Craig Emerson (Rankin, Australian Labor Party) Share this | Hansard source

I second the amendment. Labor supports the Superannuation Legislation Amendment (Trustee Board and Other Measures) Bill 2006 because it involves a modest amount of streamlining and simplification and that of itself is a worthy objective. It involves no cost to the revenue; therefore, on that basis it makes sense to establish a single board overseeing the various superannuation acts governing public servants. That is why Labor supports it. I also support very strongly the second reading amendment moved by my colleague the member for Hunter, and I want to dwell on the content of that amendment in my remarks tonight.

The entire modern superannuation system of Australia was developed by former Treasurer Paul Keating—a tribute to him and his farsightedness in ensuring that there were reasonable retirement income prospects for working Australians. Up until that time superannuation had been the province of wealthy Australians, whereas working Australians on lower incomes did not look forward to the prospect of a reasonable retirement income. Mr Keating, as the Treasurer, set the ball rolling by introducing a compulsory superannuation scheme through the superannuation guarantee arrangements.

He had the foresight to understand what was confirmed in 2002 by the present Treasurer in the Intergenerational reportthat is, we do have a problem with the ageing population. In the true Labor spirit of encouraging self-reliance and self-provision, former Treasurer Paul Keating knew that something needed to be done and that is why he created superannuation for working Australians. In so doing, he created a world-leading retirement incomes policy, where there would be a combination of superannuation and, for all those who did not have adequate retirement incomes, a part or full age pension.

This was a far-reaching reform that has put Australia in a very good position. If it had not occurred then the alarm bells that were ringing in 2002 in the Intergenerational report would have been positively deafening because, even with Paul Keating’s far-sighted reforms, there are genuine financial problems associated with the ageing population and there are problems with the budget. Indeed, the Intergenerational report projects that, on the assumption that tax rates are unchanged, there will be an increase in the fiscal deficit equal to five per cent of GDP. That is a very large amount of money, something in the order of $60 billion—something about which all Australians should be concerned and something about which we as parliamentarians need to anticipate and to put in measures to ensure that that very bad scenario does not unfold in Australia.

When Treasurer Keating introduced these reforms you would have thought and hoped that a coalition in opposition that paraded itself as the champion of self-reliance and individual liberties would have supported the spreading of superannuation through the workforce but, sadly, it opposed those superannuation measures with extreme vigour. It did everything it possibly could to ensure that working Australians did not enjoy the benefits of the superannuation guarantee.

This brings me to the often heard assertion in this parliament that, when in opposition, the coalition supported the reform program of the Hawke and Keating governments. At best, that is a massive overstatement. It is well known now—and confirmed by the Productivity Commission, the OECD, the International Monetary Fund, the Secretary of the Department of the Treasury—that much of the prosperity that Australia enjoys now was a consequence of the reform program of the Hawke and Keating governments. That reform program was not, contrary to assertions by the Prime Minister, widely supported by the coalition, then in opposition.

Central to that reform program was the introduction of an assets test on the age pension in 1984. Mr Peacock was the Leader of the Opposition at that time, but the coalition ran a very strong campaign against the assets testing of the pension. I note in the discussion paper released on budget night that there is a proposal to further ease the assets test on the pension. Access Economics has in the media today estimated that most of the $6.2 billion cost of the changes over the next four years in retirement incomes is in fact attributable to the easing of the assets test on pensions. So the coalition has been pretty consistent on this and obviously believes that the pension should be universally available—yet this is a political party that parades itself as the champion of self-reliance and self-provision.

The coalition’s opposition to Labor’s reform program did not stop there. The coalition opposed many of the measures introduced by the incoming Labor government to close down the notorious bottom of the harbour schemes. It also opposed the major tax reform program of 1985, which included a fringe benefits tax, a capital gains tax and the nondeductibility of entertainment expenses—all of which in fact were used to broaden the income tax base and to lower the marginal rates. I notice the member for Wentworth is at the table today—certainly a strong advocate of broadening the income tax base to lower the marginal rates of tax—but, while the coalition talks the talk of tax reform, it was Labor in government that walked the walk on tax reform and effected the biggest cuts in marginal rates of income tax in the postwar period. If you look at the history of the reforms to the tax system, Madam Deputy Speaker, you will find that the cuts in the marginal rates of income tax were actually made by Labor governments. Ironically, the party that says it is the party of tax reform has increased marginal rates of income tax, eroded the income tax base along the way and jiggled the thresholds ever so slightly.

It was not only the fringe benefits tax, capital gains tax and non-deductibility of entertainment expenses that the coalition opposed but also the petroleum resource rent tax, a tax that will be the subject of debate later this week. Thank goodness we have a petroleum resource rent tax: we have a resources boom and the PRRT, which I was able to assist in designing, collects for the community a reasonable share of the benefits of that resources boom as it applies to the petroleum industry. But, true to form, the coalition government opposed that.

Where am I leading with this? I am leading to this point: one of the next great reforms that the coalition opposed was the provision of superannuation and a reasonable retirement income to working Australians. The coalition was, as I said earlier, vigorous in its opposition. Of course, the coalition knew that this was an important reform and thought, for political opportunism, it should nevertheless oppose it. I have a document titled Super for all—security and flexibility in retirement: the federal coalition’s superannuation and retirement income policy, dated 19 February 1996. It was one of these rolled gold ironclad promises—a core promise, I am sure—because here it is in black and white on page 6:

A Coalition Government:

will provide in full the funds earmarked in the 1995--96 Budget to match compulsory employee contributions according to the proposed schedule;

will deliver this Government contribution into super-annuation or like savings;

reserves the right to vary the mechanism for delivering this contribution so as to provide the most effective and equitable delivery of the funds.

