In a video interview with Sky News, Labor backbencher Ed Husic lambasted the Morrison Government’s policy of allowing Australians in financial stress to access $20,000 of their superannuation savings, labelling it “highly irresponsible” and an attempt to drive an “ideological sword” through the superannuation system:
“This is going to have a huge impact on retirement incomes of those people [lower income earners] and limit the comfort in their later years… And quite frankly, I’ve had an absolute gutful with people on stronger incomes, or those people in business or in politics, driving an ideological sword… through people’s future incomes. It’s an absolute and utter disgrace”.
“The time it takes for poorer people to build up their super balances, to see them lost… [They] will be down a hundred thousand dollars by the time of retirement is just wrong”…
“Frankly some in the business community and some in politics just reckon people will go on to the pension and they will be looked after that way instead of using super, which is fiscally irresponsible because that will put a big bill on the nation down the track through the pension system, which super was designed to avoid”
“It limits people’s prosperity… It’s the height of irresponsibility really”.
I’ve had an “absolute gutful” with Labor Party MPs pretending they represent ordinary Australian workers, rather than their superannuation industry mates.
First, superannuation belongs to members. They should be able to access it in times of acute financial stress, like now.
Second, accessing superannuation will have minimal impact on a typical worker’s retirement income, according to the Grattan Institute:
Third, compulsory superannuation comes at the expense of lower wage growth. The Henry Tax Review, the Grattan Institute, the Reserve Bank of Australia, and Labor itself have all said so.
Yet Labor is firmly committed to lifting the superannuation guarantee from 9.5% currently to 12%. Thus, it explicitly supports lower wages for working Australians.
Fourth, Labor’s plan to lift the superannuation guarantee to 12% will unambiguously increase inequality in Australia. This is because the bulk of superannuation concessions flow to high income earners, according to the Australian Treasury:
As shown above, the top 1% of income earners will receive more than $700,000 in taxpayer contributions to their personal superannuation accounts over their working lives under the existing 9.5% superannuation guarantee. This dwarfs the $50,000 received by the bottom 10% of income earners.
Thus, Labor’s policy to raise the superannuation guarantee to 12% would make this imbalance even worse.
Fifth, Australia’s compulsory superannuation system is “fiscally irresponsible”. Because it lavishes higher income earners with the bulk of taxpayer concessions, superannuation costs the federal budget more than it saves in Aged Pension costs. The Grattan Institute, the Henry Tax Review, and actuarial firm Rice Warner are explicit on this point.
Therefore, lifting the superannuation guarantee to 12% would make the net drain on the federal budget even worse.
The massive financial drain from the compulsory superannuation system, which cost taxpayers $41 billion last year, also means that there are less funds available in the Budget to lift the Aged Pension.
Put another way, if the superannuation system was theoretically abolished, the Aged Pension could be lifted significantly without creating any net costs to the Budget. This would make the retirement system far more equitable and efficient, because high-income earners would no longer receive the lion’s share of taxpayer support and overall administration costs would be reduced.
Of course, Labor is against reining in compulsory superannuation because it would rob its superannuation industry mates of funds under management and the opportunity to earn fat fees.
Remember, Australians spend twice as much each year managing their superannuation than they do on electricity. But because these fees are hidden from view, few realise it.
Labor wants to fatten this gravy train by lifting the superannuation guarantee to 12%, despite the abundant evidence that doing so would rob the federal budget of funds, would rob workers of disposable income, and would worsen both inequality and efficiency.
The only winners would be Labor’s rent-seeking superannuation mates.
