I rise to speak on the merits of this bill, and to document some ongoing concerns I have with its provisions.
As an Independent, I have the privilege of assessing each bill that comes through this place on its individual merits.
This bill is no exception.
I’ve also made sure I consult deeply on this bill.
I’ve heard from constituents and small businesses across Indi about super reform, including through an online Budget Survey which received over 1400 responses just last week.
I’ve met with representatives from various super funds who would be immediately affected by these reforms.
And I’ve met with the Minister responsible for this bill to quiz her on the evidence the Government is relying on to justify these reforms from the Productivity Commission, the Senate Inquiry, the Royal Commission, and industry consultations.
On the whole, this is not a straight up bad bill.
It seeks to prevent workers from racking up multiple super accounts and unnecessary fees.
It creates an ambitious performance test to make sure our precious retirements savings are not squandered away in poor performing funds with no accountability.
And it sets up an online tool that would make it easier for workers to assess how well their fund is doing and make an informed choice about whether to invest it elsewhere.
These are all well intentioned reforms I can support.
But there are parts of this bill – particularly the directions powers given to the Treasurer in Schedule 3 – which I simply cannot support on behalf of the communities of Indi.
I know there are Members on both sides, including the Government backbenches, who share these concerns and I commend them for doing so publicly in the House.
I’ll now turn briefly to each Schedule.
Schedule One introduces a new stapling system which will ensure workers keep the first super account they open unless they make a proactive decision to change.
Stapling is a good thing if it’s done right.
Australians pay $30 billion per year in super fees, which are among the highest in the world.
More than 1 in 5 Australians have unintended multiple accounts, and some estimates have Australians wasting up to $6.5 billion per year on avoidable costs and fees.
We should be doing all we can to stop this dreadful waste.
But the fact of the matter is, you can’t staple people to their existing funds overnight and expect to solve the problem.
The Productivity Commission explicitly recommended that super funds be subject to performance testing before introducing stapling.
And there’s an important reason for this: we shouldn’t be stapling workers to an underperforming fund.
Current Treasury estimates suggest 21 out of 77 MySuper products currently held by around 3 million Australians would fail the performance test.
We also know Australians are sticky decision makers when it comes to their super. If we staple 3 million people to underperforming funds, we risk keeping them stapled for years to come: especially if performance testing doesn’t work out as expected or if people don’t end up using the comparison tool like we’ve seen with other government tools in the energy market.
Sure, the Australian Prudential Regulatory Authority publishes heat maps that show economists and other experts how well funds are performing.
But those maps are buried in 1000-page reports deep on Government websites. No worker is looking them up.
At the end of the day, stapling before performance testing doesn’t kill this bill. But it sure makes it a risky one.
We’re essentially banking on a lot of ducks falling into place down the track to make sure this works properly.
A better bill would have mandated testing for two years before stapling, and I’ll support any detailed amendments to that effect. But I won’t oppose the bill on this basis.
I’ve also heard a number of other concerns about Schedule One including the administrative burden it’d place on the ATO to have stapling ready-to-go in just four weeks’ time, the possible impact of stapling on workers in high-risk industries, and the risk that stapling will encourage super funds to engage in predatory marketing with young people starting their first job so that they “get them for life”.
I’m less worried about these concerns, and, on balance, could support Schedule One amended or unamended.
Schedule Two establishes a new performance test that goes beyond the current “CPI plus” industry benchmark. If funds fail this new test, they’ll face a number of consequences. If they fail the test repeatedly, they’ll be prevented from signing up new members and eventually driven out of the market.
Again, performance testing is a good thing if done right.
For example, it wasn’t until a few weeks ago that the Government decided to include administration fees as part of performance testing.
This exclusion created a concerning loophole that would’ve allow unscrupulous super funds to ‘game’ the performance testing system. I was pleased to see that change.
The loudest concern I heard about this part of the bill was the decision to subject industry-dominated MySuper products to performance testing before retail-dominated Choice products.
I’ve spoken to a few Members in this place who are reading the tea leaves here, suggesting that the Government wants to create a run on industry-based funds.
This might be true, it might not be true. But one thing is clear: we can’t have rules for some, and not others. Not when the stakes and figures are this high.
There’s over $818 billion in assets under management in industry funds, and over $630 billion in retail funds.
The data is there right now to performance test all products, there should be no excuse.
I’ll be pleased to support any detailed amendments that fix this oversight. And if it’s not fixed, I’ll work with colleagues in this place to put pressure on the Government to do so through immediate regulations.
Schedule Three of the bill is a whole other beast.
Section 117A has been criticised by Members on both sides of this House, and I wish to add my voice to that chorus.
That section would give the Treasurer a broad and unilateral power to block certain kinds of investments super funds are making, purely because the Treasurer believes they’re “not in the members best financial interests”.
We’re talking about pure political decision making here.
This power could be used to strike out clean investments in renewables overnight, without justification.
It could be used to defund important corporate social responsibility programs that promote women in executive leadership or greater cultural diversity on ASX 200 boards.
The truth is, we have no idea how this power would be used.
And it would create an unacceptable level of sovereign risk in a $3 trillion-dollar financial industry that no one has asked for and could be totally avoided.
I cannot find one recommendation, one report, one stakeholder, one local business, or one constituent who supports this provision.
Whatever the rationale, it’s unacceptable.
APRA currently has broad powers to intervene when super funds are not acting in their members best financial interest.
APRA makes its decisions based on fiduciary duty, not political whim and opportunity. If the Government believes that APRA could be better equipped to enforce that power independently, then it should support it to do so, not call it in and turn independent regulation into a political playground.
I see no reason to support Schedule Three, and it’s on this basis that I will be opposing this bill.
Before I conclude, I’d like to speak briefly about other superannuation reforms that the Government has floated in recent months.
Earlier this year, there was the inane suggestion that women fleeing domestic violence could dip into their super to access emergency funds to help them move into safter temporary accommodation, access psychological support services, cover lost income from time off, and so on.
This suggestion is offensive on many levels.
Victims of domestic violence should not have to bear the financial burden of escaping a situation that was not their doing. That is unnecessarily punitive and callous.
It also totally misunderstands the experience of women facing these horrific circumstances.
No person fleeing domestic and family violence would have the psychological bandwidth and patience to wade through the necessary paperwork.
The average Australian doesn’t know who their super is with and what their balance is, let alone in the middle of a crisis. And the average woman in Australia retires with 47 per cent less super than men in this country.
A big part of that is a result of the gender pay gap, but its also because the Government has missed opportunities for more productive ways to empower women through superannuation reform.
Right now, employers are not obliged to make super contributions to women on maternity leave under the Paid Parental Leave scheme. That’s straight up discrimination.
I welcomed the Government’s decision to abandon the $450 minimum threshold for super contributions on Budget Night, but I believe the Government could’ve gone much further for women and I encourage it to do so.
Just like I encourage the Government to take a close look at the deficiencies in this bill, and correct them so that MPs on both sides of this House, including the Government’s own backbench, can support it.
Thank you, Deputy Speaker.