Sydney Morning Herald
Former prime minister Paul Keating says the superannuation industry should be ”mightily worried” about the Coalition’s plans for super, which Labor has estimated will cost the average 30-year-old full-time wage earner $20,000 in savings by the time they retire.
Keating’s criticism comes amid a backlash from Labor and superannuation industry representatives, who rounded on Opposition Leader Tony Abbott for saying he would delay by two years the increase in compulsory superannuation contributions from 9 per cent to 12 per cent.
Keating, who introduced compulsory superannuation in his first year as prime minister in 1992, said Abbott was ”putting numerology and accounting ahead of national structural necessity”.
”In national savings terms, it’s imperative that compulsory super rise to 12 per cent,” Keating said. ”Only at 12 per cent can we get anywhere near a 70 per cent replacement level in retirement. A two-year delay is simply two more years lost.”
Superannuation Minister Bill Shorten called the two-year delay ”complete stupidity”, saying Abbott was preventing people from having more money for retirement.
A spokeswoman for Shorten said a 30-year-old worker on a full-time average wage – who makes no additional contributions and retires at 67 – would see an extra $127,000 by the time they retire under the government’s promised boost to superannuation.
This would drop by $20,000 if the plan is deferred by two years as proposed by Abbott in his budget reply speech, she said.
Shorten’s calculation was confirmed by economists at the Industry Super Network, but two caveats should be kept in mind.
First, the money saved into superannuation accounts would likely go to higher wages under Abbott’s plan. And second, under either policy, the hypothetical 30-year-old would retire mid-century with more than $500,000 in their superannuation account.
The Financial Services Body, a lobby group for retail super funds and fund managers, said the Coalition’s ”short-term decision” would ”reduce retirement savings by $46 billion over the next decade”.
Former ACTU secretary Bill Kelty, who helped build the super system with Mr Keating, called Abbott’s decision a ”half measure”.
”It’s a sad decision to defer generational change unless there’s a strong reason,” Kelty said. ”Because deferral in the past always meant that you lose it.”
Garry Weaven, another key figure in the development of super, said Labor’s increase in the super guarantee had been ”modestly calibrated” and the mooted delay simply shifted savings away from households and into the government.
”What is the purpose of this policy? If it’s to do with a government surplus, it’s simply a pea and thimble trick removing private savings to relieve public savings,” Mr Weaven said.
It would have been better, he said, for the Coalition to wait for the establishment of the Council of Superannuation Guardians, a Reserve Bank-style council designed to assess proposals for super on their merits and away from politicians.
Shadow assistant treasurer Mathias Cormann defended the decision, saying the Coalition had stuck to its commitment not to scrap the planned increase in compulsory superannuation.
”We are delaying the phase in to the full 12 per cent by just two years, so we’ll get there by 2021 instead of 2019,” he said.
The decision to defer the increase would save $1.1 billion a year by 2016-17, he said.