Labor should finish job Keating started on super
In 1992 Paul Keating’s leadership motivated me to join the Labor Party. Keating provided the labour movement with the leadership, vision and fighting spirit needed to combat the regressive Fightback package.
Keating won the election, and Labor celebrated a great win against neo- liberalism. What followed was a period of government where Keating’s great intellect and vision was pitted against his arrogance, exhaustion and electoral indifference.
This was a difficult and frustrating period for many Labor supporters and I remember periods of despair at our performance. After 1996 the whole labour movement shied away from defending Keating, his Government and his politics due to the collective scars caused by his defeat.
It is worth remembering the good things Keating did, and one of those was his policy of a national superannuation system that had a clear timetable for growth. Keating’s plan involved increased employer contributions, government co-contributions and employee contributions to lift the rate to fifteen percent for every Australian worker by the end of 2003.
The Government contributions were the tax cuts promised in the One Nation statement, a plan that promoted savings over consumption. Keating’s superannuation legacy would have lifted our national savings rate, decreased poverty amongst retirees, and helped to protect Australians from the volatility of the international financial system. Keating’s vision was vandalised by the Howard Government’s partisanship, its desire to boost consumption and the betrayal of the long term national interest.
It was a betrayal of the national interest to dismantle Keating’s superannuation growth plan because Australia’s great economic vulnerability has always been that we do not save as much as we consume. Sometimes that consumption has served to fuel productive investment which is good, and sometimes it has served to fuel unproductive spending and speculation, which is bad. This national vulnerability has been demonstrated by our long term current account deficits, which have persisted throughout Australian history regardless of changes of government.
Our low savings rate and love of speculation and consumption persisted despite a minerals boom that lifted individual incomes and lifted government revenue by over $300 billion during the Howard years. Even after the biggest economic boom in Australia’s history our banks still relied on overseas borrowings for half their lending, a vulnerability that required a government guarantee to protect Australia’s overall economic interests during a time of profound international financial turmoil.
This national vulnerability is writ large in the Anglo-Saxon economies, where low savings and high consumption are underpinned by the high savings and investment rates of China, the Middle East and the emerging economies. This model led to the speculation and irresponsible lending that plunged the world into international crisis. This problem lies at the heart of the international economic imbalance and it lies at the heart of Australia’s longstanding vulnerabilities, despite the Rudd Government’s stellar stewardship of the Australian economy since it came to office.
The Rudd Government has mapped out a plan to return the budget to surplus. What is needed now is a plan to lift private savings at the same time. Private savings must be increased to protect our economy in the short to medium term. In the long term a resource-rich country like Australia should produce international lenders not international borrowers. Australian politicians should make becoming a nation of savers our national bipartisan project over the next decade.
Our superannuation system has already delivered a trillion dollars in national savings. It has already delivered a pool of capital to fund productive investment and has underwritten asset values in commercial real estate, share and bond markets. Our superannuation system makes us less reliant on international lenders and has produced a world class fund management industry. Without superannuation our national savings rate would be negligible or non-existent. The current contribution rates enjoy widespread bipartisan support.
For those on the margins super often represents the difference between just getting by and the grinding harshness of poverty. Often a person’s super is their only savings, other than the asset of the family home. I often meet old people who have housing assets but who are cash poor. Despite rising house prices increasing paper wealth, generally this wealth is locked up. You can’t eat a house. A lack of super basically means a lack of income.
It is especially heartbreaking to see poverty amongst older Australians. These are men and women who have spent a lifetime doing backbreaking work for low pay, who had a little bad luck or made bad decisions, and are left to live their twilight years in grinding poverty.
We know a pension system doesn’t insure us against poverty - only superannuation can. We know that so many baby boomers, particularly women, have inadequate retirement savings. We know that even the best investments don’t always live up to expectations.
When the Henry Tax Review reports that a contribution rate of nine percent will be adequate for the retirement of workers on low to average incomes, I worry that ‘adequate’ might not cut it. I worry that it doesn’t account for life’s mistakes and bad decisions, for higher divorce rates, for future economic shocks, or for longer life spans. Saving too much is the regret of the fortunate, a mistake that can be corrected by higher consumption when you have time on your hands. Saving too little condemns an individual to economic hardship without hope or respite in their last remaining years.
Poverty amongst the elderly is a symptom of a larger problem of the wide disparity between rich and poor in this country. Our unequal distribution of wealth is a natural by-product of a liberal capitalist society, but it can produce social dislocation when taken to extremes. Governments of all persuasions seek to avoid this and the Howard Government used the tax transfer system to essentially take excess corporate tax revenue generated by the boom and redistribute it to middle-class families. The Howard model was predicated on high corporate profits, high company tax rates and a minerals boom that would never end; in short it was predicated on wishful thinking. We have to adjust our ways to meet the challenges of the new economic environment.
It is far better to use superannuation to redistribute wealth because it maximises the economic benefits through productive investment, creates a culture of saving rather than one of consumption and transfers wealth from working years to when people need it the most. Superannuation redistributes wealth from capital to labour, from foreign multinational investors to Australian nationals and from the working years to the retirement years. If you want to buy back the farm, or the mine, or any other Australian asset then back Australian workers to do so through their retirement savings. If you want a fair Australia owned by Australians then back a higher superannuation contribution rate. A more even spread of wealth fuelled by the private ownership of our national endowments would make our nation both fairer and stronger.
There is no doubt that there will be business opposition and conservative political opposition to lifting contribution rates. A conservative’s duty in part is always to oppose and delay progress no matter how desirable. This opposition and the need to prevent short-term economic dislocation necessitate a long timetable to lift contributions, but it does not warrant delay in presenting a plan. The labour movement must fight for higher superannuation contributions, safe in the knowledge that while there is short term opposition this will ultimately give way to the bipartisan national consensus that supports our current superannuation system.
The Government has called for a national debate on higher superannuation contributions and that is a good thing. My view is that we should back higher contributions, higher savings, a fairer Australia owned by Australians and a dignified and independent retirement for all Australians. We should complete Keating’s unfinished policy masterpiece.
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