Paul Keating slams early super scheme

Former PM Paul Keating says COVID aid should come from government, not from people raiding their retirement savings.

Paul Keating complained about “baby-faced Liberals” opposing a rise in the super guarantee. Picture: Nikki Short

Former Prime Minister Paul Keating has lashed the federal government’s early super access scheme, arguing the COVID-19 crisis requires a national response that does not place the burden on workers raiding their retirement savings.

Speaking at a superannuation webinar on Tuesday, Mr Keating also savaged “baby-faced Liberals” for agitating against lifting the super guarantee to the planned 12 per cent.

“Of the income support in Australia to date in this COVID emergency, $32bn has been found and paid for by the most vulnerable, lowest paid people in the country and $30bn has been provided by the Commonwealth under Jobseeker and Jobkeeper,” Mr Keating told the Industry Super Australia event.

“So instead of JobSeeker and JobKeeper carrying the main burden of income support from the get go, (it is being carried by) people ratting their own savings to the (extent) where 600,000 people — broadly young people — have no super accounts at all.”

The early access scheme, in operation since April, allowed workers to access up to $10,000 of their retirement savings, tax free, last financial year and a further $10,000 this financial year. The scheme was originally due to run until late September but the government last month extended it until December 31.

Treasury originally estimated $27bn would be sucked out of super funds by workers hit by the COVID-19 crisis but last week amended its forecast to $42bn. More than 2.6 million Australians have so far accessed their super savings through the scheme.

Labelling the raid on super “a very poor choice”, Mr Keating said the support should have come from the government “from the get go”.

“It’s a national hardship requiring a national response. And the national response should have been a fiscal policy response, not the burden of the income support and maintenance of living standards coming from people’s long-term retirement savings.”

Commenting on calls by Liberal backbenchers to hold the superannuation guarantee at 9.5 per cent, Mr Keating said there was no economic case for the planned increases to not go ahead.

“There’s been no real wage growth since 2013, zero real wage growth, 9.6 per cent labour productivity growth. None of this has been distributed to wages. It all went to the balance sheets of companies.

“So there’s 10 per cent of labour productivity banked on balance sheets. We’re asking for a quarter of it back. Shocking, shocking.”

Lifting the super guarantee to 12 per cent was about adequacy, he said.

“Anyone born in the 1970s will live to 105 or 110. If they save for 40 years, from 25 to 65, they’ll be relying on those savings to maintain them for the next 40 years. This cannot happen. The pool of funds at 9.5 per cent is not large enough to do that.

“The argument of 12 (per cent) is a very basic argument about adequacy and of course as we all know yields are coming down. If we’ve got yields falling and people living longer, what case is there possibly for not having 12 per cent?”

He said he was taking Prime Minister Scott Morrison and Treasury at their word that they had no plans to change the legislated super guarantee rise. “The government has to do nothing but let it kick up half a per cent over the next five years,” he said, as he pointed to the impact of the surge in Baby Boomers hitting retirement.

“The killer point is that when I introduced the super guarantee, six and a half people in the workforce maintained the income of one person over 65. That’s at three and a half now and falling. We’ll reach the point where young Australians, there’ll be only three of them carrying each retired person over 65 for the public pension or public costs, including health.

“You look at these young people. A lot of them are on low wages, they’re carrying the HECS charge around their neck, they have trouble accommodating themselves. And we’re saying ‘oh by the way you can look after us aged persons, and Treasury said we don’t need savings for retirement, we can do it all on the public pension’. It’s just fanciful nonsense,” he said.