Minister for Superannuation and Corporate Law
3 December 2007 - 8 June 2009
Interview with Marius Benson
ABC News Radio
Wednesday, 1 October 2008
SUBJECTS: Super fund returns, Global financial crisis, Peter Costello's $1m super special, criticism of financial planners
To look at the changing economic reality for retirement savings in Australia we're joined by the Minister for Superannuation, Senator Nick Sherry, he's joined by Marius Benson.
Senator Sherry, superannuants around Australia are probably wide-eyed with fright and wonder if they look at the present situation on the stock exchange. You're the relevant minister, the Minister for Superannuation, any advice?
Well I can understand why they are worried and concerned, but I think there's a couple of points I'd make. Firstly, the rules applying to superannuation require diversification, so the investments in superannuation are spread across various asset classes; they're not confined just to the stockmarket. So when we see the stockmarket drop significantly it doesn't replicate identically into superannuation, but it does have an impact because there is no doubt the majority of superannuation investments are in the stockmarket.
The important thing to remember is the long-term return, and superannuation is a long-term investment. And weekly movements, monthly movements, yearly movements in the stockmarket are not as important as the long-term rate of return.
And I was looking yesterday at the five-year rate of return, including this last year of downward movement in the stockmarket. And, even with this last year of downward movement in the stockmarket, the five-year rate of return is still eight per cent. So it's the medium - the longer term rate of return that counts, five to seven years. Superannuation is a long-term investment; you generally don't access it for 30 to 35 years.
We had a very, very, very good run between 2001 and 2007.
But, Senator, a concern now is that this is different. The prospect now is not for a bit of a bad time but maybe a long-term recession or worse.
Well, what we've argued is that superannuation is a long-term rate of return; there's a hundred year record. We can look back at the hundred year record on the sharemarket as it's reflected in superannuation and, in the long-term, it averages at a five per cent rate of return.
Some people are even worried about those pillars of our economic society, the big banks. Because last night the National Australia Bank announced it will take a further $400 million hit on some of its riskier investments, and that's on top of the $1 billion in write-downs they've already flagged earlier this year.
Given that, can the Prime Minister, can the Treasurer, can the Government give cast iron guarantees that our banks are in such good shape?
Well what we've said over and over again is that the regulator, APRA - the Australian Prudential Regulatory Authority - has said our banks are in a strong financial position, and that remains the case.
Can I ask you about a remark from Peter Costello, the former treasurer who was the treasurer when the government changed superannuation arrangements, and a lot of people put a lot of money into super because of tax advantages more than a year ago - in April and June last year. Now they've obviously seen those go backwards. Peter Costello says don't blame me, that was the advice of financial advisers, that wasn't me.
Well I thought his criticism was a little harsh on financial planners and advisers. I mean there's no doubt that Mr Costello and the government, I think, were talking up super in the context of the changes he made. And I think it is a bit unreasonable to be attacking financial advisers and planners.
I mean I've had criticisms - I've made criticisms of planners and advisers, or at least some of them, in terms of conflict of interest, but I think it's a little bit unreasonable to be attacking planners and effectively blaming them for advising people to put money into super.
Planners, like everyone else on the planet, didn't see the US financial crisis coming our way and the impact that was going to have on world sharemarkets. I just thought it was a bit over the top.
Senator Sherry, thank you very much.
GLEN BARTHOLOMEW: Nick Sherry, the Minister for Superannuation, speaking to Marius Benson.