Raiding super

Possibly the most intelligent document ever to come out of the Australian union movement was published in 1987 under the title, Australia Reconstructed. This did not make it on par with The Wealth of Nations, but as these things go – and perhaps there is a touch of nostalgia kicking in – by the standards of the labour movement today and its Parliamentary wing, it was the nearest thing there was to a union capitalist manifesto. My next five years were spent working to defeat its centralising intent but at least at its core was an acceptance that the market economy was not only here to stay but also had much to offer working people.

An important part of the Australia Reconstructed mentality (I can’t remember if it was part of the document) was the wish to spread superannuation throughout the working population, not restricting it as it was then to those employees an employer chose to provide superannuation to. The flaw in the proposal was that the entire cost of super was to be borne by employers and to cut a long story short we now have the Super Guarantee system in place that requires employers to put 9% of an employee’s wages cost into a superannuation fund.

Part of the argument against the super system that we put up at the time was that having such large funds that were both central and visible made them a target for governments to supplement their tax revenues. Generally up until now governments have been pretty good at leaving the system alone, partly from recognition that the savings generated are actually a good thing (not that it has created a dime’s worth of extra saving compared to how things might otherwise have gone), and partly because there is a third-rail element in messing with the retirement savings of the nation (not that anyone is better protected against poverty in old age than they were before). But today we have the Gillard Government, with its blind incoherence and social and economic incompetence as its most obvious characteristic, so all is different. They now wish to change the rules – only for the “wealthy”, of course – so that they can fund their deficits and balance their budgets without actually cutting back on their own spending, indeed with an intent to increase its level of outlays. Here is the context as reported in The Australian:

The federal government has been canvassing the industry for potential savings to meet its pledge of a budget surplus for 2012-13 amid collapsing tax revenue and a raft of spending programs in health, welfare and education.

Bill Kelty, the godfather of the superannuation system, the former ACTU Secretary, the one who didn’t go into Parliament, has been incensed. Well, sort of. From that same report:

BILL Kelty – a founding father of Australia’s superannuation system – has warned the Gillard government to stay away from tax changes to super in its search for savings and new revenue to meet the pledge of a budget surplus.

Mr Kelty said further changes to superannuation risked undermining confidence in the system at a time when years of volatile markets and low earnings had already made it vulnerable.

‘I think you’ve got to be very careful about changing the tax system and increasing it because there is increased uncertainty,’ Mr Kelty told The Weekend Australian.

‘These are decisions for a generation and when you start tampering with it then you don’t tamper with it for the day, you tamper with it for a generation.

‘So you don’t want to tamper too much with that and say in addition to the relative decline in earnings, what we are going to do is impose another adjustment process, that is a higher level of tax on it,’ he said. ‘That, I think, would be a very silly thing to do.’

I would not describe his words as a categorical rejection of the idea of tampering, not at all. If this is the strongest that will be said against the proposal to raid the super system, the certainty is that is what is about to happen. And the result, given the structures we have in place today, will be a worsening situation for those who wish to save for retirement and a reduction in our national savings which are instead to be squandered in areas favoured by the government which has shown hardly an ounce of economic judgment in anything it has done.

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