SUBJECT/S: Tony Abbott’s assault on retirement savings

CHRIS HAMMER: The political ground has shifted in Canberra on Tuesday with the Government revealing that it had done a deal with Palmer United and other Independent Senators to repeal the mining tax and associated measures including winding back increases in compulsory superannuation. Joining us to discuss this issue, two Federal MPs from New South Wales: Angus Taylor, the Liberal Member for Hume and Michelle Rowland, the Labor Member for Greenway in Sydney’s west. Michelle Rowland, to you first, Joe Hockey says this deal shows that Labor is now irrelevant. What do you say to that?

MICHELLE ROWLAND, SHADOW MINISTER FOR CITIZENSHIP AND MULTICULTURALISM: That is quite insulting to the some 9 million Australians and around the sum of $140 billion worth of contributions that would have gone towards superannuation in this country.

HAMMER: But isn’t that Labor’s fault that you haven’t been willing to deal with the government to address the Budget issues?

ROWLAND: Chris, I remember the last party who did a deal with government in betrayal of beliefs and statements that they took to the last election. They were called the Australian Democrats. So I am very happy to stand up for Labor…

HAMMER: Like the Greens on the carbon tax?

ROWLAND: At least that was a transparent process. We have a situation in the Parliament only a few days ago where we were being asked in the House of Representatives to vote on a Bill which hadn’t even been seen. Where the Assistant Treasurer-in-waiting couldn’t even give us a second reading speech. Not only does this represent broken promises from the Prime Minister, not only in terms of the substance of this, apparently ‘no adverse and unexpected changes to superannuation’, but also the promise of no grubby deals. This was the grubbiest of deals, not only in substance but also in practice.

HAMMER: But isn’t that partially Labor’s fault? You haven’t engaged with the government, do you accept there’s an issue about addressing the structural deficit in the Budget? You haven’t engaged with the government so how can you complain when it gets the best deal it can?

ROWLAND: I’m glad you raised this, about structural issues, because when we talk about retirement incomes policy in Australia there are three pillars: savings, which have improved but have always been relatively weak; the age pension, which is becoming increasingly unable to meet the demand for our ageing population and also to provide them with a comfortable retirement; and the last is the superannuation guarantee. Now, the superannuation guarantee is clearly the best option for this country to pursue. This government has made a short-sighted policy decision for a long-term detriment to this country, not only in terms of foregoing all that money that would have been going into infrastructure projects, as an example, but also putting long-term pressure on the age pension. So if you want to talk about the structural issues, I’m very happy to have a debate about how bad this is for the structure of the economy in the long term.

HAMMER: Okay Angus Taylor, let’s address some of those issues. The pension, the Treasurer said that it now takes up 10 per cent of the Federal Budget, the Government is trying to control that increase in age, limiting increases to the CPI, yet by winding back the super contributions in the future, more people are going to be relying on the old age pension. Isn’t the government simply shoving this problem off to a future generation?

ANGUS TAYLOR: Well Chris, let’s be clear: we are not winding back superannuation. There is no wind back of superannuation. The question here is how…

HAMMER: You’re taking $128 billion out over a decade.

TAYLOR: Let’s be clear for people who are watching this. What we are saying is we are not going to increase it as fast. Now the reason for that is very simple: we wanted to, but Labor of course has blocked what we wanted to do in the Senate and therefore we had to get our key commitments from the election through, and we have. Again, we are getting rid of the mining tax, we’ve got rid of the carbon tax, we’re moving the Budget back into surplus, we’re building the roads of the 21st century. This is another one of our election commitments we’ve achieved. We are dealing with the Senate where Labor is not prepared to cooperate and what we have is a Labor that is Santa Claus without wanting to pay…

HAMMER: Let’s address that issue. Does this undermine the sustainability of the old age pension by putting more weight onto it?

