Industry super is Australia’s biggest closed shop

cracked-egg-2by Andrew Bragg  12 January 2016  Australian Financial Review

As The Australian Financial Review’s Chanticleer column noted in December, declining union membership has not limited the growth or campaign capacity of the modern incarnation of the union movement.

The likes of Getup, Industry Super Australia (ISA) and a bunch of think tanks pursue reckless anti-business policy, naked rent seeking and hypocrisy.

Three examples have emerged in the first weeks of 2017.

First, unions and ISA are against January’s pension changes which boost battlers not millionaires.

The Council of Social Services (ACOSS) and Council on the Ageing (COTA) back the changes as 200,000 Australians with relatively modest assets receive higher pensions.

For example, a retired couple can now have almost $400,000 on top of the family home before their pension reduces, instead of the old cap of $300,000.

Many of these Australians are members of industry super funds, which officially oppose this change even though their members will immediately benefit.

Any measure of fiscal rectitude is opposed by a standing union campaign based on scaring people and recklessness.

No report

Second, recent pages of the Financial Review have again noted the failure of ISA to deliver a report from Bernie Fraser on the governance of industry super funds.

The Fraser report was promised to crossbench Senators Nick Xenophon and Jacqui Lambie by April 2016 in return for stalling a recommendation of two reviews presented to the former Gillard and Abbott governments that super funds have independent directors. There is no sight of the Fraser report.

Industry funds oppose independent directors for their own super funds because unions will lose power and control.

But, of course, they demand a majority of independent directors for listed companies they invest in.

It gets better. They also believe in competition for everyone in the economy, but not themselves. 

The consumer benefits of competitive markets are indisputable. Competition policy in Australia has been a major driver of higher living standards for all Australians over the past two decades.

The Productivity Commission estimated in 2005 that the competition reforms of the 1990s increased Australia’s GDP by 2.5 per cent over a decade.

Accordingly, Chief Economist for ISA, Stephen Anthony, wrote in the Financial Review on January 3:

“[The Treasurer] can allow product markets to work more efficiently by implementing all the Harper Review recommendations on flexibility and competition to enable household budgets to stretch further.”

Calling out specific industries for their “closed shop” arrangements he commented:

“Part of this requires hard reforms in closed shops such as the pharmacy sectors and medical professions, which would open the delivery of health services to greater innovation, efficiency and reduce the opaque nature of fee setting.”

Well-protected funds

He’s right. But the largest closed shop in the Australian economy is the $2 trillion superannuation industry. Over $10 billion per annum flows through the Fair Work Commission into industry super funds without any competitive tension whatsoever. 

Cheaper, better or different funds need not apply.

Industry funds have railed against competition in the superannuation industry since the Howard government first allowed some consumers to choose their own fund – but cut deals to leave massive loopholes for unions in the form of enterprise agreements that can remove a consumer’s right to choose their own fund.

Anti-competitive “Modern Awards” ensure the protected status of industry funds and have allowed the industry super sector to swell to $500 billion.

Every closed shop is a “special case” for opponents of reform – and should the government act on this issue, we can expect to hear why unions are better placed to choose a fund than consumers themselves.

New Daily

Third, the hypocrisy is exemplified through the New Daily, an online newspaper launched in November 2013.

The dubious $12 million investment was jointly funded by a collection of industry superannuation funds, out of members’ retirement savings, and holding company Industry Super Holdings (ISH).

It has taken The New Daily three years and over $9 million of its seed capital to notch up a paltry $14000 profit for members. Its roaring success is likely tied to the automatic enrolment of ALP members to its news service in 2016, unless they opted out of receiving emails.

The shares held by individual industry funds were recently bought out by Industry Super Holdings for $0, leaving ISH the sole shareholder.

It can be argued, however, that the $12 million has been a very good investment for industry funds.

The New Daily purchases content from media organisations, which consistently features content produced by the New Daily’s related party company Industry Super Australia.

As you would expect, ISA is also a wholly owned subsidiary of ISH.

Offensive material

It is perhaps the material the New Daily runs which is most offensive.

On the same day in January, a lengthy piece argued the publishers of The Australian and Financial Review run a protection racket for business, have secret commercial agendas and can’t be trusted.

The piece didn’t mention examples of the Financial Review‘s work on ANZ’s trading floor, Murray Goulburn and Ardent Leisure or the Australian‘s heavy scrutiny on Clive Palmer’s business activities.

Most grievously, the New Daily ran a concurrent article on the Fair Work Commission which failed to mention the $10 billion which flows into industry super funds every year thanks to the FWC.

As the old labour warrior Jack Lang rightly said “… always back self-interest. At least you know it’s trying.” Indeed. It’s just harder to spot these days.

Andrew Bragg is director of policy and research and Menzies Research Centre

Original article here

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s