SUPER WARS – PUT DOWN YOUR WEAPONS
TUESDAY, 9 JUNE 2020
CHIFLEY RESEARCH CENTRE
CANBERRA (VIA ZOOM)
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To ensure the single focus of the nation is on jobs – saving those in peril, and creating new ones – we have been asked to put down our weapons.
Good. We should. But if this is to be anything more than an empty slogan the Morrison Government has a few swords of its own to sheath.
The war against universal superannuation is real. By storm or by stealth the objective is to destroy that part of our economy which has done so much to see us through the worst of the crisis and is critical to building our future.
Make no mistake, if the opponents of universal super win, the consequence will be the destruction of jobs, the crippling of economic growth, an increase in taxes and a less secure future. The Prime Minister’s inability to subdue the wreakers in his own ranks puts us all at risk.
When Australia began its journey to build a retirement income system fit for the 21st century we had a lot of work to do. As a nation, we had become accustomed to spending more than we saved, and indifferent to retiring on meagre pension payments.
Longer life expectancy is a great achievement but it does mean the number of taxpayers supporting each retiree is shrinking.
Without a change of direction – we had a bleak choice: increase taxes or reduce the pension.
Superannuation was the answer but back then only 32% of all Australians and less than 15% of all women had some. On current settings the median balance at retirement for full-time workers is set to hit $311K for women and $628K for men.
Of course meagre retirement savings was part of a much bigger problem. Private sector savings couldn’t fund our capital needs. We were reliant on the savings of other countries to build our roads, railways, our cities and industry and to fund Government debt. Foreign debt was going up and up and up.
We have come a long way.
Our universal superannuation which is like a sovereign wealth fund but owned by the people not the Government has $3 trillion in funds invested. Australian workers have the 4th largest pool of pension savings in the world equal to 140% of GDP. Superannuation has helped transform Australia from a country that borrowed from the rest of the world to one with substantial savings of its own.
The Coalition have opposed it from the get-go. If there was an increase to oppose they opposed it. If there was an opportunity to delay or frustrate something – they took it. They plan to do it again but we will win because the values that underpin universal superannuation are values that run deep in our community.
The values and value of Superannuation
Australians aspire to be independent and self-reliant. To have a decent secure job, to care for family, to own a home and to put some money away for retirement. This is combined with a commitment to community and the hope that when the going gets tough the Government has got your back.
We look to Government to solve the problems that we can’t solve ourselves. We expect the Government to remove inequality. In the middle of a crisis we expect the Government to step in, to lean forward and shield or soften the blows.
Universal superannuation speaks to our values.
The extraordinary thing about universal superannuation is that it brings together both Liberal and Labor values. Self reliance which the Liberals often claim as their animating force – means providing for yourself and not being a burden on others. Having a universal system upholds the egalitarian value of Labor. The principle that every citizen deserves to retire with dignity and some independence.
In Australia we provide both the discipline and the incentive, to save for retirement. We levy employers 9.5% of workers pay for super. We also give generous tax concessions which means that at every point – from earning, to investing to withdrawing – this money is treated differently to any other. The benefit for each Australian is a better retirement. The benefit for the country includes a reduction over time in pension outlays.
Now I have to concede that these arguments have as little sway with the average 18 to 25 year old as they did with my 25 year old self. If there was a contest for the last $50 in my wallet a retirement nest egg would always come second best to a Saturday night out or a new pair of sneakers.
This is exactly why we have a universal and compulsory retirement savings – because the present will always trump the future.
For workers on modest incomes it’s the peace of mind to know whatever the Government might do down the track you’ll have a bit of money tucked away to pay off accrued debts, have a holiday, buy a new car to see you through, or treat yourself and the grand kids at Christmas.
The bigger picture
Paul Keating argued that super would also provide economy wide benefits. He was right. In the 80’s it helped fight inflation and provide an alternative to foreign capital. For the last 30 years it has been quietly building a stronger economy owned by Australians. During this crisis super has provided emergency relief to individuals and stability in capital markets that can only be assured by large, long term investors with a key stake in the national interest.
Super for the recovery and the long term
The great strength of Superannuation is that money is not held or invested for the short term. This means it can invest in industries and businesses that create good stable well paid jobs, for the long term.
For example, the Industry fund REST, which has extensive investment in Australian infrastructure and agriculture, has committed half a billion dollars of new money for new agricultural investments in NSW and Queensland. National Party members should take note. They have long held concerns about foreign ownership of Australian farms and agriculture. Here we have the opposite - Australian businesses owned by the savings of Australian workers through their Superannuation.
Super and Australia’s recovery
The challenges we faced before the crisis have gone away – we’ve just got a whole lot more.
The challenge of funding pensions for an aging population with a structurally weak budget has not gone away. In fact it has become greater.
We need a strong superannuation system, buttressed by stable and certain policy, with a mandate to invest for the long term in jobs and infrastructure for the national interest.
By Stealth or by Storm
Instead we have a Prime Minister calling on unions and employers to put down their weapons while paving a way to introduce a plan within the Liberal Party to dismantle Super by:
- • converting the existing Superannuation savings to defacto bank accounts that are drained on an annual basis, destroying a funds capacity to make long term investments;
- • Nobbling the growth of superannuation by cancelling the legislated rates;
- • Maintaining the generous superannuation tax breaks for the wealthy while removing low and middle income earners;
- • Separating superannuation from the workplace and removing union representation.
Let us be very clear about what this means
Higher taxes, lower productivity, fewer jobs and a bleak future for retirees.
Foreign debt will increase as once again we are dependant on the savings of other countries.
Productivity will stagnate as the industry’s ability to invest for the long term is crippled. All fund members will suffer as they see their retirement savings deteriorate.
Inequality will grow with a monstrous distortion of existing tax concessions. The wealthiest 1% of Australians who already receive twice as much taxpayer support for their retirement income as the poorest 10% will continue to do so. Meanwhile the taxes paid by waiters, childcare workers, truck drivers and shop assistants will be subsidising the superannuation of the wealthy.
The self reliance principle, on which superannuation is based, will be junked, in exchange for the gamble that sometime in the future pensions, rent assistance, health and aged care spending will be increased to compensate for the loss of superannuation. This is a hope against all experience, that future governments and future tax payers will be more generous than they have in the past.
So if Scott Morrison is genuine about putting down the weapons – he should start with the war on superannuation. If he does this we can rebound faster and better because a stronger superannuation sector means more jobs and a stronger economic future for all Australians.