Bill Shorten (Maribyrnong, Australian Labor Party, Assistant Treasurer) Share this | Link to this | Hansard source

by leave—The Gillard government believes Australians should achieve a more comfortable and secure life when they retire. There is little benefit in working hard, but retiring poor. In mid 2011, two decades after compulsory supera­nnuation was introduced, superan­nuation stands as one of Australian Labor’s most enduring and far-sighted reforms. Superannuation works—it is already deliver­ing retirement security to millions of Australians—and increasing the compulsory contribution to 12 per cent will only make the story better.

The Gillard government has a vision for Australians to live long lives full of comfort and meaning. We are living longer than ever before, but without better superannuation savings many Australians may have insuff­icient income security in retirement. But if we invest we will make the nation’s future stronger, creating a massive national wealth pool.

The story of superannuation is a strong story. Between July 1992 and June 2003 when the superannuation guarantee was lifted to nine per cent:

I do not attribute all these outcomes to superannuation solely, but the numbers demonstrate increasing compulsory superannuation works with economic progress.

I would not be exaggerating, however, if I said that the introduction of the superannuation guarantee back in 1992 generated fearmongering amongst those opposed to compulsory retirement savings. The then member for Bradfield, the opposition’s spokesperson on superannuation in 1992, described the Labor government policy as 'absolutely abhorrent'. He claimed that 'hundreds of thousands of workers are going to lose their jobs' and predicted the reforms 'would cause even higher unemployment, reduce real wages, add to inflation and do nothing to provide genuine retirement income for the majority of Australians'. The then member for O’Connor described superannuation as 'stupid and dishonest'. Senator Alston told the other place that 'imposing compulsory superan­nuation on individuals does not increase total savings'. The then member for Curtin said that 'the superannuation guarantee levy will have a disastrous impact on business'. I remind the House today of these 1992 statements to simply remind all of us how wrong it would be to let prejudice, vagrant opinion unsupported by visible facts, distract us from the important task of building domestic savings to support economic growth. It should be noted that the economic arguments advanced against the superann­uation guarantee in the early 1990s—whether it was that business could not afford it; that it would be better in workers’ pay; or that it will increase unemployment—were subsequently disproved and discredited. Yet these are exactly the same arguments being trotted out by the naysayers today.

In 2011 it is time for the Gillard government to continue improving the retire­ment savings of working Australian people. Personal security is a priority—nine per cent superannuation is not enough to maintain the lifestyle most of us take for granted, especially women who have breaks in their career.

With the Gillard government's commitment to take the superannuation guarantee from nine to 12 per cent, we are strengthening superannuation. And we are strengthening the chances of Australians who have worked hard and paid taxes being able to retire with a measure of decent comfort.

With our commitment to increase the concessional caps for over-50-year-olds from $25,000 to $50,000 when balances are below $500,000, we are strengthening superan­nuation.

With our commitment to make the system fairer by giving people the ability to have first time breaches of excess contributions up to $10,000 assessed at their marginal rate of tax, rather than incurring a potentially higher rate of excess contributions tax, we are strengthening superannuation.

With our commitment to make superannuation concessions fairer for 3.5 million low-income workers who currently get little or no concession on their super savings, we are strengthening superan­nuation. And we are ensuring that superannuation is not just for the well off.

With our commitment to raise the superannuation guarantee age limit from 70 to 75 from 1 July 2013, coinciding with the increase in the rate of the superannuation guarantee, we are strengthening superannu­ation.

These legislative commitments deserve the full support of this House and this parliament.

As the responsible minister I believe the inadequacy of the current nine per cent superannuation warrants greater attention in the broader national economic debate. Financial experts generally believe the average worker will need at least 60 to 65 per cent of pre-retirement income to live comfortably. The OECD recommends 70 per cent. At present only 35 in every 100 Australians are likely to achieve their desired standard of living in retirement. Despite having the fourth largest pool of funds under management in the world, in terms of adequacy, our retirement savings system ranks only seventh on the global comparison.

And with mortality improvements, the average 65-year-old man will now live beyond the age of 85. And the chance of one member of a couple reaching 100 is astonishingly high. So an increasing number of Australian retirees are going to outlive even substantial sums sets aside for retirement. Adequate retirement is even a bigger problem for women, given that women on average earn 34.8 per cent less than men.

Today, the average retirement lump sum of someone aged between 60 and 65 is $245,000 for men and $170,000 for women. By 2036, those numbers will lift to $485,000 for men and $345,000 for women, and members will note that this means women’s superannuation actually doubles between now and then. But a significant part of this forecast growth in retirement balances is attributed to the Gillard government’s proposed reforms of the minimum mand­atory 12 per cent superannuation guarantee and SuperStream’s efficiencies.

