22 March 2013


Twenty years ago this week the then Labor Treasurer, John Dawkins, addressed this conference in Wollongong.

After reviewing the remarkable progress of growth in superannuation – which had seen growth of the pool between 1983 and 1992 increase from $22 billion to $140 billion – the then Treasurer told those present

“Notwithstanding the progress to date, there is an on-going task.”

In the 20 years since, I wish to report to you today the progress which has been hard-won in superannuation.

Thanks to successive Labor Governments, the total pool of superannuation savings has grown from $140 billion in 1992 to $1.5 trillion – or equal to Australia’s GDP.

Rice Warner’s latest Superannuation Market Projections Report projects the total market to grow to over $3.1 trillion in the 15 years to 2027, in 2012 dollars.

According to Rice Warner, this quick growth is due to the “significant compulsory component within that market, driven by the Superannuation Guarantee”.

Looking further ahead, Treasury expects our superannuation savings pool to grow to $6 trillion by June 2037.

The recent superannuation reforms by our Treasurer Wayne Swan and this Government will add $500 billion to the pool of savings by 2037.

As a Government, we have cut the 15 per cent tax paid on superannuation for 3.6 million Australians earning under $37,000.

We have legislated to gradually increase the superannuation guarantee to 12 per cent.

And the downward pressure on fees and charges triggered by the My Super and Super Stream reforms will add to the bottom line of every working Australian’s superannuation savings.

But to echo the words of John Dawkins of 20 years ago, notwithstanding the progress to date, there is an on-going task.

Those among us who are over 65 now are only 3 million in number, but by 2050 there'll be 8.1 million of us.

Today there are fifty of us in work for every ten of us in retirement.

By 2050, there will be twenty-seven of us in work for every ten of us in retirement.

These days we're probably at school and in college until we're 20 or 25, and we shall be students retraining our whole adult life.

We shall work for 35 to 40 years, and after that we have another twenty or even thirty years to think about things, play bowls, go fishing, join reading groups, write family histories, and the rest of it. Thirty years, perhaps.  Forty, maybe.

Life itself, our life on earth, has been redefined by these new unchangeable figures of a long and largely healthy life.

With though the recognition of greater frailty and possible diminished confidence in one’s ninth and tenth decades.

I want to talk about three things in my address to you today:

  • Provide some context, and some history, about what superannuation was designed to do;

  • Make observations on missed opportunities in superannuation

  • Discuss what I believe represent some of the priorities in superannuation policies to assist Australians enjoy adequate retirement income.

By any measure, the value of superannuation is only going to grow in the decades ahead.

Not only the value of the national savings pool, but the value to all Australians, as our population ages, of having a robust superannuation system they know they can rely on in retirement.

That’s why it’s so important for us to make good decisions now, so our system remains strong, stable and settled.

We need to continue to reinforce the confidence of Australians in superannuation.

What superannuation was designed to do

Before 1985, Australia had relied on the taxpayer provided Age Pension as its principle post-employment income system.

Up until that time, private retirement income under the superannuation provisions applied to the upper end of the commercial sector and to employees in the public sector.

The great majority of working Australians had no viable access to the generosity of the pre-1983 superannuation tax provisions.

The first move towards universal access under the superannuation provisions came as part of the Hawke-Keating government's Accord with the Australian Council of Trade Unions, led by Bill Kelty.

Government and unions agreed that the profit share in the economy had to be restored to re-ignite private investment.  At the time, unemployment and inflation were both hovering around 10 percent.

In return for this restraint the Government supported the ACTU's claim that 3 percentage points of wages should be contributed by employers to a superannuation account in the name of each worker.

This was 1985.  And subsequent Labor Governments have built our world beating superannuation system.

Not long after becoming Prime Minister, Paul Keating announced the introduction of the Superannuation Guarantee Charge.

Under this nation building, wealth enriching legislation, employer contributions to superannuation would rise from four percentage points of ordinary time earnings in 1992-93 to nine percentage points of ordinary time earnings by 2002-2003.

Every year the Superannuation Guarantee Charge grew by a further 1 percent of employer contributions towards the 9 percent target, unit labour costs fell.

In fact, every year the Superannuation Guarantee Charge grew by a further one per cent of employer contributions towards the 9 per cent target unemployment fell, business profits as a percentage of GDP grew, as did real wages.

This meant that the cost of superannuation was never borne by employers.  It was absorbed into the overall wage cost.

Had employers not paid 9 percentage points of wages as superannuation contributions to employee super accounts: they would have paid it in cash as wages.

As Prime Minister Keating said in 2007:  "when you hear conservatives these days speak of superannuation as a tax on employers they are either ill-informed or they are lying.  The fall in unit labour costs and the upward shift in the profit share during the period of the Superannuation Guarantee Charge is simply a matter of statistical record.  It is not a matter of argument."

