HOUSE OF REPRESENTATIVES, 27 AUGUST 2020
The history of superannuation in Australia is pretty simple: it is introduced by Labor; the Liberals oppose it; people like Bronwyn Bishop speak out against it; John Howard then goes to the 1996 election promising to continue with the scheduled rate of superannuation increase, but he doesn't tell the truth and freezes the superannuation guarantee; Tony Abbott goes to the 2013 election promising to increase the superannuation contribution, but he breaks his promise and doesn't continue with the scheduled increases; and Prime Minister Scott Morrison goes to the 2019 election saying that he has pledged to continue with the legislated pattern of superannuation increases—a promise he now appears to be set to break. His own superannuation minister appears not to mind much either way, whether the government sticks with its promise, sticks with the legislation, or does the wrong thing by the Australian working people. It's a bit like Medicare. It's a bit like climate change.
These are issues which matter deeply in our hearts to those of us on this side of politics. Those on the other side know that they matter to the Australian people, and so they mouth the platitudes at election time, but when it comes to action, when it comes to doing the right thing, they don't stand up for working people.
The principle behind superannuation is straightforward—it’s tax-preferred investment to reduce reliance on the age pension. It means Australia's age pension is among the most sustainable in the world. International analyses of retirement savings systems show Australia's to be among the very best. European nations now struggling with the question of how they will pay retirement benefits can only look to Australia's wisdom in the early 1990s in putting in place universal superannuation.
For those of us in this place elected in recent years, we're fortunate to have a superannuation contribution of 15.4 per cent. Yet those on the other side say, effectively, that 15.4 per cent is good enough for them and 9.5 per cent is good enough for their constituents. They want to deny low- and middle-income Australians the superannuation contribution that they receive themselves.
Let's be clear: the legislated path is not a rapid one. It is a fairly steady ramp-up, going to 10 per cent and steadily making its way up. This is the way in which superannuation has been increased in the past. We haven't jacked it up all of a sudden; we've steadily increased it. As previous Labor speakers have noted, and as the member for Whitlam, the Shadow Assistant Treasurer, has pointed out, it is absolutely clear that any wage rises that come over the course of the next year are only going to be through award increases. We don't have a whole lot of bargaining going on at the moment. Workers are not in the strong position they might be in a tight labour market.
It's very clear that, if the superannuation promise is broken, it is not going to be delivered to workers in the form of higher wages over the course of the next year. It's clear, too, that when Tony Abbott broke his promise to increase universal superannuation it didn't lead to some wonderful wages take-off. In fact, Mr Abbott presided over a government which saw the labour share of national income fall to historic lows. We've seen appalling wage growth over recent years—a period in which, if you believed the coalition, the pause in increases in universal superannuation should have led to rivers of gold in Australian workers' pay packets. It simply hasn't happened.
I sit as deputy chair on the House of Representatives Standing Committee on Economics, and there I have the opportunity to hear frequently from members like the member for Goldstein and the member for Mackellar. Modest members they are not. Not only are they not in the least humble; they don't have the characteristic of Bert Kelly of standing up against their own party. They are doing the bidding of the Treasurer; and the assistant minister for superannuation, Senator Hume. It is very clear that they are running a surrogate campaign against superannuation, and that it has moved on now from just the old coalition attacks on industry superannuation to a full-blown war on superannuation as a whole.
We've had the chair of the committee, the member for Goldstein, snowing the industry funds with questions about matters which are utterly irrelevant to the committee's mandate. The committee has a mandate to inquire into superannuation insofar as it relates to the royal commission, not insofar as it allows the member for Goldstein to pursue personal frolics against industry superannuation. But that's what we've seen in the huge amount of questions on notice that the committee chair has put to industry funds, the answers to which are taking up, in some cases, months of staff time, with the consequence that, at a time of market volatility and at a time when those funds are dealing with the government's early release scheme, they are being forced to instead deal with the ideological frolics of the coalition—all towards one aim: discrediting the system of superannuation which is world's best practice. Countries around the world look to Australia as an example.
It is not the only way in which the government's looking to undermine superannuation. We have had universal superannuation in Australia for around three decades now. Just recently we have seen, for the first time, a fall in overall superannuation balances. In June 2019 there was $2,881 billion in superannuation. In June 2020 there was $2,864 billion in superannuation, according to the APRA superannuation statistics released on 25 August. Why the 0.6 per cent fall? It's because the government decided that, at the time of a global pandemic, at a time in which markets were down, it was overwhelmingly in the interests of Australians to rip money out of superannuation! So the government put in place a superannuation early release scheme which is almost as bad as their HomeBuilder scheme—a scheme that effectively pays affluent homeowners to do renovations they would have done anyway.
