I, too, rise to address the Treasury Laws Amendment (Improving Accountability and Member Outcomes in Superannuation Measures No. 1) Bill 2017 and the Superannuation Laws Amendment (Strengthening Trustee Arrangements) Bill 2017. I’m glad Senator Watt has remained in the chamber. I trust he’s going to stay here for a bit longer, because he put the question to the chamber and to the Australian people: why would we change something that is working well? But the question is: who is it working well for? He also said that if there was any evidence that this was not working well for members then, perhaps, he might reconsider. Can I draw his attention to some of the cases that have been raised in recent years where we have seen members’ funds, which they have put into an industry fund for the benefit of their own retirement, used on things that the members are just not aware of and, certainly, are not for the members’ benefit. Let’s take the disclosures that we see from the Australian Electoral Commission of the financial statements of industry super funds, and you get an estimate that around $8 million was paid last year alone to unions in unexplained payments. Other reports call them ‘dark payments’. The industry fund CBUS, for example, chaired by former Victorian Labor Premier Steve Bracks, looks after some 732,000 members working in the construction industry. CBUS paid over $1 million in sponsorship fees to unions, including the ACTU, the CFMEU, the AWU, the AMWU, the ETU and the PTU.
Coming back to the point that was made by Senator Watt and those opposite about directors appointed by unions, guess where their fees go? In many cases the fees are going directly to the unions, not to the directors themselves. In some cases they get paid a small retainer, or a percentage amount. Essentially there is a flow of cash to the unions both in grants and in other payments, and even the directors’ fees go back to the unions. TWUSUPER, which covers transport workers, paid almost $1 million to the TWU last year and over $126,000 in directors’ fees. It doesn’t publicly release its financial statements, but it is clearly not using those funds for the benefit of its members. Australian Super, one of the largest industry funds, with nearly $92 billion in assets, only declared one payment to the ACTU, of over $225,000, but other unions have declared to the AEC that they receive sponsorship payments from Australian Super.
What we see here is a clear pattern of industry super funds paying money to the unions. When Senator Watt says it’s a system that’s working well, I think the Australian people and members of industry funds are well placed to be asking the question, ‘But who is it working well for?’ Looking to the future, with the growth in the investment value of funds—it is already at $2.3 trillion and it is expected to grow to around $4 trillion over the next 10 years—union payments, if not scrutinised, can be expected to rise to $22 million a year. That’s $22 million that should be going into the retirement savings of Australian workers but, instead, is being diverted into the political campaigns and other activities of unions—and that is the question that we need to raise.
I’m disappointed Senator Watt has left the chamber. He said that it would be dreadful to upset the relationship on the board between employers and employees. The government is not proposing to say you can’t have equal representation. You can still have equal representation—people appointed by the employers, people appointed by the unions—but what we’re saying is that good governance requires independence, and that is not just in the financial sector; there are many sectors where good governance has a requirement around transparency and independence. The government is saying by all means have your union appointees, by all means have an equal number of employer appointees, but you must have a minimum of one-third independent directors to make sure there are no conflicts of interest and that there are no dark payments, as have been proven, with millions of dollars flowing out of the retirement savings of employees and into the coffers of unions. So the two points that Senator Watt raised are clearly disproven by the facts.
We have introduced these bills to strengthen the foundation of Australia’s compulsory superannuation system, in particular for the default MySuper members. That’s an important thing to grasp. There are two elements to that. It’s compulsory. This is us taking some of the gross earnings of workers in Australia and putting it into super. It was a Labor idea, we grant that, it has worked well, and we fully support it. But it is compulsory, which means we must make sure the governance around that process is absolutely squeaky clean, is transparent and works in the best interests of employees.
Because it’s the default MySuper program, we’re talking here about a whole range of workers, including young people who’ve just come into the workforce who perhaps have no background in financial planning or management, or thought for their retirement, and what do they do? They just take the default fund that is offered as part of their agreement or what the employer has as the default fund as part of MySuper. In terms of financial literacy, these people are probably some of the most vulnerable in our community. They need the protection of a governance system that not only is effective but is transparent to make sure that the workers are the people who benefit from the growth in that system.
