Speech on Superannuation Bills
22 Nov 2016
Dr CHALMERS (Rankin) (12:34): Thank you very much, Deputy Speaker, for the opportunity to speak on the Superannuation (Objective) Bill 2016 and cognate legislation and to support the amendment moved by the member for McMahon. Our superannuation system in Australia is the envy of the world, but it has some imperfections, and, whether it is the enviable bit or the imperfect bit, the public policy that we make in this building is part of that story. When we consider the imperfections in the system—the ones that we have a responsibility to carefully address in a considered way—there is a lot of work that needs to be done: firstly, when it comes to adequacy; when it comes to issues like the substantial gender gap that exists in superannuation; and also when it comes to issues around compliance, with something like 690,000 Australians not even getting paid the superannuation that they have earned and that they deserve, missing out on something like $2.6 billion a year—a big and growing problem in compliance in superannuation.
As I said, it is our responsibility to carefully address each of these challenges. Unfortunately, when you look at a lot of the measures implemented by those opposite, you see they are proving to be part of the problem and not part of the solution. I will give you a couple of examples. When it comes to adequacy, there were legislated increases to 12 per cent regarding the superannuation guarantee, but those opposite have frozen that three times now, so it is stuck at 9½ per cent. They flagged on the front page of a major newspaper earlier in the year that that freeze might be permanent, which would have devastating consequences for adequacy in superannuation. In relation to gender, one of the most important initiatives was the low-income super contribution—I will come back to that in a moment—being reinstated in this bill, with our support. But that was abolished by those opposite. Most of the people benefiting from the low-income super contribution were women, and that was a very disappointing decision taken by those opposite. When it comes to compliance and the 690,000 Australians I mentioned who are missing out on super, earlier this year those opposite tried to water down the penalties for those employers who do not pay their employees the superannuation that they have earned and they deserve.
In all of these ways, when we do have acknowledged challenges in our superannuation system and we do have a very substantial role to play in public policy out of this building, it is very disappointing to see that some of the government's measures have been attempted in some cases and put in place in other cases. When we think about the imperfections in the superannuation system, the main thing is the way that superannuation tax concessions are so horribly skewed towards those with the most money in the superannuation system. Even the financial system inquiry, initiated by those opposite, with a report written by David Murray with help from a lot of good people around the financial services community, concluded that those tax concessions were horribly skewed. Thirty-eight per cent of the concessions go to the top 10 per cent of earners—more than the combined benefit to the bottom 70 per cent of Australians. It was obviously not the original intention of superannuation to see tax concessions skewed in that way.
I think the original sin, if I may put it in those terms, was really during the Costello treasurership, when he took what was a progressive and well-designed retirement income system and sort of grafted on top of it an estate planning vehicle. What we really got from that big decision taken in the 2000s around the tax arrangements was a fair amount of fiscal vandalism and really the beginnings of this problem that we are addressing today. We do not agree with all the ways that those opposite are going about this, but it is important that we recognise that that original sin—the Costello change in the 2000s—has created this situation where tax concessions are now so horribly skewed towards the wealthiest people in the system. That was a policy failure by anyone's definition, and it is the main reason why we are debating these important bills today and why they are necessary.
It gives us no comfort to see the typical and characteristically shambolic way that we have got to this point, when you consider the history of this debate. It was the member for McMahon and the former member for Oxley—a great contributor to this place, Bernie Ripoll—who announced with the Leader of the Opposition in April 2015 that we would do something very courageous but very well considered, which is to begin to address these issues at the top end of tax concessions in superannuation.
Of course, those opposite said that that would be the end of the world, that that would be a terrible outcome and that we could not possibly change the tax concessions in super. But then, lo and behold, on budget night earlier this year, we had what were pretty dramatic and pretty drastic changes proposed by those opposite. Then we had the election, where it really blew up as an issue in lots of parts of the country, and then we had, of course, the shredding of the original policy and the rewriting of the policy by the member for Dawson and others, with what seemed to be, from our point of view, very little input from the Treasurer—that it was really rewritten by the backbench, who were so desperately unhappy with the first draft provided by the Treasurer.
What we then saw was what I like to call the five stages of shambles when it comes to policymaking on that side. It began with denial that there was a problem. Then it became a 'big surprise' policy announcement that they had not consulted on, followed by confusion over what it means, including from the Minister for Revenue but also the foreign minister and others who could not explain the basic details of the changes. Then we had the dishonesty about the retrospective elements of the policy. Then we had the division, as it was hastily rewritten on the back of a beer coaster by the member for Dawson. So we saw the five stages of shambles here in superannuation policy, which really showed us how not to go about superannuation reform in this country.
Unfortunately, it is the same sorts of ingredients we are seeing with the discussion around the superannuation objective as well, which was legitimately and genuinely supposed to be a bipartisan process, as the member for McMahon went through in some detail. There were discussions going on. I thought the discussions were healthy and a good sign of working together in this place, but then of course those discussions ended abruptly and we had the announcement on budget night. Nobody out in the broader community seems to support that objective, including the stakeholders. So we have the same problem that could have been avoided. But it has not been avoided because those opposite did not learn the lesson.
