7 September 2022

Address to Australian Institute of Superannuation Trustees, teleconference


Reviewing Your Future, Your Super

Hey, good to be with you, Eva and the board of AIST, thanks for the invitation. Sorry I can't be there in person but, as Eva explained in the intro, we've got Parliament sitting this week and it's a pretty hectic schedule. I always enjoy my get-togethers with you guys and I'm sure you're going to have a very productive gathering over the next couple of days.

One hundred and seven days since the Albanese Government was sworn in and I think by any measure you will agree we've been very active over that period of time. We haven't lost a moment, so whether it's in the area of wages, whether it's skills and jobs in our own industry, in the finance sector, in International Relations, right across the board, we've been really busy delivering on the commitments that we made to the Australian people. I said to my own team this week that we're 10 per cent the way through our first term. So there's a hell of a lot of work that we've got to do to deliver on all the things that we promised that we would do and within my own area and in the superannuation portfolio we are very focused on that.

So this week we'll be introducing the final draft of the legislation to implement the recommendations of the Hayne Royal Commission and the bill that I will introduce this week will set up for the first time a compensation scheme of last resort so that the victims of financial malfeasance, when a finance industry organisation falls over will, have some compensation. Long overdue. It should have been implemented by the former government, as should have the financial executive accountability regime. That should have been implemented as well. It had our full support. Unfortunately, they couldn't manage Parliament or the government so it falls to us to ensure we get it done. We want to be finishing up this year saying all of the legislation to implement the Hayne recommendations has been done and we are on track to do that.

Before the election, I also promised to have a look at the Your Future, Your Super laws. There were a lot of things within that package of legislation that Labor supported but there were also a bunch of things in there that were more driven by ideology than good sense. A bunch of that we got knocked out as the laws passed their way through the Parliament, through a united stand of Labor, our support, other people who supported good policy within the Parliament and the great campaigning and advocacy from bodies such as your own.

But when you have any major reform such as this, it just makes good sense that you would conduct a review after a period of implementation. So we announced that we would do it before the election and I can advise your conference that this week we'll be releasing the consultation paper and formally commencing the consultation with stakeholders on the Your Future, Your Super laws.

We are particularly focused on the benchmark process. I want to make it quite clear to this group, as I have said for the last 12 months, the Labor Government supports performance measurement. The Labor Government is unequivocally on the side of high-performing funds and holding trustees' feet to the fire to ensure that they deliver on their performance promises.

However, we want to ensure that when we're doing that we aren't introducing mechanisms that have unintended consequences. A lot of issues have been raised about the operation of the benchmarks, we've gone through, we're in the process of going through two measurement periods. I think it's sensible that we have a look at the operation of those benchmarks. This week formally opening the consultation process so that that can commence.

We'll also ask stakeholders to make some submissions on the application of the stapling process. Again, I want to make it quite clear. We are not going to be reopening the stapling issue up per se. For too long, we've had multiple accounts eroding members' fees through multiple lots of sets of fees and ensuring that members weren't getting the full value of their retirement savings. But we understood, as the original legislation moved through the Parliament, that there were going to be some consequences for the way the former government set stapling up and we want to have a look at it. We want to ensure that any of the unintended consequences of that are dealt with.

We also want to have a look the how it's operating at the workplace level and we'll be inviting feedback from stakeholders on those issues. I'm particularly interested in hearing submissions from stakeholders around the impact of stapling on insurance and group insurance and how that impacts on a fund member as they move from one industry to another industry but are stapled to the original funds. So particularly interested in hearing the consequences of that issue.

We'll be looking at the fund comparison tool that's serviced by the Australian Tax Office. We're keen to get some feedback from stakeholders on the implementation and of the operation of that tool as well.

And I've got to say that whenever you have a conference such as this and more than two superannuation trustees get together, there is always going to be a discussion around the issues of fund mergers. The Your Future, Your Super laws have obviously accelerated trends and discussions that were already going on within the industry - consolidation of funds. For the most part, I think the consolidation that has gone on within the industry is a good thing. I want to be very clear about that. The fund mergers that have occurred, particularly the mergers that have been driven by the performance assessment process have been a good thing. We want to ensure that if underperformance is a factor of the scale or size or structure of the operation of a fund, that merging into a higher performing fund and dealing with those scale issues is an option. If anything, I would like to see some of the friction removed from the process so that funds who have decided that it is in the best interests of their members to merge, that we can ensure that those processes occur swiftly and with less friction than is currently within the process.

There has been some discussion over the last little bit around this issue of mergers. There's been some talk about replication of the sorts of concentration that we see in the banking industry and concepts of too big to fail. I just want to make this point. We're a long way from replicating in the superannuation industry the sorts of concentration that we see in the banking sector, a long way from that. And as far as funds being too big to fail goes, you know, I think if we get to that point we've really failed at a whole heap of other areas in the governance and the prudential stages of fund management. So I'm not concerned about that.

I have included a question in the Your Future, Your Super consultation process about the implications for market structure around accelerated and excessive mergers and consolidation within the industry. But I do want to make the point, I think we are a long way from a big problem at the moment but I think it behoves any sensible government to have a mind down the track to what market structures might look like and how that might impact on the effective deployment of capital, how that might impact on competition and innovation within the sector. We are a long way from that being a problem at the moment, but it is something that we should keep an eye on, which is why I've included a question on that in the consultation paper that you will see this week.

So there's a lot going on. I thought I'd - Eva, I thought I'd concentrate my comments to this conference this morning on the review that we're initiating this week, reflecting on the fact that the Government is going to do exactly what we said we are going to do. So if we made some commitments about the things that we are going to do or not going to do in the superannuation sector before the election, we will honour those commitments.

We think the sector is performing very well. In a number of speeches I've given over the last fortnight, I've made the observation that superannuation is already contributing more to retirement incomes in Australia today than the Commonwealth Government does through the pension system, I think twice as much. So we have got a system which is significantly contributing to retirement income with so many economic benefits deriving from that fact.

We've got $3.4 trillion worth of funds under management. We are now able to ask some big questions of the industry about where we can find opportunities to align the best financial interests of members with investments in things that are in the national interest or in the strategic national interests of our country.

So we've had discussions and my colleague, Jim Chalmers, led some discussions last week and the week before around the super charging the economy policy announcements and some areas we'd like to partner with industry in the areas of housing, in the areas of infrastructure. Many of you are already active in this space and we're keen to explore ways that we can partner and take this to a new level. We've also led delegations up to Indonesia to look at new investment opportunities within our region because we know that as funds grow, that increasingly investment opportunities are going to have to be sought abroad and we should be looking in our near region for that, aligning the best interests of your members with the national interests of Australia in ensuring we are deepening our economic ties within the region.

So a review job, important to do but I don't want the important job of reviewing it and assessing the performance of the industry and recent changes to gloss over the fact that the industry is in good shape, that we are doing tremendously important work in providing solid retirement income for the members that we look after, in addition to that, investing, providing an incredibly important role in providing long-term capital, stable, patient investment in projects, in investments of strategic national importance to the Government and the Australian people.

So I want to end by thanking you for the work that you're doing in that space and looking forward to engaging with you over the matters, over the review that I've set in train this week because I think there's an important job of work to be done there. Thanks so much for the time to talk to you this morning.