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  Issue No 104 Official Organ of LaborNet 27 July 2001  

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Interview

A Super Agenda

Interview with Peter Lewis

Labor's federal spokesman on superannuation Kelvin Thompson outlines the challenges a Beazley Government will face in managing the nation's savings.

 
 

Kelvin Thompson

Universal superannuation has been with us for nearly a decade now, how successful has that strategy been?

I think it's been very successful. In the first instance, prior to the introduction of universal superannuation ... Australia had a superannuation reserves around $40 billion. We've now crossed $500 billion and in terms of a pool of national savings and the wealth of the nation, that is a very good thing.

Secondly, in terms of the individuals, prior to the superannuation guarantee, superannuation tended to be the preserve of white collar workers, public servants, executives and so on. It extended to about 40% of the population. It now extends to over 90% of the population and includes blue collar workers, women, and many part-time and casual workers. So the coverage has improved out of all sight.

What are the current political fault lines on superannuation policies?

I think one of the fault lines relates to the Government's choice of superannuation fund agenda where the Government has essentially been hostile to industry funds, incorrectly seeing them as trade union funds and vehicles of trade union power. One of its objectives of its choice of superannuation funds legislation has been to damage industry funds and therefore, and for a range of reasons - but that is one of them- for a range of reasons Labor has not supported that legislation and has raised a variety of concerns.

As for other superannuation issues, we think the key issues are adequacy - whether the 9% that the superannuation guarantee will go to next year is sufficient. The question of the complexity of the existing superannuation arrangements, and I'd note the tax arrangements in there amongst issues contributing to superannuation complexity, and its interaction with social security and how you encourage people to stay on in the workforce - perhaps on a part time or casual basis post 55/60 and indeed even beyond 65. I think they are some of the key issues and they are some of the things we want our review of the superannuation to have a look at.

On that question of adequacy, the ACTU is arguing for a 15% compulsory contribution level. What's your personal view on that?

We don't have a concluded view on what number is adequate. We accept that the concerns that people have about whether nine per cent is adequate or not is sufficiently valid to warrant an inquiry. The purpose of the inquiry is to establish whether 9% is adequate, and if it is not, to look at what's the appropriate mechanism for going beyond nine per cent.

I guess on the other side of the coin you've got people that see their super taken away each week and they'd rather be putting that money into their current mortgage or their current daily costs of living. What's your response to those people.

I think that superannuation is a stone cold necessity given the kind of society we live in, and in particular, the demographic challenge - that is to say that a couple of million baby boomers are going to retire in the course of the next ten years. Meeting their retirement income needs, the aged care accommodation, the health, the pharmaceutical costs and so on is a considerable social challenge, a considerable public policy challenge. Australia is not the only country with it of course. Many of the European countries are in a worse situation than we are. But what we would say is that one of the ways you meet that challenge - an absolutely critical way you meet that challenge - is to be putting money aside during the course of your working life.

Currently the super funds are managed by trustees. Is this the right model or should there be a more corporate based structure?

I am very sympathetic to the existing model, the trustee model. I don't believe that it has failed. I think that evidence suggests that the superannuation supervision legislation and the trustee model have been highly successful. So I think those who wish to change it, the onus of proof is on them to show why it is unsatisfactory or why it has failed.

What about on the issues of tax. Currently superannuation savings are taxed, but given that these are savings that ease the pressure on the public purse in the future, is that a fair thing?

One of the issues we would be considering in our review of superannuation is the question of the taxation arrangements and whether they can be improved upon. I have publicly acknowledged that taxes on voluntary contributions make the system very complex and they act as a disincentive to voluntary contributions. Having said that, the contributions taxes yield very substantial and immediate government revenue. So the superannuation surcharge, for example, is $500 million and the other contributions tax a much larger figure again.

So if you are going to abolish them or transform them in some way, you've got to explain to the Treasurer how it is you're going to come up with - in the case of the surcharge - the $500 million to address that, or in the case of voluntary contribution taxes generally, a much larger amount of money. And clearly, if we want to do this, you've either got to come up with a reconfiguration of the taxes which is revenue neutral, or you've got to do battle with people who believe - and I think on quite legitimate grounds - that expenditure in areas such as health and education and community services, are more pressing priorities.

Do you believe a Labor Government does have a role to play in encouraging industry based super funds over the products offered by big banks and financial houses?

It was the work of the previous Labor Government that enabled the establishment of those industry funds in the first place and we consider them to be an outstanding success. We are very proud of them. I think that in the modern world they should compete with the for profit superannuation funds for business. I think that is entirely appropriate. What we have endeavoured to do, in a public policy sense, is hold the ring and enable them to offer the services they provide. One of the things we have been concerned about, as I mentioned earlier, is our view that the Government's choice of superannuation legislation was driven by hostility to industry funds. We've also noted some of the changes that have been proposed in the area of trustees, that there may be an anti not-for-profit fund agenda in some of those things, and obviously that would influence the way we responded to the Government's legislation.

There was some talk today about C+BUS' role in actually investing in big construction projects. Would you like to see the industry super fund taking a more pro-active role in job creation opportunities with the money that they have to invest?

