18 June 2013

Address to FSC Parliamentary Function





It's a pleasure to welcome you all back to Parliament House for this annual event.

This building, like the country it represents, is vast but always full of industrious people working to make Australia a better place.

And like Australia, its Parliament is always welcoming.

In fact the design of the forecourt out the front of this building was designed by Aldo Giurgola to reflect open arms.

So it's a pleasure to welcome you here this evening.

This building is at its best when it spends its time debating ideas.

Most Australians might catch a glimpse of the theatrics of question time – and at times they may be delighted, disappointed and perhaps amused.

But question time is just a glimpse of what goes on here.

The daily contest of ideas in this building or more broadly in politics for me is all about what Australia will look like on September 15 but in fact in the next 20 and 30 years.

That's why I strongly believe, as Joseph Joubert once put it:

"The purpose of argument should not be victory, but progress"

So I want to briefly report the progress we have made to date in superannuation and financial services and some ideas we as a Government are advancing which I believe will shape the decades to come.

Fund performance

First things first – it looks like the financial services industry, and millions of Australians with retirement savings, can reasonably hope for some good news this year.

SuperRatings data released yesterday shows Australian superannuation funds are back to pre-GFC returns with the average fund forecast to report at least a 13 per cent profit this financial year.

Super fund returns continue to improve, with the average growth fund returning 15.4 per cent for the financial year to date and the average balanced fund returning 11.6 per cent.

This is welcome news for all those who work in the superannuation industry and it's also a reason for optimism among millions of Australians who work hard to save for their future.

Progress to date

Thanks to successive Labor Governments along with the financial services sector, the total pool of superannuation savings has grown from $140 billion in 1992 to $1.6 trillion – or equal to Australia's GDP.

Rice Warner's latest Superannuation Market Projections Report projects the total market to grow to over $3.1 trillion in the 15 years to 2027, in 2012 dollars.

According to Rice Warner, this quick growth is due to the "significant compulsory component within that market, driven by the Superannuation Guarantee".

We have abolished the 15 per cent tax paid on superannuation for 3.6 million Australians earning under $37,000.

And the downward pressure on fees and charges triggered by the My Super and Super Stream reforms will add to the bottom line of every working Australian's superannuation savings.

1 July changes

There are important improvements commencing July 1 delivering significant savings increases for individuals and the nation.

Universal superannuation will finally begin to move to 12 per cent – a long overdue reform.

  • This means a 30 year old on average earnings today will be $127,000 better off by the time they retire at 67.
  • And 8.4 million Australians who currently get less than 12 per cent superannuation will have their savings boosted.

It's an often forgotten fact that John Howard went to the 1996 election promising to increase universal superannuation to 15 per cent.

It's a matter of record that promise was broken and a full 6 per cent of national income was lost to individual retirees and our national savings forever.

My fear is that history will repeat itself and a promise to stall superannuation at 9.25 per cent will become an indefinite suspension under a Coalition government.

As I mentioned previously, we have cut the 15 per cent tax paid on superannuation for 3.6 million Australians earning under $37,000. The first of these payments will be made into Australians super accounts after 1 July 2013.

  • Unlike the Howard Government's co-contribution scheme, which only 1 in every 5 of those eligible actually used, 100 per cent of the 3.6 million Australians eligible for the LISC will automatically receive it.
  • 2.2 million of those hard-working low-paid Australians are women, perhaps working part-time.

In the spirit of bipartisanship I invite the opposition to revisit their policy to put a great big new 15 per cent tax on low income earners.

On July 1 Australians over 60 will be able to put an extra $10,000 into their savings.

On July 1 the upper age limit on superannuation is gone.

On July 1, thousands of Australians and New Zealanders who move across the Tasman Sea each year will be able to consolidate their retirement savings in their country of residence, as super becomes portable.

These reforms, delivered by Labor, will add $500 billion to the pool of savings by 2037.

These substantial reforms, and the positive outlook for superannuation fund performance, is a great story.

The way ahead

This Labor Government wants to build on the great legacy of Hawke and Keating – to build on our before-its-time, world-class superannuation system that is now delivering for the retirement of everyday, hardworking Australians.

In just four years, 20 in every hundred Australians will be over 65. Australians are living longer and in this context, our superannuation system needs to be fair and needs to be sustainable.

As a Government, we recognise the need to provide superannuation policy certainty.

We recognise that community confidence in superannuation is important – not just for the industry or the markets – but for all of us.

We want to de-politicise superannuation.

No retrospectivity, no uncertainty.

A charter that says, we will help you save for your retirement through mandated employer contributions and tax concessionality, and in return you are part of a wealth creating, job generating, GFC-proofing, age protecting idea that sets Australia apart from much of the developed world.

The discussion paper the Government has released on the Charter of Superannuation and Council of Custodians seeks the views of the community on the best way ahead for our world beating system.

The purpose of the Charter is to enshrine the core objectives, values and principles of our superannuation system for the long term.

I said earlier the Charter is being developed against the core principles of certainty, adequacy, fairness and sustainability.

The Charter needs to help establish how much super costs the nation and getting better measurement of the tax concessions.

The Charter Group is also seeking input on the establishment of a Council of Superannuation Custodians.

The Council will report annually on the adequacy, performance and sustainability of superannuation, as well as make recommendations to Parliament for improvements.

The Council will act as an impartial, expert superannuation body which protects the integrity of the scheme and ensures the policy settings are consistent with its core objectives, values and principles.

The Charter and the Council will assist in this task – by ensuring an independent body casts an eye over all superannuation policy changes from all sides of politics to ensure they are consistent with the long-term interests of all Australians.

Not the short term budgetary or political interests of the government of the day.

In an ideal situation changes to superannuation could be guided by updates to the Intergenerational Report and avoid annual or sporadic changes.

It is an eminently sensible idea.

I'm pleased this proposal enjoys the support of the Financial Services Council and again hope the Opposition respects the legitimate aspiration of the community to see superannuation depoliticised.


I'd like to extend my thanks to you all.

You have worked co-operatively and diligently with the Government to deliver a reform program will improve retirement outcomes for Australians for generations to come.

What I have appreciated is the professionalism of your approach; this includes the good work of the FSC and the individual regulatory and government relations experts in the companies themselves.

Naming names is always risky, but the good work of the FSC policy team, led by Martin Codina, Helen Brady at MLC, Al Kinloch at AMP, Nicolette Rubinstein at Colonial, Allan Hansell at OnePath and Alyson Clarke at BT should be acknowledged.

And I of course acknowledge the leadership of John Brogden, who is always willing to offer his counsel - whether or not it is sought – but who has proved himself to be an effective advocate for his members.

We should also like to acknowledge Treasury, ASIC and APRA and my staff who are the coal-face of many policy interactions with you.

As you can see from my comments this evening, I'm hugely optimistic about the future of our superannuation system and the future of Australia.

I believe I share that optimism with those gathered here this evening.

I know that we all cherish and strive for progress.

I look forward to this positive and productive relationship continuing for many years to come.

Please enjoy your evening.

I thank you.