Greg Combet calls on Canberra to halt early super access scheme by end of year

Errors in the execution mean the stimulatory measure ‘which is not equitable’ should be halted by December.

“But we now know that the Australian Taxation Office has not scrutinised the hardship criteria, so the $42bn that’s likely to be withdrawn under the scheme should be seen at the macro level as a stimulatory measure,” Mr Combet said.

The industry superannuation sector has called for a prompt termination of the Morrison government’s early access program at the end of this year, saying it’s a de facto stimulus measure that penalises the lowly paid and will cost the not-for-profit funds $2.6bn in investment returns.

Greg Combet, chairman of Industry Super Australia and a former federal Labor minister, said the $700bn sector had supported the motivation of the scheme to allow members suffering financial hardship early access to their retirement savings.

“But we now know that the Australian Taxation Office has not scrutinised the hardship criteria, so the $42bn that’s likely to be withdrawn under the scheme should be seen at the macro level as a stimulatory measure,” Mr Combet said.

“Not only that, but it’s a stimulatory measure which is not equitable, because it comes from the private savings of mostly young and lowly-paid people. That’s why the scheme should terminate on December 31.”

The impact on investment returns — equivalent to 35 basis points or $251 per member — arises from super funds having to hold a greater proportion of their investment portfolios in lower-yielding liquid assets so they can cover redemption requests.

APRA figures released on Monday show payments under the early release scheme reached $29.4bn last week, with the value of applications worth $30.7bn. Treasury originally estimated that $29.5bn would be accessed.

That figure has significantly increased to $42bn, reflecting the government’s decision to extend the scheme until the end of the year as a result of the second coronavirus lockdown in Victoria.

Treasurer Josh Frydenberg said last week that more than 2.6 million Australians had benefited from early access, and hit back against the scheme’s critics.

“We know that almost 60 per cent of those accessing their super early have used it or plan to use it to meet essential day-to-day expenses, including paying down debts, with another 36 per cent adding the money to their savings,” Mr Frydenberg said.

“Opponents are basically saying to 2.6m Australians that we don’t trust you to make your own financial decisions with your own money.”

Mr Combet continued to argue strongly for the legislated increase in the super guarantee charge from 9.5 to 10 per cent, despite growing pressure for a deferral from a group of coalition backbenchers.

Greg Combet Picture: Nick Cubbin

The Grattan Institute boosted this argument last month by concluding in a report that any increase in the charge could harm workers by reducing their take-home pay and reducing access to the age pension. Mr Combet hit back, saying workers had only received one increase of 50 basis points in the charge over the past 18 years.

“Industry funds are extremely committed to the legislation passed six years ago,” he said. “An extra $5 a week in their super accounts for members earning $50,000 a year is very affordable.”

On the retirement income review — the first wholesale review of the retirement system in three decades, which was handed to the government a week ago — Mr Combet called for its quick release to “establish a good fact base”.

He said it was unlikely that the review had considered the impact of the early release scheme, and how 560,000 workers who had “cleaned out” their super accounts could rebuild their nest eggs.

Mr Combet, who concluded his role with the National COVID-19 Commission advisory board last month and joined an industrial relations task force headed by Attorney-General Christian Porter, declined to comment on the contribution of casualisation of the workforce to spreading the pandemic.

The reliance of casual workers on their next pay cheque has been seen as a contributor to infections because of their reluctance to stay home, even if they have the virus.

“We need people to stay at home and get tested so we have to alleviate the financial pressure that they feel,” Mr Combet said.

“It’s important to consider some kind of pandemic leave.”

More broadly, he said the most important economic policy was to contain the virus.