Superannuation Guarantee Amendment

15 June 2015

Dr CHALMERS (Rankin) (16:13):  Thank you for the opportunity to speak on the Superannuation Guarantee (Administration) Amendment Bill 2015. As speakers before me have said, the bill removes the obligation for employers to offer a choice of super fund to temporary resident employees or when super funds are merge. This bill is all about reducing the burden for employers. That is why both sides, whether it be the member for Oxley on my side or the member for Riverina just now, have spoken at length about the positive consequences of this bill for business in Australia and particularly small businesses. They are right to point to those advantages.

I thought that, before I got into the various specifics of the bill, I might spend some time instead on the superannuation guarantee itself, because I think compulsory super and the SG, as it is called—the superannuation guarantee—are one of the most substantial public policy triumphs in Australia since Federation. I am proud to say that the labour movement—the Labor Party—was instrumental in setting up the first retirement income schemes in Australia a century ago.

By 1945, the Chifley government set up the National Welfare Fund, which was intended to be the basis from which a national super fund could be operated. By 1973, the Whitlam government responded to the fact that only 32 per cent of workers were covered by super at that time, and they initiated the national superannuation inquiry, chaired by Keith Hancock. By 1983, the Hawke government reformed superannuation tax concessions to remove overly generous concessions for the wealthiest Australians—remembering that super was still not yet compulsory in 1983. It was the same for 1986. The Hawke-Keating Accord implemented a series of reforms so that, by 1986, awards stipulated that three per cent employer super contributions would go into industry funds.

By 1991, Paul Keating, who was then a backbencher, delivered a speech that said:

Unless we can move - and move rapidly - we will put the Commonwealth Government age pension system under unbearable stress and condemn an entire generation of elderly people to an unsatisfactory and poorly provided retirement.

Around 1991, Keating proposed a compulsory super system. I quote from him again. He said:

… I suggest that by the year 2000 we reach a national benchmark where each and every employee has a contribution to superannuation equal to 12 per cent of wage and salary income paid into his or her superannuation account.

At the same time, he warned:

It is the difference between a full, active life and a life governed by budgetary exigencies and the vagaries of politics.

As you would probably recall, Madam Deputy Speaker Burke, or members of this House will recall, Keating's speech kicked off a wave of support for universal superannuation. A few months later, the Labor government would announce a universal super scheme, which Keating would then improve on in the years after that. In the speech that he gave in 1991—and the member for Chifley, who is at the table, is also an avid follower of the words and deeds of one of our finest prime ministers and certainly one of the finest Labor treasurers we have had—he was both right and prophetic when he said the demographic challenges of an ageing Australia would put the Commonwealth budget under considerable pressure.

That is one of the reasons why Labor under Prime Minister Rudd introduced a phasing in of a 12 per cent superannuation guarantee. I pay tribute to the work of the members for McMahon and Lilley for implementing that policy in their time in the Treasury portfolio—a very important change, a 12 per cent superannuation guarantee. And then, under Prime Minister Gillard, we had the MySuper package introduced to try to lower superannuation fees.

But Paul Keating was also prophetic in that he said that, until the superannuation project is complete, until we reach a point where most Australians can depend on their own savings to retire comfortably, their retirement incomes will be under political attack from the members opposite. He was absolutely spot on. We have been seeing that in the first and second budgets of this current government.

Indeed, right through the history of super, the Liberal Party have stood in the way of a stronger super system. In 1976, the Fraser government rejected the Hancock inquiry recommendation of a universal pension system. In 1996, the Howard government abandoned the plans to increase the super guarantee, costing the average Australian worker something like $250,000 over their working life. At the time, the now Prime Minister, Prime Minister Abbott, said:

Compulsory superannuation is one of the biggest con jobs ever foisted by government on the Australian people.

If you think about that, the current Prime Minister of Australia thinks that superannuation, one of the big public policy triumphs in Australian history, is a con job. That quote will sit on the record forever. It is a good illustration of what those opposite think about superannuation and the possibilities and opportunities of super for Middle Australia.

