He proposed it 34 years ago. On Tuesday, Paul Keating’s plan comes to fruition
By Shane Wright
Paul Keating, the man who came up with the 12 per cent superannuation guarantee that will flow to millions of workers from July 1, has likened the private pension system to a binding force between all Australians.
But the former treasurer and prime minister has given a subtle hint to Treasurer Jim Chalmers that his planned changes to the tax arrangements on super accounts with more than $3 million will affect far more people than the government is claiming.
Former prime minister Paul Keating Keating said the superannuation system had matured with the 12 per cent guarantee. Credit: Louie Douvis
The super guarantee levy has increased half a percentage point every year since 2022, reaching 12 per cent with the 2025-26 financial year.
Keating was instrumental in the first step towards universal superannuation, when in 1985 the ACTU sought to have 3 per cent of industrial workers’ wages go into retirement savings funds run jointly by union and employer groups.
Six years later, when he had moved to the backbench after his first failed leadership challenge against then-prime minister Bob Hawke, Keating first outlined what would become the country’s retirement savings system.
He said retirement needed to be based on both the age pension and privately funded superannuation, nominating 12 per cent as the contribution from workers towards their retirement income.
At the time, he hoped the 12 per cent would be in place by 2000, noting that at such a level it would provide a retirement income that would be “the difference between a full, active life and a life governed by budgetary exigencies and the vagaries of politics”.
Keating on Monday said the superannuation system had matured with the 12 per cent guarantee, delivering Australia the fourth-largest retirement accumulation in the world at $4.1 trillion, which is 150 per cent of GDP.
The Reserve Bank has estimated super will reach $8 trillion by 2035, when Australia will have the second-largest retirement base in the world, behind only the United States.
Keating said super had been a revolution in national and personal savings, unlike any other nation. It had also become instrumental to the nation’s economic story.
“Superannuation, like Medicare, is now an Australian community standard, binding the whole population as a national economic family, with each person having a place,” Keating said.
Chalmers is facing backlash to his plan to tax earnings on assets above a $3 million threshold held within super.
The government says the “modest” change, which is due to start from July 1, will affect about 80,000 wealthy individuals but raise more than $2.7 billion in revenue. The $3 million starting point is not being indexed to inflation or wages growth.
While Keating did not address Chalmers’ plan directly, he noted that with workers benefiting from the 12 per cent super guarantee, all would ultimately reach the $3 million threshold.
“Every young person joining the workforce this year will begin and remain at 12 per cent of superannuation contributions throughout their entire working life,” he said.
“This level of contributions and compound earnings will guarantee personal super accumulations in excess of $3 million at retirement, reducing the call by the age pension on the Australian budget to 2 per cent of GDP in the 2050s.
“France spends 14 per cent of its GDP on public pensions while Germany sits at 10 per cent. The United States is at 7 per cent. Australia’s pension call on the budget is currently just 2.3 per cent of GDP – a sunken level thanks entirely to universal superannuation.”
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