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Wednesday, 23 November 2011
Page: 9443


Senator BUSHBY (TasmaniaDeputy Opposition Whip in the Senate) (19:45): I note Senator Polley's comments earlier on about beyondblue. You may notice that I have been growing a moustache since the beginning of this month and that is in aid of Movember, which is raising money for both beyondblue and the Prostate Cancer Foundation. My main motivation for that was the fact that my father died of prostate cancer in 1994. But I acknowledge that it is also raising money for beyondblue, which is also an excellent organisation.

That is not why I rise tonight. I rise tonight to discuss the need for the Gillard government to be fairer when it comes to developing and applying its superannuation regulation policies. I use the word 'fair' as this was the word that the Assistant Treasurer used in the debate in the House on 3 November 2011 when he said:

Fees in superannuation are unfair, so we are going to have SuperStream and MySuper and make sure that we put downward pressure on fees and charges in superannuation. We are going to improve and reform the provision of financial advice in Australia.

In my view, and in those views that have been put to me by countless people involved in the industry, it would be an understatement to say that this government's superannuation regulation policies are unfair in the extreme in the way they operate within the industry itself, to the detriment of those on behalf of whom the funds are managed. Further, the Labor government's approach is effectively locking out competition from the market, which can only lead to less than optimal outcomes for future retirees. These may sound like fairly strong assertions, but they are supportable.

Let me catalogue some of the instances of unfairness. As this year ends, we are now into the third year of unfair and anticompetitive allocation of default fund status under the Fair Work Australia regime. What we have is a system which entrenches super fund tenders into an industrial relations approach which predates the superannuation guarantee charge regime and which fails to successfully incorporate advances in the funds' management since that time. This throwback into the prechoice super fund era means that some low-cost funds, funds that meet all the criteria the government says it would like to see offered to super savers, are unable to tender to become default funds. Consequently, for most industries, employers can only choose a default fund from a narrow list of options which have been agreed by employers associations and unions. New offerings and lower cost options are effectively excluded. Worse, we have seen the Fair Work process add some funds to these default super options, including funds like the MTAA fund, which was added as a default fund at the same time as the Australian Prudential Regulation Authority was investigating it for losing lots of money and doing some things that were not in the interests of its members.

I challenge senators to give an example of any other industry which offers its products in such an anticompetitive environment, although I acknowledge that the government is working hard to turn the broadband industry into a similarly anticompetitive state. In this regard, well-known and successful super fund brand names have been excluded from competition. Successful brands with substantial capital backing such as AMP, BT, Colonial First State and MLC—some of whom have offered products in this segment for well over a century—have been locked out under Labor, despite their offerings being of proven stability and appeal. I am not sure how this contributes to fairness in superannuation. What is worse, this approach of locking out the competitors has spanned three ministers—Ministers Sherry, Bowen and now Shorten.

As we move into a new calendar year the government continues to unfairly favour some parties, mainly those backed by unions and unfairly populated with union officials as directors. And we still await some announcement from the Minister for Financial Services and Superannuation—who is, amongst other things, the minister for productivity—on how he intends to drive competition for super fund default flows, which account for at least 80 per cent of superannuation guarantee flows and are in the order of $50 billion annually.

The second superannuation related matter is the unfair treatment that the government affords financial planners relative to super funds. These two players in the financial services industry vie for business in the same industry, and it is appropriate that they do so on a footing that is not rendered unequal through the picking of winners by government. Few would argue in this chamber that we do not need some reform in the financial advice space, and the Ripoll committee has made useful recom­mendations in this regard. However, this government has gone about this job with a reformist zeal which exceeds the bounds of reasonableness, in the absence of a regulatory impact statement, under best practice regulation. Indeed, the changes it is seeking to ram through go way beyond those recommended in the Ripoll report and seek to address high-profile issues in the industry by measures that address problems that were not the cause of those issues but which make good political points for the government.

In the absence of any international or domestic benchmarking, the government's plans to implement reforms to financial planning are likely to make financial advice more expensive and less accessible to many Australians. The government plans to ban certain payments for financial planners and raise the bar for the standard of advice—arguably of benefit if done well and in a way that does not impose unreasonable cost burdens, but if not done well it will impose costs which ultimately will be passed on to those needing advice and in some cases pushing that advice out of the reach of many.

More specifically, super fund trustees and senior management should disclose their remuneration arrangements. To the extent that it is beneficial for financial planners to disclose their payments and have others proscribed as well, surely it would be beneficial for super fund directors and management, who have responsibility for direct management of superannuation funds—a huge responsibility—to have similar disclosure obligations. If it is in the interests of those seeking to invest their funds that financial planners should have to disclose any related party transactions and conflicts of interest, it must also be in their interests of super funds, who also give financial advice to members, to come clean under an analogous regime.

What further concerns me is that our independent prudential and disclosure regulators appear to have turned a Nelsonian eye when it comes to these concerns and have apparently done precious little for a lot of super fund members when it comes to enhanced disclosure and governance, notwithstanding a legislative remit to take action in this domain. Again, to the extent that requiring financial planners to allocate every dollar of costs and revenue to a client's account and not receive hidden payments helps protect super account owners from conflicted decision making, surely any advice rendered to account holders within a super fund should be treated in the same way and, if so, would similarly protect account holders. The final concern I want to raise tonight is in the area of advertising. If a financial planner were to advertise that people should come to his or her business based on a wealth creation projection of 30 to 40 years, I am sure that ASIC would be knocking on their door asking them to explain why their licence to advise should not be withdrawn. It would simply not be acceptable for such a planner to advertise a general statement not backed by any analysis of a particular person's actual circumstances with a conclusion as to what the end balance available on retirement would be some 30 or 40 years in the future. But for some super funds, particularly the union backed industry funds, notwithstanding the fact that there has been a dramatic shift in market fundamentals and returns, a 40-year projection, as indicated by the poker machine reel on those ads, is fair game. Accordingly, I have asked ASIC to examine further this form of promotion, the extent to which these ads reasonably alert the targets of the ads to the vagaries and uncertainties of future projections and whether they may be misleading.

It is time for the minister to stay true to his fairness principle and apply fairness more broadly across his portfolio. With Australia's productivity and competition indices now exhibiting vortex-like characteristics, perhaps the minister should begin his quest for fairness in his own backyard and before the end-of-year break announce that he will address some of the issues which I have identified today. To take these issues further, I have placed on notice a host of estimates questions for our regulators so I can explore the regulator's approach and its thinking on how best to ensure the interests of superannuation account holders are promoted. I look forward to the regulators rendering some guidance to the parliament within the time lines required.

The PRESIDENT: I understand there is an informal arrangement between Senator Rhiannon and Senator Carol Brown and the clock will be set accordingly.