15 September 2016
Transcript - #2016057, 2016

Interview with Ross Greenwood, 2GB Money News

SUBJECTS: Superannuation, economy, ASIC, banking

ROSS GREENWOOD:

We are talking this evening to Kelly O’Dwyer who was a key part of this policy, who is with me on the program now, many thanks for your time Kelly.

KELLY O’DWYER:

Great pleasure Ross, really nice to be with you again.

ROSS GREENWOOD:

OK, was this political pragmatism to get some measures through?

KELLY O’DWYER:

Well absolutely we wanted to deliver our package of reforms on superannuation and we have made a modification so that we can do that. We think that this modification does make the system fairer, it does make it more flexible, and it will ultimately make it far more sustainable into the long term.

ROSS GREENWOOD:

OK, does that imply that your $500,000 lifetime non-concessional cap when you were going to look back to 2007 that so many people vehemently opposed does that mean that it was unfair?

KELLY O’DWYER:

We’ve come up with an even fairer way of actually dealing with this issue.

ROSS GREENWOOD:

So you’re saying yes it was unfair.

KELLY O’DWYER:

No, I’m not saying that, you’re saying that. I’m saying we’ve come up with an even better solution and the solution we’ve come up with is to ensure that we have annual caps for after-tax contributions, that they are $100,000 each year that people can have a bring forward of three years. So that means that lump sums can be put in of $300,000 in a three-year period and, this is limited by an eligibility which says, that in order to make these contributions, you need to have less than $1.6 million in your superannuation balance.

ROSS GREENWOOD:

OK, I get all that. If this was a better solution why didn’t you come up with it during the Budget and before the election so that it would have cost you less pain at the ballot box and your own supporters would not have deserted you prior to the election, which meant that the Prime Minister had to put his own hand in his own pocket to help fund political advertising.

KELLY O’DWYER:

Well Ross, there are a few things that you have covered off in your statement and what I would say to you is that from an electoral point of view there was one massive issue that did have a very significant electoral impact and that was the Mediscare campaign, which was a completely vile campaign run by the Labor Party and the trade union movement to frighten older Australians about their ability to access health care. So if you want to talk about the impact on the election campaign; that certainly had an impact.

ROSS GREENWOOD:

But I’m mainly talking about your own supporters who were ringing up this radio station every day for weeks on end leading into that election and they were saying that they weren’t going to back you, they weren’t going to man the booths; they weren’t going to give political donations to the Coalition as a result of this policy.

KELLY O’DWYER:

Well, I can certainly say to you that, in those areas where people would have been most affected we had some swings toward us and in those areas like Curtin and Kooyong and Goldstein that was pretty significant. They were the sort of electorates that would have been most affected by those potential changes. But let’s not lose sight of the fact that the reason that we have brought in this reform package is that we actually do want to give people the tools to be able to save for their retirement. We’ve got additional flexibility arrangements that make it so much fairer for people, no matter who they work for, how they are employed, to be able to contribute concessionally to their superannuation. We used to have this preposterous situation, which I know you’re familiar with Ross, that said that if you work for a small business that didn’t offer salary sacrificing you couldn’t take full advantage of your concessional contributions. We also had a ridiculous situation where, if you had part of your income earned through a salary and part of it earned through a self-contracting business, again you couldn’t take full advantage of your concessional contributions. Now, we simply think that is not fair. We think everyone in Australia should be on a level playing field in contributing to their retirement future.

ROSS GREENWOOD:

Ok, I’m with all of that, and in fact I think the changes that have been made today are better, certainly than the system that you had proposed going into the election. I make no bones about that. You’ve trimmed off the top end of it, and as a result, it is certainly fairer. I noticed today that the Treasurer said that he’d been in contact with Chris Bowen the shadow treasurer in regards to these changes does that imply that the Labor Party will support them?

KELLY O’DWYER:

Well, there is absolutely no impediment for the Labor Party now. I mean they didn’t have a superannuation policy going into the last election. They told the Australian people that they would have to just wait until after the election to know what it would be, but they banked the savings that were actually in the package. And we have said to them the impediments that were there for your support –

ROSS GREENWOOD:

To be fair they did say that they would tax people once it they had a certain amount of income that came out of their retirement stream, didn’t they?

