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Monday, 4 December 2017
Page: 9445

Senator WHISH-WILSON (Tasmania) (11:32): It seems a bit like groundhog day. It seems like only yesterday we were in here debating an almost identical bill. The Greens actually believe that the legislation before us is precisely the wrong model for the superannuation industry. We've argued for some time now that what's not broken doesn't need fixing, and no-one yet has provided a compelling argument that the model we have before us, administered by Industry Super Australia, is broken. Where is the evidence that the current system is not working? It wasn't provided when we debated this bill earlier in the year and it hasn't been provided to us now.

In my contribution today, I also want to talk a little bit about the announcement of a royal commission last week and address some of the concerns around the terms of reference and how they may be targeting industry super funds. Before I get to that, these superannuation bills introduced by this government risk dismantling the not-for-profit superannuation sector and giving the banks a leave pass on some new transparency and disclosure requirements. Australians will be concerned that the government's agenda is not about improving governance and transparency but about advancing the commercial interests of the banks.

The Superannuation Laws Amendment (Strengthening Trustee Arrangements) Bill 2017 will dismantle the successful industry super and not-for-profit super governance model, and the Treasury Laws Amendment (Improving Accountability and Member Outcomes in Superannuation Measures No. 1) Bill 2017 will enhance trustee obligations and regulatory powers in the default super sector, but not the 83 per cent of retail sector assets dominated by the big-bank-owned funds. The government still haven't advanced any evidence that their proposals will improve returns for members. They've talked about risk management and improving governance, but at the end of the day the track record is clear: for the 10 years to 30 June 2017, SuperRatings data shows on average that industry super funds have outperformed bank-owned super funds by more than two per cent a year.

Meanwhile, in the banking sector, ANZ have to pay an extra $10.5 million to 160,000 customers after ASIC found they incorrectly processed member super contributions and failed to deal with the loss in active member balances correctly. CommBank had to repay an estimated $105.6 million for charges fees where no advice was provided. As of 19 May 2017, CBA had repaid or offered to repay only $5.85 million of that. We've had ASIC alleging that Westpac's subsidiaries provided personal advice to customers, recommending that they roll out their other superannuation funds into Westpac-related superannuation accounts, even though they were not legally allowed to provide personal financial advice. We've seen with NAB, the last of the big four, that super trustee NULIS Nominees had to repay $34.7 million to 220,000 super accounts in February 2017. It charged planned service fees between September 2012 and October 2016 to clients for general advice where no plan adviser had been appointed to provide advice. So here are some examples where we've seen bad behaviour in the profit sector of the retail industry, and there's been no discussion whatsoever about that from the other side of the chamber in this debate.

For those who are new to this debate and are listening in, essentially—and at the risk of oversimplifying things—we have two sectors in superannuation. We have a for-profit sector, often called the retail sector, and we have a not-for-profit sector, which is often associated with the unions and employer representatives. The government previously introduced into this place a bill to try to bring in independent directors and change the equal representation law that is in place between employer representatives and workers. They've said that's necessary to provide new expertise and better governance, to reduce the risks to industry super members. But, as I've previously shown, industry super funds have outperformed for-profit retail funds.

The one thing that might not be known by those listening to this debate is that when the Liberal-National Party say that union reps sitting on the board are making complicated investment decisions—and I listened to the contributions from other senators when this debate was on a few weeks ago when they were asking: where do union reps get their expertise in providing financial advice or looking at asset allocation between portfolios? What they neglected to tell you was that these industry super funds use IFAs, independent financial advisers. They outsource their financial advice and most of their asset allocation decisions to highly qualified and experienced experts. That's why their funds have done so well. So, to somehow portray a risk to members because union reps are making decisions and say that these union reps should be on the shop floor doing some welding or boilermaker work and not sitting on the board of an industry super fund, is actually wrong. They're there to represent the workers but they're not necessarily making the financial decisions; those decisions are being outsourced to IFAs.

