Costello questions whether super is working
FORMER Treasurer Peter Costello has called for any top-level review into the banking sector to be broadened to take in the $1.4 trillion superannuation industry, saying governments have failed to assess properly whether the system was meeting people's retirement needs.
FORMER Treasurer Peter Costello has called for any top-level review into the banking sector to be broadened to take in the $1.4 trillion superannuation industry, saying governments have failed to assess properly whether the system was meeting people's retirement needs.As the share of wages that must be put into super is set to rise to 12 per cent, from 9 per cent, today, Mr Costello said "very few people" realised this system had recently lost money, and there was a risk workers were being forced to make "bad investments".If it wins the election, the Coalition plans to hold a "root-and-branch" review of the financial system, a move shadow treasurer Joe Hockey has dubbed the "Son of Wallis" in reference to the 1997 review by businessman Stan Wallis.Mr Costello, who as treasurer commissioned the Wallis inquiry into the financial system, said the probe would only be beneficial if its focus was on broad questions such as whether superannuation was serving the interests of members and the broader economy."There is one sector of the financial sector in Australia which the government has never properly looked at, which is superannuation," Mr Costello told The Age."That should be looked at, particularly at a time when the government is requiring people to give up more and more of their take-home pay and hand it across to this industry, and it's going to affect retirement incomes and national savings."If it just looks at the banking system, I don't think it will be of much use," he said.Mr Costello said there had been an assumption in Australia that putting extra into super was automatically a good thing, but what funds were returning for members had been overlooked. Dismal sharemarket returns have taken a toll on retirement savings, with the typical super fund failing to make a positive return over the past five years.Over the past year the average balanced super fund has returned just 0.3 per cent, well short of inflation. On a five-year basis, the rolling returns represent a loss of 0.2 per cent, according to figures from SuperRatings."After passing laws that require the money to go off into superannuation [the government] appears to be blissfully unconcerned what happens to it after that," Mr Costello said."This is where the current government and the current Treasurer are blissfully ignorant that they are requiring people to give up more and more of their income and lose it."What they could well be doing is legislating people into bad investments," he said. "I don't think the question is how much you're putting into it, I think the question is how much is going to come out of it?"The Wallis inquiry into the financial system, which occurred as technology was reshaping the industry, is credited with boosting competition and contributing to the resilience of the banking system.But the global financial crisis sharply increased the big banks' dominance. They now control about 85 per cent of the market for new home loans, up from 60 per cent before the GFC.Mr Costello said the review could look at whether super could provide the banks with a more efficient source of funds than global money markets.
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