2004 Cabinet Papers: Split over reforms to politicians’ superannuation perks

Politicians’ generous super entitlements became a battleground issue in 2004, as Labor leader Mark Latham revitalised the opposition and rivalled Bob Hawke for popularity in opinion polls.

The famously aggressive handshake from then Labor leader Mark Latham, left, when he met John Howard at the ABC Radio studios in Sydney during the 2004 election campaign. Picture: John Feder

At the start of 2004, the re-election of the Howard government for a fourth term looked anything but certain. Labor leader Mark Latham had revitalised the opposition and rivalled Bob Hawke for popularity in opinion polls.

Peter Costello, who hoped to succeed John Howard after the election that year, thought Latham “rattled” Howard.

That was evident when Mr Howard abolished the generous superannuation scheme for new MPs, triggering a party revolt and ­opposition in cabinet.

“Latham appealed to the tradie working-class conservative crew that we were increasingly picking up,” the former treasurer told The Australian. “When he talked about reading, giving kids a good education, the ladder of ­opportunity – which was basically a doctrine of self-improvement – he was very good. I think he did rattle Howard for a time.”

When Mr Latham announced a crackdown on superannuation perks for politicians, judges and governors-general, ending the employer contribution rate of 50-75 per cent depending on years of service and offices held at a time when most employees had just 9 per cent, Mr Howard followed suit.

On March 22, 2004, cabinet agreed “contributions at the rate of 9 per cent of salary be paid” into the superannuation accounts of new MPs, and allow them to make contributions by sacrificing up to 50 per cent of their salary.

Earlier, on February 12, cabinet “indicated a disposition” to close the Parliamentary Contri­bu­tory Superannuation Scheme to new members and “establish an accumulation superannuation scheme” for new MPs with the employer contribution “having regard to community standards”.

Mr Howard recalled opposition in cabinet and partyroom. Coalition MPs spoke against the initial proposal to abolish the scheme altogether for serving MPs and replace it with a 15 per cent contribution scheme.

Instead, a 9 per cent scheme for new MPs was adopted.

“It was the right decision, but I admit that it had the appearance of being forced on the government,” the former prime minister told The Australian.

“Not everybody in my party agreed with me. It was a difficult issue. I came to the conclusion that it would be politically uphill to be arguing for a retention of that old system in the face of the Labor Party saying ‘Well, we’re going to have a new system’.”

Mr Costello opposed change.

“I remember saying, ‘Well, if it was good enough for (Ben) Chifley and (John) Curtin, I’m not going to get rid of it just because of Mark Latham’,” he recalled.

“The political pressure in the end was so great that Howard felt he had to agree to it.

“It was really an anti-corruption measure. The idea was that when politicians leave politics, they can at least put food on the table. Because if they’re not sure of that, while they’re in politics they might be trying to ingratiate themselves to people who can look after them in their after-politics lives.”

The 2004 changes coincided with choice-of-super legislation that allowed Australians to choose their fund.

In September 2006, Mr Howard backtracked and announced MPs under the new scheme would have their contributions increased from 9 per cent to 15.4 per cent.

On October 9, 2004, the Coalition won re-election and gained a majority in the Senate. Labor’s primary vote fell to 37.6 per cent and Mr Latham resigned as opposition leader three months later.