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Nov 7, 2011

Keeping Labor's 12% -- why not the Howard-Costello approach?

Don't worry too much about the Coalition's promise to fund the compulsory super increase - it's dealt with this problem before.

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There’s a lot of heat being generated by the shadow cabinet’s decision to reverse its opposition to the increase in the compulsory super levy to 12%, as part of what appears to be a general enthusiasm for spending and disdain for taxing.

People shouldn’t get too carried away. The Coalition has been in this sort of territory before and emerged intact, thanks.

In the 1995 budget, Ralph Willis unveiled a scheduled increase in compulsory super from 9% to 12% and eventually to 15%. It was to be one of the Keating government’s major legacy reforms.

In its superannuation policy for the 1996 election, Super for all, the Coalition, which had hitherto been implacably opposed to Labor’s policies, promised it:

  • Will provide in full the funds earmarked in the 1995–96 Budget to match compulsory employee contributions according to the proposed schedule;
  • Will deliver this government contribution into superannuation or like savings;
  • Reserves the right to vary the mechanism for delivering this contribution so as to provide the most effective and equitable delivery of the funds.

So why don’t we have 15% superannuation now? Because John Howard and Peter Costello nixed it in the 1996 budget barely six months after it released its policy, insisting it was too expensive. They didn’t “vary the mechanism” so much as halted it.

So it’s no biggie for the Coalition to once again promise to honour Labor’s “proposed schedule” to increase compulsory super. It can just ditch the promise once it gets into government, insisting that fiscal circumstances require it.

There’s only one group that the Coalition pays attention to on superannuation: financial planners. They in effect have a veto over Coalition policy, which is why the opposition opposes the government’s efforts to end the rort of huge commissions for financial advice most account holders never seek or use, reflecting the view of many — though by no mean all — financial planners that getting Australians to “opt in” for financial advice will destroy the industry revenue model.

It may be up to the financial planners to put the acid on an Abbott government not to dump the promise it has just made to keep 12%.

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11 comments

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11 thoughts on “Keeping Labor’s 12% — why not the Howard-Costello approach?

  1. Gavin Moodie

    Abbott has been like Howard in distinguishing between core and non core promises. I would have hoped that in view of the fuss he made of Gillard’s ‘broken promise’ on taxing carbon he would be more consistent in future, but perhaps that is too much.

  2. david

    It certainly confirms what we already know, the Opposition is an utter shambles on most of the Govts policies, they have no position on anything except NO and merely go with the wind, and are a bunch of economic illiterates

  3. Gavin Moodie

    @ david

    Agreed. But would it be such a shambles in government? If so, it could be a single term.

  4. David Allen

    Gavin,

    I think you can find the answer to your question yourself. Look at the opposition front bench. Gawd help us!

  5. GocomSys

    Why is it almost accepted wisdom that someone like Abbott will form government I ask you?
    Ooops, ah, yes the polls of course. How silly of me.

  6. david

    Re the Polls… informed insider advises tomorrows newspoll very similar to todays Essential at LNP 53 Lab 47 if so…the narrowing continues at that steady pace. Satisfactory and shows consistency across the board…Abbott should be very very worried as the Lodge fades into the distance 🙂

  7. Gavin Moodie

    As Richard Farmer would no doubt remind us, the next federal election is due a long way off in political time. Some expect the Coalition’s lead to narrow as the election approaches which will lead the Liberals to panic and replace Abbott with Turnbull. I suggest that would be better for Australia but worse for Labor.

  8. david

    Gavin I don’t share your enthusiasm for Turnbulls return..2 major reasons. The Gretch shambles is not forgotten by the Govt along with his disaster over the shabby utegate affair and he has enemies in the Liberal party room which, even if he did scrape up the numbers,would ensure disruption and ongoing infighting..all to be welcomed by a resurging Govt

  9. david

    Note to the human moderator(s) it would assist contributors if there was a referral list of undesirable words, phrases we should avoid using. It is rather tiresome to have a post delayed, sometimes for hours thus losing the thread, because of some minor disagreement with the electronic moderator which finally allows the post unaltered.

  10. AR

    It is inevitable that the tories will dump MM as his one (NO!) trick pony schtick falls apart. The cringing embarrassment one can see on the backbench during PMQ almost allows me to feel sorry for them. …well.. no, not really, they chose him and the ethically barren game plan.
    If the super contribution is raised, can we also see some reform of the fee-gouging as currently is the norm in the rip-off industry? I fear not.

  11. Gavin Moodie

    @ david

    You are right to remind me of Turnbull’s political mistakes. However, I believe he would advance better policies for Australia than Abbott.

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