australia, to individual Australians and to the future of our nation.

The fact that the FSC and the ISN can come together this morning, and more generally, to work collaboratively on improving and growing the industry is, as Treasurer and a friend of the industry, a very good thing.

Well, thanks for coming this morning. I know it’s a busy period. I know its results time, profits reporting time.

It is results reporting time for me as well. It’s also contract renewal time. As we report on the results and seek to renew our contract with the Australian people, there is a story for us to tell; the story of the last few years and the story of how we can build on the last few years going into the future.

The story of the last few years in Australia is a remarkable one.

The fact is that we are 14 per cent bigger as an economy than we were when we came to office; when the rest of the world is largely either the same size in terms of the size of their economy or only slightly larger and many nations are still smaller.

Australia has grown by 14 per cent - a remarkable achievement - a credit not only to the Government, but to industry, the unions and to all, heading through the global financial crisis.

As I’ve said before, the global financial crisis is an Australian term.

You got to the G20 or other international fora and you talk about the global financial crisis, or the GFC, and they look at you strangely.

In the rest of the world it is known as the Great Recession.

It’s what my colleague finance ministers refer to it in meetings, it’s what commentators refer to it as.

Of course, we can’t call it the Great Recession in Australia, because we didn’t have one.

We’ve all lived through a recession. We all know what it means.

It means people being thrown on the scrap heap of unemployment - young people, people who are perhaps nearing the end of their working life but are thrown out of employment before they are ready and find it very difficult to get back in - and it leads to intergenerational inequalities.

So that’s why we make no apologies at all for the actions that were taken and the actions that were necessary for Australian to avoid a recession.

It had a cost in terms of the budget, but it was the right thing to do.

And, as we look at our reporting season, as we look at our results, looking at the budget is an important part of that as well.

You’ll hear a lot about it. Apparently, we’re in a budget emergency - well, it’s some emergency.

It’s an emergency that many countries around the world would be grateful to have.

You will have heard me say that we are one of eight countries in the world that have a AAA credit rating from each of the major credit agencies with a stable outlook - and that’s true.

But, of course, it means more than that.

When we came to office, there were 16 countries in the world with a AAA credit rating, and we weren’t one of them.

Now there are 11, and we’re one of eight with a stable outlook from all three agencies.

As the club has become more exclusive, we’ve joined it.

In 2007, the United States and the United Kingdom were members of the club. They no longer are.

Australia wasn’t a member of the club, and we’ve joined the club.

And why do I make that point about the AAA credit rating?

Well, of course, it’s important in terms of the cost of our interest bill; it’s important in terms of confidence; but it also underlines the strength of the Australian budget.

Yes, there are challenges. Yes, there are things we have to deal with. Yes, there are headwinds to navigate. But we approach the coming period from a position of strength.

We approach it from a position of strength in terms of our fiscal settings; in relation to our national debt and debt rates; we approach it from a position of strength in terms of our real economy.

Again, over our time in office, we’ve gone up the pecking order in terms of the size of our economy - we were the 16th largest economy in the world, now we’re the 13th largest economy in the world, against the headwinds of the Great Recession around the world, overtaking countries that were going backwards in terms of the size of our economy.

And why does the size of the economy matter? Of course it matters in terms of jobs, employment, growth and simply, the national well-being.

So, if we’re going to have a debate about our economy, if we’re going to have a debate about the strength of our nation - great, bring it on.

But let’s do so in context.

Let’s do so based on facts.

Let’s do so based not on overblown rhetoric on the level of our debt, the level of our deficit. Let’s do so based on a clear and calm understanding of our place in the world.

But of course we do face some headwinds coming our way.

You’ve heard me talk about this and you’ve heard the Prime Minister talk about this.

The mining boom, which has been so important to our economy, is now going through a different period.

The investment phase is now drawing to an end.

And of course the investment phase has been very important to us - all of us, right throughout the economy.

