Address - Australia Wealth Management Summit, Sydney

8 May 2024

Good afternoon,

It is a pleasure to address the Australia Wealth Management Summit, especially with so many friends in this room.

Friends that I have had the pleasure of engaging with in my previous jobs - from my days in private banking and wealth management, through to my role as Chair of the Senate Economics Committee, where I know a few of you provided expert evidence on the bills and issues of the day, and to my time as Minister for Superannuation, Financial Services and the Digital Economy.

For those of you I haven’t met, I worked in financial services for 20 years prior to entering Parliament. Its an industry I love and, like you, I take great pride in it’s development and success.

Among my proudest political achievements are the reforms to superannuation that I, together with Josh Frydenberg as Treasurer, Scott Morrison as Prime Minister, and many supporters in the sector, pushed through the parliament.

• Having your superannuation follow you, or “stapling”, preventing the creation of unintended multiple superannuation accounts when employees change jobs.
• Holding funds to account for underperformance, to lower fees and protecting disengaged super members from poor outcomes.
• Choice of super fund for all Australians, regardless of your employer or industry.
• Protecting Australia’s retirement savings by implementing the best financial interest duty, sharpening trustees’ minds as to just how they spend member’s retirement savings and requiring transparency by publishing that information in advance of Annual Members’ Meetings.

These are reforms that delivered tangible benefits to Australians, benefits that will compound over the years to come.

I was thrilled to see a Rainmaker report recently that showed that superannuation fees are now lower than they’ve ever been.

And so I was thrilled to see Luke Howarth appointed by Peter Dutton to be the Coalition’s Shadow Assistant Treasurer.

Luke is immensely talented, hardworking with a background in small and family business, and he’s a good friend, and will excel in that role.

My role now as Shadow Minister for Finance is very different; I of course take a more ‘whole of economy’ view of policy making, with a particular focus on fiscal policy, government expenditure, and regulation.

Which sounds all big picture stuff.

But today, with the leaders of some of Australia’s biggest financial institutions represented in this room, I want to talk to you about the little guy; individual investors, small and family businesses - the engine room of Australia’s economy.

The importance of individual and small investors

Individuals are the foundation of our markets and economy.

I firmly believe that if the economy doesn’t work for individuals and small businesses - it simply doesn’t work.

These are the people that carry our economy, and so it is critical that government gets the policy and regulatory settings right so that individuals and small businesses can participate in our markets on a level playing field.

Indeed, the defining characteristic of democratic capitalism - a system Australia embraces - is the placing of the individual at the heart of decision-making in both the political and economic systems.

The idea has certainly been central to the Liberal Party since its foundation.

When Robert Menzies heard a post-war Labor Government minister dismiss the idea to instil greater economic power in the hands of the middle class as “making the workers into little capitalists,” he nodded enthusiastically, appropriated the phrase and used it consistently in his speeches to advocate for exactly that.

The strategy of empowering individuals to operate in our economy, to grow their own wealth, build their own businesses, manage their own affairs, has been extraordinarily successful.

Over this time, the markets and investment opportunities available to individuals, or more specifically, individuals that are neither ultra wealthy nor financial industry professionals, have greatly expanded. Many of those in this room have been a part of that.

Today, Australians of all backgrounds are invested in our stockmarket - directly and via their superannuation; they are invested in the housing market as owner-occupiers; and they own businesses of all sizes.

We must keep it that way.

Our society is healthiest and our economy strongest when individuals are actively encouraged to take risks and innovate, as well as when they feel they have bought-in to the Australian economy through personal ownership.

This belief is at the core of the Liberal Party’s philosophy.

Indeed, our statement of principles, the “We Believe” statement, calls on Liberals to “work towards a lean government that minimises interference in our daily lives; and maximises individual and private sector initiative.”

Liberals inevitably refer back to the “We Believe” statement as a north star.

That is not to say that all regulation is bad regulation. Of course not.

There will inevitably be a role for government to play to maintain orderly markets and protect the interests of ordinary Australians, as our economy and markets get more and more complex, as well as the imperative to respond to geopolitical challenges from actors that do not believe in the centrality of the individual as we might do.

