A strawberry isn't a berry, and the Liberal Party isn't liberal
HOUSE OF REPRESENTATIVES
WEDNESDAY, 2 JUNE 2021
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A sea monkey isn't a monkey. A shooting star isn't a star. A koala bear isn't a bear. A firefly isn't a fly. A strawberry isn't a berry. A jellyfish isn't made of jelly. And the modern Liberal Party certainly isn't liberal. If you needed any more proof that the modern Liberal Party has become the illiberal party in Australia, look at this bill before the House, the Treasury Laws Amendment (Your Future, Your Super) Bill 2021, which gives the Treasurer the power to unilaterally cancel investments. As the member for New England, Barnaby Joyce, has just pointed out, this is a measure that could cut directly to the heart of the market system, by giving the Treasurer Chavez-like powers to cancel any investment he doesn't like. It has been called a measure that would 'do more harm than good' and 'create new compliance burdens that would add new costs and risks and would divert management and board attention'. It would represent 'arbitrary powers granted to the Treasurer of the day' that 'would set a dangerous precedent and would add a new and unpredictable source of sovereign risk to the investment process'. Which union leader or Labor member said that? It turns out to have been Innes Willox, the head of the Australian Industry Group, who also said that, if there had been a regulatory impact statement for this bill, then it would not have survived.
The fact is, the member for New England was right: this is a power which the government intends to be used so it can knock off decisions by superannuation funds that take into account climate risk or the gender composition of boards or risky industrial relations practices that might have some short-term gain but a long-term cost. However, once granted, that power could easily be used by a Treasurer of a different persuasion to cancel the kinds of investments that those opposite would hold dear. As the member for New England has pointed out, there is nothing in this bill that would prevent a future Treasurer from cancelling a coal investment just because they didn't like coal.
This bill has been a long time coming. I went back into the archives to look at some of the argy-bargy around this issue. In March 2019 we had AustralianSuper speaking to BHP about whether their work practices ultimately might cause problems for the bottom line. In response to former Australian Industry Group head Heather Ridout's intervention on behalf of AustralianSuper, we had the Statler and Waldorf of attacks on superannuation—the members for Goldstein and Mackellar—come out and put in the media shockingly personal attacks on Ms Ridout. The member for Mackellar described her comments as being ‘shockingly partisan’. The member for Goldstein said, 'She's either an apologist for union strangling of industry, or completely captured and foolish.' But the view that you need to look at corporate practice in order to ensure long-term sustainability was backed up by none other than former ANZ chair David Gonski, who said, in reference to the problems that led to the banking royal commission:
There is absolutely no doubt—and we weren't alone in this—in thinking from time to time short term and finding things to fix quickly.. but we didn't think through in the longer term.
Mr Gonski defended the approach of Australian Super as an investor, saying that ‘every single shareholder is entitled to have their view and put it to us’. That sort of long-term thinking is part of where smart investors are at—considering social, environmental, longer-term governance considerations. If you are a company whose profits are based on the fact that you are channelling profits through a tax haven then that is a real risk to the long-term stability of your investments. Investors are right to look at whether those tax practices are putting their investments at risk. Likewise, if you have an investment which is failing to take into account climate risk, as large Australian companies that are well managed now do, superannuation funds might then consider your practices. There is nothing wrong with those superannuation funds taking a broad view.
This bill contains a political override power which should chill members of the coalition. The member for Whitlam, who has been championing this issue for months now, has written to all members of the coalition, pointing out this risk, just in case they missed it when it went through their party room. We know that crossbenchers are concerned and the National Party is concerned, as we have just heard today from the member for New England. This is a measure which is fundamentally illiberal.
The bill starts from the principle that we need to reduce total fees in the superannuation sector. I agree entirely with that. The Grattan Institute's report on superannuation fees noted that Australians pay some $30 billion in superannuation fees. That was a 2018 figure, so today's number is surely higher. That amount was then two per cent of GDP. The Grattan Institute pointed out that a household nearing retirement would be paying average superannuation fees of $3,700 a year. The Grattan Institute pointed out that the amount the Australians spend on superannuation fees is more than they spend on energy, which accounted then for $23 billion. They noted that there are a range of duplicate accounts. One-third of all superannuation fund accounts, about 10 million of them, are unintended multiple accounts. They pointed out, too, that there are almost five million super accounts in high-fee funds costing $1.3 billion a year more than low-fee funds. The Productivity Commission's analysis put the difference between choosing a high-fee fund and a low-performing fund at $635,000 for a typical full-time worker in retirement. So that is a massive cost for workers in high-fee funds.