This is why the minerals resource rent tax is so important to our nation’s future. It will pay for the tax concessional treatment of the additional three per cent superannuation guarantee—because workers' retirement contributions are taxed at 15 per cent instead of their higher marginal personal income tax rate.

Private sector research demonstrates that a couple in life after work need about $54,000 per year to live comfortably. I am not satisfied the status quo of nine per cent will deliver a sufficient reward for decades in the workforce. For an individual it is around $23,000 a year including the aged pension entitlement. The average current retirement balance from AustralianSuper, I am advised, is about $43,000. If retirees try to live at the aforementioned adequacy standard their superannuation will be exhausted in just three or four years. If a couple stick to a modest lifestyle they have an 80 per cent chance of it lasting their lifetime as an allocated pension. For those who have bigger balances or those with more time in the workforce contributing nine per cent who may ultimately achieve balances of $150,000 or $300,000 the outlook is still not greatly better.

Retiring at 65 the retiree with $150,000 can only expect to be able to live com­fortably until they are 71 and the retiree with $300,000 until they are 80 years old. That is still well short of a retiree's life expectancy. Because the undeniable fact is that we are living longer. The number of Australians over 65 years of age is projected to grow from three million in 2010 to 8.1 million by 2050. During the same period, the ratio of working-age Australians to those aged over 65 will decrease from 50 people for every 10 today, to just 27 working people for every 10 by 2020.

It used to be the case that we would leave school in our teens, work for 40 to 50 years and then live in retirement for about 10 years. Now we might be in education until 20 to 25 years of age, work for about 35 years, and then we have a post-work life of say 20 or even 30 years.

What it means to retire has been fundamentally redefined with the gift of longer, healthier life. Longer life is the great gift from 20th century Australia to 21st century Australia. The legacy of health and medical science discoveries combined with living in the lucky country. This longer life after work is why the Gillard government’s superannuation reforms are so very impor­tant to addressing the retirement savings adequacy gap that so many Australians are facing today.

Whilst women live longer than men, their super balances are in fact on average 30 per cent lower than men’s. This is a serious challenge to their financial independence. Currently, around 2.1 million Australian women get no tax benefit from contributing to superannuation, due to the 15 per cent superannuation contribution tax being at or below their income tax rate.

The Gillard government is therefore acting on the recommendation of the Australia's Future Tax System (AFTS) report which said that superannuation tax concessions be distributed more equitably. From 1 July 2012, the government will make the system fairer by ensuring no tax is paid on the nine per cent superannuation guarantee contributions for Australians earning up to $37,000 and that the money is instead directed into their superannuation. Sixty per cent of the beneficiaries of this policy are women. The superannuation savings of 2.1 million women earning less than $37,000 will be boosted by $550 million in 2012-13 alone. The combined impact of our reforms means the superannuation savings of 3½ million low-income earners, both men or women, will be boosted by a total of $830 million per annum in 2012-13. So a 30-year-old woman on average wages (around $60,000) will have an extra $108,000 in retirement savings, providing her with an extra $2,900 to spend each year of her retirement. If that 30-year-old women undertakes some part-time work and spends time out of the workforce, she will still have an extra $78,000 in retirement savings, amounting to an extra $1,800 to spend in each year of her retirement.

Data today does show that around 30 per cent of the workforce receives more than nine per cent superannuation already. This includes workers and employees at companies as diverse as Linfox and National Australia Bank. In fact, National Australia Bank has been paying its staff over nine per cent for about a decade.

All members of this parliament will receive either the very generous defined benefit if they were fortunate enough to be elected before 2004 or receive 15 per cent superannuation if elected after 2004. So how can it possibly be reasonable or consistent for this parliament to say that one thing is acceptable for the members of this parliament but vote against better conditions for the rest of Australia’s workforce?

The benefits of increased superannuation are not only to the individual, but to the whole of the nation that we love. As of March 2011 Australia enjoys well over $1.36 trillion invested in superannuation. This figure is estimated to grow to $6.2 trillion by 2036, including $550 billion directly from the government's superannuation reforms which I have outlined. This massive, rapidly-growing pool of funds means that more money is available to be invested in the broader economy. A proportion of this growing pool of funds will be allocated to the domestic economy, and will continue to be a great enabler of Australian enterprise.

Our multitrillion dollar savings pool is a terrific business enabler because it means that Australian companies have access to a large domestic savings pool. It should not be overlooked that during the global financial crisis approximately 15 per cent of the globe's capital raisings was undertaken here in Australia—largely due to our trillion-dollar nest egg.

Our already strong degree of financial self-reliance is one of the reasons why Australia weathered the global financial crisis so well. And the post global financial crisis growth of funds under management continues to drive a significant and sophisticated wealth management industry in Australia.

