Labor and industry super: The pernicious consequences

Judith Sloan I 22 February 2025 ?I Spectator Australia

Horse and carriage; love and marriage; industry super and Labor. In fact, the link between industry super and Labor is stronger than the sturdiest marriage. There is a real co-dependence. There’s no chance of divorce.

When Labor was elected in 2022, the champagne corks were popping in the board- rooms of the industry super funds. Now was the time to really cash in – and I mean that literally. Think of the favours that could be doled out, the useful regulatory changes. There would be no more talk of early withdrawals for a home deposit. Perish the thought – this would deprive industry super of the opportunity to manage some funds and cream off fees.

The point is often made by the apologists for the system that industry super funds are jointly controlled by the sponsoring unions and employer associations. Take it from me, the employer associations have non-speaking roles on the boards and simply take any money and other favours flowing in their direction.

Their directors are a long way from the driving seats, although part of their role is to endorse the principle of compulsory superannuation, the central role of industry super funds and the dubious equal representation model. They comply very well with these criteria.

But just check out the so-called ‘independent’ directors who have joined the trustee boards of some of the big industry super funds. This tells you where their connections lie. Think here Steve Bracks, John Brumby, Wayne Swan, Don Russell (former right-hand man to Paul Keating), Nicola Roxon and James Merlino.

Yep, all Labor hacks who have been rewarded in retirement with lucrative positions on industry super boards, even though most of them have no experience in funds management or any other relevant skill set for that matter.

Just watch this space for Tim Pallas, former Victorian treasurer who sent the state broke, to pop up on the board of an industry super fund quite soon.

The reality is that the industry super funds are critical to the trade union movement that has been haemorrhaging members for decades. The rate of unionisation is now below eight per cent in the private sector and some of the unions, at least the state branches, are close to insolvent. Were it not for the flow of funds from the industry super funds, it would be very slim pickings indeed.

In turn, the financial support for trade unions underpins the financial and organisational help the trade unions give to the Australian Labor party. Dollars for campaigning, feet on the ground for doorknocking and on election day. It’s a beautiful symbiosis if you are in on the game.

Mind you what is even more unforgivable than the underhand favours meted out to industry super by Labor governments is the repeated, gutless failure of Coalition governments to stand up to the racket that is industry super. There were real chances between 2013 and 2022.

Tony Abbott as prime minister did pause the increase in the rate of the Superannuation Guarantee Charge (SGC) from 9 to 12 per cent.? Josh Frydenberg, by then Treasurer, could have made the pause permanent and stuck with 9 per cent, but he caved.

He was clearly afraid that the industry super funds and their extremely well-funded lobby groups would mount a savage political attack against him and the Coalition government. There had been a lot of backgrounding and discussion about the need to start to raise the SGC again. The claim was that workers needed it to guarantee a ‘dignified’ retirement. The truth was that the funds were desperate for a higher inflow of funds.

It was also completely apparent that the industry super funds regularly violate the single purpose test that is laid down in legislation. This test states that funds must act solely in the best financial interests of the members to fund their retirement. It’s not about handing out funds to unions; it’s not about funding sponsorships of football teams; it’s not about inviting special guests to the Australian Open.

But here’s the thing: the Australian Prudential Regulation Agency (Apra), which is ostensibly in charge of regulating the industry superannuation funds, has effectively done nothing over many years. To say they were using all the power of wet lettuce leaves is to overstate the efforts of Apra. The officials have used so many mealy-mouthed excuses that I often don’t bother to read their press releases.

Gosh, we have known about the governance failure of Cbus, the large industry super fund covering the construction industry, for at least a decade. A report was commissioned in 2015 that pointed to serious weaknesses in governance and the completely unacceptable connections with the construction unions. But nothing was done.

More recently, it turned out that Cbus was failing its members badly by delaying the payment of death and total disability entitlements. The excuse of the trustees – Wayne Swan is the chair – was that an outsourced organisation was to blame. But as any student of the law knows, it’s not possible to outsource directors’ responsibilities.

Of course, this is not the half of it. After the Construction, Forestry and Maritime Employees Union (CFMEU) was placed in administration, Cbus removed the three CFMEU nominees on the board of trustees.? But after a brief pause, one was reinstated and one chap from the old Maritime Union of Australia was called up even though he had been the trustee of a fund that had performed so badly it had to be absorbed into another. You couldn’t make this stuff up.

We have now heard of the case of another fund, Rest Super covering retail workers, in which insurance payments were deducted from members’ accounts without their consent. But wait for it – if the members want their money back, they must contact the fund and make an application for the money to be returned to them.

This is all tip of the iceberg stuff. The governance of industry super funds is a complete mess – boards that are too large, too many men by today’s standards, far too many trustees without the requisite skills.

The irony is that industry super funds use their substantial shareholdings in Australian listed companies to push all sorts of progressive causes, including diversity, equity and inclusion (DEI), even though the funds fail on this score, as well as climate change.

The recent spat down at the Australian Securities Exchange illustrates the point very well. Yet another version of the ‘if not, why not’ guidelines for listed companies has been under consideration. Some members of the vast committee wanted to extend the DEI requirements even further, to include sexuality (is it even legal to ask people about this?) and ethnic background. There was a split between the committee members.

But industry super made its position very clear through the lobby groups – it supports the extension. While US companies are turning their backs on DEI, in part because of the impetus of Trump’s executive order, the protected species which is industry super is heading in precisely the opposite direction.? It bodes badly for the future.

Author: Judith Sloan