Acknowledgements
I acknowledge the Kaurna People as the traditional custodians of the land on which we meet and pay my respects to their elders past, present and emerging.
I also acknowledge Eva Scheerlink, CEO of the AIST and give a shoutout to her and her team for organising this conference.
Introduction
In seven weeks’ time, Australian workers will receive an additional 0.5 per cent in their superannuation contributions.
Although legislated eight years ago, and promised before the last election, its delivery has been anything but certain.
The Government’s war on superannuation has raged since the 2019 election results were in.
The Budget handed down last week represents a ceasefire in that war - but nobody is declaring victory.
Workers will benefit from the halt in hostilities from the Government.
Industry Super Australia estimates the July increase will deliver a 30-year-old worker on a median salary an extra $19,000 at retirement.
This is a good thing, as workers themselves increasingly understand.
Polling conducted for Industry Super Australia shows a sharp rise in opposition to the Government’s plans to freeze super contributions, especially among workers approaching retirement.
Two-thirds of Australians overall now support an increase in their super contributions to the legislated 12 per cent, against just a third who support a freeze.
You would think numbers like that would settle the argument once and for all, but there are no signs that is the case within the Coalition.
Last week the Treasurer pointedly refused to back in the legislated 12 per cent contribution rate as the Coalition’s ‘forever’ policy.
He is briefing journalists up and down the press gallery that he was indeed moving in the budget to cut super contributions, but Scott Morrison vetoed him.
That will only encourage the backbench sniping from the anti-super radicals who are not giving up their campaign to smash our world class super system.
The rise to 10 per cent was hard won and it won’t repair the damage done by $37 billion that has been removed from super through the poorly designed and administered Early Access Scheme.
But it does ensure the millions of Australians will be closer to enjoying a dignified retirement.
I also want to welcome the removal of the $450 monthly threshold for superannuation contributions, unveiled in last week’s Budget.
For too long, 300,000 low paid casual workers have been denied the benefit of superannuation savings.
Sixty-three percent of those 300,000 workers are women.
Their inclusion in the superannuation system will provide them with a modest but important contribution to their retirement savings.
The Superannuation Minister, Jane Hume, should be congratulated for succeeding in convincing her colleagues to include this measure in the Budget.
It’s all the more remarkable given the number of Coalition MPs who had spent the previous 12 months campaigning against these exact measures.
This represents a significant change of heart for many in the Coalition, directly attributed to the fantastic advocacy of many organisations who have championed the cause.
Super has played a critical role in helping Australia through the pandemic and can be at the core of a strong, sustainable recovery.
Prior to the pandemic, our $3 trillion pool of national savings helped build airports, roads and bridges that keep our economy moving.
During the pandemic, the long term, patient nature of super investments provided a reliable backstop during a time of extreme uncertainty.
And yes, there were those who benefitted from being able to access their super savings to see them and their families through the financial crisis brought on by the pandemic.
As the economy climbs its way out of the deepest recession in almost a century, super will be there again to give a helping hand.
It is investing in renewable energy projects that are powering a new low emission, low cost energy future.
It is providing capital to build affordable housing, addressing a social need while supporting construction jobs.
Most importantly, it is giving workers confidence that their future is secure and their savings will continue to grow through thick and thin.
Your Super, Your Future
But super’s critical role in our economic rebuilding is far from certain.
There are threats to our world class system.
One such threat is the Your Future, Your Super legislation currently before the Parliament.
I expect that legislation to be debated when Parliament resumes next week, so it is timely I am speaking to you about it now because its fate is far from certain.
It is supposed to improve fund performance, an objective we support.
But sadly, the legislation is deeply flawed.
Labor and crossbench MPs and senators have foreshadowed significant amendments to what the Government has proposed and I do not expect an easy passage for the bill.
Labor alone has identified eight substantial amendments. But for today’s purposes I’d like to focus on the two of most significance.
Firstly, the stapling provisions in schedule one which could see three million workers defaulted into an underperforming fund for life.
And secondly, the directions power in schedule three which give the Treasurer the power to cancel any super investment.
Before I get into the details, I want to be quite clear about one thing: Our aim is to save the bill, not to sink it.
Labor supports measures for the benchmarking and performance management of funds.
For too long, underperforming funds have delivered subpar returns and robbed Australian workers of a better retirement.
The Productivity Commission has estimated underperforming funds are costing workers more than $3 billion in lost savings each year, so it is important we fix this.
If it takes a robust and independent performance measurement regime to put a spotlight on underperformance, then so be it.
But that is not what we have before us in this bill.
Stapling
Schedule One of the bill concerns the stapling of fund members to a single fund for life.
This was a recommendation of the Hayne Royal Commission, though Commissioner Hayne was not given the power to suggest a specific mechanism.
There are at least two ways that stapling could be done.
The first would staple members to their money, which, with the assistance of tax file number tagging, would move with the employee from one fund to another when they change jobs.
This method has the advantage of ensuring insurance coverage is appropriate to the workplace and occupation of the worker.
This is especially important for dangerous jobs like construction or frontline medical jobs like nursing which both involve higher risk than the average worker faces.
The other method, the method which has been chosen by the Government, will mandate that an employee is stapled to a superannuation fund for life.