TAYLOR: We are doing a lot which Labor is not prepared to support to make sure that the age pension is sustainable and we’ve had many discussions about that in the past so that is very clear and we’re very focused on it. But remember this: this will put more pay in the pockets of everyday Australians.

HAMMER: That’s not why the government is doing it.

TAYLOR: And remember this as well: say Australians are saving more. We can expect significant savings coming out of this but the important thing is that Bill Shorten himself has said that superannuation comes out of the pay packets of everyday Australians so they will receive more. They can choose whether to save it and we would like to see some of this being saved, of course.

HAMMER: In net terms though, they won’t receive more because if they receive it in their pay-packet, they’ll be paying full marginal tax on it, that’s why the Government wants it because it wants to restore the budget whereas if it goes into superannuation, they’re paying concessional tax rates. So in net terms, they won’t be better off.

TAYLOR: Their pay packets will have more in them. But let’s go back to what Labor is doing here. Labor is being Santa Claus without paying the bill. We hear nothing about where they’re going to get their savings and I can only assume they fully intend to increase taxes or leave a lot of debt to the next generation. Neither of which we are prepared to canvas because all of their promises and all of their unwillingness to work with us in the Senate results in unfunded liabilities, unfunded costs that Labor’s not prepared to address.

HAMMER: Can I put this to you: one of the problems that opinion polling has revealed the Government has had with this Budget is that it’s been unfair. That the burden is being carried by lower-middle income earners while high income earners are more or less untouched. These changes to super means that lower and middle income earners will get less super, they’ll get paid more in their pay packet but get paid top margin of tax on it. Those more well off people, particularly with self-managed super funds, will still have access to the full range of superannuation concessions. Isn’t this unfair?

TAYLOR: No and in fact, quite the opposite. This will put more money in the pay packets of the poorest, more vulnerable Australians. Bill Shorten and Ken Henry have both conceded that superannuation comes out of your pay packet. It will put more money in the pockets of those who are least well off. To say that this is regressive is quite wrong. I find it interesting that people say the rich aren’t paying for any of the debt problems that we have. You will remember before the Budget there was a very big debate about whether our levy was appropriate or not. We have put it in place. The important thing here though on this issue is the average Australian and particularly the more vulnerable Australians, will have more in their pay packet as a result of this and Bill Shorten has confirmed that in what he has said in the past.

HAMMER: Michelle Rowland, what’s your response to this claim by the government that lower paid workers are going to be better off? They’re going to have more money in their pay packet.

ROWLAND: For a start, as you rightly attest, the fact is that superannuation is taxed at a lower rate. A marginal rate of tax doesn’t apply. It’s a concessional rate. And also employers who make a contribution, they have benefits as well, offsetting the contributions that they make. So it’s indeed a false economy to try and argue that this is going to be more money in people’s bank accounts. But I also think it ignores the bigger issue here in terms of the policy, and it’s an important policy from a values perspective. This government is intent on turning its back on some $140 billion that would be going into compulsory superannuation in this country, recognising that the age pension as it stands is unsustainable in terms of providing people in the long term, the retirement income that they are going to need. It’s an absolute false economy to suggest that what is being done in this grubby deal, will actually be good for the long term interests of people.

And I’ll also say if you want to talk about value statements, look also at who this is benefitting: who this change is benefiting and who it is hurting. It’s hurting some 9 million ordinary working Australians. It is benefitting a handful of people with mining interests in this country. And also on the issue of people not being worse off: the low income superannuation contribution, $37,000 threshold. A stay of execution, but it is going to be gone. They are predominately women on that amount, predominately women who earn enough to qualify for that concession. That is going to be gone as well, so if you want to talk about – this is clearly an issue about values and choices, but also short term political grubby deals over long term good public policy.  And I will go with the latter any day.

HAMMER: So if Labor were to win the next election, would you reverse these decisions? Would you re-introduce the tax, would you re-introduce the schedule for increasing superannuation up to 12 per cent?

