20 October 2015
Transcript - #2015057, 2015

In the role of: Minister for Small Business and Assistant Treasurer [21 September 2015 - 18 July 2016]

Interview with Greg Jennett, ABC, Capital Hill

SUBJECTS: Government’s response to the Financial System Inquiry

ABCGREG JENNETT:

Assistant Treasurer Kelly O'Dwyer is responsible for getting many of these changes passed into law, especially superannuation, and she joins us in the studio now. Minister, let's start talking about super choice. It's a big part of your announcement today. How many more people are likely to be freed from current constraints and to have choice enabled for them as a result of these changes?

MINISTER O'DWYER:

Potentially millions of Australians. So what we have right now is limitation of choice, where someone who is part of an enterprise bargaining agreement is forced to have a particular superannuation fund. It's chosen for them. There is no individual choice in that. It might not be right for them, it might not be best for their family circumstances and it might not be best for their ultimate retirement income. That's why we say they should be able to choose the fund that is right for them. They should be able to make that decision, not outsource that decision to someone else, whether it's an employer or a union.

JENNETT:

Haven't successive governments gradually introduced more choice in this sector and if so which are the last bastions, the industries or the industry super funds, that still tend to be tied to particular agreements?

MINISTER O'DWYER:

Well, I have mentioned the enterprise bargaining agreements. That's not just union agreements. I mean, that's across-the-board, where business might come up with a particular enterprise agreement with its employees and they can be using industry funds or in fact retail funds. We're not discriminating here. This is not an ideological view. This is simply about making sure that individuals can make the decisions that are best for their future and for their retirement. When it comes to default funds, at the moment, under the award system, you are forced to choose from a list of default funds. We're not sure that that's the most competitive nor efficient system, nor being best for choice. So we have tasked the Productivity Commission with actually looking at this question as to whether or not this is the most competitive system that is available to us to allocate default funds. We're going to look forward to the recommendations that they make to us on that.

JENNETT:

Looking at the funds in the market, who might stand most to lose? Is it the industry super funds typically aligned with unions?

MINISTER O'DWYER:

I think the better question here is who has to gain. At the end of the day, the individual whose money it is, whose money is being saved for their retirement, stands to benefit because they will be able to make the choice about what is going to be best for them in retirement. So it's all about who wins, not who loses.

JENNETT:

They go to need to do their homework, though, because when you take on choice, you are taking on some very big decisions about your financial future?

MINISTER O'DWYER:

That's right. But we make big decisions about our financial future every single day. We make big decisions, which is why this whole report is so critically important. Our financial system is all about the big decisions we make every single day, whether it's about our retirement incomes, whether it's about buying a house, and borrowing from a particular bank, whether it's utilising a financial adviser and receiving advice from them. Our financial system touches upon everyone, which is why we have very carefully considered the report that's been put before us and announced 48 measures in response to that.

JENNETT:

There's another piece of work ahead which is defining what they call the objective of superannuation. Now, that seems simple enough. Most of us have a fairly clear understanding, super's about saving for our retirement. What's the complexity involved, why haven't we got a clear national understanding of what the objective of super actually is?

MINISTER O'DWYER:

Because I suppose for some people, it does mean different things. For some people, it's about not being part of the welfare system, it's about not needing to access an aged pension or even a part pension. That's what Murray said when he put forward the objectives. For other people, it might be somewhat different. What we have said is that we actually need to agree to what the objective is, because so much hangs off that. We think that Murray and what he has said in his report is a very good start.

JENNETT:

So you like the idea of something that mentions a transition off welfare and pensions onto self-funding retirement. Is that your preferred model?

MINISTER O'DWYER:

Well, we're saying that we're going to have a discussion about the best model. We think it's a good start, what Murray has said. We think it's a very sensible start. We want people to have retirement savings that they can live off, and not require the aged pension or even a part pension. The whole objective behind superannuation in the first instance was so that people could have retirement income that they could rely on, to live out their retirement years. So as I said, we're going to talk about the objective, we're going to make sure that we can get everyone to agree on that objective, and then we will legislate that, so that everyone when we talk about superannuation and what it's there to do, can agree on the same thing.

JENNETT:

When you say get everyone to agree, is that politically too, you're going to take Labor into this process?

MINISTER O'DWYER:

We'll work with everyone on this. It's so important. This can't be seen to be a partisan political discussion. This is an important discussion for every Australian and we are very happy to work with the Labor Party, we're happy to work with the Greens, we're happy to work with the crossbenchers to make sure we get this right.

JENNETT:

Let's look at card surcharges now. We've heard explanations from the media conference earlier today about how the objectives to have the surcharge match the actual cost. What factors actually influence cost? Give us some examples maybe of an industry where it is almost valid to have a 10 per cent surcharge, versus another where 1.5 is arguably too high?

MINISTER O'DWYER:

So what we are saying here is that if your bank is charging you a particular interchange fee, that's one aspect of the payment systems and currently the Reserve Bank, through its payment systems board, is actually looking at whether or not those fees are right. There will be a determination before the end of the year in relation to that. But when somebody presents their card at a business and it might, in this instance, be a credit card, and it costs the merchant a certain percentage in order to process that payment, let's say it's 2 per cent, and they're charging you, the customer, 5 per cent, well, that's excessive surcharging.

JENNETT:

How do we get to transparency on that?

MINISTER O'DWYER:

We're going to put a ban on that and say you cannot charge that excess surcharge to the customer because that is not what you are being forced to pay, and therefore, you cannot make that charge apply to the customer. Now it is perfectly up to businesses to be able to charge for their services, to be able to charge for their products. We're not regulating that. But
we're saying you can't be misleading and deceptive about the payment system. So if you are producing a debit card or a credit card and you're saying it's costing you a certain amount and it isn't, it's not on.

JENNETT:

Do your regulators have a fix on where the worst clusters of excessive surcharges exist typically in the economy at the moment?

MINISTER O'DWYER:

Well, certainly, there are some examples. I'm not going to specify them directly. The ACCC will have the power to come in and to make sure that this is enforced, this ban is enforced. So we're putting real teeth behind this particular measure and customers at the end of the day are going to win from this. It's going to be far more transparent. They are going to know that if a surcharge is being applied to them in relation to their payment method, that that is right and appropriate. Otherwise, the ACCC will take action.

JENNETT:

But this isn't a guarantee, there's no embedded guarantee that surcharges are coming down across-the-board. It's only where it's proved to be excessive?

MINISTER O'DWYER:

That's right, and there are lots of examples where in fact there have been excessive surcharges. No doubt the ACCC will take action in relation to that and no doubt customers are going to benefit because they will see that price drop.

JENNETT:

Alright. Plenty of work for an Assistant Treasurer to get on with it but thanks for that update today.

MINISTER O'DWYER:

Great pleasure.