Ideological assault on superannuation will leave us worse off

The Coalition’s opportunistic assault on superannuation is nothing short of outrageous.

Cartoon: Tom Jellett

The Coalition’s opportunistic assault on superannuation is nothing short of outrageous. Frankly, it staggers me that anyone would think it’s a good idea to dismantle a system that is the envy of the world. In addition to helping people fund their own retirement, Australia’s $3 trillion superannuation sector provides important stability to our markets as well as valuable funds that get invested in nation-building infrastructure.

Let’s hope the rumblings within the government are nothing more than maverick backbenchers freelancing. The concern, however, is that the assault is much more calculated than that. When asked about plans to junk legislated increases in super contributions, both Scott Morrison and Josh Frydenberg have implied the upcoming budget may include just such a shift.

The compulsory rate of superannuation contributions is due to lift from 9.5 per cent to 10 per cent from July 1 next year, eventually increasing to 12 per cent in 2025. But the fact businesses are doing it tough right now is being used as a fig leaf to conceal an ideological assault on super. And it is sucking in some financial experts who seemingly don’t realise that eroding super has long been a partisan goal for conservatives. Because Labor introduced compulsory super, Liberal MPs, who seem to have lost their zeal for necessary reforms in other areas, are hellbent on tearing down the system.

To be sure, super has its problems. Vested interests distort the value of super. Returns are dimin­ished by unnecessarily excessive fees and charges. Yes, compulsory super goes against principles of freedom of choice, and there are some downsides to denying people early access to super in the here and now.

We know the tax arrangements are problematic and too many people burn through their super, only to become a burden on the state-funded pension system, directly contradicting super’s primary purpose.

But so what? All of these issues can be fixed without trashing the system.

For many Liberals, dismantling super has become the modern equivalent of dismantling Medicare. That was a raison d’etre for economic dries during the 1980s and early 90s until John Howard backed down and supported Medicare from 1995 onwards. It is now a proud bedrock of Australia’s social liberalism and held up as one of the best healthcare systems anywhere.

The question is, can Labor use the popularity of super in the community to outmanoeuvre the Coalition if it seeks to erode it, just as Labor did previously on Medicare? It is one of the few issues on which Labor has the potential to win the day. Perhaps that’s why the Coalition promised not to adjust the planned increases at last year’s federal election.

We know a contribution rate of 9.5 per cent is insufficient to plan for a comfortable retirement, which is why public servants get 15 per cent. It is also why the parliament has legislated to lift the rate incrementally to 12 per cent.

So what has changed? Is it hubris now that the Prime Minister is popular and Labor continues to lick its wounds from last year’s unexpected election defeat?

The pandemic hasn’t adjusted Liberal thinking. The same voices calling for changes now were doing so before the pandemic. They just have an excuse for breaking the election promise: the pandemic.

Longer life expectancy serves to increase the importance of super. Because people are living longer, we have to save more for retirement. While libertarians may like to believe people can do that independently for themselves, most do not.

Forced savings via a superannuation scheme is therefore a good idea, and Australia’s system (notwithstanding the problems noted) ranks as one of the best in the world. According to the Mercer Global Pension Index, Australia ranks third, trailing only Denmark and The Netherlands.

As Paul Keating so eloquently pointed out this week, the baby-faced Liberal MPs who are trying to prevent super increases taking effect are themselves enjoying public service super rates. Hypocrisy is thy name.

And when you talk to MPs privately on either side of politics, they lament the 2004 ending of the generous parliamentary super scheme in which MPs and senators were paid a percentage of their salary for the rest of their lives.

Keating, of course, introduced super in the first place. His observation — that it’s a fallacy that super can’t go up as it has been legislated to do because it will depress wages growth — is right. Wages have been depressed for years. They didn’t go up after 2013 when the newly elected Coalition government delayed the planned increase in super. For many Australians the subsequent increase in super contributions from 9 per cent to 9.5 per cent has been the only wage rise they have had.

Then we have the vandalism of the decision to let Australians access up to $20,000 from their super during the current economic downturn. More than 40 per cent of people who took advantage of the early access did so despite not having suffered a reduction in their income, and one in 10 gambled the money away.

In what can be described only as an awful public policy decision, the early access to super the Treasurer announced at the height of the pandemic has punched a $30bn hole in the retirement savings of Australians. The multiplier effect of what that will cost Australians retiring decades from now is off the charts.

The decision also has set a very dangerous precedent, which might mean future governments also find excuses to provide early access exceptions, further eroding super savings.

Allowing people to access their super early, with very limited oversight, is diminishing people’s capacity to live comfortably in retirement. The Coalition likes to talk about the burden national debt puts on future generations as a reason to try to reduce debt levels. The same logic should see them resist diminishing super savings as they have been. Doing so will put a bigger burden on future generations to fund state pension schemes for the many Australians who have eroded their super.

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