08 April 2020


SUBJECTS: JobKeeper legislation; early access to superannuation; banks paying dividends.

ANNELISE NIELSEN: Joining us live is Shadow Assistant Treasurer Stephen Jones. Thank you for your time. Big day in Parliament today. This is a historic Bill. The Government has said it's not going to come to the table over the amendments Labor wants. Is this the Opposition trying to make the perfect the enemy of the good?

STEPHEN JONES: No, absolutely not. We've already made it quite clear that we're not going to block the JobKeeper legislation from passing through Parliament. It was, after all, our idea. It would be absurd if we blocked it, but it's also our obligation to ensure that we point out where there are anomalies, deficiencies, you know. It does seem a bit absurd to us, for example, that some casuals will get a pay rise out of this while other casuals will go without and we will be pointing those issues out, putting out some sensible amendments and encouraging the Government to take them up. If they don't, then that's their decision and I think they'll be a lot of casuals are quite disappointed. One-in-four Australian workers are on a casual employment contract. It has far reaching consequences.

NIELSEN: You've been quite vocal about this policy allowing Australians to raid their superannuation if they find themselves in financial distress, we've heard super funds say that they're worried about liquidity. No one's actually put their hand up themselves though and said that their super fund is it risk. Do you think this is becoming a bit of politicking as the Treasurer just said a short time ago? There's a trillion dollars in cash in Australian super funds.

JONES: There's cash in superannuation funds for a reason, because it's needed to pay down on superannuation account based pensions or it's there because superannuation fund members have chosen a cash-rich investment option. If they were to access that cash to pay for draw-downs, under this new facility, it would have to be replaced with more cash which requires those funds to sell down on equities or infrastructure that they’ve got money invested in now. I'm certainly not being alarmist about this. I'm certainly not playing politics. We encourage the Government to listen to industry and put in place a prudent set of arrangements to ensure that the superannuation funds have the same sort of liquidity backstop that the banks have available to them, as and when they need it. I'd say there should be two principles which could govern such an arrangement. The first is there should be no cost to taxpayers. That is it should be provided on a commercial basis so that if it's the Reserve Bank offering bonds and there's a rate of return on the bonds. If it's the Government directly funding it off its books than that is done on a commercial basis. The second principle, and this is quite important, is that it's made available to all a APRA regulated funds as if and when they need it. That's to get around the problem that was identified by David Murray and others late last week where he said, and I don't actually think it's going to happen, but you don't want to create a moral hazard, where a part of the industry says, well we know we have access to this fund so we won't take the prudent decisions that we would otherwise make now, I think that's a very low risk, but if it's made available to all funds and the normal prudential requirements are applying upon those funds. I think fund members, the industry and taxpayers will benefit from such an arrangement.

NIELSEN: On the point of a moral hazard though, when you're asking the RBA to release bonds to fund superannuation funds, when it is open to those funds to merge with other ones if they are worried about their liquidity, that would be a fundamental change in the Australian super space to have leveraged commodities within super funds. That would be a huge change.

JONES: Absolutely not. Can I just say a couple of things? Let's deal with the merger issue up front. There would have to be legislative changes to ensure if funds are forced to merge in the current environment because of liquidity problems, and we've got a very, very, very big problem under the existing legislative arrangements. There's a freeze on assets in any event when funds are going through a merger process. So it's not as if that is an answer to the liquidity issues. It might be an answer to a whole bunch of other issues,  work is underway on that anyway. APRA is now taking an activist role and ensuring that undersized funds are merging, we support that. Merging is not an answer to a liquidity problem. And the second point I'd make is if this is done on a commercial basis, this is not free money for a fund, this would be done on the basis of the funds paying a commercial rate of interest on accessing that that cash, whether it be of through a bond or another facility, entirely commercial and the taxpayers shouldn't be hit up for it and neither should the Reserve Bank. It should be done on a commercial basis.

NIELSEN: APRA has warned the banks against paying out dividends saying it's probably not the right time. It's not as strong a warning as we've seen out of Europe or New Zealand towards banks. The Treasurer wasn't really going much further, he’s just saying that the bank should be listening to the regulator. Do you think that the Government should be taking a stronger stand here?

JONES: Firstly, the regulator could have gone further and would have had our support if they did. I think by and large, both our banks in our insurance sector have been playing a very patriotic role during this crisis and I congratulate them for the steps they've put in place. But a message to bank shareholders and insurance company shareholders, it'll be a bit rich of them to demand a dividend at a time when two thirds of bank customers are reporting a dramatic fall-off in their revenues and seeking emergency credit arrangements. It'll be a bit rich for an insurance company shareholder to be demanding a dividend at a time when insurers are having to change or alter policies or not pay out on a claim. I think everybody is going to take a hit through this and the shareholders of banks and insurance companies no less than that. I think it is entirely unrealistic for a dividend to be paid through the period of the current crisis.

NIELSEN: Stephen Jones Shadow Assistant Treasurer, thank you for your time.

JONES: Good to be with you.