Daniel Mulino (Fraser, Australian Labor Party) Share this | Hansard source

Poverty, vulnerability and uncertainty have been hallmarks of old age for many people throughout human history, and societies have grappled with how to help people navigate these challenges. For much of human history the main mechanism by which older people dealt with these risks was through the family. That worked some of the time, but it was patchy.

In the 19th century, in a number of countries, academics, public policymakers and government officials started to explore whether there were ways in which something better, more stable and more comprehensive could be constructed. One example: in the 1890s, Charles Booth undertook a major survey of poverty of elderly people in Victorian England. At around the same time, in 1899, a departmental committee on the aged deserving poor also undertook a rigorous statistical analysis of those living in poverty and those living with insecurity in Victorian England. They found that a very significant number of older people relied on charity, on their local parish or on the whims of relatives, or some combination of these.

In some parts of England at the time, 23 per cent, or just a quarter of people, relied solely on earnings. Many people relied on other forms of assistance. While that reflected families and communities coming together, as I mentioned earlier, it put many people in a situation where they were vulnerable and where they were insecure, and that led to a number of countries exploring whether it was appropriate for the government to create a safety net.

We saw in Germany in the 1890s and in parts of Scandinavia at around the same time safety nets created, Bismarck's Germany being the one with the highest profile—a basic pension to support those above a certain age. These were important schemes. They were very fiscally modest but they were an important step forward. They provided a much greater level of certainty for people who may not have had family or people who perhaps had suffered other shocks in their lives, like bad health outcomes. Many other countries followed suit. Australia wasn't the very first, but it was one of the first movers. In Australia, legislation was passed in 1908 to provide for an age pension. This was one of the key planks of our social welfare state, and I believe it remains to this day one of the key antipoverty measures, one of the key civilising institutions in our society.

If one goes back to that time in 1909 and looks at that scheme, it's telling. People on the age pension in 1909 received 10 shillings. There were just 34,000 people on the age pension. Each of those received something in the order of 12 per cent of average male earnings. I think what's particularly telling is that the retirement age at the time for men was 65 but life expectancy was 55. So people were getting this benefit but the average life expectancy was materially below the age at which it kicked in. That's obviously totally different to the situation we find today. Women's retirement age was 60 but their life expectancy was 59, a smaller gap but, nonetheless, life expectancy below the official retirement age. What we saw was that, as in other countries in Western Europe and the US a couple of decades later, the age pension was introduced but didn't cost a great deal, partly because the replacement rate wasn't particularly high but also because people weren't living that long.

What we've seen since then is that life expectancy has increased fairly continuously over the last 100 years—a wonderful thing for people; a reflection of healthier lifestyles, more effective health services and other things. We're also having fewer kids. So what we find is that, over the last century, we have a retirement income system, an age pension, that is costing more and more relative to our taxpayer base. We saw superannuation gradually being introduced in the post-war era to supplement the age pension. In Australia, this was a critical means by which we as a country, firstly, took pressure off the age pension and, secondly, provided assistance to people to save for themselves and provide themselves with more autonomy and more agency.

If we go back to 1991 and the introduction of some of the absolutely key pieces of legislation that, to this day, continue to underpin our superannuation system, Paul Keating said, 'I wish to propose the creation of a comprehensive national retirement income system.' At that time, he was making it clear that superannuation was to complement, to add to, the age pension. He talked about the fact that the superannuation legislation that he was bringing in in 1991 would involve not just broader coverage but also a move over time to a 12 per cent contribution rate, for greater adequacy in terms of people saving for themselves, given longer life expectancy. When Keating spoke to students at the Australian Graduate School of Management on 25 July 1991, he said:

Today there are five working age Australians to every Australian over 65. In forty years—

or 2031—

there will be only three of working age to each over 65.

Way back in 1991 he saw the demographic pressures that our age pension scheme would come under. That was one of the key motivations for those seminal and important pieces of legislation back in 1991.

If we look at some of the statements from the Treasurer at the time, in 1992 John Dawkins made the observation when introducing key legislation that, in 1983, 40 per cent of the workforce had some super cover—although, even there, it was patchy in terms of how much it provided. By 1991 that proportion had risen to 72 per cent, and it's far higher today thanks to the legislation that they both championed at the time.

I think it's critical to go back to that period, to 1991, because today's bill is a very important piece of reform that is helping to solidify that second key step. If the age pension back in 1909 was the first step to help our society better deal with vulnerability, uncertainty and poverty in old age, by providing a basic safety net for everybody; and if superannuation as broadened and deepened in 1991 was the second complimentary key step, it's critical to think deeply about what it is that the system is there to achieve.

