The Australian, December 1, 2017
Malcolm Turnbull has dragged the $2.3 trillion superannuation industry into the political fight over a banking royal commission, naming the sector as a key target after surrendering to a backbench revolt to quell a growing threat to his authority.
Caving in to years of pressure to investigate the banks, the Prime Minister set up the $75 million inquiry just days after rejecting the idea, only to come under immediate attack from Labor, the Greens and rebel Nationals for taking too long to make the move.
The decision, made by the full federal cabinet yesterday morning, aims to neutralise one of Bill Shorten’s most potent attacks on the government after years of argument over financial scandals that revealed the harm to consumers from the power of the major banks.
“The speculation about an inquiry cannot go on,’’ Mr Turnbull said after the early-morning cabinet meeting. “It’s moving into dangerous territory where some of the proposals being put forward have the potential to seriously damage some of our most important institutions.”
The shock move came after the big four banks’ chairs and chief executives wrote to Scott Morrison, calling on the government to end the political uncertainty which “risks undermining the critical perception that our banks are unquestionably strong’’.
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The Treasurer said the inquiry was the “least worst” option. “It was the bad or the very bad,’’ Mr Morrison said.
The inquiry is expected to run for 12 months and report to the government by February 2019.
Renegade Nationals senator Barry O’Sullivan, who forced the backflip by gaining enough support to pass his own wideranging financial services probe with the support of Labor and the Greens, said the inquiry would be a “cathartic event”.
The move on the super industry infuriated union leaders, who are linked to major industry funds that manage $545 billion in retirement savings, a sector the government sees as a source of cash for the union movement.
ACTU president Ged Kearney wrote to senators yesterday to warn against the terms of reference for the new commission, fearing it would become a “witch-hunt” into industry funds and unions. “It must be a bona fide investigation of the scandalous behaviour of the banking executives who are stealing hundreds of millions of dollars from working Australians,” Ms Kearney wrote.
Industry Super Australia chairman Peter Collins, a former state Liberal minister, lashed out at the “politically driven” agenda behind the government’s plans for the industry fund sector, calling for a halt to the legislation while the commission was under way.
The most controversial element in the draft terms of reference for the new commission tells it to inquire into the use of someone’s super savings “for any purpose that does not meet community standards and expectations or is otherwise not in the best interest of members” — a move that could lead to investigations into the funds.
The government will escalate the battle next week by asking parliament to debate the super fund laws, which would force industry funds to appoint more independent directors and abolish workplace rules that prevent some workers choosing their own funds.
In a key decision, Mr Morrison and Financial Services Minister Kelly O’Dwyer will not let the commission delay their existing reform plans for the sector including tougher remuneration laws for banking executives, a new “one-stop shop” to hear consumer complaints and the super changes.
The Coalition has been trying for more than two years to break open the workplace regime that favours industry funds backed by unions, arguing that the sector helps the unions by paying fees to directors and signing marketing deals.
At stake is the control of millions of super fund accounts by the competing powers of the vast industry, with retail funds owned by the banks seeking more scope to take on the not-for-profit industry funds set up by unions and employer groups.
Industry funds fear a repeat of the Abbott government’s trade union royal commission, which uncovered arrangements such as the wrongful disclosure of member details by industry fund CBUS to union officials.
Australian Institute of Superannuation Trustees chief Eva Scheerlinck said the banks had abused their social licence and deserved the new commission but the super industry should be left out of the inquiry.
“Australia’s super system is world-class, and there is no evidence of gouging, fraud or unethical behaviour to warrant a royal commission into the industry,” Ms Scheerlinck said.
The terms of reference for the commission add the super industry but avoid other demands, such as pressure from the Greens to investigate political donations.
Mr Turnbull dismissed the idea of a royal commission as recently as Tuesday after claiming for years that the exercise would waste money on lawyers without producing an outcome for consumers and business.
The Prime Minister admitted the government’s decision was made in part because the government was “two members down in the House of Representatives” while Barnaby Joyce and Liberal MP John Alexander fight by-elections this month.
“Government policy remains the same until it’s changed,” Mr Turnbull said. “Obviously, there’s been a lot of changes in the political environment here.”
The Australian Bankers Association warned that the industry was already exposed to multiple inquiries but it welcomed the royal commission on the grounds that a parliamentary commission would have been worse.
“Australia’s banking and financial system is too important to leave in the hands of minor parties and fringe elements in the parliament,” the association said.
The Opposition Leader attacked the government for saying that it was a “regrettable” move and for announcing the decision only after the big four banks threw their support behind the royal commission in a joint letter early yesterday.
“We found out that only when the four big banks sign a permission slip for Mr Turnbull does he give in and have a banking royal commission,” Mr Shorten said. “We all know that Mr Turnbull is supporting a banking royal commission not because he believes in it — he has called it regrettable, he thinks it is the wrong policy — but he has done so to keep his job and avoid further embarrassing splits within the government.
“We now have a Prime Minister who has lost control of his party. Malcolm Turnbull has lost control of the parliament. Malcolm Turnbull is a Prime Minister in name only.”
Labor Treasury spokesman Chris Bowen called last night for stronger terms of reference, warning of a political attack on industry funds and saying the government should consult the victims of financial scandals.
The government is expected to name the royal commissioners within a week and is considering former or sitting judges for the position.
But it is under no obligation to consult Labor or others on the terms of reference. Nationals MPs who had pushed for the commission, offered mixed views yesterday on Mr Turnbull in a clear sign of the discontent within Coalition ranks.
Queensland Nationals lower-house MP George Christensen said he did not understand why Mr Turnbull had to be dragged “kicking and screaming” to announce the royal commission.
Resources Minister Matt Canavan said it was not an “unprecedented experience” for the Nationals to speak up to change policy, but he denied it was a sign of government instability.
Victorian Nationals MP Andrew Broad said the cabinet had acted “wisely” in listening to the calls for the royal commission.