Super reform will win the election

The magnificent David Murray has ramped up pressure on Malcolm Turnbull to abandon the Abbottalyptic ban on super concession reform. From the AFR:

The current framework for superannuation tax concessions was “particularly harmful” to low income people, he said.

“In order to deliver value to the Australians in the superannuation system, policymakers will have to come to grips with the fact it doesn’t deliver the value it should, given the vast amount of money people are putting into it via contributions and as a taxpayers”.

He added, “Not only do those people with the lowest balances in the super system get no value from the tax concessions, but as taxpayers they are giving back into that system.”

As I wrote last week, this is low hanging fruit for reform. It already has near universal approval and the upside is material. Turnbull is on side, from mid 2014:

And the Henry Tax Review showed the sense in it.  The current Treasury head John Fraser, former head Martin Parkinson and the Productivity Commission are in favour of super concession reform. So are the RBA, BT head Brad Cooper, the Actuaries Institute, Grattan Institute, Super Australia, Business Council of Australia, Councils on the Ageing Australia, Australian Council of Social Service and the Australian Council of Trade Unions. If you can recall a more comprehensive cross section of Australian society and its lobbies you’d be doing well.

Blind Freddy can see that the superannuation system is unfair and in desperate need of reform. Concessions on contributions/earnings overwhelmingly benefit higher paid workers:

ScreenHunter_9042 Aug. 27 08.32

Accordingly, the amount of concessions received overwhelmingly flows to higher income earners:ScreenHunter_7126 Apr. 21 13.46

Meanwhile, superannuation concessions are costing the Budget many billions in lost revenue, and are projected to grow by a whopping 10.8% per annum between 2014-15 and 2017-18.

The politics of it are also favourable given it will immediately wash off the Abbottalyptic stain of “unfairness” that tainted the Coalition and offer a large dividend in Budget repair to the conservatives. The Greens are in favour and will back it in Senate. It outflanks Labor who are in favour of it.

The obviousness of all of this makes clear what a tin-eared idiot was the Abbottalypse. The only other person not in favour is Peter Costello, who created the current regime. But that, too, can be a political advantage. Turnbull need only open a discussion around the needed economic adjustment following the end of the mining boom. Costello largesse does not stand up under that framework and draws a line under the changing times.

Ideally, yes, such reform is undertaken as a broader package. But super reform has such universal support that a few months of discussion leading up to the May Budget is more than enough to till the earth for it. It can be put as a no-brainer first step in the post-mining boom reform process, immediately demarcating the Turnbull regime from those that came before at almost no political cost. The grey gougers aren’t going to vote Labor and it will endear many Labor voters to Turnbull by implicitly dragging the Government to the centre, as well as giving the Turnbull Government immediate reform kudos over the Abbottalypse and Labor in the lead up to what will be tougher battles on taxation, property, climate change, the GST and Federation after the election.

Begin the discussion now, Malcolm and put it in your May Budget. This reform alone can win the election.

Houses and Holes

David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the fouding publisher and global economy editor of The Diplomat, the Asia Pacific’s leading geo-politics and economics portal.

He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.

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