But while acknowledging a role for government, it is absolutely fundamental to getting the regulatory and policy balance right. In a world where there will always be a pressure to interfere, intervene, regulate, compensate, litigate… nurturing the best environment for the individual - the little guy - to get ahead, Liberals will tell you it’s imperative to see the wood and not get lost in the trees.

Labor’s attacks on individual and small investors

Unfortunately, we are seeing a Labor Government that is taking a different approach in their policy choices.

I am deeply concerned about a raft of new policies and policy ideas that will further tilt the scales against individual investors.

A clear example of this is Labor’s doubling of the 15 per cent tax rate on superannuation funds with a balance above $3 million to 30 per cent.

The Coalition will always stand up for self managed super funds.

Individuals that chose to take control of their own retirement planning should not be targeted or penalised for that decision.

Australians opting for SMSFs do so because they want a closer control over their financial wellbeing and retirement. That is their right - its their money, their savings.

Don’t get me wrong - many commercial and industry superannuation funds have performed very well for their members, and for the disengaged they are, for the most part - thanks to the reforms I mentioned above - a reliable option. But our system must continue to have room for those that wish to trust their own talents and risk appetites ahead of others.

A compulsory superannuation system does not mean a compulsory payment to fund managers.

We oppose Labor’s tax on principle.

Prior to the 2022 election both Anthony Albanese and Stephen Jones said it would not change superannuation settings, yet this backflip - made less than a year after the election promise - is a significant move of the goalposts for Australian retirees.

We oppose it for its consequences for younger Australians.

The Grattan Institute has estimated that within 30 years, about one in ten workers will begin to retire with super balances of around $3 million.

And we oppose it because of the disproportionate impact it will have on Australians with self-managed super funds, particularly given its impact on unrealised capital gains.

Taxation of unrealised capital gains is unprecedented in our tax system, and will simply act as a disincentive to invest particular asset classes.

Let me give you a really obvious example. We know self-managed super funds, particularly those operated by Australian small business owners, often own commercial properties or other non-liquid assets held for their long-term growth benefits.

Fluctuations in asset values, especially unexpected spikes, could lead to unexpected tax obligations that have no relationship to the income streams generated by those assets.

As experts from the National Farmers Federation to the Tax Institute have pointed out, taxation of unrealised capital gains could force self-managed super funds to sell assets to meet year to year tax obligations, impacting on their future retirement income.

Larger industry and commercial funds have the scale that allows them to cover this new tax - it is self managed super funds operators and their retirement savings that will suffer disproportionately.

So not only is this not good tax policy, it makes it harder for individual investors to compete. It’s a direct attack on the little guy trying to make his own way with his own money in favour of the industry behemoths.

Similarly, ensuring an even playing field for smaller investors is one of the reasons why the Coalition is committed to retaining negative gearing as a feature of our property system.

If a company purchases a property, whether it be residential or commercial, that company can rightly claim costs associated with the day to day operating of that property as a deduction against its assessable income.

This is the same for a hairdresser that owns its premises, or for a multinational company that owns and operates commercial tenancies.

Negative gearing ensures that private individual investors can also claim the costs associated with investment properites.

At least in a tax sense, individuals operate on an equal playing field to the big corporate property investors.

Removing or curtailing negative gearing, which the Labor Government has time and time again refused to rule out, entrenches the tax advantage with the corporate investor, against the individual.

It would be a step towards big business and superfunds monopolising investment opportunities in Australia - indeed, that is why the Labor refuses to rule it out.

Empowering Australians to participate in markets

It is critical that our policy and regulatory settings facilitate individual Australians engaging in our economy.

That is why we oppose any changes to increasing the thresholds of the sophisticated investor test.

The sophisticated investor thresholds acknowledge that some investors have access to a level of financial advice and an understanding of investment risks over and above many other Australians.

Sophisticated investors play a critical role in our economy, particularly supporting start ups and scale ups through private equity, venture capital and angel investing.

