Bill's Media Releases

Opinion Piece: More comfortable retirement for working Australians

Published in The Australian on page 28, Thursday 22 March 2012

The Gillard Government’s superannuation reforms that passed the Federal Parliament this week will deliver big improvements in our nation’s retirement savings.  For millions it puts the golden goal of lifetime income security within reach.  We know many Australians do not have enough money saved to comfortably retire.

Increasing superannuation is also terrific for the Australian economy.  By 2035 the national savings pool will have been boosted by $500 billion thanks to 12 percent superannuation.  This means more capital available for Australian enterprise and making us less reliant on overseas borrowing.

The Government does not claim that the mining tax literally pays for the increase to an individual’s superannuation.  A core pillar of our retirement savings system is that if we are going to make saving compulsory we should also tax it concessionally.  Taxing super concessionally (at 15%) rather than at higher marginal tax rates comes at a significant cost to the Budget.  Treasury forecasts a cost to the Budget of $240 million in 2013-14 and $500 million in 2014-15 as we lift the rate towards 12 percent.  Revenue from the mining tax ensures the lift is affordable.

We are also abolishing the 15 percent tax paid on superannuation contributions of people who earn less than $37,000.  There is also a significant budget impact of handing back that revenue.  I want all readers of this newspaper to know that 3.6 million Australians, including 2.1 million women, will benefit from the Low Income Superannuation Contribution at a cost to the Commonwealth of $1.9 billion over the forward estimates. Revenue from the mining tax makes this very fair measure affordable.

Claims that employers will bear the cost of increasing the superannuation are also misleading.  History supports my argument.  When the Superannuation Guarantee was last increased from 3 percent to 9 percent between 1992 and 2003, unit labour costs fell.   This shows that the cost of superannuation increases does not fuel spikes in wages. 

One of the architects of our system, Paul Keating, observed 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."

The increase from 9 to 12% will be phased in through reasonable instalments over 7 years.  This means employees and employers have time to adjust and take the increase into account in future wage negotiations.  Further, I am confident future productivity increases are certain to ensure that real wages continue to grow.

There is also a claim made from time to time that increasing superannuation is wrong because it means a reduction in wages.

But this is another fallacy.

The truth is that superannuation is part of an employee’s total remuneration. So an increase in super means an increase in remuneration – or wages by another name.  And so by taxing this portion of wages concessionally, an increase in the super guarantee from 9 to 12% really means that worker’s receive a deferred wage increase. And they are better off overall because they pay less tax on the increased portion of their income that is superannuation.

And Australians are no stranger to saving. Since the global financial crisis we have witnessed the emergence of the cautious consumer.  Australians were saving 3.7 percent of their household income in 2007/08 compared to at least 9 percent every year following the GFC.  So gradually mandating quarter or half percent increases in savings over the next 7 years when this is happening already shows public policy is running with the breeze of Australian behaviour, not against it.

Our superannuation reforms also abolish the current superannuation guarantee age limit.  From 1 July 2013 an additional 51,000 Australians aged 70 and over will receive the benefits of superannuation guarantee if they continue working.  We are a Government against age discrimination and firmly believe superannuation should be for all.   We want to encourage more mature age workers to stay on in the workforce and help our national productivity.

We are also improving superannuation governance, transparency and accountability through MySuper, Superstream and the Future of Financial Advice reforms.  All these policies are part of a global package that comprehensively strengthens our retirement savings and wealth management system.

Increasing superannuation is good for Australia.  It is not paid for by the Government.  But to govern is to choose – and our policy choice is to build Australia’s retirement savings and to account for the costs to the budget bottom line in doing so.  That is why the mining tax is responsible, sensible and future focused. 

This is also why the Coalition’s opposition to the mining tax and increasing superannuation is economically and politically irresponsible.  We want Australians who work hard their whole life to not retire poor.  I just wish these reforms had occurred 40 years ago to truly help our current retirees.