I don't know enough about the investment practices of C+BUS or other funds to comment on investment strategies. I would express a note of caution about putting all your eggs in the one basket. That is to say if a worker's employment prospects are tied up in a particular workplace or industry, that if their retirement income prospects are also tied up in that area, there are some potential dangers in that. But, as I say, I'm not familiar with the detail of the C+BUS investment strategy or other investment strategy of various superannuation funds, and others would be better qualified to comment than me.

On a broader level, there is significant purchasing power in super funds and obviously the potential for some shareholder activism there. Yet the current fiduciary duty laws constrain what a super fund can actually do. Is that something you'd like to see reviewed?

We support the sole purpose test, that is that superannuation is about retirement incomes. Having said that, I've taken quite a lot of interest and so has my colleague, Stephen Conroy, who is responsible for corporate governance issues and Financial Services and Regulations spokesman. We've taken quite a lot of interest in ethical investment and issues of shareholder activism, and think that that has the potential to be a socially progressive and constructive thing and also note a fair bit of evidence to suggest that ethical investment need not have an adverse affect on the bottom line. There's evidence to the contrary - that it can have a positive affect on the bottom line. We have talked about choice of investment as opposed to choice of fund, and it may be that with an investment choice that funds will increasingly see fit to offer ethical investment choices.

Are there fiduciary duty problems though with those ethical investment returns that are less than non-ethical investments?

If the choice is offered to the fund members and they make those choices with proper disclosure and in the light of adequate information, I wouldn't have thought so. There could arise problems for trustees who invested their members funds in investments with poor returns. You couldn't justify doing that on the basis that the one investment was more ethical. What I'm supportive of is a fund member themselves could make a choice to have their money put in, what they believe to be ethically superior investments.

Do you see the Government having a role in setting up that sort of infrastructure - to actually have some sort of personal choice in where your retirement funds are going?

Part of our choice of superannuation model, as an alternative to the Government's choice of fund model, has proposed choice of investment. So superannuation funds would offer a range of investment choices to their members.

You were talking before about the aging population. Where is savings policy going in the mid to long term?

One of the things which I think savings policies needs to do in having regard to the fact that it looks like we are all going to live longer - it looks like we are all going to live 'til we're 90 - is to encourage people to spend more time in the workforce rather than seeing retirement at 55 as being the be all and end all. I know this is something which the OECD and European countries, which have a very substantial demographic issue on their hands, have been thinking about and directing policies to.

It partly a question of employee culture and not thinking that it's 55 and out. It partly employer culture, and I do detect some ageism and reluctance on the part of employers to employee mature age and older workers and I think we need to tackle that culture. I think that older workers are going to be healthier and are going to have the experience and the qualifications and so on to continue to make a contribution. Not necessarily doing nine to five but doing part-time casual, flexible work arrangements. And I think our social security system, the way in which it interacts with superannuation, needs to encourage that. So there needs to be a bit of an incentive there to remain in the workforce.

Finally. I'm in my early 30s. What sort of retirement can I look forward to?

I think that superannuation guarantee is ensuring that we will be able to meet the pressure of increased number of people retiring in the future so that the social security, the safety net we have in place now, will be sustainable. But if we want to provide better retirement incomes than the pension, and better benefits for the generation ahead, then we will need to encourage the voluntary contributions and we'll need to have a retirement incomes policy which is putting aside more money than is being set aside now.


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*   View entire issue - print all of the articles!

*   Issue 104 contents

In this issue
Features
*  Interview: A Super Agenda
Labor's federal spokesman on superannuation Kelvin Thompson outlines the challenges a Beazley Government will face in managing the nation's savings.
*
*  E-Change: 1.4 The Shifting Sands of Ideology
Peter Lewis and Michael Gadiel conclude the first part of their study of new politics by looking for core Labor values in a post-Cold War environment.
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*  Corporate: Locking Horns
The same names keep cropping up in the business pages as the web of corporate control stays tied to a few big players. Georgina Murray has been looking at the extent and depth of the connections.
*
*  Unions: The Workers Bank
With banks on the nose, David Whiteley looks at how unions and super funds have got together to create the real deal � the workers bank.
*
*  International: Phil Davey's Amazon Postcard
The CFMEU's Boy Wonder has downed the megaphone for three months in South America. Here's what he's been up to.
*
*  History: Faded Vision of The American Bounder
King O'Malley was an American ex-pat who dreamed of a people's bank. Neale Towart looks at what happened to his vision.
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*  Activists: The Big Gee-Up
With the big guns of the anti-corporate movement in town, Mark Hebblewhite goes looking for a definition of globalisation.
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*  Indonesia: Where to the Workers After Gus Dur?
At the end of a turbulent week, Jasper Goss looks at the impact of the overthrow of Wahid on Indonesian workers.
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*  Review: Mixing Pop and Politics
'The Bank' is a new Australian film that takes a contemporary political issue and transforms it into a piece of compelling popular culture.
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*  Satire: Milosevic's Defence: "I Was Just Issuing Orders"
Disgraced former Serbian President Slobodan Milosevic has brushed off against charges for war crimes against humanity and mass genocide.
*

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Columns
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Letters to the editor
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»  How to Bash the Bank
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»  Dreams Do Come True
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»  Howard's Job Creation Policy
*

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