We've also got some very progressive models that the industry super funds have run. I initiated a Senate inquiry a couple of years ago that looked at infrastructure spending in this country. It found that some of the industry super fund long-term allocations going to infrastructure have been some of the most productive and high-returning in this country, investing in long-term assets—and not just investing but also managing assets. They have been very progressive and very successful. I also like the fact that workers' super funds are being directly invested in our economy, not only helping to produce long-term productive infrastructure for this nation but also providing jobs to workers and stimulus to our economy. That's something that the Greens support, and industry super funds are to be commended for some of the great investment work that they've done and are continuing to do in those sectors.

To somehow portray this as being a matter of expertise—that there are risks to the governance of these structures and that those risks come directly from the fact that union reps, who are there to represent workers, are risking the returns of investors—is false. The real reason that the government has brought on these bills is that the salaries those union reps—and they're on record about it; there's no lack of disclosure—get paid are put back into the unions. And this government has done everything it can since it's been elected in the last two parliaments to attack unions. This is all about an ideological agenda by the Turnbull government to attack unions and workers. There is no evidence that the current structures as they exist are broken and don't provide good returns for investors, super fund members in the industry super sector or their workers. This is part of an ideological attack.

Before I go into a little more detail, I want to address the royal commission that was announced last week. I want to say, more broadly, that it's in absolutely no-one's interest for this royal commission—a royal commission that the Greens have campaigned on for nearly four years, especially the financial services sector, the banks, the insurance companies—to be some kind of half-baked, whitewashed, Clayton's royal commission, or for it to be a royal commission that is overtly political and set up to target, as has been portrayed by some in the media, industry super funds or the government's enemy, the unions. I've got a couple of things to say on this. While the terms of reference are more prescriptive in targeting industry super funds, the parliamentary commission of inquiry bill that the Greens initiated in this place that went through—with the support of Labor, the crossbench and Senator Williams—also allowed a commissioner to look at industry super funds. It wasn't discussed then, and there was no mud throwing going on at that time. I just want to make it clear: this place has already sent a bill down to the other place, the House, for a royal commission that reports to parliament that included this more broadly in its terms of reference.

I also want to say that, if the government's view was that they needed a royal commission and a commissioner to look at industry super funds and to discover some kind of rorting of members, misconduct, or fraud, a royal commission has, just recently, looked at industry super funds. I've got the terms of reference here, and the section from the recent government inquiry into unions and union misconduct, and it found almost nothing. What's there to see here? Once again, I think the inclusion of something a bit more descriptive about industry super in the royal commission terms of reference last week was simply something to soften the belly-flop, or the backflip, that Mr Malcolm Turnbull did last week. He was throwing a bit of red meat to some of his more conservative backbenchers and frontbenchers to soften the blow.

I don't believe it will be the case that a royal commission set up for only 12 months is going to spend all its time focusing on industry super funds. They already disclose all their payments; they've got nothing to hide. A royal commission's already looked at it. But, most importantly, we're already here with the government's agenda debating legislation before us to change—to break open and break apart—the industry super fund model. Why would the government want a royal commission and a commissioner to look at this issue in detail, when they've already made up their minds about their legislative agenda?

We have two bills before us to dismantle the not-for-profit sector in industry super. So why bother? That's another reason why I don't believe that the royal commission announced last Friday will spend a lot of time focusing on this particular issue. Lastly, having sat on numerous Senate inquiries for a number of years, as have other senators in this chamber, I believe that the commissioner—especially with a 12-month time frame, which, by the way, is not long enough; the Greens' parliamentary commission of inquiry bill, supported by the Senate, was for at least two years—is going to have so much work to do dealing with those issues that cause the most harm and are the most urgent or pressing. This issue about industry super funds is not urgent or pressing. There is nothing to see here, as the recent Abbott commission into union corruption found. There will be plenty of work for a commissioner to look at. I think there's going to be a tsunami, an avalanche, of information provided to that commissioner. Let me say, in relation to that 12-month time frame: 12 months is not long enough.