The superannuation sector has grown to over $2 trillion as a result of the mandatory nature of it. These reforms are consumer based reforms. They’re focused on the consumer to make sure that it’s more accessible and more understandable, and that the providers are more accountable for how they use their members’ money. It’s aiming to have stronger prudential standards—that is, the enforcement and the transparency which gives people who are putting their money compulsorily into these funds the confidence that it’s being managed in their best interests. This is not something that’s just been cooked up overnight. There have been a series of reviews that have recommended these kinds of measures and these bills put them together.
There are three bills: Treasury laws amendment improving accountability bills that I mentioned, Treasury laws bill No. 2 and the accountability bills. They aim to increase choice, increase independence on the trustee boards and increase transparency. It includes new measures to strengthen the supervision of the superannuation sector, boosting the trustee accountability and improving member engagement. I’ve had a crack at the unions here, but importantly it also closes a legal loophole that has been used by some unscrupulous employers, a minority, to short-change employees who choose to make a salary sacrifice contribution into their accounts.
Contrary to what those opposite would tell you that this is all about the government trying to disrupt and tear down the system, we’re actually trying to make it more transparent and effective, and to increase the governance of the framework for the benefit of the employees. The protests that come from the other side, particularly when you hear them say, ‘It’s working well,’ should ask the question, ‘Who’s it working well for?’ Currently, it’s working well for the unions.
Is this just something that comes from the conservative sides of politics? Let’s go back to Mr Jeremy Cooper, who was appointed by the ALP as the chair of 2010 super system review—and Labor was in government then. This quote comes from the Senate Economics Committee inquiry hearing. Mr Cooper said, ‘Providing for independent directors shouldn’t diminish the representation of members but actually enhance it.’ He goes on to say, ‘How we can make people who are forced to save into it feel confident that the standards of governance is at or near world’s best practice.’ That is from someone appointed by a Labor government to do a review into super who is saying that transparency is a good thing and will actually enhance the benefit for members.
Professor Graeme Samuel was appointed by the board to conduct an independent review into the governance arrangements at the CFMEU-backed industry fund, Cbus. This quote comes from the Senate Economics Committee inquiry hearing. Professor Samuel said: ‘I don’t draw a great distinction between the structures of corporate governance. I’m more concerned about the reality of it. When you’ve got proprietors or sponsors that are heavily involved in the board and are appointed as representatives of proprietors or sponsors, there’s a tendency for the skills metrics to be less relevant. That’s where independent directors then become much more relevant and where the skills metrics and qualities that they can provide become far more relevant.’
What we hear there is that where it’s just jobs for the boys—or girls, as the case may be—the members are actually getting a disservice because the people on the board are there because of who they know not what they know. It is not their skills or competence that results in them getting the appointment; it is because they’ve been a long-term member or secretary of a union, or they’re part of the employer’s group. What we’ve seen from two eminent people who have presented evidence to the Senate committee is that those are not in the best interests of the members of the fund. Members of the funds are members of the Australian public who expect transparency when it comes to money that is theirs, whether it is their savings or their taxes.
Looking at South Australia, where I’m from, when it comes to transparency we’ve had an issue just recently, where the Aboriginal Affairs minister, Kyam Maher, has been embroiled in a scandal about the appointment of a Mr King to the APY Lands, and an FOI has uncovered that it looks like there were backroom deals done, appointments and packages approved by the minister—we’re not quite sure what the relationship was—but there’s been no transparency. Now they’re using taxpayer funds to fight the FOI order which was given by the appropriate authority who said, ‘Yes, this should be released.’ They’re fighting that, and the public are rightly outraged that money appears to be being spent in a way that is not endorsed by the board, even, and it is unrealistic in its terms and conditions.
