Move to enshrine the objective of the superannuation system in legislation amid measures announced in response to Murray review of financial system

This article is more than 4 years old

This article is more than 4 years old

The Turnbull government has vowed to crack down on excessive surcharges for credit card transactions and will also move to enshrine the objective of the superannuation system in legislation.

The Coalition is also planning to launch a Productivity Commission review into “the efficiency and competitiveness” of the super system, with an eye to changing the existing process for allocating default fund members to products.

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The measures are part of the government’s response to the financial system inquiry, which also suggested action to increase the capital held by banks so that they are “unquestionably strong” and resilient during times of crisis.

It announced on Tuesday that it would support most of the 44 recommendations made by the review team led by the former Commonwealth Bank chief David Murray.

The Australian Prudential Regulatory Authority is leading the process of increasing mortgage risk weights for the big banks and ensuring they have stronger capital ratios – a process that has been cited by Westpac as a justification for its decision to increase mortgage interest rates.

The government played down suggestions the changes should lead banks to increase interest rates, although the prime minister, Malcolm Turnbull, said it was “ultimately a matter for them and of course for the market”.

The treasurer, Scott Morrison, who criticised Westpac’s decision last week, said banks had begun raising capital from investors.

“The banks will make their own calls and they can deal with their own customers,” he said on Tuesday.

The government has agreed to take action to improve fee and surcharging arrangements for credit card transactions, which could reduce the costs faced by consumers when they buy products at shops and restaurants.

“We will phase in a legislated ban on surcharges that exceed the reasonable costs faced by merchants in accepting cards,” the government said in its formal response. “We will also make the ACCC responsible for enforcing the ban on excessive surcharging.”

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The government is yet to define what it would consider to be unreasonably high surcharges. Turnbull told reporters the government was acting in response to “considerable consumer concern” and was working to a deadline of about July next year.

“Quite plainly where a merchant says if you use a credit card it’s an extra 2% or 3%, that carries with it an absolutely crystal clear, irrefutable representation that the merchant is seeking to recover his or her costs,” the prime minister said.

“In many cases, these surcharges are well in excess of the real cost.

“You will know if you go to a hotel to book a room or you book a flight or you buy something at a store and they say the credit card surcharge is X%, then that is what it is costing the merchant to process your payment via a card as opposed to cash.”

Enshrining the objective of the super system in legislation would “serve as a guide to policy makers, regulators, industry and the community about superannuation’s fundamental purpose”, the government said.

In a sign the Coalition might be positioning itself to rein in super concessions for high income earners, the document said the legislated objective would “provide a framework for important discussions Australia needs to have about fairness, adequacy and dignity in the superannuation system”.

Morrison said the primary purpose of superannuation was to ensure Australians who reached retirement age did not have to rely on the pension.

Asked whether the definition would include avoiding using super for wealth creation, Turnbull said everyone understood the argument about the tax concessions and the issues remained “under consideration”.

“You learn from experience and you’ve got to adjust the system as you go along,” the prime minister said.

It is understood super tax concessions will be looked at in the context of the current tax white paper process.

The Productivity Commission would also be asked to develop criteria to assess the efficiency and competitiveness of the super system and look at other models for a formal competitive process for allocating default fund members to products.

But the proposed review would be done only after the full implementation of the MySuper reforms introduced by the former Labor government.

The government rejected a recommendation to clamp down on borrowing by super funds, despite the Murray report saying it would “prevent the unnecessary build-up of risk in the superannuation system and the financial system more broadly”.

The report raised concerns about the emerging trend of superannuation funds using limited recourse borrowing arrangements to buy assets, which increased the risk to taxpayers who underwrote adverse outcomes through the provision of the age pension.

Such borrowings increased from $497m in June 2009 to $8.7bn in June 2014, the report said, arguing the global financial crisis highlighted the benefits of Australia’s relatively unleveraged super system.

The government said there were “anecdotal concerns” about the borrowing but “at this time the government does not consider the data sufficient to justify significant policy intervention”.

Morrison vowed to “continue to monitor this extremely closely” and said the government would act if needed.

The government has also agreed to develop legislative amendments to raise the professional, ethical and educational standards of financial advisers by requiring them to hold a degree, pass an exam, undertake continuous professional development, subscribe to a code of ethics and undertake a professional year.

The assistant treasurer, Kelly O’Dwyer, said the government would bring legislation before the parliament by the end of this year to allow for crowd-sourced equity funding.

Labor welcomed the plan to legislate an objective for the superannuation system, which the shadow treasurer, Chris Bowen, defined as providing a dignified retirement for as many Australians as possible.

Bowen also backed action on credit card surcharges and standards for financial planners, but said one of the government’s first actions after the 2013 election win was to try to unwind the future of financial advice reforms.

Labor’s financial services spokesman, Jim Chalmers, said the opposition was wary of the government’s motives on superannuation and did not believe the Coalition had the right priorities.

Consumer group Choice welcomed the action on transaction fees, describing it as a decision “to crush sky-high credit card surcharging”.

“While consumers will need to wait until mid-2016 for this new surcharging law, industry is on notice,” said the chief executive of Choice, Alan Kirkland.

The Greens MP Adam Bandt said the move should be extended to include ATM fees.