Twenty years after that quote, his government announced a freeze on the super guarantee for another six years. They also announced that they are scrapping the low-income superannuation contribution from 1 July 2017. If you just take my communities for example, the cuts to that low-income superannuation contribution will affect 28,300 people just in my electorate alone. You can imagine the magnitude of the hurt that is being inflicted on people right around Australia when you consider that almost 30,000 people just in my electorate of 100,000 or so will be adversely affected. The aggregate outcome of these sorts of cuts and these sorts of decisions is that the national savings pool, Australia's national pool of savings, will be $45 billion worse off by 2021 and $983 billion worse off by 2055.

Labor does recognise that there is a real need to improve the superannuation system in Australia. We can always do more to make it better, fairer and more sustainable. We do need to recognise that, with people living longer, they need to save more before retirement, particularly if they want to maintain an adequate standard of living. We do know that the current level of contribution is not sufficient to support Australians' lifestyle expectations for their future retirement, and that is why we think we need to increase the super guarantee to 12 per cent, which is what was initially proposed by Paul Keating, wound back by John Howard, reintroduced by the members for McMahon and Lilley and wound back by the current Prime Minister, Tony Abbott.

The coalition alleges that any increase in the superannuation guarantee is not affordable for employers. The facts do not bear out that assertion. It is not the first time that the facts have inconveniently got in the way of a political strategy. But the past experience shows that any increase in the SG is not likely to have a negative impact on business, on employment, on the CPI or on any of the measures that we pay close attention to when we implement changes of this magnitude. So what is really going on here, when you take a step back, is that the coalition, when it comes to the super guarantee, is really trading off a short-term fiscal fix for long-term benefits for Australians. The net fiscal cost of compulsory super to the government, estimated by Treasury, will peak at less than 0.5 per cent of GDP before gradually falling to less than 0.2 per cent of GDP. In comparison, the current fiscal cost of the age pension is projected to increase from around 2.7 per cent of GDP to around 3.9 per cent of GDP by 2050 if no changes are made to the current superannuation settings.

Increasing the super guarantee is also good for the Australian economy more generally. Modelling done for the Association of Superannuation Funds of Australia has shown that an increase in the SG will—this is a 12-year horizon—increase investment by 1.3 per cent, increase exports by 1.04 per cent, increase capital stocks by 0.9 per cent, increase the real wage by 1.06 per cent and increase real GDP by 0.33 per cent. What that shows is that the government's attacks on the superannuation guarantee are not just bad for workers—especially young workers today, the vulnerable and people on low incomes—but also bad for our economy more generally.

When Labor sat down to consider this bill, we did so knowing that this is a government and a Prime Minister who are not interested in improving the superannuation system more broadly, in growing super investment or in making the superannuation system fairer. On the two sides of the House we have vast differences about superannuation. We have had them for some time. When it comes to the big building blocks of super, those differences will continue. When it comes to this bill—a very specific bill which does not compromise the broader system of superannuation and indeed improves the situation for business, including small business—as the member for Oxley flagged in his excellent contribution, we will be supporting the specifics of this bill.

The measures in this bill remove the obligation for employers to offer a choice of super fund to temporary resident employees or when super funds merge. Many temporary resident employees do not currently exercise choice of fund or complete the choice of fund form and are therefore placed in their employer's default super fund. Under the new arrangements in this bill, temporary residents maintain the right to choose a super fund but employers are not obliged to give the standard choice form to employees. Small businesses have identified this as a burden on their paperwork, so we are willing to do what we can to make this easier for them. This bill also removes this responsibility for employers when super funds are merged. We recognise that forcing employers to offer certain forms at that time is unnecessarily burdensome for small businesses. Importantly, as I said before, none of these measures will interfere with the responsibility of employers to provide superannuation guarantee payments for their employees.

So Labor will support the Superannuation Guarantee (Administration) Amendment Bill 2015. Labor, as you know, is always looking for sensible ways to ease the administrative burden on small businesses, and these appear to be sensible proposals put forward by industry. Labor is the champion of super. We always have been and we always will be. So, more broadly, we will continue to oppose the Abbott government's attacks on super and we will continue to fight for a stronger, fairer super system for all Australians. That includes improving the superannuation concessions, which right now unfairly benefit the very wealthiest in our society at the expense of middle Australia.