Our superannuation reforms will deliver a great good to Australians upon their retirement and the Australian economy more generally. The great good of a comfortable postwork life. The great good of seeing Australia become even better at financial services. The great good of more capital becoming available for nation-building infrastructure. The great good of low inflation, high savings and a more secure future.

The Gillard government understands the forces of economic transition that we must manage shrewdly to secure the next wave of national prosperity. That the ageing of our population is one of these forces is undeniable and the need for greater retirement savings is therefore irresistible. The Gillard government is acting for the long term and we are strategically positioning the nation for the challenges and opportunities of the future—be it climate change, the National Broadband Network or stronger superannuation. Australians need not fear the future—we should be optimistic.

The goal of lifetime income security for Australians is a worthy mission for all those of the parliament. I urge the House to consider these matters carefully over the coming winter recess, for when the parliament returns in the second half of this year there is important work for us to do to secure and strengthen Australia’s future.

I ask leave of the House to move a motion to enable the member for North Sydney to speak for 15 minutes.

Leave granted.

With some trepidation, I move:

That so much of the standing and sessional orders be suspended as would prevent Mr Hockey speaking in reply to the ministerial statement for a period not exceeding 15 minutes.

Question agreed to.

Joe Hockey (North Sydney, Liberal Party, Shadow Treasurer) Share this | Link to this | Hansard source

Despite the chief executive of a significant financial institution describing me as Hugo Chavez, I will speak for only 15 minutes.

The Assistant Treasurer has sought to portray the coalition as antisuperannuation and antisavings. I assure him that we are not. The coalition believes there is a pressing need to increase national savings. As a nation we need to save more to meet our burgeoning requirements for more infrastructure. We need to save more to provide for the longer retirements that we can all now expect to enjoy, as the Assistant Treasurer referred to. But we also need to save more to become less reliant on international capital markets.

The coalition supports Australia's three-pillar retirement system comprising an aged pension, a compulsory system of retirement savings through superannuation and incentives for voluntary saving. The coalition wants to encourage as many Australians as possible to plan and save for their retirement and to take full advantage of the benefits the superannuation system offers. We want to see a superannuation system which is as efficient, as transparent and as competitive as possible so as to maximise retirement incomes for all superannuants.

That is why the coalition will continue to support any changes making our superannuation system more efficient, transparent and competitive and which deliver better value to superannuants across Australia. In particular, sensible changes to streamline super fund operations and to strengthen corporate governance arrange­ments should be progressed by government as a matter of priority.

Where we differ from the government is in the way that increased national saving can be achieved. The very first step should be for the government to lead by example and get its fiscal house in order. This year the government is dissaving to the tune of $49.4 billion and next year—a heroic assumption, but nevertheless reported in the budget papers—$22.6 billion. Net debt will continue to rise and will peak at an estimated $107 billion next year, the highest peacetime debt in dollars in our history. This is a disturbing outcome at a time when Australia is enjoying the strongest terms of trade in around 150 years. Now is the time when the government should be putting money aside, paying down debt and preparing for a rainy day.

The coalition is opposed to some, but not all, of the government's proposals on superannuation. This is not because we do not believe in superannuation. Rather, many of the government's measures are funded from the proceeds of the mining tax. The coalition does not believe that saddling our most productive business sector with another tax is in the best interests of the country. It does not help our country to compete on a global scale by putting lead in the saddlebags of our fastest horse.

The Assistant Treasurer has outlined various elements of the government's policy on superannuation. The government has committed to increasing the superannuation guarantee from nine per cent to 12 per cent. What they have not been upfront about is who is going to pay. The additional superannuation which workers will accrue is not intended to be a wage rise. The total remuneration received by workers will not increase. Rather, the intention is that workers should accept lower wages growth in return for increased superannuation. Workers will have less spending power today in return for greater spending power in the future. Now is not the time to be eroding the growth in workers' take-home pay. Australians are already under considerable financial stress from the rising cost of living, rising interest rates and additional government taxes.

The Melbourne Institute survey shows that household financial conditions fell by nearly one quarter in June to the lowest level since the survey began in March 2001. The Westpac-Melbourne Institute Consumer Sentiment Index shows consumer confidence has fallen to the lowest level since the global financial crisis. It is no wonder that Aust­ralians are cocooning—reducing spending and increasing savings. The household savings ratio for the March 2011 quarter rose to 11.5 per cent—again, a level not seen since the global financial crisis. The 11.5 per cent ratio means that households are now saving more than a tenth of their disposable income. Australians cannot afford another hit to their take-home pay.

The Henry tax review argued against an increase in the superannuation guarantee. Remember, this was chaired by the man who was then the Secretary of the Treasury and is now, rather extraordinarily, the private adviser to the Prime Minister. The review's Report on strategic issues for the retirement income system specifically recommended not increasing the superannuation guarantee from nine per cent to 12 per cent but that the superannuation guarantee rate should remain at nine per cent. It states:

This strikes an appropriate balance for most individuals between their consumption opportunities during their working life and compulsory saving for retirement.