Superannuation early release has seen half a million Australians zero out their superannuation. It means that people are taking money out now and losing the returns that they would have received later. Superannuation isn't there as a fund to be dipped into at times of temporary crisis; it is there to protect dignity in retirement. Once upon a time, the coalition even believed this. They talked about a legislated purpose of superannuation: ‘to provide income in retirement to substitute or supplement the age pension’. But, very clearly, they no longer believe in that purpose. They see superannuation as a nest egg. They see in the pandemic an opportunity to undermine superannuation.
As AlphaBeta director Andrew Charlton has pointed out:
If someone used super money to buy a $20 pizza, that pizza might end up costing them $150 at the time of their retirement. It will be the most expensive pizza they've ever bought.
He's not just talking hypothetically. AlphaBeta analysis showed that those that took advantage of the superannuation early release scheme spent an additional $2,855 in the first fortnight. What did they spend it on? Number one was debt repayments, $393 on average. Number two was gambling. Just behind debt repayments, there was $327 on average spent on gambling.
Also, an average of $207 was spent on restaurants and cafes, $157 was spent on alcohol and tobacco and $75 was spent on apps, games and music. So it's very clear that this is money being spent on discretionary items. AlphaBeta also showed that 40 per cent of the recipients didn't in fact suffer a drop in their income.
One of the impacts of the superannuation early release scheme is that Australian taxpayers are going to have to spend more on the pension because there will be more pension-reliant retirees. What's ironic about this scheme is that it stands in direct contrast to the way in which the government has handled the issue of mandatory draw-down for those in the retirement phase. They've halved the required rate of mandatory draw-down. And, as the Prime Minister has said, the reason for that is so you are not 'forced to pull money out in the middle of a bad market'. That principle should hold true for young Australians. If this government cared about young Australians, it wouldn't be encouraging them to take money out of superannuation—forcing some, by excluding a million casuals from the JobKeeper program.
Another impact of the superannuation early release scheme is investment drag. We know that even those who don't take money out will suffer a hit to their retirement savings because superannuation funds are having to move money out of growth assets into cash in order to be prepared for the possibility of superannuation early release. The funds have acted extraordinarily quickly. They didn't receive any advance notice of this from the government but they've moved swiftly, and indeed industry funds have outperformed retail funds in getting money out to members within the five-day window. But make no mistake: one of the impacts of the superannuation early release scheme is that funds have to keep more money in cash and therefore they're getting lower returns than if they had that money in productive assets.
The brunt of the superannuation early release scheme is on young people. One analysis by the Australian Institute of Superannuation Trustees found that one in five people aged 25 to 34 dipped into super, 15 per cent drained their accounts and 30 per cent had less than $1,000 remaining after their withdrawal. Eva Scheerlinck of the institute said: 'The early release scheme unfortunately forced many people to choose between poverty now or poverty in retirement.'
It has led to fraud. More than 400 account holders withdrawing retirement savings through the early release scheme are now being investigated by the Australian Taxation Office. Why is that? Because the government did no checks. Exactly as we saw during the robo-debt scheme, this was just a scheme that was put in place and left on autopilot. There have been no checks to see if people have a need for the money, as would normally be the case for somebody seeking early release of superannuation.
So, in that context, no wonder we've seen people spending money on gambling. No wonder we've seen half a million people zeroing out their accounts. No wonder we have a spate of fraud being investigated by the Australian Taxation Office.
You'd think that these would be critical issues for the House of Representatives Standing Committee on Economics to explore. But, when we sit down on 10 September for a hearing, we won't be following up on the mandate of the Hayne royal commission to look at wrongdoing by superannuation funds. As members are aware, Commissioner Ken Hayne devoted considerable attention to the wrongdoing of a handful of superannuation funds, including Suncorp, BT, Colonial First State, OnePath and Mercer. Yet none of those funds has been called before the House of Representatives economics committee, and none will be called before the House of Representatives economics committee on 10 September. Instead, the Liberals have chosen to fight their tired old fights against industry superannuation. Instead, they're calling ethical superannuation funds, rather than quizzing the ethics of those who've been found wanting. The fact is: the House of Representatives economics committee is being used by the chair and the Liberal members of the committee in order to pursue this government's agenda of attacking superannuation. We're not looking into impropriety uncovered by the Hayne royal commission, as is the mandate of the committee.
Instead, the Liberals on this committee are doing the bidding of the Treasurer, who has said 'Let's undermine super.' The Treasurer knows that there is a budgetary cost to increasing universal superannuation—something in the order of $1 billion of forgone revenue per year for every percentage point that universal superannuation is increased. The Treasurer doesn't want to spend that money. The Liberals have always been ideologically against superannuation. If they had their way, we wouldn't have universal superannuation in this country. If coalition governments had been in office since the early 1990s, there would be no universal superannuation and our pension costs would be massive. We would be facing the same issue most advanced countries have today. Superannuation is a Labor invention. We have fought for universal superannuation and we will continue to fight to defend it, here and in the Australian community.
Authorised by Paul Erickson, ALP, Canberra.