Contributed by Joe Montero
The Australian government is talking up the reform of superannuation in Australia.
Change is certainly needed. For too long, funds coming out of workers’ pockets have been used as a vehicle to secure a ready made reserve for fund managers to line their pockets and for corporations to secure cheap investment funds, rather than having to use their own.
A consequence has been a growth in reckless investment, at the expense of those to whom the money really belongs.
Banks and other financial institutions have used superannuation money as a component of growing involvement in speculative investment, at the expense of investment in the real economy. It has contributed to the housing bubble that has made life harder for so many people.
To believe that the present talk of reform is about addressing this would be a mistake. Curtailing excess fees might be welcome, but it remains only a sideshow to the real purpose. Slanging at the unpopular banks might bring on a few smiles. When there is no substance behind it, nothing real is going to eventuate.
There are some other changes that came into effect on 1 July or are on the way, providing a few few minor sweeteners and take away with the other hand. This article is not covering these, but focuses on the main game, which hides behind Malcolm Turnbull’s promise of “providing better choices for consumers”.
If past comment is any indication, the intention is to open up areas currently covered by what are called industry funds, to penetration by those that are referred to as independent funds.
There is a great difference between the two. Industry funds are essentially not for profit, in that they distribute earnings to the policy holders. The so-called private funds and referred to as corporate funds by ASIC, are private businesses that are solely in the game to make a profit. Most of these are owned by the banks. At the workplace, these funds are appointed by the employer, unlike the industry funds that are based on agreement between employers and unions.
Industry funds are overseen by committees of management that are made up of government, business and employee representatives (unions). While this might not be perfect, there is at least some element of social supervision over what they do. The others are directly managed by financial institutions and they make all the decisions.
Private funds have had a history of being used to pull up the bottom line of the companies who manage them and returning significantly less to the contributors.
Both types of funds operate largely though the banks, and because of this, are well placed to be winners in the intended changes.
The exception is when funds find their way into community and cooperative banks. Although relatively small scale, this is a growing trend and is potentially a significant threat to the big banks. It is in their interests to have this stopped and it is the industry funds that are involved.
Superannuation is an existing resource that could be used to assist with revitalising the economy on a broad base. Funds currently under the control of the private financial institutions and corporations are not being used in this way. It suggests the failure of the market.
A broad base would include overcoming infrastructure weaknesses and rebuilding a solid manufacturing foundation.
Industry funds, because they do not represent such narrow interests are much better placed to meet these needs. More so, when community pressure builds. This is starting to happen.
Pressure is also on, to invest in sustainable and environmentally favourable technologies and a fairer economy.
Put together, it adds up to the worst nightmare for narrow corporate interests and a government so hooked on unhindered market forces, minimal government intervention, cost cutting and turning over public assets to private use, concepts that are the essence of neoliberal view of a capitalist society.
This is the reason why industry funds are under attack.
It also serves as the rational for the ambition to remove unions from the governing boards, under the guise that they are using the money for the wrong purposes.
What it really means is the removal of any form of community oversight, so that all the decision making power can be left in the hands of major shareholders, to be used to meet the wants of the corporate world and not the rest of society.
With this, the Australian government shows its aversion to idea democratic control and that there are solid reasons why it is just to oppose any shift in this direction