Ideology is the enemy of sensible super reform

18 November 2015







I begin by acknowledging the traditional owners of this land – the Wurundjeri people of the Kulin Nation – and by paying my respects to their elders and traditions. I also want to thank Ged Kearney for her introduction, friends from the ACTU who have brought us together in Melbourne, plus the other panellists. If I put a dollar away for every person who told me after I got this job to go and talk to Ian Silk, I would have almost as much as Australian Super. Ian thanks for your time yesterday.

As Ged mentioned in her intro, about a month ago, Bill Shorten gave me the opportunity to serve as Labor’s Shadow Minister for Financial Services and Super. It’s a great opportunity which engages my passion for economic policy and gives me the chance to meet with so many diverse stakeholders from peak groups to funds of all shapes and sizes to financial planners, to banks, insurers and more. I also got the sport portfolio which meant a couple of guilt-free hours at the Brisbane Test! I think I’ve held roundtables and consultations with more than 60 groups, funds or companies so far including some of you here – I thank you for that.

There's lots on and there probably hasn't been a more interesting time to hold this portfolio. My intention is to have an open door and an open mind, across all the issues. Not just because it’s how I’ve always worked, but because it’s especially important in an industry which makes the biggest contribution to our economy in value-added terms, is the second-fastest growing sector, employs almost half a million Australians and which boasts trillions of dollars under management.

If there’s one thing I’ve learned from all these initial meetings it’s that there’s an appetite to avoid, where possible, the discussion degenerating into the irreconcilable viewpoints of two warring tribes – some sort of predictable character play. Of course the industry won’t always or even often agree – there won’t be unanimity – but we need to situate the arguments in a broader frame of what’s good for Australians, their financial security, and their economy.

That’s the approach I’m taking and we are taking to many of the issues in the portfolio. It’s certainly the approach Chris Bowen and I applied to the Government’s response to David Murray’s very considered inquiry into the financial system, when we found common ground on almost all of the recommendations that were adopted.



The exception of course was superannuation. Here there are genuine differences. 

Some of you here may be veterans of the debates in the late 1980s and early 1990s. You’d know the Liberals fought us tooth and nail and had we not won the argument – had they prevailed instead – we wouldn’t have the financial security that comes with more than $2 trillion under management today. So universal super is one of the labour movement’s finest achievements but it’s much more than that – it is a symbol of Australian economic policy innovation and success.

There are substantial differences here between the parties, some historical and some contemporary, some fundamental and some technical, and I’ll touch on the main ones shortly. But the key point I'll make today is that we shouldn't be guided in all this by history or legacy or especially ideology, but instead by a hard-headed assessment of where the challenges are and what governments can realistically do to address them or at least not to exacerbate them. 

Just because Australia’s superannuation system is the envy of the world doesn't mean there isn't room for improvement. So let’s begin by taking stock of three sets of simple stats which shine a light on the system's imperfections. 

First, inadequacy. Deloitte found in 2014 that the average man is still retiring with $226,000 less than the balance required for a “modest” retirement lifestyle. It’s much worse for women. You’d be familiar with Industry Super research released last week which found that the gender pay gap, currently 18 percent in Australia, translates to a superannuation gender gap of around 44 percent at retirement. You’d also be aware of another estimate that women retire with around $85,000 less than the average man, and that a third of all women have no super at all.

Second, unfairness in the way super is taxed. The Australia Institute found that 38 percent of the concessions go to the top 10 percent of income earners, and that 20 percent go to the top 3 percent. The Murray Inquiry reported that accounts with assets in retirement in excess of $5 million could each receive annual tax concessions more than five times larger than the single Age Pension.

Then third, non-compliance. On Monday, Cbus released research that employer non-compliance in super affects 690,000 Australians, costing them $2.6 billion and growing at 5 percent per year. An estimated 6.8 percent of the workforce loses on average the equivalent of nine months in contributions every year.

Anyone who comes across these stats with an open mind would recognise that we have an adequacy problem among the low paid and women, that the tax system directs the tax concessions to those who need them least, and that too many workers are missing out on the super guarantee payments they need, deserve and are entitled to by law. 



Faced with these obvious challenges, Australians have a right to expect their Government to be on the case, working diligently to address the genuine problems in the system. Instead, their Government is off on a damaging ideological frolic; a badly-motivated crusade against working people, their unions and their representative boards which give employers and employees a seat at the table and a chance to work together.

That’s what’s driving the current debate on trustee governance and the Government's attempts to politicise the APRA in the process. They still can’t point to any evidence that their preferred model results in better returns for members than the representative model. So they’re proposing a solution to a problem that doesn’t exist, mixing ideology with incompetence by going after some of the highest-performing super funds in the system as part of an attack on their political opponents.           