When it comes to superannuation, people rightly have the same concerns. In South Australia, questions have been asked about the validity of some of the members on the board of Statewide Super in South Australia. People are concerned about this concept of jobs for the boys, or jobs for the girls. Ms Alexandra Overly has recently been appointed as a board member of Statewide Super. She took the position over in March this year, after her husband, Justin Hanson, became a state member of the SA Legislative Council for Labor. Mr Hanson, interestingly, inherited the membership or the directorship from his father. I’ve got to say, that’s a pretty close nexus—from father to son to wife. I think Professor Graeme Samuel’s point about whether there is a skills deficit here as opposed to appointment for other reasons is a really valid question that people should be asking. Another Statewide Super director, Mr Ian Steel, was appointed by the South Australian and Northern Territory branch of the Australian Services Union and, according to his LinkedIn profile, he’s also been working for Labor ministers. In 2015-16, over 70 per cent of the fees received by Mr Steel for his work as a director were paid to the ASU. There are also current members of the lower house, from the Labor side, who have a history with Statewide Super. Mr Georganas, for example, received $66,000-plus in directors fees for one year, all of which was paid to the ASU. One of our former colleagues here, former senator Anne McEwen, was appointed by the ASU as a member representative on the board of Statewide Super. Katrine Hildyard MP, the state Labor Minister for Disabilities and the Minister Assisting the Minister for Recreation and Sport, was a former secretary of the ASU and also a director on the Statewide Super board and resigned when she went into the parliament.
You have to start asking questions about whether it is all just an in-house thing and what value is being added to the members, particularly when Statewide Super has started sponsoring things in the community that are related to people from the unions who are on their board. On 9 October, there was a $150,000 sponsorship for women’s sports, and Ms Hildyard is now coincidentally the Minister Assisting the Minister for Recreation and Sport. It would be interesting to know if there was any declaration of conflicts of interest around that particular one. Also, the Australian Electoral Commission records show the SA branch of the Labor Party received over $16,000 from Statewide Super in 2015-16. Statewide Super asserts that this was a refund for overpayments. That may well be. But, in total, Statewide Super has paid over $600,000 of the retirement savings of hardworking South Australians to the trade unions over the past decade. Yet, if you come back to this concept of ‘compulsory’ and MySuper, Statewide Super is the default fund in 18 different South Australian industrial awards, including those for children’s service workers, hospitality employees and passenger vehicle transport workers. That means that funds are being stripped out of this super fund—a super fund for some of the lowest paid, hardest working people in Australia, who trust their money to this union, to this super fund—not for their benefit but to go back to the unions. And members opposite ask why we think transparency is important. Members opposite made the point, ‘It’s a good thing if industry super funds outperform other funds.’
Let’s look at Statewide Super. They have outdelivered and outperformed for the unions but not necessarily for their own members. Using Industry Super’s own advertisement concept, let’s compare the pair and see how a Statewide Super member would fare next to a member in another average industry super fund. Take a 30-year-old office worker and look at what she has achieved in terms of the rate of return. What you will find over a 10-year average period is that Statewide Super returned 3.58 per cent and the Industry Super fund returned 5.13 per cent. That means that she would be $116,000 worse off in retirement because she didn’t look around and check to see if there was another industry fund that would do a better job. I will pick a fund that I’ve done some research on, BT Growth. Over a 10-year period there was a return of 5.53 per cent. So all the rhetoric that says industry funds will always get you a better deal is clearly not correct for Statewide Super. They’re not getting the best returns and they’re streaming money off to the unions, none of which are in the members’ best interests.
What the government is looking to do is not just make the funds more user-friendly for the people who are using them but, importantly, put accountability and transparency around the governance—still keeping the model that the Labor Party want in terms of having employee and employer representatives. That’s absolutely fine. But what we’re saying is that one-third of the directors should be independent so that we can deal with the issues of conflict of interest and we can ensure that accountability and transparency are there, not in our interests but in the interests of the men and women who those opposite and the unions purport to represent. What we see in the facts before us is that around the country, in union after union and industry fund after industry fund, the savings of hardworking Australians are creamed off and paid to unions for their own political benefit rather than the benefit of their members. I will be supporting this bill.