Buy a home now, worry about living standards later

A plan to let people have early access to super is all about ideology.

Illustration: Tom Jellett

Scott Morrison is ascendant and unbeatable at the next federal election. That much we know for sure. It’s all part of his Teflon coating courtesy of the coronavirus, a shield that insulates him from even the most craven failures such as robodebt.

But that doesn’t mean he can ignore the desires of his backbench. No leader can, even dominant political leaders. Which is why Morrison will throw a little red meat the way of his more ideological backbenchers when next year’s budget is handed down.

That will include plans to allow Australians to opt out of the compulsory super system by using their saved funds to help with the purchase of a first home.

The exact structure of how it will be done is yet to be finalised, but Team Morrison has already established the broad framework and workshopped the political calculations.

Such moves will finally fire up the debate over superannuation.

Josh Frydenberg remains in the dark, yet to be consulted as to what will go into his budget.

It is early days, but the Treasurer is on the road to understanding how Peter Costello felt during the Howard years. Make no mistake, this government is run out of the Prime Minister’s office.

The likelihood is that the legislated increases to super — from the current 9.5 per cent to 12 per cent come 2025 — still will go ahead. Morrison is worried about being seen to break an election promise, especially with no guarantees that even trying to do so would be successful.

Stopping the increases requires new legislation, which would have a tough time passing the Senate.

Even if the Coalition does decide to try to stop the increases, next year’s increase from 9.5 per cent to 10 per cent is a near certainty to happen. The timing is too close to the next election.

Changes after an election would at least allow the Coalition to flag them prior, rebutting claims of a broken promise.

But the reason Morrison is disinclined to reverse the rises already legislated is because he doesn’t want an all-out war with the super sector, one that would also unite Labor on an issue the opposition is passionate about.

Throw in that MPs and senators earn 15.4 per cent super and Morrison knows full well the charge of hypocrisy would be levelled at his team were it to prevent ordinary workers getting a super rise.

Morrison’s strategists want the super debate to be focused elsewhere, believing they can win the public relations war over Australians being allowed to access super early to buy a home and can convince the crossbench of the virtue of such a move.

The plan is to announce this change in the budget and use it as a pillar of the Coalition’s election strategy, depicting Labor as beholden to special interests in the super industry while the government is putting the power to choose in the hands of individuals.

Team Morrison hopes such policy positioning will wedge Labor against voters who struggle to raise the deposit for a first home. In time other reasons to claim early access to one’s super might be added, further eroding the compulsory nature of the system.

Some Liberals believe changes such as this will disproportionately hit industry super funds the hardest, and they are the ones with the closest links to the union movement and the Labor Party.

By simply pointing out that he’s giving people choice, Morrison hopes to be able to bat away Labor claims that he is tearing apart the super system Paul Keating established in the 1990s.

It is a dangerous policy goal for Labor to oppose because it is one that can be argued for effectively by the Morrison government — especially in the post pandemic economic climate, with the build-up of goodwill Morrison is enjoying courtesy of Australia’s success in combating the virus.

But the approach does contradict the findings of the retirement income review commissioned by the Coalition.

Last week the review finally was released, deliberately in the shadow of the Brereton report into alleged war crimes also being made public. As Keating told the ABC during the week, the government doesn’t want people looking over the details of the retirement review, and he’s right about that.

That’s because it spells out the importance of the compulsory superannuation system to the sustainability of Australia’s retirement system. “Most people would not save enough voluntarily for their retirement,” the review states. “Government intervention is required, such as the super guarantee. Without government intervention, many people would experience a reduction in living standards in retirement.” By undercutting the compulsory nature of the scheme, perhaps with a longer-term plan to eliminate future increases in the compulsory rate all the way to 12 per cent, the Coalition will put the living standards of Australians at risk when they hit retirement age.

Such changes also will damage the budgets of future governments, by increasing the cost burden on the commonwealth. We are an ageing population. The review also highlights that Australia is a global leader when it comes to containing the costs of an ageing population, precisely because of the investments we have made in compulsory super.

While the review does open the door to adjustments, it notes that to compensate any drawing down on people’s super would require retirees to become more reliant on reverse mortgages on their homes. Few people will want to go down that path and I can’t imagine this government having the political courage to force people to do that rather than draw on public funding in retirement.

In short, if the government hoped the review would give it justification to make super optional, it was wrong. It does the opposite.

Keating’s idea from the 90s has flourished into a cornerstone of Australia’s economic success. Even just the capital that compulsory super has made available for large-scale infrastructure projects has huge economic advantages. We are no longer reliant on investments from abroad for nation building the way we once were.

For years the Coalition opposed Medicare, before John Howard eventually capitulated on his return as Liberal Party leader. Doing so was about politics, not ideology. The conservatives eventually realised that Australians wanted universal healthcare.

The Coalition’s opposition to compulsory superannuation is similarly strident, at least among Liberals who still think about policy and ideology.

Morrison believes he has found a way to satisfy their penchant for reform without the political costs that could come with it.

We’ll soon see.

Peter van Onselen is a professor of politics and public policy at the University of Western Australia and Griffith University.