The advantages that incentivise investment in these sectors such as the sophisticated investor tax offsets and early stage investor tax incentives should not be moved further out of reach for Australians.

We must not regulate ourselves out of growth and innovation.

This is important across our whole economy, not just the financial services sector.

The fact is that, if regulatory settings are not working for individual investors, if they’re not working for small and family businesses, then they’re not working.

Unchecked bureaucracies and red tape cannot be allowed to simply preserve incumbents that have the scale and sophistication to navigate the regulatory maze and collect rents in the form of tax breaks and grants to underwrite their risk.

That approach actively hampers competition and assists entrenched monopolies.

A recent and obvious example of this is in industrial relations, where the complexity of award rates cost small businesses tens or even hundreds of hours every year of unpaid work to ensure compliance.

This additional burden carries a significant opportunity cost.

As the CEO of COSBOA told my Cost of Living Committee: “The ability for small businesses to delight their customers is being undermined by this additional red tape—this cost of compliance.”

The cost of compliance is felt differently across industries and businesses - it could be financial, in time, it can hinder innovation, or be an impediment to increased productivity.

Existing regulations should continuously be measured against this cost of compliance.

There are workable ways to do this. For instance, a requirement to undertake a Regulatory Impact Statements (RIS) with each new policy, encourages the policy makers to consciously consider the burden that new laws will have on our economy.

The problem of course is that a Regulatory Impact Statement is only effective if governments pay attention to them.

To assist with this, a Coalition Government will adopt a principles-based approach to regulation to ensure our regulatory environment is fit for purpose.

We will structure our regulatory agenda around these core tenets:

1. Fit for purpose regulations fostering trust and confidence in all sectors of Australia’s economy;

1. Proportionate regulations for reasonable protections; and

1. Regulations facilitate innovation and growth at the business, sector and economy levels.

These principles must have practical application.

For example, telling different parts of government the same information in different, separately prescribed ways is burdensome and rarely productive.

A Coalition government will therefore consult on a “tell them once” system, to examine how we can better align government agencies and regulators to limit the burden on Australian businesses, to be rolled out across key portfolios.

Similarly, calibrating what is proportionate for reasonable protections cannot be determined in isolation by a bureaucrat in the Treasury or a politician in the ministerial suite - it must be informed by talking to impacted businesses, and understanding what they are trying to achieve.

Under a Dutton Coalition Government, cabinet discipline will require new legislation and regulations to be subject to consultation by impacted stakeholders and an appropriate implementation timeline, including a transition period, if appropriate.

If this cannot happen, the relevant Minister will have to inform Cabinet as to why this is not the case.

We cannot simply keep layering new regulations on top of old regulations.

So where changes to regulatory regimes are required, new changes will be considered in the context of the regulatory burden as a whole, and redundant regulation should be removed when superseded.

These should not be controversial, but history has shown us that applying them in a consistent and disciplined manner is not always an easy task.

However, we know that this programme of changes will reduce the burden on all businesses, saving time and money that could be better spent hiring new employees, on innovation, research and development, or to owners and investors that rely on the business for their livelihood or retirement savings.

Conclusion

I began this speech with a discussion of why our economy must work for the little guy - Australia’s small investors and small businesses owners - the people that make our economy hum.

It’s hard enough to take risks with your personal capital, to innovate, build a business and employ others. Its hard enough to take a big breath, gird your loins and challenge the big players in new markets and old ones. Regulations and policy settings shouldn’t make it harder for small investors and small business to compete with entrenched interests or developed business. They should be on a level playing field. We do not need to gear policy against them to make it harder.

I’m always cautious when quoting others - so much gets interpreted from the choice of the speaker as opposed to the quote itself , but perhaps Ronald Reagan said it best: “You can't be for big government, big taxes and big bureaucracy and still be for the little guy”.

We must move away from the current Government’s attacks on small investors and self managed super funds, and towards a principles-based regulatory framework that is fit for purpose and serves the modern, dynamic and competitive economy that we want for the future.

Thank you.