Busting the industry super returns myth

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You know the ads – one person on the ascending escalator, the other on the descending. The ad is designed to sell the idea that the returns from industry superannuation funds are better than anything offered by the competition.

There’s just one problem: it’s a fabrication.

Professor Judith Sloan cuts through the industry super returns myth in her column in The Australian today ($):

…the defence of the status quo given by the industry super funds that they are the best performing funds has been blown out of the water by Helen Rowell, member of the Australian Prudential Regulation Authority. As she notes, apples are not being compared with apples when the industry super funds make this claim.

Within classes of assets, there are no significant differences to the returns that the various types of funds earn — something that is hardly surprising. It is the fact industry super funds have distinct asset allocations that has contributed to the average returns being slightly better for industry funds compared with others. (Mind you, there have been some badly performing industry funds, including at least two that have run into serious trouble.)

Here lies the nub of the issue: because industry funds are effectively guaranteed a flow of funds by virtue of their monopoly position in enterprise agreements and their preferred position as default funds in modern awards, they are relieved of the need to manage liquidity to the extent required of other funds. And since their members are younger than those of other funds, they are in position to experiment with asset allocation, particularly in terms of investing in illiquid classes of assets.

But this preferential arrangement for industry super funds is impossible to defend on competi­tion grounds. It is also inconsistent with the principle of choice of funds when it comes to enterprise agreements.

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Union membership at lowest rate in over 100 years

Screen Shot 2015-10-27 at 12.19.43 AMAustralia’s union membership is at its lowest point in over a century, according to new data released by the Australian Bureau of Statistics (ABS).

The latest employment data, released today, shows that union membership fell by more than 2 per cent—over 200,000 people—in a single year. The Australian reports:

Trade union membership declined markedly between August 2013 and 2014, according to fresh statistics published by the Australian Bureau of Statistics.

The ABS figures show the number of people who were trade union members in their main job fell from 17 per cent in August 2013 to only 15 per cent in August 2014.

The fall in union membership occurred across the economy, with union membership in the private sector falling from 12 to 11 per cent, and public sector membership falling from 42 to 39 per cent.

This means that Australia’s rate of union membership is now less than a quarter of what it was at it’s peak in 1962 (61 per cent). Since 1992, it’s fallen by over a third, from 40 to 15 per cent.

This leaves the Australian Labor Party (ALP) as the sole place where union membership has flourished—as IPA research has found, 17 of 25 sitting ALP Senators (68 per cent), and 23 of 55 ALP MPs (42 per cent), are former union officials.

This glaring disparity between union membership and political power is a direct result of the deep interconnected relationship between the ALP and the union movement. Such disproportionate influence of a single interest group is a problem for Australian democracy.


For more on union influence in the ALP, read the IPA’s 2015 report: Unions in Labor: A handbrake on reform (by myself and James Paterson)

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Queensland senator pushing for amendments to tackle activist litigation

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The federal government faces pressure from within to go ahead with amendments which would close off special privileges for environmental activists to challenge approvals for major projects. From The Australian today:

Malcolm Turnbull faces an ­internal push to close a loophole used by environmentalists to delay ­approvals for the Adani coalmine in Queensland amid questions about the handling of the case.

Queensland Nationals senator Matt Canavan wants the ­government to revisit an amendment to the Environment Protection and Biodiversity Conser­vation Act that would limit the ability of environmentalists to chal­lenge approvals based on ministerial consideration of conservation advice.

Senator Canavan will also ­recall senior officials from the ­Environment Department to a November 12 estimates hearing as he seeks a further explanation as to why conservation advice on two species was not passed to Minister Greg Hunt, causing a delay in the project after a court challenge by green groups.

Restoring the common law position on party’s ability to initiate court proceedings (someone directly affected by the development) would be sensible, and bring some legal certainty to an area that sorely needs it. As my colleague Brett Hogan explained last week, this green lawfare won’t go away anytime soon. In the meantime, Australia risks becoming an investment no-go zone.

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Queensland set to extend smoking bans

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Read the latest contribution to public debate from the Queensland Parliament’s Health and Ambulance Services Committee, and weep for our lost freedoms.

The key recommendation from the report is that “the Tobacco and other Smoking Products (Extension of Smoking Bans) Amendment Bill 2015 be passed.”

The bill proposes to ban:

  • smoking within 5 metres of all state government buildings
  • smoking at skate parks
  • smoking at public swimming pools
  • smoking at all transport waiting areas and pedestrian malls
  • the sale of cigarettes from a vehicle and at ‘pop up’ sales venues

The public space allowed for one of Australia’s most unpopular minorities grows smaller and smaller.

But don’t despair, the committee did consider the quaint notion of the “Rights and Liberties of Individuals”. The authors of the report even provided this helpful little definition of the word ‘liberty’:

The concept of liberty requires that an activity (including business activity) should be lawful unless there is a sufficient reason to declare it unlawful by an appropriate authority.

Not a definition you’ll find reading Mill or Bastiat. No surprises it lost out against competing priorities.

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NSW MP questions ICAC procedures

Damien Tudehope, Member for Epping

Damien Tudehope, Member for Epping

More on ICAC today. Liberal NSW MP Damien Tudehope has raised concerns about the questionable procedures followed by ICAC in the conduct of public hearings:

“If someone made a finding of corrupt conduct against a public official, it’d be the end of their career,” he said.

“Because [a finding of corrupt conduct] brings with it punitive penalties, should there be an element of procedural fairness that accompanies the manner in which ICAC conducts a public hearing?”

