Don’t be fooled for a minute into thinking what is building into the biggest attack on superannuation for decades by the government has anything to do with policy.
If it did, Josh Frydenberg wouldn’t have leaked parts of the retirement incomes review, by a panel led by former senior Liberal staffer and Treasury official Mike Callaghan, to friendly journalists at the Financial Review and The Australian ahead of its release last week, or held a media event to discuss it 40 minutes before the release of the actual report on Friday.
Few people on any side come to the debate about superannuation with genuine disinterestedness. Some independent, highly regarded economists — Brendan Coates at the Grattan Institute, and now Saul Eslake — argue against further rises on the basis that they are unnecessary and will detract from wages growth.
Everyone else, pretty much, has a vested interest. And the interest doesn’t come bigger and uglier than that of the Liberal Party.
As Crikey has explained for a long time, the Liberals spent years trying to tilt the super system against industry super funds and in favour of retail funds that used to be owned by the big banks.
That was driven by the huge donations they received from the banks, and by a hatred of industry super funds.
But as their attempts to help retail super funds blew up in their faces, the Liberals’ hatred of industry super hardened into something even more toxic: a growing resentment of the entire superannuation system and the way that it reroutes power away from them and into the hands of large super funds — industry, retail, corporate and public sector.
The Liberals are terrified of the growing power of super funds and the way funds of all stripes have used it to pursue policies like net-zero emissions targets — contrary to its own business model of taking donations from large corporations in exchange for influencing policy.
The Liberal policy on retirement incomes is therefore pretty simple: kill super. It’s only a slightly more sophisticated version of the Nationals threatening to destabilise the entire financial system because banks are refusing to lend to their coal industry donor mates.
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Not all super would be targeted, of course: every Liberal MP attacking super has a 15.4% super contribution rate. Don’t expect them to cut their super contributions back to 9.5% any time soon.
The Liberal plan to kill super has two parts: first, stop increases in compulsory super payments, possibly including the increase to 10% scheduled for just seven months’ time. Then, “open up” super so that members can draw down on their balances — which has proven highly successful in the context of the pandemic.
Both will be sold as being all about the interests of members. The removal of further increases in compulsory super will be all about wages growth and the good of the economy post-COVID. Opening up super will be sold as giving Australians greater freedom and allowing young Australians to get into the housing market.
In both cases, the arguments presented are missing key pieces of information. The wage stagnation that Australian workers have endured for years has nothing to do with super rises, but much to do with government policies. It is this government that has demonised unions, refused to support minimum pay rises, supported penalty rate cuts, turned a blind eye to the epidemic of wage theft for years, and slashed its one direct, powerful tool for increasing wages — public service pay rises.
The wage price index for the year to September was just 1.4%, a new record low. The Reserve Bank doesn’t expect wages growth to reach 2% again until at least 2023.
Halting further compulsory super rises won’t do a thing to restore even the tepid wages growth of recent years. Instead, it will effectively transfer income from workers’ retirement accounts to businesses, because there’ll be no magical compensating wage rise if super is kept at 9.5%.
If the government really cared about wages growth, it would dump its new (and mostly ignored by the media) linking of public sector wages to private sector growth, which guarantees overall wages growth will be significantly lower in coming years (the average difference between private and public wages growth since 2016 has been 0.3 points a year). And it would support minimum wage rises.
And helping Australians raid their super will just pump more money into the housing market, driving up prices accordingly — and leaving young people with no retirement incomes to show for it. But that would be good for News Corp, which owns 61% of realestate.com.au, and Nine Entertainment, which owns 58% of Domain.
If the government really wanted to improve affordability, it could axe negative gearing. But that assumes the Liberals are interested in policy outcomes. The only outcome the Liberals want is to destroy super.
The review also laments the cost of super tax concessions, which are “projected to grow as a proportion of GDP and exceed that of age pension expenditure by around 2050. This is due to earnings tax concessions. The increase in the SG rate to 12% will increase the fiscal cost of the system over the long term”.
The costliest ever change to super tax treatment was by Peter Costello in 2007, when he removed tax on super earnings for people over 60 and the superannuation surcharge. Mike Callaghan was Costello’s chief of staff when those changes commenced in 2007. Too bad Mike didn’t say something then.
What do you think of the government’s policy on retirement incomes? Let us know your thoughts by writing to [email protected]. Please include your full name to be considered for publication in Crikey’s Your Say column.