Janet Albrechtsen has done a terrific job today tearing apart Paul Keating’s anti-working class calls to lift the superannuation guarantee (SG) to 12%, which would inevitably lower workers’ take-home wages and increase inequality:
The sell-out is laid bare every time the former prime minister enters an important public debate about modernising an ageing superannuation system he set up in 1992… it means defending a system that has created groups of rich rorters able to milk the system at the expense of others…
Thirty-five years later, this straight-talking change agent has become an emotive anti-reformer. More than anyone else, Keating would know that Australia’s superannuation system was never intended to create a tax nirvana for the old and the rich who can use super to build an inheritance haven for their children.
…the Callaghan Review into retirement income found that “most retirees die with the bulk of their wealth intact”. In other words, they are not drawing down capital to fund their retirement. Instead, they are using super as a tax planning system, living off generous tax concessions that superannuation attracts…
It is simply not fair that the rich pour as much money into super as they can to reap the rewards of generous tax concessions that allow them to pass on the bulk of their wealth to their children…
It is unfair because the biggest losers are working-class Australians who subsidise this largesse for the rich. So, it beggars belief that a boy from Bankstown, whose father was a boilermaker, is not outraged by the inequity that has emerged…
Labor’s dependence on money from industry super funds is perverting ALP policy-making. Policies that drive more money into super mean money for the ALP. Hence, Labor’s blind support for increased super guarantee levies that are extracted from workers’ wages at the expense of home ownership and wage growth. Not to mention Labor turning a blind eye to inherited wealth built on tax concessions in the superannuation system that disproportionately favour the already wealthy.
Keating’s determination to defend his legacy at the cost of much-needed reform is not just a blow to his credibility as one of the country’s great reformers. The former Labor prime minister is also emboldening Labor’s grand betrayal of ordinary Australians.
Brilliantly put. Compulsory superannuation has three fatal flaws.
First, the requirement that workers pay 9.5% of their wages into a superannuation account necessarily means that workers’ take-home pay is lower than it otherwise would be. This particularly damaging for lower-income workers that struggle to survive paycheck to paycheck.
Second, because of the 15% flat tax on most superannuation contributions/earnings, the tax benefits from superannuation are badly skewed toward higher income earners:
The above Australian Treasury chart illustrates this inequity clearly: taxpayers spend at least twice as much supporting the retirements of the top 1% of income earners as they spend on someone receiving the age pension.
Looking at superannuation specifically, the top 1% of income earners are projected by Treasury to receive more than $700,000 in superannuation concessions over their working lives, roughly 14-times the $50,000 of concessions received by the bottom 10% of income earners.
Thus, Australia’s superannuation system is effectively a giant tax dodge for the rich that entrenches inequality.
Finally, the budget cost of the largesse showered on higher income earners is enormous, with more than $40 billion of revenue lost via superannuation concessions every year. The situation is so bad that Australia’s compulsory superannuation system is projected to cost the federal budget far more than it saves in reduced aged pension costs:
So, what we have inherited is a superannuation system that is poorly targeted to those in genuine need, which reduces workers’ take home pay, costs the budget dearly, and entrenches inequality by encouraging tax avoidance and wealth accumulation by the rich.
Lifting the SG to 12% would only worsen these outcomes by creating a bigger rort.
If Paul Keating and Labor genuinely cared for the working class, they would argue for root-and-branch reform to the superannuation system.
