Defeated superannuation reform bid designed to fail

This week, a bill that was allegedly going to shake up the industry superannuation sector failed in the Senate. Key crossbenchers declined to lend their support.

Those throwing their hands up in exasperation (“See, reform in this country is impossible!”) shouldn’t waste their emotional energy. The bill had little going for it. It was a hangover from the last administration, didn’t address the fundamental issues, treated the symptom instead of the disease and shouldn’t be waved around as proof that reform is unattainable within our political system.

Reporting on the failed bill for The Australian, political correspondent David Crowe said it “would require all funds to ensure they have an independent chairperson and that independent directors make up at least one-third of the board membership, as well as requiring funds to disclose the interests of their directors — including positions on other boards that could cause conflicts”.

In other words, if the bill had passed, more of the top jobs would go to people other than ex-union officials. As reforms go, this is of the “let’s share the good jobs more equally between our chaps and your chaps” genre. This may suit a few ambitious individuals in the finance sector but it does not put the superannuation customers’ interest at the centre of concern.

Our system has real problems around transparency and disclosure. Policymakers have known this for years, yet no one seems to want to do anything to address it.

Broadly speaking, the industry fund sector, on paper, has a record of good investment returns. These returns are used to bolster the argument that no reform is necessary. These arguments were used to defeat the bill this week. However, industry insiders have long muttered allegations that these figures are potentially fudged and ­accounting trickery may be used. Some are concerned that future ­financial scandals on a catastrophic scale are brewing. There is no way of telling whether this is true, but it is an alarming thought.

In 2009, the federal Labor government commissioned a report into the superannuation system. The Cooper review found: “The Australian superannuation system is characterised by a lack of transparency, comparability and, consequently, accountability. There is no standardised methodology for calculating and disclosing relevant fund or investment option information.”

In other words, when industry funds cite superior investment returns compared with the retail sector, we have no way of knowing if the comparisons are fair and accurate. If the accounting methodology between funds varies wildly, then perhaps we cannot rely on industry fund figures. The great returns the funds love to boast about may be correct, or they may be just a feel-good illusion. Again, there is no way of telling.

The Cooper review made recommendations to address these deficiencies, including methodology for “standardising the way in which performance and costs are reported”. However, the recommendations were not taken up.

In 2010, the Institute of Public Affairs completed a report called Keeping Super Safe. It found that the government regulator reported exactly what the various funds told it, and nothing more. Further, the report exposed deficiencies in the performance of the regulatory authorities, noting: “Neither APRA (the Australian Prudential Regulation Authority) nor ASIC (the Australian Securities & Investments Commission) appear to undertake any form of direct auditing of the superannuation funds.” As well as lacking transparency and disclosure, our superannuation sector does not operate as a free and open market, in accordance with the principles of competition. Some funds have a competitive advantage over others as workers are herded into those funds by our industrial relations system. The government should ensure all funds compete on an equal basis, with equal access to markets, standard measures of performance and strict rules about disclosure. It defies belief that this is too much to ask.

This entire episode is characteristic of the Coalition’s weakness when it comes to handling industrial relations policy. It is probably because a few key employer groups continually bleat codswallop in its ear, but for the Coalition industrial relations reform is often seen through the prism of lawyerly ideology instead of mainstream logic and reason. If the government were to introduce the sensible reforms that Cooper recommended, the superannuation sector would work as it should, and where a handful of people in the top jobs came from would be entirely irrelevant.

Too often, Tony Abbott and his team put up inadequate proposals destined for failure, then used the rejection of these as proof that all reform was impossible because everybody else was so unreasonable. This immature, irresponsible, dumb, lazy and frustrating method of governance was central to their downfall.

Malcolm Turnbull and his team must only put up laws that fix real problems with real solutions for the benefit of real people.