Today the savings pool is worth more than $1.5 trillion to the nation.

Our retirement savings system is the fourth biggest pool of funds under management on the planet.

The Superannuation Guarantee legislation has since proven fundamental to the sustainability of our private retirement income.

Superannuation has proved to be a terrific idea; blessing Australia with a national institution that almost every developed economy in the rest of the world would give their eye teeth for.

In the Hawke-Keating years, Labor’s retirement income system was built around three pillars:

  • The age pension – to provide a minimum level of income support – but one which is inevitably hostage to political whims and budget constraints of the Government of the day.

  • Universal, mandated superannuation for the middle classes with a goal of a replacement rate of 70% of pre-retirement incomes

  • For those with the means, voluntary savings above and beyond superannuation. This was to be concessionally taxed within a reasonable benefit limit.

The great missed opportunity

It’s an often forgotten fact of Australian political history that John Howard went to the 1996 election promising to increase universal superannuation to 15 per cent.

This was arguably one of the greatest missed opportunities from the conservative side of politics in superannuation policy.

A full six percentage points of national income lost for a decade to the capital markets, to national savings and to millions of future retirees.

One should be able to assume Conservative governments can understand the merit of savings.

History recalls that for 12 years, superannuation levels were stalled at 9 per cent.

Additionally, despite its good intent Costello’s co-contribution scheme failed to understand that for the majority of Australian workers having a spare $1000 cash to put into your super was pure fantasy.

Indeed only one in every five workers eligible for the co-contribution actually used it.

Our ongoing task

In just four years, 20 per cent of Australia’s population will be over 65. Australians are living longer and in this context, our superannuation system needs to be fair and needs to be sustainable.

The Gillard-Swan Labor Government will never lose sight of the low-paid, we’ll always support and strengthen the safety net of the aged-pension.

But superannuation was never designed as a welfare tool for low income earners.

That is appropriately the preserve of the aged pension, and this Labor Government has significantly improved our pension system.

Superannuation was designed to reward and supports the Australian middle-class, those on multiples of average earnings, to save for a comfortable, secure and financially adequate retirement.

We want a system which rewards a lifetime of hard work, and ideally ensures that Australian workers have something approaching 70 per cent replacement rate of their working income.

People need to have sufficient savings to retire comfortably – adequately.

We owe it to all Australians, present and future, to sustain a system that gives everybody a fair shot at a decent and dignified retirement.

This is our ongoing task in superannuation.

It is a task which requires long-term thinking.

In 20, 30, 40 years and beyond when Australian workers are retiring, they will not remember today’s opinion polls, speculative budget stories or any of the other flotsam and jetsam which washes through the 24 hour media cycle.

They won’t remember line items in annual budgets.

As a Government, we recognise the need to provide superannuation policy certainty.

To look beyond the electoral cycle and instead focus on what current generations of working Australians will want from their retirement in the decades to come.

We recognise that community confidence in superannuation is important – not just for the industry or the markets – but for those mums and dads, and sons and daughters, whose hard working wages are compulsorily deferred to provide for their retirement security.

And we recognise that, fundamentally, superannuation represents a charter with working Australians.

A charter that says, we will help you save for your retirement through mandated employer contributions and tax concessionality, and in return you are part of a wealth creating, job generating, GFC-proofing idea that sets Australia apart from much of the developed world.

Labor never, never, never, never gives up on supporting superannuation.

Only a Labor Government could ever legislate to convince Australian workers to put 12 per cent of their wages into savings.

We invented universal superannuation and the Liberals opposed it.

We voted to increase superannuation from 3 to 9 per cent – and the Liberals opposed it.

We voted to increase superannuation from 9 to 12 per cent – and the Liberals opposed it.

We voted to remove the tax paid on superannuation by 3.6 million low-paid workers, including 2.1 million women, and the Liberals opposed it.

So when the Liberal’s now cry wolf and propose not to make “any negative unexpected changes”, it must be viewed through the prism of their record.

A record that opposed superannuation every step of the way.

A record of missed opportunities.

Labor is the party of superannuation. We established it and we continue to improve it.

It has taken Labor a generation to establish the legacy and we shall not let our opponents steal the record.

Labor superannuation policy over 20 years has, is, and will be guided by the following vision:

  • Australians are living longer (longevity)

  • They will need to have sufficient savings to retire comfortably (adequacy)

  • And Australians want the process of superannuation policy- making to be de-politicised

  • Because community confidence in the superannuation system is important.

Only Labor is focused on the future, the next 20, 30, and 40 years.

Only Labor is focussed on what it wants superannuation to achieve for Australians – to provide a secure retirement.

I thank you.

Mr Shorten’s Media Contact: Sam Casey — 0421 697 660