Address by Andrew Bragg – Liberal Senate Candidate for New South Wales
“Labour markets, unions and work”
Ladies and gentlemen, vested interests continue to stymie pro-consumer reforms in Australia today.
Last weekend, the Australian people rejected the Labor Party along with its radical workplace agenda which had been drafted by the ACTU.
- Abolition of the Australian Building & Construction Commission
- Introduction of pattern bargaining
- Removal of flexible work
It is clear that the unions have become an electoral liability for the Labor Party because they write the policies Labor takes to market – for their own interest, not the national interest.
The same is true in the superannuation space.
Labor took a Retiree Tax proposal to the electorate which was conceived and developed by the ACTU.
This policy would have stolen overpaid tax from small super funds such as SMSFs but exempted large industry (and bank) super funds – thereby creating an incentive for people to move from SMSFs to industry funds.
Billions would have flowed into large industry and bank super funds if this policy was enacted. Every part of the superannuation industry was opposed to this change except for the industry funds!
In turn, higher distributions from super funds to trade unions would have been delivered.
The unfair, retrospective Retiree Tax was a significant factor in the election.
The House Economics Committee inquiry into refundable franking credits demonstrated that changes to dividend imputation laws for certain Australians (retirees and people earning under $18,000) was unfair, retrospective and poorly targeted.
In short, the unions foisted a policy on Labor which hurt many people in its traditional constituency.
Vested interests are not new in politics.
The founder of the Liberal Party was very clear about ensuring vested interests did not dominate the Liberal Party as had occurred in the previous United Australia Party.
Sir Robert Menzies said in 1964:
We have greatly aided social justice. We have not just kept the right and allowed victory to go to the strong. We have encouraged free enterprise, have recognised the making of a people as one of the dynamic inducements to the taking of capital risks in the development of the nation.
In a practical sense this means we the Liberals support enterprise, not any particular business or industry.
We are not owned by anyone unlike our opponents where the union movement literally own the Australian Labor Party.
Accordingly we do not put forward policies to benefit any particular sector or business.
The Senate’s failure to act in the national interest
In past Parliaments, the Senate has regularly failed to act in the best interests of saving Australians.
The Senate has repeatedly stymied attempts to improve superannuation governance standards, reduce unnecessary costs and reunite people with their lost super.
Twice the Senate has been unprepared to pass legislation which would have ensured superannuation fund boards had more independent, non-aligned directors.
This reform would ensure there are people on boards who do not owe their loyalty to a bank or a union in a retail or industry super fund – their loyalty is solely to the member.
Notwithstanding the governance reforms were themselves the product of a review conducted when Labor was last in office, they were not adopted in Australia because the unions prevented the Labor Party from supporting them and convinced the Senate crossbench the changes were unnecessary.
In my view, unions have seen superannuation as a way to increase their power in the economy but also derive a revenue stream to finance their operations in the face of union workplace representation declining to less than 15 per cent of the economy.
Any changes to improve super governance has been seen as a loosening of union control and therefore resisted.
Across the economy, better governance is becoming more important as the potential for conflicts of interest has been exposed by various Royal Commissions.
Yet the unions are arguing the opposite.
Evidence of conflicts of interest emerged in March when the ACTU president and alternate director of AustralianSuper, Michelle O’Neill said industry super funds should use their resources to pursue union industrial agendas.
In other words, pursue the union agenda, not the savers’ agenda.
In response APRA Chair Wayne Byres said
APRA expects that trustees will carry out their role and meet their responsibilities free from the influence of sponsoring organisations or any other external parties.
Conflicts of interest also arise in bank controlled super funds.
IOOF, for instance, is now restructuring its superannuation governance arrangements in the same way the defeated legislation would have required.
During the interceding period, it has been alleged by APRA and the Hayne Royal Commission that IOOF’s superannuation governance arrangements led to consumers being treated poorly. It has been alleged some consumers were overcharged and treated very unfairly.
