Super debate: the future of ageing Australians will not be comfortable
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Version 0 of 1. It’s been a year since the federal government election was won by the conservative Coalition. While we dissect the recent past, the future created by our government looms as a shadowy and insecure Australian destiny. The deal negotiated by the government with Clive Palmer’s party to freeze increases to worker superannuation illustrates how Abbott’s conservatives, and their antecedents in the Howard government, politically consider the future – and what that means for those of us who have neither Palmer’s riches or a politician’s privileges to accompany us towards it. To paraphrase Stiglitz, economic policy decisions do not exist outside party inheritance, and Abbott’s example here is a case in point. The last conservative prime minister of Australia, John Howard, famously declared his future vision for the nation as a place both “relaxed and comfortable”. This vision had significant cultural appeal. The two million Australians of retirement age and older on the day of Howard’s election in 1996 bore generational memories of the depression and the second world war, not to mention the economic and social ructions of the half-century that followed. As the great pork-barreller of the modern political era, Howard was very canny to barrel his pork with a demonstrative flourish to relax and comfort this grey end of town. With taxation revenue pouring in from a minerals boom, Howard offered tax breaks and found the money for carers allowances to retired and ageing Australians while protecting tax treats like the negative gearing of investment properties and halving capital gains tax. Across age demographics, Howard’s breaks, concessions and bonuses made middle income Australians - not the disadvantaged - the largest beneficiaries of welfare under his government. It’s unsurprising that on the 10th anniversary of his election in 2006, 83% of Australians across party lines told a poll they believed Howard was a good manager of the economy. The appearance of largesse, alas, was an illusion. As Howard spent big in the years of the minerals boom, it was a purchase of short-term electoral favour at the expense of investment for long-term prosperity. Howard’s grey armies were not, actually, the generational main game. The Keating Labor government that preceded Howard were aware of the ticking population clock that would see the baby-boom generation become the largest proportion of seniors in Australian population history and in 1992 legislated Australia’s compulsory superannuation savings scheme to relieve the state of some of their costs of eventual retirement. In 1995, Labor scheduled two 3% increases to the original 9% rate that would take the nations workers to an eventual 15% savings contribution. But once elected, the then Coalition government moved quickly to shelve the increases, despite having repeatedly promised pre-election to retain them. The Howard government then proceeded step-by-step to relax various limitations on voluntary contributions – moves not made for the benefit of the population at large, but for the benefit of the richest Australians. By moving their wealth into super funds, wealthy Australians could then take advantage of far lower rates of taxation and therefore contribute less to the nation’s taxation revenue pool, tilting the system towards becoming a tax-minimising investment vehicle for the well-off rather than its original purpose as a widespread savings vehicle for ordinary people. The Rudd-Gillard Labor governments did not move fast enough to fix the problem. The result is now a superannuation system whose tax concessions alone will cost more than the aged pension by around 2016. Its advantages disproportionately favour high-income earners: over 50% of the super tax concessions go to the highest 20% of income earners. Howard could get away with skewed economic short-termism because when he made his famous declaration that “the times” were his, they were. He could blithely cut tax rates in 2006 because at that time no one knew what the letters GFC stood for, and too many Australians could convince themselves the mining boom would last forever. The profligacy of Howard’s economic record cannot be understated, nor can Labor’s timidity in failing to redress the balance: if taxation rates were restored to 2006 levels, today’s federal budget would be restored to surplus. The problem with the past, as with the present, is that the future has a habit of not actually going away. Where we find ourselves as of last week is that the last Labor government’s re-initiating of the increase schedule for super contributions from 9% to 12% - and 20 years out of time – was scuppered again by the Coalition, with Palmer’s support. As a direct result of the deal, the super industry estimates that retiring Australians will be collectively $128bn worse off by 2025. Presented with this statistic, treasurer Joe Hockey’s retort was “How do you know?” Well, because they’re the super industry, Joe; whatever one thinks of them, it’s their business to know and it’s actually yours, too – and to consider that while the number of senior Australians were 12% of the population in 1997, they’ll be 18% in 2021 and between 24% and 26% in 2051. Their financial security is the economic challenge of our times. As for Palmer’s claim that 50% of Australians are dead before claiming their super is nonsense; a report from think-tank Per Capita bears the verifiable statistic that government projections of retirement life-expectancy have actually underestimated Australian longevity by around a decade, largely due to declining mortality. It’s in this context that Hockey’s empty promise that somehow the super contribution freeze will lead to more “money in the pockets” of workers should be considered with alarm. It’s not merely that the trickle-down treasurer himself admits he doesn’t have tangible evidence to back this claim.; it’s that the Abbott government is making decisions within the Howard-era mindset that short-term cash is enough to distract the present electorate from the future consequences of present decision-making. Thing is, with the mining boom over, this tax-averse conservative government doesn’t have the revenue to cash-up the voters like it the one before it. We have a growing aged population. The government’s loyalty to big business will not allow the superannuation system the stretch to meet the retirement needs of that population. Super tax concessions are reducing the tax revenue pool. And while the Abbott government has only been in power for one year, the future of Australia is already looking anything but relaxed or comfortable. |