So here we have the coalition coming into government saying, ‘We will preserve and protect the amount of money that Labor has set aside for increasing superannuation contributions through the superannuation guarantee.’ It said it might look at different ways of making sure that those funds flowed to people’s retirement incomes but it would keep that amount. It goes on to say:

The Coalition will inherit both Labor’s proposal and the expectation that has gone with it. We will deliver the full benefit of the proposed contribution but will do so in a manner that is both efficient and equitable.

The coalition took government in 1996 and then in the 1997 budget it cancelled the extra contribution which would have flowed into the accounts of working Australians and which would thereby have increased the provision for retirement incomes to 12 per cent from nine per cent. It did not preserve those funds. It did not do that at all. Instead it introduced the infamous savings rebate that lasted all of six weeks. When the Prime Minister was asked in the parliament whether he would take the savings bonus, he declared he would not and the whole thing went down the tube within six weeks—and with that came the breaking of the promise that was made in 1996 and the assurance that retirement savings of working Australians would be an adequate 12 per cent of incomes.

Fast forward to 2006. We have another major change in the superannuation arrangements. It is a complex document and detail is still missing. I want to spend some time now making some observations about the discussion paper that was released on budget night. The Treasurer certainly gave the impression on budget night that this was a set of policies. It is not. It is a discussion paper. But, when you stop to think for a moment it means this: that anyone over the age of 60 in the future need not pay income tax. The reason I say that is that anyone over the age of 60 will be able to take superannuation benefits as a lump sum or put it into a savings vehicle, and the earnings on that savings vehicle will be tax exempt. So they can take the lump sum tax free or they can put that money into this vehicle and any earnings on that will be tax exempt. Add to that the senior Australian tax offset, which is around $20,000 for an individual and $40,000 for a couple, and you would be a mug to be paying income tax if you are over the age of 60.

When we assess the merits of this proposal, let us apply the standard tests. The first test in assessing the merits of a change in taxation arrangements is simplicity. It passes that. It certainly is simple, and therefore, on that basis, the proposal has merit. But I have a way of simplifying the income tax system dramatically. Up until recent changes, the income tax act ran to 9,600 pages. There is a way of simplifying that: abolish income tax. This is effectively what the government has done in respect of superannuation for anyone over the age of 60. So abolishing a tax certainly passes the test of simplicity and gets a tick on that basis.

The second criterion would be revenue-raising capacity. We have taxes to raise revenue. As a result of the effective abolition of income tax for people over the age of 60, as appears to be the case outlined in this discussion paper, there will be a very substantial hole in the revenue. Taxation statistics have just been released for the year 2003-04 and they reveal that income tax collected from people over the age of 60 amounted then to almost $10 billion. So I pose this question: do these changes put a $10 billion hole in the income tax base? On the face of it, that appears to be the case.

If you put a $10 billion hole in the income tax base then we must ask the question: how will the hole be plugged? There are three ways. The first way to plug a $10 billion hole in the income tax base is to increase the income tax for those who still pay it—that is, working people up to the age of 60. I have done a simple calculation. For a taxpayer on $55,000 per annum, the average tax rate would have to rise from 25.2 per cent to 28.1 per cent. That is an increase of 2.9 percentage points and it equates to an increase in tax paid of—wait for it—11.5 per cent. What does that work out as in dollars per week? More than $30 a week. So, if you do poke a $10 billion hole in the income tax base and you say to the other people, who do pay tax, ‘You’ve got to pick up the bill,’ the bill for someone on $55,000 a year is more than $30 a week.

There are two other ways of plugging the hole. The second way is to withdraw services for people over the age of 60—or indeed for people under the age of 60. People over the age of 60 have become accustomed to having their aged care supported financially by the government of the day. They have been accustomed to receiving an age pension if their incomes are not so high as to preclude them from receiving the pension, and there is also health care. One or more of those would have to be curtailed in order to fund the $10 billion hole.

There is a third way. The third way is the GST. This is the orphan tax. The government of Australia, the Howard government, denies that it ever gave birth to this tax. It says it is not a Commonwealth tax. It is a Commonwealth tax. Ask the Statistician and ask the Auditor-General but do not ask the Howard government because it will deny that the GST is a Commonwealth tax. The third way of plugging a $10 billion hole is to increase the rate of GST or remove the food exemption—that would do the trick. We on the Labor side of politics would strongly oppose these sorts of measures: increasing the GST rate or removing the food exemption, withdrawing the age pension or services from people over the age of 60 who have retired and are on low incomes or increasing the income tax burden on working Australians. It is incumbent on the government, when it releases its final position paper on these superannuation changes, to inform the Australian people honestly as to which of those three options it favours in order to fund the big hole that it has poked in the income tax base.

The Intergenerational report was an important report and if we have a $10 billion hole now just imagine what that hole will look like as more and more wealthy baby boomers move into retirement. The first of those baby boomers, born in 1946, will reach the age of 60 this year, but we know that there is a huge surge of retiring baby boomers coming through the system and that that is what is causing the ageing of the population. I advise the House that at present around 18 per cent of Australians are over the age of 60 and that by 2041 that will have increased to more than 31 per cent, so the $10 billion hole must get bigger and the chickens must come home to roost. It is all very well for this government to release a policy which sounds terrific and simple but will it lead to those chickens coming home to roost and to a future government withdrawing services from or increasing tax rates on the poor? That is what the government has to answer, and it has to answer it soon. (Time expired)

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