For anyone who dismisses this as a predictable partisan point, remember that Alan Kohler in the Business Spectator dismissed the Government’s approach by writing “let’s not allow facts to get in the way of a bit of unfounded prejudice." Alan’s right, and it’s this distorted ideology and disdain for people on modest incomes which has driven so many of their other decisions, the net effect of which will be less adequacy, less fairness and less compliance when we need more of each. 

For example, when the Government cut the Low Income Superannuation Contribution they ensured 3.6 million Australians will lose up to $500 in super a year, around two thirds of them women. When they froze the superannuation guarantee, they wiped $20,000 off the retirement savings of every Australian on average according to research by Rice Warner for the Financial Services Council.

Malcolm Turnbull's approach to super to date has not been similar to Tony Abbott's, it has been identical. Despite the thought bubbles and the commentary, not a single plank of the Liberals' approach to super has been rewritten, revised or unwound so far. The Prime Minister even said that he stands by every measure in the 2014 budget, including the cuts to the LISC, including the freezing of the super guarantee.

His Assistant Treasurer fares no better; her contribution limited to two big gaffes before even clocking up two months in the job. The first was on Sky News when she said “this idea that people can amass multi-millions of dollars in their superannuation funds is just simply not correct”, which collides spectacularly with the fact that there are around 100,000 people with superannuation balances over $2 million.

The second was this week, when she said “The Government is focused on making sure employees get superannuation guarantee payments.” It takes some front to say this four days after introducing legislation to lower the penalties on the 20 percent of employers that are flaunting their super obligations in the guise of red tape removal. These gaffes aren’t the sign of an auspicious beginning!

At the same time, the Government has tasked the Productivity Commission to come up with ways to replace the system of default fund allocation. But for as long as 80 percent of employees fail to exercise choice of super funds, we need to ensure the default fund system has the best interest of workers at its core. Even David Murray said in his Report that MySuper should be given time to work before considering any changes to default funds: a very sensible proposition.

Australians have a right to be suspicious here given the Government’s form and when you consider it still hasn’t appointed new members to Fair Work’s Expert Panel on Default Funds, preventing the intended reviews of default funds in modern awards from taking place. How can the Government seek to make changes to a system that hasn’t even been given a chance to work?

Of course, we’ll consider the recommendations of any Productivity Commission review very carefully. But unlike our political opponents we’ll do so motivated by addressing the real challenges of adequacy, fairness and the interests of workers.



More broadly, it is up to Labor and to people in this room to lead the super debate on genuine ways to make our system stronger; to fill the vacuum left by the Government where sensible forward-looking policy should be. 

Let's begin by bedding down a purpose for the super system which enshrines what it’s for. Let’s agree it’s there to resource a dignified retirement for as many Australian as possible without recourse to the full age pension. Then we have a measuring stick with which we can consider all future super policies.

Labor has already outlined its policy to make superannuation tax concessions fairer and better targeted. For months we've had on the table a detailed, considered, costed plan to reform the tax exemption for earnings on balances over $1.5 million and reduce the Higher Income Superannuation Charge threshold from $300,000 to $250,000. That we put this on the table so far out from an election is evidence that we want a proper conversation about it and we want it compared with alternatives.

I know that in this room and beyond there will be a mixture of genuine and considered views about the best way to reform superannuation tax concessions. I’m pleased to see it finally receive the attention it deserves as an important issue.

Beyond tax, we need to look for fiscally-responsible ways to ensure people on modest incomes and especially women have enough super for retirement; particularly important given the hole that will be left by the abolition of the Low Income Superannuation Contribution and the freezing of the Superannuation Guarantee.

In that respect it’s terrific Chris Bowen and I get the opportunity to work with Jenny McAllister who is leading a Senate committee on women’s retirement incomes. Like everything Jenny does it will be a thoughtful, constructive process and an important input into Labor’s policy development in the lead-up to the election. Many of you have already fed views in, and I hope more of you will do the same.



I mentioned cricket at the start so please forgive me returning to that by repeating the famous line from the 1932-33 Ashes series about there being two sides out there but only one playing cricket. In super there are parallels: it’s great it’s on the front pages again but it's an unfortunate reality that while both sides are talking about it only our side is focussed on the real issues. 

We can go about super reform one of two ways. The first mixes ideology and incompetence – the Turnbull Government’s way. The second is more constructive and begins with a hard-headed assessment of what's working and what's not.

It’s disappointing the Government is promoting an outdated and divisive argument between warring tribes. But it’s pleasing that you and so many others are seeking common ground and solutions to actual problems.

Thanks for maintaining that focus, and for the opportunity to set out some initial portfolio priorities today. I’m looking forward to the discussion.