STUART BOCKING:
We all want to live well in retirement and that’s where super is so important. Today the Federal Government is releasing a consultation paper to look at issues of governance, these types of things. The Assistant Treasurer, Arthur Sinodinos, is the man behind all of this, and he’s on the line. Senator good morning.
ARTHUR SINODINOS:
Hi Stuart thanks for the opportunity to talk.
STUART BOCKING:
It’s a pleasure, what are some of the thing you are looking at in consultation with the industry that you’re releasing today?
ARTHUR SINODINOS:
Look we’re doing a few things. The first, as you mentioned there, was looking at the governance of the superfunds. And while to the man in the street or the woman in the street it may sound a bit, sort of arcane, what we’re trying to do there is say: look we want all super funds to be as well governed as possible so that they’re as accountable as possible to their members. And often the best principle in that regard is to have as many independent members as possible, have an independent chairperson and then make all of them accountable, whatever their background, whether they’re a retail fund, whether they’re an industry fund, make them all accountable in a clear and transparent and comparable way. Their members can so you’ve got confidence that they’re being run in the best possible way.
This is a response to the fact that the industry is sort of a bit of mixture of different types of superannuation funds. And some of them are union based funds, like the industry funds that came of the union sector, you’ve got the retail funds, which have come out of the bank sector and the broader wealth management sector. But we’re basically saying: look you are all now playing on the same field, so we want to be able to compare you. And the way to compare on governance is through having independents on the board. It means, for example, if the chairman and members of board of a fund are not happy with a particular member of the board, because they may be under a cloud, they’ve got a capacity to take them off. In the past that’s proven to be quite difficult, even if it has an impact on the reputation of the fund.
STUART BOCKING:
Right. Tell me about this, because there’s been a lot of talk, in the past week or so. A specific example as it relates to industry funds, this New Daily, an online newspaper, which has been set up as a cooperative between a number of industry funds. It’s not as if members were asked about it, there is a concern that members’ money is being used to fund all of this, that it is flowing into this New Daily operation with little prospect of any decent return. Would these changes have any impact on that? Because the members have had no say in this at all.
ARTHUR SINODINOS:
That’s good example of something where I think the funds just took the initiative to do this, without necessarily, you know, running it past members or being accountable to members for it. And our concern about it was that it was broader than just being a membership type journal, this was providing daily news…
STUART BOCKING:
Yeah that’s right.
ARTHUR SINODINOS:
...and potentially competing in that broader space .And as you know, at the moment the print media and the news media is not necessarily the most profitable area to be in.
STUART BOCKING:
Well it’s very difficult. I just wonder from the members’ viewpoint, if News Corporation, if Fairfax are having trouble monetizing their digital area, how on earth does some start-up operation run by a couple of superfunds achieve it? It seems to me extraordinary, and yet no consultation with members at all.
ARTHUR SINODINOS:
And the prudential regulator is having a look at that, because they would be concerned about it. Because ultimately there’s a sole purpose test, which relates to the purpose for which, you know, investments are being made and all the rest of it. What’s the purpose of the fund? And the purpose has to be to maximize members’ returns.
STUART BOCKING:
And that’s exactly right, that’s the key to it. I noticed this week, obviously you’d have seen these, dual reports, one from the productivity commission, one from the Grattan Institute, a number of different things, some of which are obviously very controversial, are you swayed or impressed by any of the suggestions?
ARTHUR SINODINOS:
The first thing to say is that those reports provide an opportunity to have a community debate around a whole slew of issues that come up with the ageing of the population. And look we shouldn’t be negative about this, people are living longer and they’re going to be healthier. So we’ve got to find ways to keep people engaged, because people want things to do, they want to keep their minds engaged, not everybody wants to retire at 55. So we’ve got to find ways of making sure our working arrangements, our superannuation arrangements, all the arrangements which bear on the decisions about, how you participate in the labour force, what time you take off, adapt to these new realities, how we cope with some of these costs of health and ageing. So the reports have done us a service to raise some of the issues.
The question then of what you do about it, that’s a broader debate over a longer period. No one is rushing to judgement. This is not a Government that likes to sort of, you know, mug the punters on the way through. We want to consider all these matters carefully. We’ve got a Commission of Audit, which is looking at the size of government, and by the budget next year you’ll have a good feel for what we believe is the right size of government, how that should be paid for. That has an impact on the size of resources we’ve got available to deal with an ageing population. These are exciting things though, because we’re going to find ways to make sure more workers are engaged for longer.
STUART BOCKING:
As a pre-election commitment, certainly in the area of superannuation, you’d said basically no surprises. It was going to be a no surprise government. Christopher Pyne obviously produced a surprise of his own earlier this week. In terms of superannuation, can we expect to see that honoured to the letter, that there will be no surprises, that there will be certainty around this area during your first term?
ARTHUR SINODINOS:
This is a very [inaudible] pre-election commitment that the Prime Minister made in Opposition and it was in response to feedback we were getting from people out there, not just the funds but also the beneficiaries of the funds. The members saying: look there’s a lot of change going on, we’re uncertain about how much more to invest in super or to invest at all. If things keep changing, are you going to retrospectivity take benefits away from it? Superannuation is meant to be a 30 to 40 year contract that you enter into, so you know that by the time you retire, hopefully you’ve got enough to live on in a reasonable standard of living and at a reasonable standard of living. And it’s important for us to do everything we can to make that as certain and stable for people as possible.
STUART BOCKING:
So no surprises.
ARTHUR SINODINOS:
Nope.
STUART BOCKING:
Terrific. Look I appreciate your time and wish you well with this consultation paper. It is very important, all of our futures are now tied up in all of this, so it’s a very important arm of Government and I appreciate your time.
ARTHUR SINODINOS:
Thanks Stuart, good luck.