ROWLAND: Two things, Chris. Firstly, we brought superannuation into this country. The Libs voted against it on every level and in fact the arguments that Angus is making today from the talking points are exactly the same arguments that were made in the early 1990s by the Liberals to oppose compulsory superannuation. Their arguments haven’t changed. Our values and our position on long term good public policy hasn’t changed either. We believe that workers should be entitled to a decent retirement, that the pillar of the superannuation guarantee, is the fundamental pillar in order to achieve this, and we will ensure that we make responsible savings. And if you want an example as a start, the paid parental leave scheme that can’t be afforded right now. There’s a saving you can do straight away.

TAYLOR: You’ve taken us nowhere.

ROWLAND: Mate, you’re going nowhere on this but anyway.

TAYLOR: Let’s be clear, the mining tax was one of the great fiscal con jobs of recent political history in Australia. It’s extraordinary. They budgeted $5 billion of revenue every year for the mining tax. They spent the money and nothing came in. So Labor has to explain… what we have done is we’ve fixed it, we got rid of it. What Labor has to do, is it has to explain where all this money that they are effectively committing is going to come from and I can only assume it’s one of two things. It’s debt to our kids or it’s higher taxes and they’re going to have to explain it.

HAMMER: Can I return to superannuation. You’ve made the point that by delaying the increases in compulsory super, that equates to money in pay packets, yet you’ve retained the overall target of 12 per cent by 2025. It says that the increases aren’t until 2021. So over a four year period you want to step up super by 2 and a half per cent. Aren’t you essentially promising a four year wage freeze?

TAYLOR: No, we’re not. Because what we know from Ken Henry and Bill Shorten… We know, and wages will be what they will be, what happens then is the amount of super you take out of it is independent of that wage level. If we’re going to have less super there’ll be more of that wage going into people’s pay packets. That’s what economists tell us and Bill Shorten agrees.

HAMMER: But between your own policy between 2021 and 2025 super will increase from 9.5 to 12. That’s 2 and a half per cent. So most of anyone’s wage increases is not going to go into their pocket. It’s essentially a wage freeze for most of what’s going into their pockets.

TAYLOR: That’s not right, Chris. What happens is wages will be what they will be, they’re driven by…

HAMMER: If there’s more money going into their pocket now it means less going into the pocket then.

TAYLOR: The point is that wages are what they are and the question is how much goes into super and how much goes into the pay packet. At the moment we can’t, unfortunately because of the position Labor’s put us in, we can’t afford to put more of that into super. We’re putting more of it into people’s pay packets. Over time we will increase super but we have to do this in a way that is sustainable. If we don’t do it in a way that’s sustainable, we will be having to increase taxes and leaving debt to our kids. Labor is going to have to make that choice at some point.

HAMMER: Okay Michelle Rowland, final response?

ROWLAND: Well it’s interesting that Angus talks about more money and pay packets. Even if we did accept that argument, which is an absolute economic furphy, even if we did accept that argument the fact is that…

HAMMER: So Bill Shorten is wrong?

ROWLAND: No, what he is saying here is that people are going to be better off. It will be more money in the pay packet, but in the long term, we are going to have an unsustainable situation with retirement incomes in this country. And even if Angus wants to run an argument about debt and deficit, cost of living etcetera, what about all that money that’s going to have to go to fund other broken promises of this government? Not limited to things like the GP Tax, not limited to things like the increased tax on petrol that they’re bringing in. What you need to consider here, and what Angus totally fails to understand, is that we have three pillars of retirement income in this country. By doing away with the progressive rates of increase in the time frames that were set out under Labor’s plan, you are actually damaging the economy in the long term. You’re making it unsustainable for retirement incomes from the public purse and totally undoing any argument that he tries to raise about people being better off.

HAMMER: Okay. I think we should leave it there. Michelle Rowland, Angus Taylor, thank you for your time.

TAYLOR: Thanks, Chris.

ROWLAND: Pleasure.