The review suggested there were better ways to support retirement savings:

The Panel considers that more can be done through preservation and other rules to ensure that the 9 per cent contribution rate produces an adequate retirement income for greater numbers of people, and its other recommendations are made partly for this purpose.

The Henry review also made the point that Labor's plan to increase compulsory super beyond nine per cent would most heavily impact on low- and middle-income earners. These are, of course, Labor's forgotten families, already doing it tough and dealing with increasing cost-of-living pressures. There is Labor's flood tax and obviously the carbon tax, if it comes through this place, and they will probably be indirectly affected by the mining tax.

There is another problem with Labor's approach. The government is creating a structural hole in the budget. The spending—that is, the tax forgone—from the increase in the superannuation guarantee will rise through time. However, the revenue from the mining tax is highly variable. The government's forecasts of revenue over the forward estimates are based on commodity prices and the terms of trade remaining at historically high levels. Inevitably, over the longer term, commodity prices will fall and revenues will decline. This combination of volatile revenues and rising commitments will add to the fragility of the budget. It will add to the cyclic movements in the budget bottom line. It is another example of the poor fiscal practice and inexperience of this government.

The government has announced that it will raise the superannuation guarantee age limit from 70 to 75, with effect from 1 July 2013. The coalition welcomes this change. We wish the government had gone further. The coalition's shadow minister for seniors, Bronwyn Bishop, the member for Mackellar, introduced a bill to parliament on 28 February 2011 which sought to amend the Superannuation Guarantee (Administration) Act to abolish the age limit on the payment of the superannuation guarantee charge. This would provide for all employees to receive superannuation guarantee contributions, no matter what their age. The coalition's current position is that it does not see it necessary to have any age limit at all. The current age limit set at 70 unfairly discriminates against older workers and, in effect, means they take a pay cut at age 70 through the loss of compulsory superannuation. At this point, some may be discouraged and leave the workforce. We should be encouraging mature Australians to work for as long as they want. We cannot afford to prematurely lose their hard won wisdom and skills.

The Assistant Treasurer wants the government to be given credit for doubling the concessional contribution cap from $25,000 to $50,000 for over-50-year-olds with superannuation balances below $500,000. However, what the Assistant Treasurer fails to mention is that this policy is simply unwinding in part the government's earlier decision in the 2009-10 budget to halve the contribution cap. That was ill-considered policy—in keeping with a number of other initiatives from the government. It was done at a time when many working Australians approaching retirement age had been dealt a hard blow by the global financial crisis. Their accumulated retirement savings had fallen sharply in value as stock markets crashed in Australia and around the world. What Australians needed was the capacity to rebuild their savings. Instead, this government chose to make it harder for them to contribute to superannuation.

Labor has changed the rules regarding concessional and non-concessional caps in each of the last three budgets. These changes have, overall, been designed to raise additional revenue to pay for this government's wasteful ways. In effect, the government has been reducing the saving capacity of ordinary Australians so that it does not have to cut its own bloated spending. It is not good policy. The frequent changes have created great uncertainty and impacted confidence in the superannuation system as a retirement savings vehicle.

These frequent changes and uncertainty have been a factor in many more Australians being caught by excess contributions tax. The Assistant Treasurer has noted a concession on the excess contributions tax, allowing people with first-time breaches of excess contributions up to $10,000 to be assessed at their marginal rate of tax rather than incurring a potentially higher rate of excess tax. This is welcome. Treasury estimates that more than 65,000 Australians are likely to breach their concessional superannuation contribution cap during the 2009-10 financial year, up from 28,000 the previous year. The government is taxing those excess contributions at 46.5 per cent and will collect around $140 million in additional tax revenue from these accidental breaches.

There are a lot of annoyed hardworking Australians who have been doing the right thing by providing for their own retirement but who have now been stung by the frequent and confusing changes this government has made to concessional contribution caps. Excess contributions tax on superannuation contributions has been a particularly hot issue in my electorate of North Sydney. I have been advised that some superannuants who have unintentionally breached the non-concessional contribution cap rules by between just $125 and $5,000 each are now facing tax bills of around $70,000 each. This hardly seems equitable in the light of a government that has continuously shifted the goalposts for the past three financial years. It has made compliance and monitoring difficult if not impossible for working Australians, and all these hardworking Australians will not be assisted by the government's latest changes.

In conclusion, the coalition is fully supportive of the superannuation system as one element of retirement savings. When last in government, the coalition introduced reforms to enable Australians to choose their own superannuation fund. We oversaw payments and incentives that encouraged Australians, especially Australians on lower to middle incomes, to make additional contributions to their retirement nest egg. The coalition will continue to support measures that encourage Australians to provide for their future.