High-fee funds are over-represented in the for-profit sector, which stands to reason. If someone has to take a profit margin out of your investment, it is more likely that you will end up with higher fees and lower returns than if you are in a not-for-profit account. That is not to say that all not-for-profit superannuation funds deliver high returns for their members. Some are clearly too small to get economies of scale and will need to merge in order to do the best for their members. As Deputy Chair of the House Economics Committee, I have been working hard to ensure that we hold the feet to the fire of those superannuation funds who are not doing the right thing by their members. The APRA heatmap has been important in this because it gives us the ability to directly say to underperforming superfunds, 'Well, why are we seeing so much red in this map here when we look at the performance of your funds?' That is all to the good. But the problem with this bill is that it fails to deliver on the promise of reducing duplicate accounts and reducing superannuation fees. The approach being taken to stapling means that members can be locked into underperforming funds. Treasury's estimate is that up to three million Australians will be stapled to underperforming funds from the first day of the bill's effect. This is a measure which could effectively lock Australians into funds which deliver $635,000 less in retirement.
That means a lower standard of living in retirement for those Australians and a higher reliance on the age pension, meaning that the rest of us taxpayers will end up having to pay more to support those people in retirement.
There is a reverse onus of proof, which was criticised by Labor senators when this bill was referred to a Senate inquiry and has been opposed by the Law Council. Such reverse onuses of proof are more commonly found in terrorism-related pieces of legislation than in a bill relating to superannuation. The performance measures proposed don't extend to all choice products and will initially cover only MySuper products, which means approximately a third of all assets managed by APRA-regulated funds will be excluded from the performance mechanism in their entirety.
This is a bill which Labor cannot support in its unamended form. It's a bill which has flowed from the coalition's ideological dislike of superannuation. When universal superannuation was first legislated there were many on the other side of the House that attacked it. I think of former member for Mackellar Bronwyn Bishop—she was then in the Senate—who told a story about how there had already been small businesses forced to close because they had to pay the cost of universal superannuation, prompting the late senator Peter Cook to interject that it was a bit strange that those businesses were closing given that the universal superannuation law hadn't yet come into effect. The fact is that, after we introduced universal superannuation, workers saw strong wage growth, and the pause on increasing the superannuation contribution has not been associated with a surge in wage growth. Indeed, the coalition have presided over the worst wage growth in history and have just brought down a budget which sees real wages go backwards. So, if there's anybody who has no right to talk about wages, it is the coalition.
The fact is workers need that high level of superannuation contribution. Those opposite campaigned hard to stop the increase to universal superannuation. I know the member for Goldstein strongly opposes the increase to universal superannuation. He believes, like so many on that side of the House, that 15 per cent is okay for them but that the workers shouldn't get 10 per cent. Of course it's not a position that Senator Bragg has always taken. Senator Bragg once argued that we needed to increase universal superannuation contributions as quickly as possible, but he has now changed his tune and joined with those on the other side of the House who want to keep the universal superannuation contribution for workers low but who themselves enjoy the benefit of 15 per cent superannuation. That holds true with the Prime Minister, whose 15 per cent superannuation contribution ends up being higher than the salary for many regular workers. The fact is that Australia's pool of superannuation has meant that we have greater stability in the economy.
I'll finish where I started. When I was studying in the United States in 2000, we saw the election of President George W Bush, and the Republicans at that time were campaigning hard for private social security accounts. As an Australian, it took me a bit of time to get my head around this—that the Democrats were opposing private accounts and the Republicans were supporting them. But here we have the strange situation where it was a party of the Left that introduced universal private accounts and that saw the benefits for workers in getting those strong share market and property gains and those strong gains in the value of infrastructure assets. Yet, it's a party of the Right that is trying to white-ant superannuation and that attacks superannuation at every possible turn, whether it's attacking ISA or attacking proxy advisers, who do nothing more than provide independent advice to superannuation funds and, indeed, to other share market investors.
Those opposite won't stop at any turn to attack our effective superannuation policy, which has ensured that our pension is more sustainable than almost any in the world and will deliver dignity in retirement to millions of Australians.
Authorised by Paul Erickson, ALP, Canberra