This could have been avoided if the recommendations of prior inquires such as Murray Financial System Review and Cooper Inquiry into Superannuation had been passed in the Senate.
Don’t forget, Labor said better governance wasn’t needed.
In a worrying sign, it appears Labor is again lining up to oppose a key Hayne Commission recommendation to reunite people with their lost super and stop the proliferation of new accounts.
In its parallel examination of the superannuation system, the Productivity Commission concluded that ‘stapling’ would help protect customers from the $2.6 billion a year in fee gouging and excessive insurance premiums charged on the 10 million duplicate accounts in the system.
The PC was clear that stapling was a superior policy to industry super’s counter proposal of ‘rolling over’ customers from one fund to another as they changed jobs.
The PC estimated that ‘roll over’ would introduce $45 million per annum in new administration costs, not to mention the potentially devastating impact to individuals of losing insurance coverage as they acquire pre-existing health conditions as they roll from fund to fund.
Not to be deterred by the clear recommendation of the Royal Commission, however, a large super fund’s CEO sought to rewrite the Commissioner’s recommendation.
In the same breath as cautioning industry funds against hubris following the Royal Commission he audaciously argued “the mechanism by which [stapling] occurs should be a secondary concern” and that “whether it’s the Productivity Commission’s proposal or the auto-rollover proposal doesn’t matter so much...”.
This ‘gentle, gentle’ argument for turning the ship on the Commissioner’s recommendation could not be further from the truth.
Consumer group Choice, called out the error in this argument, telling the AFR that “balance rollover was not consistent with ‘stapling’ accounts” and “adds a whole bunch of extra costs into the system.”
“Balance rollover... seems really inappropriate and designed to satisfy industry not customer needs” they concluded.
Perhaps more alarming, however, is that Labor’s Shadow Minister for Financial Services, who is responsible for Labor’s response to the Royal Commission, has echoed the super fund’s line of attack on the Royal Commission’s recommendation.
Ms O’Neil responded by arguing that ‘stapling’ was not “diametrically opposed” to the union / industry super push for a ‘balance rollover’ scheme.
The difference is, stapling would keep you in the account you first join until you proactively choose another fund. The “balance rollover” will move you to a new default (industry) fund every time you change jobs!
I know the Senate can do better when it comes to superannuation policy in future where savers are the focus - not industry sectors as groups like Choice have called out.
Royal Commission implementation
The Treasurer Josh Frydenberg released a full response to the 76 recommendations of the Hayne Commission in February.
The Treasurer has established a Treasury Financial Services Implementation Taskforce which has begun its work by issuing a series of consultation papers before the election.
The superannuation recommendations of the Commission have been adopted by the Morrison Government in full.
The recommendations will significantly improve governance, transparency and operation of the superannuation system.
The Treasurer has said:
…we will ensure fund members only have one default account for new members entering the system — a recommendation that mirrors the Productivity Commission’s report into superannuation.
This will ensure superannuation funds work for people – not the industry.
The Treasurer has also committed to adopting a Productivity Commission recommendation to guarantee insurance in superannuation is suited to people’s needs.
The Treasurer has committed to:
Preventing the erosion of accounts by having members with accounts under $6,000 or under 25 years “opting in” to insurance arrangements rather than being automatically allocated insurance and then having to “opt out.
There is a clear need for this reform. Of the one million Australians with insurance in superannuation, around 2.5 million individuals have duplicate cover.
Of these individuals, over 10 per cent are under 25 years old.
This reform should be supported by the Senate. To date, Labor has also been opposed to this pro consumer reform.
In the new Parliament, history must not be allowed to repeatitself where recommendations developed by independent commissions of inquiry are subsequently ignored by the Senate due to lobbying from vested interests.
Superannuation must be for the members of the funds: the savers of Australia. Not for industry sectors and certainly not for unions or banks.
The Royal Commissioner has provided clear recommendations to improve the system, our government has adopted them in full and they will be implemented in this term.