KELLY O’DWYER:

Well they had some elements that they revealed to the Australian people, but there were a whole heap of other elements that they didn’t reveal. They certainly didn’t reveal that they were going to actually drop the Division 293 where you are paying 30 per cent if you earned over $200,000, I mean that was something they definitely didn’t reveal to the Australian people, and frankly which we reject .

ROSS GREENWOOD:

Can I pick up on one thing and that is the original $500,000 cap, was I think out of the top of my memory was going to save the government $550 million over the forward estimates. Now that that’s disappeared, have you got enough money that you’ve been able to claw back in other areas such as the proposed catch-up concessional superannuation contributions being deferred by 12 months. This is about women and other people in the workforce or out of it being able to make catch-up payments? Is it actually all going to balance out in the end?

KELLY O’DWYER:

It not only balances out in the forward estimates, in fact, because of the changes that we have announced today, over the forward estimates we are $180 million better off, and over the medium term, up to 2026-27 we will be $670 million better off, but we will still be able to have the catch-up contributions, which the Labor Party oppose, which I think are really, really important for those people who have time out of the workforce for whatever reason, whether it’s to care for an elderly parent, or whether it’s because they’ve got parental responsibilities, it gives them the ability, if they’ve got a low balance, to be able to make catch-up concessional contributions on a rolling five year basis. We’ve had to defer it in order to make our modified package wash its face to make sure that we can fit within the budget parameters, so that means that applies now from 1 July 2018. But we have stuck with it because we know that these flexibility measures are the tools that people need in order to properly save for their retirement.

ROSS GREENWOOD:

Will you get these through the Senate, will you get these through the House of Reps do you believe?

KELLY O’DWYER:

Well we think that the Labor Party have no reason now not to back these changes. So we think we should have their support. We see no reason that we wouldn’t get their support for this and there has been an initial discussion with Chris Bowen on this point. We also, we’ll obviously look to take this package through the Senate. We think that the package will go through and we’re obviously going to continue to look for that bi-partisan support not only with the Labor Party, we’ll also speak to the Greens as well and the crossbench to make sure that they understand the policy package and the benefits that will flow to Australians.

ROSS GREENWOOD:

Just one thing before I let you go Kelly, I did note today, very late in the piece, the House of Representatives Standing Committee on Economics started a review of the performance and the strengths of Australia’s bank and financial system, and those hearings are going to start October 4. So there’s the other commitment you made that there would be an inquiry into the banks.

KELLY O’DWYER:

So this is actually going to be an oversight hearing, which the economics committee is conducting in the same sort of way that they would conduct on the Reserve Bank and on APRA. I think that this is going to be a very good measure to allow further transparency into the operation and decision making of some of our most significant institutions, and I know that David Coleman, as Chair of that committee, will do a very, very good job on that. But at the same time, this is not the only measure that we have brought in in order to make sure that where there are problems, those problems are fixed. We have announced additional resourcing for ASIC, an additional $127 million for ASIC to make sure that they have the capacity and resources to properly do their job at not only prosecuting where there are problems but making sure that they can detect it in advance of harm being caused. You’d also be aware that we are currently conducting an expert panel review on external dispute resolution procedures, that’s definitely on its way, and we expect an interim report in November and a final report in March. And that will also give recommendations and observations around a compensation scheme of last resort. So there is a lot of action that’s taking place here but I think it is very reckless of the Labor Party to actually call for a Royal Commission when we know that the result of that is that when you travel overseas, when the Treasurer travels to the G20 or the IMF, global partners and ratings agencies will say things like, does that then mean there is a systemic problem with your banking sector. It is absolutely reckless for investment and confidence.

ROSS GREENWOOD:

Kelly O’Dwyer is our Minister for Revenue and Financial Services, thanks for your time Kelly.

KELLY O’DWYER:

Terrific, thanks so much Ross.