ADDRESS TO THE CONEXUS INSTITUTE RETIREMENT FORUM
Senator Dean Smith Shadow Assistant Minister for Competition, Charities and Treasury Tuesday 8 August 2023 Old Parliament House, Canberra Opening remarks I begin by acknowledging the traditional custodians of the land on which we meet today, the Ngunnawal people, and pay my respects to elders past, present and emerging. And I extend the Coalition’s appreciation to David Bell and Colin Tate from Conexus for the opportunity to share these remarks. I am delighted to represent Shadow Treasurer Angus Taylor. Introduction In 2009, the Henry Review observed that “The retirement income system is facing challenges that will test it as the 21st century unfolds. These challenges include the ageing of the population, longer life expectancies and more people interacting with the system.” Fourteen years later, with each of these challenges magnified and in the middle of a cost of living crisis, the Review’s findings are now urgently real. It is key to the wellbeing of Australian retirees, and the national economy, that we have a secure and trusted superannuation system, reinforced by a more accessible financial services sector. The remark by one industry participant that “the hard work in translating super into better retirement outcomes is only just beginning” is evidently very true. Economic context Many Australians’ economic circumstances have changed dramatically since the last Federal election. The cost of living and the cumulative effect of 11 interest rate rises mean many households are grappling with financial challenges they have never experienced before. The latest data makes it clear. The ABS Selected Living Cost Indexes, released last week, rose by between 0.8% and 1.5% in the June 2023 quarter. Annually, the same Living Cost Indexes rose by up to 9.6%. Working households experienced the highest annual rise in expenses on record. This was based largely on blow-outs in mortgage interest charges, which grew 91.6% – and represented another record increase. It is unsurprising that Roy Morgan research found that, in the three months to June, 1.43 million Australians were at risk of mortgage stress. Looking again at the ABS data, most relevant here today is that insurance and financial services were a major component of these cost of living increases. For self-funded retirees, insurance and financial services costs rose by 17.0%. It was 25.7% for pensioner and beneficiary recipients and 51.8% for working Australians. Meanwhile, the most recent HILDA survey found around 8.5 million adult Australians were financially illiterate. And it’s suggested that almost 90% of Australians are prohibited from accessing financial advice due to cost. This is the current reality. But these circumstances also represent a rare opportunity for the financial services sector – which is something I will return to. The Coalition and superannuation Current position Australia’s superannuation system succeeds when people feel it delivers stability and certainty in planning for their retirement. It is a balancing act of recalibrating to ensure it is fit for purpose while maintaining the certainly expected of any long-term investment. Future changes must be measured and respond to genuine requirements only. Superannuation must not become an unwilling participant in political culture wars or be viewed as a piggy bank for Governments to dip into when the Budget needs supplementing. It is Australians’ money, intended to provide them with a secure retirement income. That is why the Coalition believes future priorities for superannuation should be guided by supporting retirement outcomes for Australians. These include: Improving superannuation awareness among Australians; Balancing broader benefits without compromising the preservation principle; Addressing the balance gap to assist women, primary caregivers and low-income earners grow their superannuation; and Reducing red tape across the financial services sector and economy, driving investment and making it easier to deliver returns. The Levy Review Too many Australians have been cut out of access to financial advice for too long. The Coalition commissioned the Quality of Advice Review – commonly known as the Levy Review – with a view to changing this. Labor’s announcement in June this year that it would adopt some of the Review’s recommendations seemed an encouraging start. But, viewed from any angle, the staggered approach being taken by the Albanese Government is disappointing considering the pressing need for reform. So is the decision to accept just 14 of the 22 recommendations, especially given the Review’s author has stressed this will “change very little” for the accessibility and affordability of advice. Crucially, the need for a fifth round of consultations indicates Labor still lacks a clear vision on the future of financial services in this country. As a result, we now see media coverage of the negative impact of the Albanese Government’s inaction on older Australians – some left with expensive and unnecessary life insurance policies and others with no cover at all. Younger Australians are also reported to be stranded without the financial advice they need. Given the current economic climate, it is particularly concerning that Australians of all ages experience these issues while Labor attempts to find its way to reform. This inaction is causing real life, real time hardship to consumers. Having commissioned the Levy Review, the Coalition’s priority is to see its findings reflected in necessary and timely change. Australian Financial Services Law Review In four months, we will see the final report of the Australian Law Reform Commission inquiry into simplifying financial services regulations. Also commissioned by the Coalition, the inquiry is intended to create an achievable pathway towards a regime that is more adaptable, efficient and easier to navigate. The inquiry’s most recent interim report found the complexity and poor structure of the current legislation makes it difficult to work with and understand, increasing the time, resources and costs needed to comply with it. Successful compliance is, unsurprisingly, less likely as a result. Importantly, the complicated nature of the existing legislation seriously reduces its potential as a vehicle for future policy reform. The interim report found the sooner reforms are made to existing regulations, the simpler they will be to implement and delays and expense associated with remaining with…