Building mines soaks up workers.

It’s provided its challenges and difficulties in terms of managing the labour market, but it’s been a very good problem to have.

But that investment phase is coming to an end and we’re moving into the export phase.

Now the investment phase means that we’ve locked in the wealth for Australia.

The fact that LNG production has expanded so rapidly, and we’re on track to be one of the world’s top LNG producers.

It means that government and industry - working together - have risen to the challenge - we’ve increased supply, locked in the gains for our national wealth.

And the export phase will be important for us for many years to come.

But the investment phase that’s been so important to our economy and it is ending.

Simply, the big mines won’t be there, being constructed, in the next few years.

And that changes very much the nature of our economy and needs careful management.

And frankly, need a bit of imagination and a bit of vision.

And that means working together to make sure the changes in our economy are smooth - not jagged - smooth; and that we don’t face cliffs in terms of economic activity but that we expand and diversify.

And the people in this room have a key role to play in that process. As you know, I’m soft on the financial services industry.

I think the financial services industry is very important for Australia - very important in terms of the savings of individual Australians and providing them with a secure, more comfortable income.

I’m proud of the fact that my party was the party that invented superannuation in an earlier period.

Being Treasurer, just as being Superannuation Minister earlier in my career, means that I am responsible for that great Labor legacy, ensuring that it continues to thrive and prosper.

That’s one of the reasons that I’m proud of the fact that during my time as Minister for Superannuation, the Government took, frankly the bold decision, to raise the Superannuation Guarantee from 9 per cent to 12 per cent.

I’m disappointed that, despite earlier rhetoric, that timetable is no longer bi-partisan. It’s important that it’s delivered.

If John Howard had met his original commitment to move Superannuation to 12 per cent when he was elected in 1996, then Australia’s Superannuation industry would be in an even better and stronger position than it is today.

It’s happening too late - it should have happened in 1996, but we are delivering it now, back in office, and of course, if re-elected, we would deliver it in the timeframe already outlined.

As I said to you in Brisbane, I fear, that having already delayed the increase from nine to 12 per cent as a promise, if the Liberal party is elected on September 7, 12 per cent would frankly not happen.

They will find an excuse to move away from it further if they were elected.

But I do see the financial services industry having an important role to play in expanding its part of the Australian economy in developing its exports.

It’s something that I’m very passionate about.

As Assistant Treasurer I commissioned Mark Johnson to do the Johnson Review. As Minister for Superannuation and Financial Services I received the Johnson Review.

Thanks for being here this morning Mark it’s a very fine report as you will all recognise and I’m very pleased with the progress that is being made in implementing it.

If we are re-elected I will seek to re-energise that process and do even more.

If we are re-elected I’d want to have signatures from my Asia Pacific counter parts on the ASEAN funds management passport.

I raised it with them at the G20 and in our individual meetings and I found the response good and encouraging, but there is much more to do.

I’m pleased that the investment management regime now has its finishing touches put on it but it now needs to be implemented and implemented with vigour.

They’re some of the things we need to do if were re-elected. To take our financial services industry and reinvigorate the approach to exports.

That’s something I’d be very keen to prioritise from September the 8th onwards.

Now the superannuation industry of course faces its challenges, with the report out from APRA yesterday is a good one an encouraging one but there is much to do.

Not just nine to 12 on the timetable that we’ve outlined but other things as well.

I’m proud of the fact that we have made the taxation system of superannuation more fair.

Low income earners deserve a tax concession on superannuation as much as anybody else.

The fact they won’t get that tax concession if were not re-elected they’ll pay the same marginal tax rate on their superannuation contributions as they do on their general income is a great shame. If we are re-elected that policy will remain.

I do want to say something today about taxation and double taxation.

You know, our opponents have said there would be no adverse or unexpected changes to superannuation policy if they’re elected.

Well this week I think we’ve seen a pretty extreme adverse effect and unexpected policy announced.

