As a child in the 1950s, I listened curiously to my parent's excited conversation when the latest pay rise for teachers brought with it additional units of superannuation.
This, in turn, meant a larger retirement income. With each pay rise, mum would eagerly ask dad: "and how many extra super units did we get?"
Access to such industry-specific superannuation schemes was limited mainly to the public service and the upper echelons of business during the last century. As a result, most of the population had to make do with their savings and the aged pension, which has been available in Australia since 1908.
The Keating reforms to superannuation in 1992 made it possible for a much higher proportion of the community to create a more comfortable provision for their retirement. This has been through a compulsory scheme to which employees must contribute a certain percentage of their income. In 2023, this will rise to 12 per cent. The super funds, in turn, invest their members' money in shares and other assets to maximise returns and grow the super balances of income earners.
For the 16 million fund members, there is a high level of sensitivity to any proposal to change the rules around super. This was a significant factor in the defeat of the ALP in the 2019 election. Ahead of the 2022 election, future PM Anthony Albanese promised that there would be: "no changes to compulsory superannuation policy".
So, there was great surprise when Treasurer Jim Chalmers, in February 2023, proposed to change the tax treatment for people with super balances of more than $3 million. Some wealthy individuals are 'gaming' the system and using the lenient super tax rules to create personal wealth. For example, one member had a reported balance of $400 million. With average super balances at $150,000, such rorts must be stopped.
Nevertheless, apart from this adjustment, a more comprehensive super agenda now seems to be in play. For example, Assistant Treasurer Stephen Jones 'belled the cat' when he addressed a convention of self-managed superfund owners in late February 2023.
He compared Australian retirement savings of $3.3 trillion to: "honey that should be managed in the best interests of the hive". Treasurer Jim Chalmers had previously flagged this: "the government's ambition is to leverage super funds to invest in government-backed nation-building projects."
However, there was no mention of investment returns.
It is worth remembering that when 16 million Australians created their retirement accounts over the past 30 years, they were assured that the super funds would manage their money to maximise investment returns. This apparent conflict in the purpose of Australia's world-class compulsory superannuation scheme triggered my memory of an earlier incarnation of the same debate during the Hawke/Keating era.
In 1987, the ALP government and the ACTU proposed the establishment of a 'hive' called the National Development Fund (NDP), which would support enterprises according to the government's agenda. This proposal didn't go ahead then, but a remarkably similar body, The National Reconstruction Fund (NRF), is now before the parliament for approval.
The NRF aims to: "support, diversify and transform Australian industry, across seven priority areas including, medical science, defence, value-added agriculture and low emission technology, to drive economic growth." But if the Treasurer was inferring that super funds be allowed to invest in government programs, how would this affect the returns in individual super accounts?
If the NRF scheme had existed in 2016, it might have invested in the government's Snowy Hydro 2.0 low emission technology. The two-billion-dollar budget of this government investment had, by early 2023, blown out to over six billion dollars and rising. It didn't help that "Florence", the tunnel borer, became stuck in the mud. Not much honey will be produced by this investment. Government-sponsored bodies do not have a great track record when choosing investments with a good return.
Jeremy Cooper, who led an earlier review of Australia's superannuation system during the Gillard government, cautions that: "the proposal to push super funds to invest further in national priority areas risk overcooking the economy and artificially inflating asset values." Former PM Howard also warns: "It is all very well to say we will just skim a bit off the top. Well, that is just the first chapter in a very long book."
If the Albanese government plans to change the investment rules for super funds so that "more honey will be for the benefit of the hive", he has an ethical obligation to take such a significant change back to the people at an election. John Howard did this with the GST in 1998. Albanese should also seek a mandate at the 2025 election if his government plans to invest the people's super in a different, and perhaps riskier, way.
Newcastle East's Dr John Tierney AM BEc is a former Hunter-based Liberal federal senator
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