Even when the worker changes jobs or industries, they will continue with the same fund they defaulted into at the start of the new arrangements.
For most workers, this will be their current fund.
For new employees, it will be the first fund they join when they enter the workforce.
Schedule two of this bill establishes the architecture for performance measurement.
As I said, Labor supports holding funds to account for their performance because that is how workers’ wealth is built.
The Productivity Commission showed the difference between a low and a high performance fund can be as much as $500,000 in retirement savings.
The Governments proposals would mandate that an underperforming fund will be closed to new members and existing members will be notified.
There is of course an obvious deficiency with this plan.
What happens to members who don’t shift their money to another fund?
The stapling measures in schedule one of the bill will be leave them languishing in a fund which the Government has identified as certain to destroy their retirement savings.
This is devastating.
There are likely to be as many as three million accounts in under-performing funds.
The Productivity Commission estimates that there is around $270 billion invested in underperforming funds in the MySuper sector against $405 billion in well-performing funds.
So long as there is an absence of a plan to actively manage the members in those underperforming funds into better performing funds, Labor cannot support the bill.
If we are to achieve the Government’s aim of improving performance and delivering better retirement income for workers, this must be fixed.
The consequence of the Government’s proposals will have employees stapled to a fund which the Government itself says is performing so badly it will be prevented from accepting new members.
This is extraordinary.
The Productivity Commission tells us the difference between a high performing and underperforming fund can be as much as $500,000 in lost retirement savings.
The Government is therefore entering workers into a lottery, where the winners have a dignified retirement and the losers have come up with half a million dollars from elsewhere when they retire.
The measure cannot be allowed to stand.
The bill will not proceed if the Government does not remove this measure.
Investment Kill Switch
That brings me to schedule three of the bill.
This legislation introduces a new ‘best financial interest duty’ for superannuation funds and trustees.
This runs contrary to recommendations Commissioner Hayne made in the final report of the Banking Royal Commission, who observed introducing a new duty is redundant and risks blurring rather than clarifying duties.
Schedule three also contains a new reverse onus - the direct impact of which will be an obligation on trustees to document a business case for every expenditure from a box of paper clips to the purchase of a high-rise office tower.
It’s an interesting measure to come from the pen of the minister who once trumpeted himself as the Minister for Red Tape Reduction.
If this was the only problematic measure within schedule three, it may well have passed without significant attention.
Regrettably, it’s not.
The proposed law contains an extraordinary and unprecedented directions-making power that makes Josh Frydenberg Australia’s Superannuation Trustee-in-Chief.
This power allows him to cancel any investment he does not like.
That’s kryptonite for investment certainty.
It creates the type of sovereign risk normally associated with tin pot dictatorships.
It is unfathomable that Liberal Party and National Party MPs would vote for a provision of this sort.
Yet, unbelievably, it sailed through the Coalition party room unnoticed.
As such, I took the initiative earlier this year of writing to each and every MP and senator, as well as several business and community groups, to draw their attention to this diabolical provision.
As a result, many are now raising concerns.
Two strong voices emerging on this come from right here in South Australia in the form of crossbench senator Rex Patrick and Stirling Griff.
As Senator Patrick has observed, this Government has demonstrated though its use of directions powers in the Biosecurity Act that it cannot be trusted with such discretion.
Just ask the thousands of Australians threatened with jail if they return from India.
The senator’s point is well made.
We have also seen the Resources Minister, Keith Pitt, use directions powers in the Northern Australia Infrastructure Fund to cancel a $300 million investment in a wind and battery farm in that state.
Never mind the 250 jobs and clean, low cost energy the project would have created, Minister Pitt just doesn’t like wind farms and batteries.
It is not hard to predict how the directions powers contained in the Your Super, Your Future bill could be used.
More wind farm investments could be cancelled, like the one I visited in Snowtown this morning which has AWARE super as a major investor.
Conversely, in different hands the kill switch could be used to cancel a coal mine.
Indeed, there is almost no end to the ways the kill switch could be deployed.
When John Howard brought in WorkChoices, he directed government procurement agencies to favour tenders from businesses which used individual enterprise agreements.
That set a precedent for how such directions can be used to advantage ideological ends.
It is conceivable Labor would use the directions power currently being contemplated to advance our agenda.
One option open to us would be to order the cancellation of investments in companies which have been found guilty of wage theft or consistently demonstrate a poor industrial relations record.
Given the size of the political can of worms this legislation will open up, the silence from the business lobby has been deafening.
I do note the Australian Industry Group has voiced their concerns this week and I thank them for taking this issue seriously.
But it is extraordinary they have been left by their fellow travellers in the business community to fight this alone.
It will be difficult to take credibly any future claims from the business sector about sovereign risk if it allows the Treasurer to take control of $3 trillion worth of funds under management without so much as a whimper.
Conclusion
Labor has now been on the record for more than six months about the serious flaws in Your Super Your Future.
We have done this not to kill it off, but to make it better.
Rest assured that as debate begins in the Parliament, we will continue to pressure the Government to amend its legislation to conform with the goals it has set itself.
Australian employees work hard for their money.
They have a right to expect their retirement investments work just as hard for them.
We cannot support a bill that does not achieve that simple objective.
I again call on the Government to work constructively with Labor to fix what’s wrong here.
Let’s do it once and do it right.