Mr Tudehope said ICAC would retain the power to conduct public hearings.

“But, if they do hold a public inquiry, should they as a matter or procedural fairness serve statements which they have taken in camera or otherwise in the course of their investigation on the solicitors or the person of interest?” he asked.

“So this would mean that the whole of the material in their possession is available to the person who is the subject of the inquiry.”

Mr Tudehope said that “a general inquiry about procedural fairness is worthwhile and I think that’s something the community would embrace.”

Tudehope’s concerns have led him to question the appropriateness of the most recent bill relating to ICAC’s already very significant powers. The bill seeks to provide the commission with the power to initiate its own criminal proceedings under the Criminal Procedure Act 1986 (NSW).

Quite apart from any concerns the public might have about a proliferation of government agencies that can initiate criminal proceedings, a more practical issue arises here: ICAC is not an agency deserving of reward.

Acting outside its powers, conducting ‘gotcha’ trials, ignoring basic legal rights, leaking to the media, and other dodgy practices are all causes for significant concern – not reasons to increase the role of this out of control organisation in the public sphere.

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Will bacon give you cancer?

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Fuelling the belief that every food either tastes terrible or causes cancer, a new World Health Organisation report has said that eating processed meat is as bad for you as smoking.

The report by the International Agency for Research on Cancer has found “sufficient evidence in humans that the consumption of processed meat causes colorectal cancer.”

This is another example of Nanny Staters using outlandish claims to scare us into purity. Eating processed meat is bad for you. No one shoves sausage rolls in to their mouth thinking they’re going to be healthier because of it.

This story has been sweeping the world, and holes are starting to emerge in the WHO’s statement. Dr Elizabeth Lund, former research leader at the Institute of Food Research, says that “red meat was linked to about three extra cases of bowel cancer per 100,000 adults in developed countries.”

The North American Meat Institute adds:

Red and processed meat are among 940 agents reviewed by the IARC and found to pose some level of theoretical ‘hazard’. Only one substance, a chemical in yoga pants, has been declared by the IARC not to cause cancer.

There is also a bigger point to be made here. People make imperfect decisions about their health. Because they want to.

Bacon and egg sandwiches are delicious. They are empirically more fun to eat than kale. If I give up bacon and egg sandwiches for a few extra weeks on my lifespan, I will spend those extra weeks not having bacon and egg sandwiches. So do I really win?

Professor Tim Key, Cancer Research UK’s epidemiologist, says that people should listen to the WHO’s warnings and “have a bean salad for lunch over a BLT.”

…No.

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Shorten backs removal of constitutional provisions referring to ‘race’

Michelle Grattan in The Conversation today reports:

Opposition Leader Bill Shorten has said that Indigenous recognition in the Constitution cannot just be “empty poetry” but must lay to rest “the ghosts of the discrimination” haunting the document.

Its “so-called race powers” were crafted for Australia’s past, he said.

In the Northern Territory for the 30th anniversary of the handover of Uluru to its traditional owners, Shorten said the proposed referendum was very important and reiterated that the change must be one of substance.

“We want to make sure the change is not just symbolic. We don’t need more flowery poetry in our Constitution – we just need to be straight.”

The race power refers to Section 51 (26) which gives the Commonwealth the power to make laws for people of any race. There is also an anachronistic reference to race in Section 25.

Shorten is right about removing sections of the Australian Constitution that refer to race. This would be a positive step. The nation’s founding document should be free from references to race for the simple reason that race is irrelevant – we’re all Australian, and we’re all equal.

The IPA supports the removal of the two provisions to which Shorten refers: sections 25 and 51 (xxvi).

To find out more, visit racehasnoplace.org.au.

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Nuclear should be part of the energy mix

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The Herald Sun is this morning speculating that the federal government’s proposed appointment of Monash University Chancellor Alan Finkel as Australia’s new Chief Scientist may signal a renewed interest in nuclear power.

While the appointment is yet to be confirmed, and there is no evidence that if Dr Finkel is appointed it will be due to his views on nuclear power, it does serve to highlight that there is another potential source of baseload power for the National Electricity Market that isn’t coal, gas or renewables.

Here is a link to an article that Dr Finkel wrote for Monash in 2013 which explains how nuclear is an important part of the European energy mix.

The USA’s Nuclear Energy Institute points out that 30 countries currently operate nuclear power plants and that nuclear is responsible for over 10 per cent of the world’s electricity, and South Australia is currently running a Nuclear Fuel Cycle Royal Commission to examine its potential to participate in nuclear mining, processing, electricity and disposal.

A sensible approach to baseload power in Australia would be for each state to play to its strengths – meaning Queensland and NSW go with black coal, Victoria brown coal, Tasmania hydro-electric power and South Australia nuclear power.

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Queensland lockout laws will not be supported by crossbench MPs

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Great news out of Queensland, as crossbench MPs have revealed they will not support state government plans to introduce lockout laws:

Labor is due to introduce its statewide lockout laws — including a ban on shots and high-alcohol drinks after midnight followed by a 1am lockout and a ban on the sale of alcohol in clubs and pubs after 3am — before the end of the year.

But the Katter’s Australian Party has revealed it will not support the laws when they come to a vote.

They have secured the backing of fellow crossbencher Billy Gordon who told The Sunday Mail he would not vote for the policy in its current form.

Their decision means the Government will not have the numbers on the floor of the hung Parliament to get its changes across the line.

Lockout proposals are borne from ‘a moral panic that has no empirical foundation whatsoever‘, and punishes the many for the sins of the few. It’s great to see Queensland will not go ahead with this.

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