Paul Keating abolished Australian government taxation in 1987 and this week Tony Abbott said he would bring it back.

To pay for his paid parental leave scheme under a 1.5% levy that he said would be applied to big business in Australia, we now know won’t receive franking credits.

That, to me, is a pretty amazing policy development which re-introduces double taxation in Australia and impacts on every investor, every superannuant, every superannuation policy - a retrograde step by enormous proportions.

You’ve got half a million dollars in Australian shares that means roughly $1000 extra tax a year - a backward step which frankly should be resisted by all of us.

I’m not sure if the Liberal Party realised what they were doing when they announced that policy; I’m not sure whether it was a deliberate move or not, but I know the impact is negative and I know the impact should be resisted.

But I also want to repeat my commitment earlier, again announced at your Brisbane conference John, of our approach to changes in superannuation.

Changes in superannuation are sometimes necessary.

In my earlier life, as Minister for Superannuation not only did we do nine to 12, we completed the Cooper Review including MySuper,.and FOFA.

Again, not everybody in this room would have agreed with every element of those changes, at all times, but we worked through and consulted, but having made those changes it’s now time for consolidation.

It’s now time to let the industry get on with the job.

It’s now time to let the industry implement and provide that certainty.

That’s why it was important for me to say not only will we not make any changes to superannuation if we are re-elected but to go much further than that.

A policy that we’ve announced is that we will legislate the superannuation charter that means it will be in law that there be no major changes to taxation superannuation for a period of five years.

Just as important is the process that accompanies the change we will appoint the board of superannuation guardians.

They will as their five year mark approaches, release their discussion paper on the issues facing the superannuation industry, what changes which maybe contemplated, what changes which should considered by Government and there will be a process of consultation with the sector around those changes and then the superannuation guardians would make recommendations to Government about those changes and Government would consider those changes and then there would be another five year period of certainty until that next period of change began.

I think that’s appropriate.

I know the FSC has been calling for a long time and I know the ISN has welcomed that initiative I think it’s an important one.

It’s simply not good enough to say we won’t make changes you need to have a process around it and that’s the difference in approach that we are taking at this election when it comes to superannuation.

The fact that we will have a legislated process, we will have a council of superannuation guardians and we will have an open and transparent way of dealing with changes.

Changes will always be necessary.

They will be things that you ask for in terms of changes but it’s important that there be a process of dealing with it that gives the Australian people confidence.

Because as I said to the FSC conference in Brisbane frankly the size of the superannuation tax concessions we have in Australia means there will always be a temptation for Government.

There will always be a recommendation before Government from the Department of Finance and Treasury for where things can be tightened - that’s their job.

But that needs to be balanced against the need for certainty and the initiative that we’ve announced means that taxation superannuation will be dealt with from an intergenerational level not a budget level.

It will be looked at in the intergenerational cycle not in a budget cycle.

And I think that is a key difference and one that is time for in Australia given the maturity of our superannuation sector and given where we got to after the period of change we’ve experienced over the last few years - we need times of certainty and times of consolidation.

Now that’s the programme that we put before you and before the Australian people when it comes time to renew our contract on September 7.

That’s our profit result.

That’s our period of results been given to you and our proposals for the next few years if we are re-elected.

If were re-elected I look forward to working with each of you on that great Labor initiative of superannuation.

Consolidating it, implementing it for the good of all Australians, for the good of Australian individuals who now have a scheme in place which means that they are not necessarily relying on the aged pension but can have a comfortable more comfortable secure retirement.

Through the efforts of the superannuation system and the efforts of each of you in this room and the importance of the superannuation financial services industry in

dealing with the headwinds coming towards the Australian economy, diversifying our economy will be an important part of ensuring that our unparalleled and unprecedented record of twenty two years of unbroken economic growth is continued for the good of the Australian people and your contribution will be a very important part of that.

Thanks for having me here this morning.