I don't agree with Senator O'Neill that the banks wrote the terms of reference for the royal commission announced last week. The reason I don't believe that is that some of those terms of reference were taken almost directly from the Greens' bill that passed this place. I'm unhappy with some of the omissions from those terms of reference. There are things I would have like to have seen in the terms of reference, but I don't believe they've been written by the banks. Let me warn the Prime Minister and the big banks and the financial services companies: if you think this issue has been political to this point—a 'political football' was the way it was described—you just wait and see what political is going to be if this royal commission is a whitewash or is even seen to be a whitewash.

This will be the most scrutinised royal commission in this country's history—there's that much public interest in it. If this is even seen to be a whitewash, just you wait to see what political is going to be, especially in the 12 months going into a federal election. With Labor wanting to own the royal commission—they were happy throwing mud at the announcement last week; fair enough; that's politics—and Labor campaigning on this going into a federal election, if the banks actually want to have trust restored in the financial system and in themselves, then I warn them and the government to make sure this is not a whitewash or a clayton's royal commission. This royal commission has to have the powers and the resources to get to the bottom of some systemic issues in this country that have caused misconduct—the misconduct that a number of senators in this Senate have witnessed and felt helpless that they couldn't do anything about—so that those issues can be fixed and so that victims of financial crime and misconduct can get properly compensated.

Until the banks get out of the bathtub fully scrubbed up, this issue is not going to go away. I will make that really clear today. For all of the people who think that this is going to be a whitewash, that it's going to be a furphy and that the banks only want a limited royal commission, so it's going to be a waste of time and money—it can't happen. It's going to be a whole lot worse. The door is now open and it's not going to be closed until this issue is dealt with. To finish on this legislation: the government can ask a commissioner in the next 12 months to look at these issues, but we clearly have an agenda before us today to change and dismantle the industry super model.

There are a couple of other things I want to say. There are some things, some of the high-level objectives of this bill, that I will admit, on face value, seem quite reasonable, but, regrettably, this reform package requires significant amendment to deliver on any potential to improve member outcomes, accountability and transparency. It fails to include all superannuation products in the strength and outcomes test and assessment framework. As I mentioned before, the vast majority—nearly 83 per cent—of bank-owned and other retail superannuation assets are held outside MySuper and will be excluded from the requirement. This is the case notwithstanding that such products, on average, underperform MySuper products, where the majority of industry super funds are held. It provides APRA with new powers to administer the superannuation sector, but in a manner that seems ineffective when it comes to bank-owned and other vertically integrated retail super funds. In particular, the enhanced power to issue directions to connected entities would typically exclude the bank-owned funds, parent companies and party-related service providers.

By the way, while we're talking about a royal commission, the terms of reference that have been set out in the last week actually allow very good and in-depth insight into vertically integrated business models, the conflicts of interest, the high fees, and the money that goes towards profits for the big banks and financial services companies. To those who think it's just about targeting superannuation funds, the terms of reference and the advice that I have show it will easily allow a commissioner to look at the for-profit sector and the problems inherent within that for-profit sector, not to mention the allocation of the for-profit super funds' or investment funds' revenues going into things like unethical investments—investments like Adani that will end up ruining the environment. Anyway, I digress.

The look-through reporting requirements for operating expenses have been modelled on the look-through reporting requirements for investment, which have allowed two-thirds of the super funds owned by the big four banks, Macquarie and AMP to disclose absolutely zero investment expenses or member investment fees. They fail to address the key areas of longstanding inefficiency and opacity in the system and, in particular, the underperformance of the retail sector, which I have already alluded to. They've reduced retirement savings across the system to the tune of $135 billion since 1996 and increased the fiscal impost on the federal budget in the form of increased age-pension outlays. I could go on; there are a number of faults. But, luckily, we have another superannuation bill which we'll be debating very soon, so I will be able to continue this discussion.

To wrap up, this is precisely the wrong model. The simple adage is: if it ain't broke, why fix it? This government is only trying to fix it because it wants to attack the unions and workers. This is part of an ideological crusade to not only undermine the unions and workers in this country but provide a leg-up for their big-business mates in the banking sector.