Formal Remarks at the Launch of
(Government Response to the Cooper Review)
Moonee Ponds Bowls Club
16 December 2010
Thank you Simon Madden, a great footballer, a real hero of this community and a man and father who absolutely gets the importance of superannuation and Australia's retirement savings system.
Can I also thank so many of you who are integral members of the superannuation and financial services industry and have come along this morning to the proud and enduring Moonee Ponds Bowls Club. You all really get it, what we're here launching today, and it's something I personally and this Government as a whole recognises and thanks you for.
To first become a dad in your forties, like me, is to become aware, if a bit late in the day, how it is with humankind.
You go from 'I' to 'we'. From 'me' to 'us' - in an instant.
You confront, fully formed, an alert and loving little creature, with all her perfect fingers and toes, you would literally die for, would give up your parachute in an aeroplane, would throw yourself on a hand grenade to save. You confront fully formed a creature who will henceforth worry every day of your life, hereinafter.
All of us ask, as a first and last question, this Christmas and next - how do I make a better future for my kids?
In Moonee Ponds and Marrickville, Mooloolaba and Manangatang, this is the great Hamlet question. To provide or not to provide, or to provide less well? This is the query that humankind asks of the heavens and stars and the sunrise of every day of their existence.
And as a Government it's the very question we should be asking. And we are. Round the Cabinet table in Canberra. Round the various Christmas celebrations of our many far-flung electorates. Wherever we travel as Ministers round the floods and traffic jams and bushfires and dust bowls of an always restless continent.
We ask as professionals but as individuals - what is the answer, what is to be done, what is the future of our children? And how long will that be? Will we go to their graduations and weddings proudly applauding, or will we stand by their adult years uncertain what else we could have done?
And it's a question worth asking here as much as anywhere. Here in Moonee Ponds, a legendary place, in a place of good sports, successful immigrants and happy retirees, how can later Australians be as glad and fulfilled as we the luckier ones, from a luckier generation?
How can we make sure that a happy, comfortable retirement is a trusted promise we can make to our children and grandchildren.
Stronger Super is solid contributor to that promise.
It comes prompted by the expert commissioned work of Jeremy Cooper and his team, and I thank them solemnly for it. And I recognise the great work of my predecessors Chris Bowen and Nick Sherry who have ably steered this portfolio when the Review was taking place.
Our Stronger Super response to the Cooper Review covers 177 specific recommendations. But our detailed response does essentially orbit around 3 key themes of strength. The themes of 1) Better Governance, 2) Greater efficiencies, and 3) Fairness.
Better governance measures are required for people to gain greater confidence in super as an investment option. Particularly after the difficult time superannuation funds experienced during the global financial crisis. The GFC meanwhile did highlight the strength of the Australian regulatory system. So some of these recommendations we're adopting and implementing here will see that superannuation fund trustees are subject to the same prudential requirements as other major financial institutions that are overseen by APRA.
Finding Greater Efficiencies are about making clear to the customers what they are in for. To reduce for the first time, and hopefully erase, the diabolical complexity that some of our superannuation arrangements fling us into every time we invest. Imagine one of those scenes in The Matrix where it's all numbers, blips and monochromatic static, and then suddenly it turns into real life, and colour, and simplicity.
Well we want to prompt this transformation to clarity in the superannuation system. Super account holders today face an oversupply of services and paperwork yet an under-use of technology. So the efficiency measures in Stronger Super are not just cutting back the paperwork, and saving the forests that feed it, it's using the technology we now have to educate and empower the customer in the landscape he or she is travelling.
The fairness theme is fundamentally about addressing the problem of existing fees and charges in much of the superannuation sector that are tough to justify or just plain excessive. Most modest, ordinary Australians don't actively and intimately 'manage' their superannuation savings. Yet at present far too many are cross-subsidising those few who do want to actively manage their funds.
Why? Because they're all paying the same amount of fees and charges. The MySuper reform is about mandating the creation of a default product that's simple and most importantly – is low cost – so that the overwhelming majority of account holders don't get hit by unnecessary fees and charges.
