Sharpening Regulation in the Australian Superannuation Industry to Ensure Compatibility of Public and Private Objectives

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Three decades of bipartisan reforms have taken place in the Australian superannuation industry ostensibly in the public interest. The regulatory reforms have created a paradox: ongoing reforms but flawed fund member outcomes. For example, the superannuation system is not delivering lifetime retirement incomes but high levels of administrative and investment fees are currently costing fund members more than $21 billion each year. Systematic problems remain with conflicted investment advice, and periodic large-scale, financial collapses have resulted in further losses to members. In seeking to elaborate and resolve this paradox, the research project outlined in this paper provides a voice to Australia’s superannuation trustees through the mechanism of three surveys across a thirteen-year period. The surveys confirm that dissatisfaction with regulatory reform is widely shared amongst stakeholders most involved with reform implementation. While all regulation is ostensibly in the public interest, regulators can be thwarted by the lobbying of vested interests and be subject to subtler forms of regulatory capture. One form particularly identified in the Australian context is regulatory complexity, which acts to protect incumbents through barriers to entry, and benefits the professional consultants that provide most input into the regulatory process. More needs to be done to blunt the force of private interest rent seeking. We believe that one solution lies in the proper integration and implementation of the Regulatory Impact Analysis (RIA) framework as recommended by the OECD Council on Regulatory Policy and Governance. RIA has the capacity to minimise rent seeking by fostering transparency and engagement and reinforcing the system of checks and balances to ensure that policies and regulations serve the public interest.