In his second reading speech for the Superannuation Guarantee (Administration) Bill 1992, John Dawkins spoke in relation to expanding coverage. He said, 'There is also a need to increase the average level of superannuation savings for each individual if these savings are to provide for an adequate level of retirement income.' So it's adequacy of income in retirement, saving at a sufficient rate to reflect the fact that people are living longer and some people are retiring earlier.

John Dawkins in that same speech said, 'It will lay the foundation for income security and higher standards of living in retirement for future generations of retirees.' Higher standards of living in retirement: that's what we are aiming for. In the face of demographic pressures, we're trying to move away from a system where all too many retirees live in poverty, live with insecurity, live worried about whether their savings will last them through their lives, live worried that they will be at the whim of others for their income, live worried about what a negative shock such as a bad health outcome will do to them. This will provide both income security and high standards of living.

Again, Keating, from that same year in parliament, said that for him a decent standard of living in retirement lay at the heart the superannuation system. In his words: 'It is the difference between a full, active life and a life governed by budgetary exigencies the vagueness of politics.' Superannuation was to provide people with a decent, adequate, secure standard of living in retirement. Again in Keating's words: 'The difference of being able to enjoy the free time at the end of one's working life and wanting the means to enjoy it.'

As opposed to 1909, when some people lived beyond 65 and enjoyed years in retirement, but not that many, now we have a situation, fortunately, where the vast majority live past 65, and many for decades past it. That's why superannuation is absolutely critical if we are going to provide that dignity.

It's important to go back to that period, to 1991 and 1992, with the architects of the scheme to look at the core purpose they saw this scheme providing and, I believe, the purpose that it has actually lived to provide in its maturity. This bill embeds that purpose into the superannuation system. The purpose in this bill that we are discussing today is to preserve savings to deliver income for a dignified retirement, alongside government support, in an equitable and sustainable way. Those words go right back into 1991. They could have come out of the second reading speeches of Treasurer Dawkins or PM Keating. They could have come out of the commentary at that time. That is why today's bill is so important: because a dignified retirement and security and sustainable and equitable supports for people remain absolutely at the heart. This is a simple but cogent and coherent purpose that is contained in this bill.

This bill also does not just define it; it says that future changes to the superannuation system must support that objective rather than undermining it. That means that half baked or populist measures that will undermine the system, such as measures that undermine the potential for people to keep money in their accounts over long periods of time, schemes that attack preservation, will need to come into this place, and the onus will be on people proposing such schemes to justify how they support the system, how they support the purpose of superannuation rather than undermining it. In my opinion they will have a very hard time doing so. So clearly defining the objective will make it that much harder for people to bring forward schemes that have a very short-term objective, a very political objective, but that undermine the scheme. It is absolutely critical for our retirees that that protection is there.

I will finish on the point that, again, those architects back in 1991 had it so right. They talked about the fact that you need a public safety net. You need voluntary savings and then you need mandatory savings, which is what the superannuation scheme is. It's those three key pillars. When you go back to the mid-1990s, the World Bank in its seminal report, Averting the old-age crisis, it was built around those three pillars. So it almost could have been structured around the second reading speeches I just read from. It's this ability to provide risk-management at the individual level, by having a safety net, providing people with management against longevity risk, with protection against inflation risk and with protection against other shocks in their lives, like health outcomes. The age pension is still very good at providing individuals with that risk protection. But the mandatory superannuation system is very good at providing people with protection against an aging society. It's intergenerational, in the sense that it's helping individuals to save for themselves at a future time when there will be fewer taxpayers to provide for them. And it's the fact that we have a retirement income system with all of these pillars working together. Today's bill is critical for that, because the purpose of that third pillar—the superannuation system; the mandated savings—which is to provide adequacy and sustainability and equity in people's retirement income, is absolutely critical.

I'll just go back to the words that were spoken in that debate, back when these key bills were introduced: that, when the superannuation system works well and when people are not forced to take away from today to support themselves today at the expense of tomorrow, and when preservation is protected and when people are contributing at a suitable rate, then, in the words of those wise people back in 1991, our superannuation can help to provide 'the difference between being able to enjoy the free time at the end of one's working life and wanting the means to enjoy it.'

Our superannuation scheme has fulfilled so much of the promise that it held back in 1991, and today we're strengthening its ability to continue to do so in the future.

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