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Tuesday, 1 February 1994
Page: 26

Senator KERNOT —My question is directed to the minister representing the Treasurer, Senator Cook, whom I hope can live up to the standards set by Senator McMullan. I refer to recent press reports regarding the McDonnell & East department chain store in Queensland. Those reports suggest that the company is in severe financial difficulty and that the superannuation scheme for the company's employees does not now have sufficient assets to meet its $1.1 million superannuation liabilities, despite the fact that the fund had $2.8 million of assets just 19 months ago. I ask the minister: firstly, is this shaping up to be Australia's first Robert Maxwell-style superannuation fund rip-off and, secondly, can the minister assure the chamber that all efforts have been made to ensure that employees recently retrenched or soon to be out of a job with the company will receive their full superannuation payouts?

Senator COOK —I do share Senator Kernot's hope.

  Senator Kernot interjecting

Senator COOK —I will take on board Senator Kernot's interjection.

Senator Vanstone —How gracious of you!

Senator COOK —That is right; it is the day of graciousness. As Senator Kernot has said, there have been public reports about an alleged shortfall in the funding of defined benefits in the superannuation fund for the employees of McDonnell & East. The Insurance and Superannuation Commission—ISC—is aware of the circumstances of that particular fund. The provisions of the current legislation are limiting as to what measures the ISC can take, but it is following its usual approach of seeking to protect the interests of the fund members. That is the fundamental concern of the ISC. The Queensland Industrial Relations Commission is also investigating this matter.

  In response to the Industrial Relations Commission's request, the Parliamentary Secretary to the Treasurer approved an ISC recommendation that the ISC give relevant information to the Industrial Relations Commission to help that commission's considerations. This was judged by the Treasurer to be in the public interest. There are no legislative provisions in the Commonwealth legislation now for any shortfall in the funding of defined benefit funds to be made good. The question of any obligation that might arise to fund members may be a matter to be resolved by an administrator, whom I understand has been appointed by the controlling company, North Quay Ltd, or in legal processes. New Commonwealth legislation for the prudential supervision of superannuation is intended to give more protection to fund members and greater powers to assist members' interests, which should generally assist cases such as the McDonnell & East case. That legislation—the Superannuation Industry Supervision Act—comes into effect on 1 July this year.