‘How pathetic’: Paul Keating slams PC, Clive Palmer for ‘dudding’ workers

‘How pathetic’: Paul Keating slams PC, Clive Palmer for ‘dudding’ workers


“How pathetic is this as a policy recommendation?” Mr Keating said.

“It is no news to anyone that the Treasury never supported the advent of compulsory superannuation.

“It was delivered by political and industrial entrepreneurship. And only by political and industrial entrepreneurship.”

Periodic increases

InSuperannuation: Assessing Efficiency and Competitiveness, the government’s independent economic adviser signalled doubts about the efficacy of the compulsory superannuation system founded by Mr Keating in 1992 because multiple accounts, poor investing and high fees are costing millions of members $3.8 billion a year.

As such, one of the commission’s 31 recommendations was for a new independent inquiry into the retirement income system to be held before any possible increase in the current 9.5 per cent superannuation guarantee rate.

Periodic increases in the Superannuation Guarantee are legislated for between 2021 and 2025, ultimately taking it to 12 per cent. An inquiry suggested by the Productivity Commission could be completed before then.

The Coalition government has officially supported the increases, though many Liberals have private reservations.

Both the Abbott and Howard governments previously delayed or cancelled higher superannuation because of the immediate cost to the budget and the belief of most economists that workers ultimately receive lower take-home pay in return for deferred retirement savings.

analyst

Karen Chester is recommending another retirement income system inquiry before any possible rise in the SG – next due in 2021. Alex Ellinghausen / Fairfax Media

Under Kevin Rudd, the government began lifting the legislated rate from 9 to 9.5 per cent by 2014.

The Coalition government, which is philosophically more circumspect on government-mandated super, delayed scheduled increases to 12 per cent due to the cost to the budget from superannuation contribution tax concessions.

The superannuation and broader funds management industry, which would benefit from earning more fees from a higher compulsory superannuation contribution, strongly back higher contributions by employers to workers.

Keating accuses PC

Calls by the commission for a proposed broad retirement income inquiry are being considered by the Morrison government. It would asses whether the superannuation system set up 27 years ago was achieving its original stated objective of raising national savings – by increasing private savings and taking pressure off the government budget.

Chris Bowen

Clive Palmer is accused of dudding workers. Jeremy Piper

The commission wants to see if compelling workers to forgo a portion of their salary in favour of deferred superannuation savings benefits the poor and wealthy fairly. Low-income earners make a relatively large immediate sacrifice of forgone income they could spend today, while the wealthy receive big superannuation tax concessions.

It also wants an inquiry to explore if any reduction in reliance on the public pension helps the federal budget, given higher income earners receive big tax concessions from superannuation.

But Mr Keating accused the Productivity Commission of overlooking a paper by analyst Michael Rice, who the former Labor PM said “demonstrates how effectively superannuation works in reducing the national call on the age pension”.

“He notes that theIntergenerational Reportprojected that the age pension would rise from 2.7 per cent of GDP to 4.6 per cent of GDP over a 40-year period,” Mr Keating said.

“In his comprehensive report – because of higher super balances and a tighter means test – Rice estimates the cost of the age pension will now fall from 2.7 per cent of GDP in 2017 to 2.5 per cent in 2038.

“And a fall from a projected 4.6 per cent of GDP to 2.5 per cent by 2038.”

The Grattan Institute think tank has countered that, pointing to Treasury’s long-term projections showing federal budget savings from paying lower pensions will only exceed the cost of superannuation tax concessions by 2060, or 2100 including the accumulated debt the system is racking up now.

Labor’s aspirational goal

The Shorten opposition and the unions have championed lifting compulsory superannuation contributions to at least 12 per cent to boost the retirement savings of workers.

Mr Keating, who initially introduced compulsory superannuation at 3 per cent of employees’ income in 1992, has urged for the rate to be gradually lifted to 15 per cent.

Super tax concessions are typically taxed at 15 per cent, below most people’s marginal rates of incomes.

Because super contributions are typically paid instead of higher wages, people receive less take-home pay and hence pay lower income tax.

“Although employers are required to make superannuation guarantee contributions, employees bear the cost of these contributions through lower wage growth,” former Treasury secretary Ken Henry’s tax review found in 2010. “This means the increase in the employee’s retirement income is achieved by reducing their standard of living before retirement.”

At Labor’s national conference in December,unions were pushing for Labor to fast-track the increase to 12 per centover the first three years of a future Labor government, but treasury spokesman Chris Bowen had the motion watered down to an aspirational goal.

The Transport Workers Union and the Construction, Forestry, Maritime, Mining and Energy Union had put forward amendments to Labor’s platform to fast-track increases to super by 0.75 per cent a year from its first budget and toset a target of 15 per cent by 2030.

Instead the conference voted to “urgently prioritise” ending the freeze on super at 9.5 per cent and increase super to 12 per cent “as soon as practicable”.

“Once the important goal of 12 per cent has been achieved Labor will set out the pathway to its original objective of 15 per cent to further enhance retirement income adequacy for workers,” the conference motion said.

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