01 April 2020


SUBJECTS: Superannuation early access; economic hibernation.

ANNELISE NIELSEN, HOST: Joining us live now is Shadow Assistant Treasurer Stephen Jones. Thank you for your time.

STEPHEN JONES: Good to be with you.

NIELSEN: The big concern Labor has at the moment has been the Government policy allowing people to raid their superannuation of $10,000 this financial year and next financial year, cumulatively $20,000, if they are seeing a drop in their income because of COVID-19. The Government says that APRA has signed off on this, saying that the super funds have a lot of liquidity that they could raid and should be raiding now. Why shouldn't they be using that money to help Australians get through coronavirus?

JONES: I'm not going to fight past battles. We opposed the measure. We don't think it's good policy. It's been legislated for. The objective of Labor now is to not to fight the past but to ensure that the policy is properly implemented and that requires ensuring the administrative arrangements are satisfactory. We have some deep concerns about that. We want to ensure that if people are encouraged to contact the Tax Office and their super fund to get the money that the processes work properly. The ones that were laid out before Parliament sat last week were not sufficient. The second thing we want to do is ensure that all fund members aren't damaged and don't lose significant amounts of their savings if there's a run on the super funds. We're proposing that some sort of liquidity backstop be put in place for the superannuation funds in the same sort of way an arrangement has been put in place for the banks. This is not, and I want to stress, this is not a case of taxpayers bailing out superannuation funds, it’s far from it. In fact on one of the models that we're encouraging the Government to consider the taxpayers actually make money out of it. If it was a bond issue then the superannuation funds would be paying the Reserve Bank, effectively, for access to that loan facility or that fund facility. There are a bunch of other models that because could be put in place and would actually benefit the taxpayer, benefit the bottom line, and not be a drag on the bottom line. Superannuation funds would also benefit as well because it would mean that they're not required to sell assets at the bottom of the market and doing it any time soon will be the bottom of the market.

NIELSEN: You have joined the Shadow Treasurer Jim Chalmers in calling on the RBA to provide liquidity to super funds. Isn't that just stumping up the cash and that is taxpayer money?

JONES: No, it's not. Just in the same way that the Reserve Bank is providing access to a line of credit and entering the bond market to assist the banks is not the taxpayer stumping up. Banks are actually paying for access to that capital and the superannuation funds would be paying for access to that capital as well at the going market rate. That's one of the models that could be put in place and I understand it's one that the Reserve Bank is reported to be considering. It's not a matter of taxpayer money being used to prop up superannuation funds, it's a matter of commercial arrangements being reached between the Reserve Bank and the superannuation funds to ensure that if they are short of cash they can, on commercial terms, access funds held by the Reserve Bank so that they don't have to sell down shares. The reason we're proposing this is that if super funds have to dump shares in the middle of a market downturn, when it's 30 percent down on the highs of February, every fund member loses from that because the overall holdings of the fund lose. They are cashing out at the bottom of the market and at some point in the next 18 months, they're going to have to reposition to purchase those shares again. However, far from purchasing in the bottom of the market and selling at the top of the market they'll be doing the reverse and that doesn't make financial sense, particularly when there is a great alternative out there that benefits everybody.

NIELSEN: The Treasurer Josh Frydenberg is calling on G20 countries to come to the table with the same kind of deal that we're going through in Australia, saying that they should be trying to put their economies into hibernation like we are. Do you think that's a good call?

JONES: 100% support. 100% support for the Treasurer in this. We know from our experience in the global financial crisis that the best results are going to occur when you've got all of the G20 nations moving in a synchronised fashion, whether it be monetary policy, whether it be fiscal policy, we need to be moving all of those measures together because when we come out of this Australia, as a trading nation, knows that it's going to need access to healthy markets around the world to sell our agricultural products, to sell our services, to attract tourism. If economies in our neighbours aren’t booming and people aren't going to be coming to Australia on planes or in boats, they're not going to be buying our export products, they're not going to be buying our commodities and our minerals. We need everybody to be moving in a similar fashion to ensure that when we come out of this we're able to get our economy and everyone else's moving again in unison.

NEILSEN: Stephen Jones, thank you for your time.

JONES: Always good to be with you.