Bizarre proxy saga ends with a bang
Treasurer Josh Frydenberg’s proxy reforms have been blown out of the water. The question that remains is why they were ever proposed in the first place.
The decision to disallow Frydenberg’s proxy advice regulations marks the end of a deeply weird saga where Treasury tried to annihilate an entire industry – that barely anybody had ever complained about – on a whim.
In the immediate aftermath of the defeat, Frydenberg accused Labor of conspiring with the Greens to roll back the reforms, shading over dissent from within his own party and the key role that independent senator Rex Patrick played in bringing the disallowance motion. The senate voted 29-25 in favour of Patrick’s disallowance motion – far from the close shave it was expected to be.
“A big defeat for Josh Frydenberg and his big business donors, but a great win for everyday Australians,” Patrick wrote shortly after the vote. “Thanks to all senators who supported me on this.”
It’s a good day for transparency and shareholder outcomes. The Australian Council of Superannuation Investors (ACSI) has been spared annihilation, and proxy advisers will not be the subject of onerous financial penalties that would have compelled them to pay millions for minor errors.
The defeat mirrors that of the removal of the investment veto power originally included in the Your Future Your Super (YFYS) reforms, which would have given the Treasurer of the day the ability to unilaterally cancel any investment made through a third-party. While YFYS included many sensible changes (some of them implemented badly) few could bring themselves to hand such power to the Treasurer. Even some of the more enthusiastic cheerleaders for the proxy reforms disagreed in private about the veto power, considering it a worrying consolidation of power over Australian business.
It was not so much the proxy reforms that outraged senators – though they were ludicrous – as the way they were forced through. It was the overreach that galvanized senator Concetta Fierravanti-Wells to issue a “please explain”, and the overreach that pushed Patrick to bring his disallowance motion. By trying to slip them through, Frydenberg planted the seed of his own destruction. If he’d simply introduced them as primary legislation, there was every chance they would have passed – though likely in an amended form.
In the end, the proxy reforms seemed to be an attempt to limit the burgeoning power of Australia’s super funds – a problem that the LNP and Frydenberg have actually exacerbated through YFYS, which will push funds to consolidate and create a handful of mega players wielding outsized power. This was the policy equivalent of the decision to release cane toads to control Queensland’s sugarcane pests, replacing one problem with another of even greater severity. To extend the analogy, the proxy reforms were like trying to use napalm to control the cane toads.
But questions remain. With an election looming, will Frydenberg take the defeat on the nose and focus on burnishing the LNP’s apparent economic credentials? Or like some horror movie villain lurching back to life for an even worse sequel, will the reforms be entered as primary legislation, likely to become the subject of more ridicule – and another defeat? You’d have to be crazy to try. But maybe that’s how we got these “reforms” in the first place.