There was no cost/benefit analysis; it was opposed by the government’s financial advisor, the Treasury; it has ballooned over 25 years into a $2.3 trillion industry with serious systemic problems. But compulsory superannuation is a Labor sacred cow – and is being milked for billions of dollars. It was Paul Keating’s gift to the ACTU’s Bill Kelty and was more about union power and keeping Kelty on side with the Accord than its stated welfare and budgetary objectives. Labor governments have certainly delivered on this key political promise to offset the loss of union power resulting from collapsing membership numbers by delivering increasing financial power to the union movement. As Keating told the 1992 ACTU Congress as his government was introducing his compulsory superannuation legislation: ‘You are losing your industrial muscle; I have given you the opportunity to take on financial muscle. You will get that through your superannuation funds. It is time you entered self-management’. This was consistent with the 1981 ALP Special National Conference paper that: ‘We must recognise at this early stage of union involvement in the superannuation issue that control over the funds will provide unions with considerable financial leverage… to be used to advance the cause of Socialism’. Labor super policy since then has consistently been built around that key pro-union objective, resulting in the phenomenal growth of assets managed by the union dominated Industry Superannuation Funds to $545 billion – most of it coming from non-union members.
As for the stated objective of improving retirement incomes, particularly at the lower end, and cutting the rapidly rising future cost to governments of pensions, Keating eventually admitted four years ago that compulsory superannuation ‘was not introduced as a welfare measure to supplement the incomes of the low paid. It was principally designed for middle Australia, those earning $65,000 to $130,000 a year. This is not to say that those [on lower incomes] should not benefit equitably from the super provisions. They should. But for middle Australia, compulsory super and salary sacrifice was and is the way forward’. And it would also provide a far more rewarding source of the billions of dollars the unions would get to manage than a scheme aimed at low income earners. So much for the need to ensure pensioners are not in poverty; welfare organisations have objected, calling for the cancelling of tax concessions to fund necessary rises in pensions.
So Labor will determinedly block (or repeal) any substantial reform proposals that may emerge from the current enquiry by the Productivity Commission that would damage the present preferred position of union-dominated ISFs – and especially the default arrangements that give them the inside running for the $117 billion dollars a year contributed to APRA super accounts. Meanwhile, widespread concern about the present super system is being expressed across the political, academic and economic spectrum; it is inefficient, too costly, has failed to achieve its social objectives (there has been no marked reduction in retirees receiving the age pension) and has become a monster that is sucking up to an estimated $30 billion a year in expenses out of Australian retirement savings. But repeated and unsettling governmental fiddling with super over the last 25 years has not addressed the basic question: Is the present system in Australia’s best interests; do the benefits to retirees justify the $38 billion dollar a year costs to revenue of super tax concessions plus the consequences of a $117 billion a year reduction in current workers’ household incomes through compulsory super instead of higher wages. 25 years of Keating’s compulsory super has yet to demonstrate that its benefits to retirees and welfare savings are ever likely to exceed its costs. Headlines like ‘A super fail: 80 per cent retire on benefits’ and ‘Why do we have the world’s most expensive super?’ have been followed by Peter Costello’s public attack on the ‘gross inefficiency’ of the Australian super system, recommending that the union-friendly default arrangements should, instead, go to a government-administered fund; the very successful Future Fund, which he chairs, costs far less to run than the rest of the industry. Don’t hold your breath.
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