We have done our best to be constructive, not just when it comes to the objective but also when it comes to the broader policy sweep. In that context, in that vein, there are elements of the bills that we are debating today that we on this side of the House do support. It is worth noting that we support the $1.6 million transfer cap. We do support improving the super balances of low-income spouses. We do support removing the anti-detriment provision. We do support strengthening the integrity of retirement income streams.
Probably most notably, given what I said before about the low-income super contribution, we of course support the reinstatement of that. It should never have been abolished in the first place. It is a shameful episode when you consider the impact on women in particular. As my terrific colleague from the other place, Jenny McAllister, senator for New South Wales, said, if we had known your only problem was with the name of the thing, we could have resolved this two years ago, before you abolished it. It is good to see the policy intent of that measure. A new name, so be it, but it is back and is a feature of the superannuation system in this country. It is a very important measure, and we support it. There are other measures, of course, that we oppose, and those have been discussed at some length. The minister referred to them, as did the shadow Treasurer. The ones that we do not intend to support are the catch-up concessional super contributions, the tax deductions for personal super contributions and there is one other that I will not go into.
I think the most important contribution we can make, given the shambolic way that this policy has been made by those on that side of the House, is to play the type of constructive role that says that we have found ways to improve the policy. We have a substantial contribution to make on that front, given that we have led this debate over the last couple of years. So we are proposing some changes, including lowering the annual non-concessional contributions cap to $75,000 and further lowering the high-income super contribution threshold to $200,000. There are also the measures that we oppose and a couple of other odds and sods as well. What we are trying to do is say to the government, 'We think we can do a better job making superannuation even fairer.' We support some elements of what the government is proposing, because they do take tentative steps towards a fairer system, but we think there is no reason why we cannot take this opportunity to make it even fairer than what the government is proposing.
At the same time—and this is no small thing—we do have a situation at the moment with our AAA credit rating. This AAA credit rating was won from all three agencies under the former Labor government, proudly—a much coveted, highly sought after AAA credit rating from the three agencies. One of those agencies has said that that AAA credit rating is at risk. It has said multiple times now on Treasurer Morrison's watch that that AAA credit rating is at risk.
So what we have done here in this bill and in other policy areas as well, including negative gearing, capital gains and other measures too, is that we have said to the government: 'Look, you've got a big problem here. The AAA is at risk. The 2015-16 deficit blew out by a factor of eight from the PEFO in 2013 to the final budget outcome. We've got a 2016-17 deficit which has tripled. Our net debt has blown out by well over $100 billion, and, if we believe Deloitte Access Economics, that number is blowing out substantially more than that. We've got a big problem on Treasurer Morrison's watch, and we need to address it.'
So what we are saying—and over and over again we get the lectures from those opposite about playing a constructive role—is: 'Here, if you want to take it, is an extra $1.4 billion over the forwards and an extra $19 billion over the medium term. We want you to copy our homework. We want you to pick up this policy and run with it. Now is a good opportunity, having taken the tentative steps towards a fairer super system, for you to get it right and to pick up the suggestions that we are putting on the table. That is really an investment in protecting that coveted AAA credit rating, which is at serious risk after the midyear update on 19 December. So here it is. If you want us to be constructive when it comes to savings, pick up and run with the proposal that we are putting on the table for you to take and run with today.' We are proposing to make the superannuation system fairer. We are proposing to save more money in the process and to protect that AAA credit rating.
I had the privilege of being in this portfolio before the election. Over that period from 2015, all the way through the election and all the way through those opposite's budget announcement, there was really an enormous amount of goodwill and constructive contributions from all parts of the superannuation system and the broader financial services world. I want to acknowledge all of that input that I had over that period. It really has fed—not just with me but with the shadow Treasurer and with Senator Gallagher, who holds the portfolio now, and Bernie Ripoll, who held it before—into a tremendous amount of goodwill in the sector. People do genuinely want to get these things right.
The more that we in this place can listen to people in the broader community but also people from the peak organisations, the super funds and the consumer groups, the better chance we give ourselves of getting these big policy decisions right. It is no credit to this place and especially to those opposite that, when you announce these big changes as a surprise on budget night, having said for some months that they were not necessary, without consultation, without working through the retrospective elements and without working through the significant and genuine feedback that people have, you get this kind of shambolic process that has led us to this point today.
Superannuation is a precious, cherished policy achievement not just of our side of politics, though we are definitely proud of that achievement, but also of this parliament and also of the nation beyond these walls. Superannuation is something that other countries look at in Australia, and they wish that they had a system like ours. Our responsibility is to cherish it and to improve it in a careful way, in a considered way and in a consultative way, because at the end of the day, even though what we say here and do here has such a big impact on the superannuation system, it is, after all, all about a dignified and secure retirement for the people we represent, the millions of people who would rather have self-sufficiency in retirement than rely on the age pension, as the member for McMahon said before. Our responsibility is to get it right for them so that we give the Australian people the best possible chance of a retirement that is secure, rewarding and enjoyable, one that is based on the contributions that people have made throughout their working life. In our superannuation system, the benefits far outweigh the imperfections, but it is incumbent on us to get it right and to go about reform in the right way, not in the shambolic way that has got the government to this point to date.