And so it works out that if you take on a lower-fee account for, say, well, 37 years, you are 7 percent better off with $40,000 more in your kick than you get from the present onerous arrangements. That's equivalent to almost a 1 percent increase in Superannuation Guarantee contributions.
We estimate that in the long run, these reforms will save members $2.7 billion a year in fees. That's a lot of money, however you look at it. You can buy four Qantas 747s for that, or the playing list of Essendon for a decade hey Simon (Madden).
Fairness also means the Superannuation Guarantee rate goes up, at last, from 9 to 12 percent.
The gift of longer life is something we can all profoundly celebrate – it's the gift of 20th century's social progress to this new millennium.
But if you're going to have an adequate retirement in the years when there are more old people on walking frames than young people paying for them, you have to pay now for those securities, those machineries of adequate return, that come back to you then, in your old age.
Much of what we're doing, in uncertain times, is building certainty, or at least building confidence, in what Ben Chifley might have called the light on the hill at the end of the tunnel. Where you come to journey's end in adequate physical comfort and adequate philosophical satisfaction that your life hasn't been a swindle that ends in a burden on your children.
We are today at a kind of middle stage in our national story.
If this is done right, we in Government can take our hands off the levers, and cease to fiddle with superannuation, which can function in the marketplace without us. I know from scores of consultations with big stakeholders and small, that greater certainty in super is a wish whispered from most quarters. As is almost always the case in a free market economy, certainty is a good thing.
Superannuation is a critical part of the Australian economy. It is the largest source of long‑term savings in Australia and the second most significant source of wealth for many Australians after the family home. And by ensuring that the superannuation system is more efficient, these reforms will also improve the productivity of the Australian economy.
Our multi-trillion dollar national savings pool ($1.2 trillion to date) is a great business enabler because it ensures Aussie companies can rely less on overseas capital. And instead more and more on our long-term domestic funding sources – which are relatively secure and steady.
As we journey forward, with an even bigger superannuation pool, Australian banks and business should be required to call less and less on overseas money markets for raising new capital.
Our already growing strong degree of financial self reliance is one of the reasons why Australia weathered the global financial crisis so well. And the post-GFC growth of funds under management continues to drive a significant and sophisticated wealth management industry in Australia.
Stronger Super builds on all of this.
Not just for individual Australian citizens now and into the future, but for Australia the nation beyond the 21st century horizon.
In terms of our noble citizens, the number of 65 and overs is projected to grow from three million in 2010 to 8.1 million by 2050. The first baby boomer ever invented, born in 1946, turns 65 next year. This means that we are passing out of the long baby boom and into the baby bust.
The boom began when homes, and therefore children, could be afforded. The bust began when this was abruptly not so, when the leveraging laws of the past decade or two put the thought of even a two-bedroom flat beyond many workers who, in the fifties, would have had a house, a lawn, a beach house and a motorboat.
What we're doing now – and I note some cynical pundits attempt to claim this Gillard Government has no vision – what we're doing now is recalibrating some of our most important economic settings and levers to help produce the longer term country and economy we want. Not for ourselves, but for our children.
Listen carefully my friends. Superannuation is big. It's the biggest bucket of investment gold in our national story. And super is not as fragile as it seemed a couple of years ago for a couple of minutes, when our overseas rivals were going to hell in a handcart and shopping trolley, yelling for government assistance in billions they didn't have.
But it has to be built, and increased, and enhanced, and embraced, and force-fed, until its numbers make sense. It has to be up to 12 percent, at least. And you, here, in Moonee Ponds today, and your neighbours and children have to believe it. There has to be an effusive consensus around this great, illuminating, egalitarian idea of bread on the waters that returns to you after many days.
A great, illuminating, egalitarian enthusing idea that steadies the hand that rocks the cradle and broadens the smile you bestow on a sleeping baby, knowing at last one part of the future, your future, and hers, is secure.
Thanks for coming today. I give you Stronger Super.