Former ACTU secretary Bill Kelty has big message on super

Given the state of the economy and business confidence, it is right to believe both federal Labor and the trade union movement are a poor reflection of what they were during the reform period of Bob Hawke and Paul Keating.

Former ACTU secretary Bill Kelty was at the heart of the economic reforms for which Hawke and Mr Keating are held in high esteem. Achievements of that time included floating the Australian dollar, the Prices and Incomes Accord, and promoting enterprise bargaining.

The Prices and Incomes Accord was a series of agreements between Labor and the ACTU where unions agreed to moderated wage demands in exchange for improvements in the “social wage”. The social wage included better public health provision through Medicare and improved social welfare payments for the unemployed and pensioners.

The Industrial Relations Commission developed a policy of “two-tier” wage fixing under which basic increases would be provided, but additional wage rises were dependent on “efficiency offsets” or increases in productivity. The accord system culminated in a system of enterprise bargaining and the social trade-off eventually included compulsory superannuation. Together with Mr Keating,

Mr Kelty was instrumental in the introduction of compulsory superannuation, which is now under sustained threat from repeated government interventions to change the rules of investment. The latest example is a plan by Jim Chalmers to tax unrealised profits in high-balance superannuation funds without indexation.

In a wide-ranging interview with workplace editor Ewin Hannan on Saturday, Mr Kelty describes Dr Chalmers’ proposal as “bad policy” that if left to run wild would destroy the superannuation system. Mr Kelty is not opposed to increasing the tax on high-balance super funds.

But, like many leading economists and business figures, he can appreciate the impact the proposed changes will have on farmers, small business and investment decisions. “I think taxing unrealised capital gains is bad policy. It distorts the effective tax, changes your income flows, and if it was on superannuation generally, there would be a revolution about it. It would destroy super,” Mr Kelty said.

He is not alone. As we have reported repeatedly, the unrealised gains tax component of Labor’s proposal has ­received stiff opposition from some of the highest-ranking business and economic voices, who are in favour of a clampdown on super tax concessions. CSL chairman Brian McNamee and Wesfarmers chief executive Rob Scott have both criticised ­unrealised gains tax while indicating they are open to changes on the rates on earnings for wealthy superannuation accounts.

Former Treasury secretary Ken Henry has suggested more equitable ways of applying tax rates on super, but is firmly against unrealised capital gains. Former Reserve Bank governor Philip Lowe said tax rates on super earnings and contributions were too generous and could be lifted but was also against unrealised capital gains.

The Albanese government would be wise to listen to what Mr Kelty has to say. His message extends beyond superannuation and makes a useful contribution to Dr Chalmers’ planned productivity roundtable with business and trade unions later this year.

He says the government should adopt tax policy changes to ease financial pressures on young people and small business, and to shift the tax burden from pay-as-you-earn taxpayers. He said small-business tax was too complex and hard to enforce, while the top marginal tax rate was too high. It is difficult to argue with that.

But the real message for Canberra is that it has lost sight of the compact at the heart of the accord bargain when Mr Kelty was at the head of the ACTU. The trade-offs under Anthony Albanese and Dr Chalmers are all one way.

The government is determined to increase wages as well as the social compact. It is prepared to stifle investment and innovation in the private sector because it thinks big government knows best. This is why business leaders are preparing for the upcoming productivity roundtable with fresh wounds from the Jobs and Skills Summit after Albanese victory mark one, which delivered stricter workplace laws that were not on the election agenda.

Since that time, the Albanese government has been set on turning back the advances made by Mr Keating and Mr Kelty. The government should stop and pay attention to someone who has demonstrated a keen understanding of what productivity growth and workplace co-operation can deliver for workers and the nation.