Mr McARTHUR (10:34 AM) —I am pleased to participate in this debate on the Superannuation (Government Co-contribution for Low Income Earners) Bill 2002 and the Superannuation Legislation Amendment Bill 2002. I note the wide-ranging contributions of previous speakers on the issue of superannuation and, of course, the government's initiative in providing a government co-contribution to low-income earners. Although the superannuation arrangements have improved in recent years, we still have a savings problem in Australia. If you look at the data you will see that, whilst large funds are accumulated for superannuants, our savings ratio relative to other Western nations remains under question.

Superannuation is a provision for Australians who are growing older. An ageing population will put pressure on the government-funded pension scheme and, as the population ages, there is a shrinking tax base. I particularly refer to the Intergenerational Report brought down by the Treasurer with the budget in which, in very simple terms, we talk about a better superannuation scheme. For the record I will summarise the initiatives in that document. The present legislation before the parliament benefits low-income earners and allows for a higher fully deductable contribution limit for the self-employed. It moves the deduction from $3,000 to $5,000 for those who are self-employed. This encourages them to take out bigger amounts of superannuation, as they receive a tax deductible contribution of $5,000, which is a step in the right direction in anyone's language. The government is proposing to reduce the surcharge from 15 per cent to 10.5 per cent over the period up to 2004-05. It is my understanding that the Labor Party will be opposed to that.

I have had a number of discussions with people associated with superannuation, and they are very concerned about the administration of the surcharge and the impact on those so-called high-income earners when the surcharge suddenly chops in and reduces their superannuation entitlement. I note by their public comments that the judiciary are particularly concerned about the impact of the surcharge. Again, that is a step in the right direction, and I hope that the Labor Party and the minority parties in the Senate will support that initiative by the government. The quarterly superannuation guarantee payment is also a welcome initiative. Companies will be forced to put in their contributions on a quarterly basis, and there can be no doubt that the payments will be made.

I want to talk in a broad-brush sense about superannuation and the guarantee levy. Obviously, superannuation is a very complex matter. When we in this House talk to constituents we get a number of complaints about the complexity of the government's regime—both this government's and the previous government's. I notice that previous treasurers have always looked for ways to increase revenue. Whilst superannuation is tax effective in some areas, some treasurers have suggested it has been too tax effective, and they have sought to gain revenue both prior to entry and on exit from superannuation programs. The super guarantee, which has been a matter of some debate in this parliament, started at the low figure of three per cent, as I recall, then graduated year by year and now stands at nine per cent. I emphasise the point that the employer makes the contribution. Whilst those opposite laud the importance of the super guarantee scheme and say how wonderful it is, let me just say that that is yet another on-cost that employers have to pay. I make the philosophical point that there is no contribution by the employee. This initiative by the government does redress that. At least the government has been aware that there should be a contribution by the employee. I think it is a little unfair that the employer takes the full burden of the superannuation contribution of nine per cent. In the companies that I have looked at, the employers see that as a very big burden on their payrolls. Not only have they got to pay payroll tax to the state government, they have got to pay this super guarantee charge of nine per cent.

I note the private sector schemes that I have been associated with where the employer might contribute, say, 15 per cent and the employee might contribute seven per cent. That then makes a very valuable contribution to the employee's final superannuation payout. So I advocate a position where employees take some responsibility, even if it is only a minor one, for their superannuation final payment. Over time, in actuarial terms, the superannuation can then gain a certain amount of financial strength so that, in an ageing nation, people will have a superannuation nest egg that will be valuable and worth while. While the nine per cent sounds good, in my view actuarially it will not provide too much of a payment for somebody in 20 or 30 years, taking into account inflation.

I have always been particularly interested in the Singapore government's approach to this matter at the very early stage of the development of that country. I think you will recall, Mr Deputy Speaker Jenkins, that you and I received some interesting presentations about that matter. In that country the contribution by both parties—the employer and the employee—is in the range of 19 to 21 per cent. Whilst it is a bit more complex than a straight-out superannuation scheme because of the way in which the government organises the health schemes, pension payments and aged care related to this total payment, let me assure members of the House that the bigger payment by individuals and employers, totalling 19 to 21 per cent, ensures that there is a viable scheme. So, in the longer run, the ability of individuals, companies and the government to sustain an aged care program in that small company has been well substantiated. Of course, that helped develop a savings culture in Singapore which allowed quite enormous growth.

I draw the attention of the House to the quite staggering amount of money that has been invested in superannuation funds. Members would be aware of quite big figures. I took out the statistics from the APRA bulletin for the 2002 March quarter. In very simple terms, assets involved in superannuation total $532 billion. I emphasise that figure: $532 billion is now invested in superannuation schemes. Approximately one-third of that, $181 billion, has been directly invested; $189 billion has been placed with investment managers; and $160 billion has been invested in life office statutory funds. Again, that is $532 billion invested. I know those opposite use those figures to show how we have improved savings. I concede the point that those are vast sums of money. It raises a philosophical point, as this amount—the $500-odd billion—has now moved to pension fund managers who have considerable influence in the share market and an influence on corporate governance matters. That is the new power in Australia coming from superannuation funds. Those figures are interesting and they reflect the debates that we have had in this parliament over recent years.

More recently, there was an interesting report commissioned by the National Centre for Social and Economic Modelling at the University of Canberra. This report got considerable coverage, and I would like to quote some of the headlines and details because they impinge on the superannuation debate we are having here this morning. The headline in the Financial Review on Thursday, 19 September, was `Australians are 41pc wealthier'. That is quite a powerful statement. This report noted that this wealth was due to higher house prices, which had increased by 64 per cent since 1997 so that average equity in houses had improved quite dramatically. Another headline talked about super cutting the gap between the rich and the poor, while another talked about the state of savings. But I would like to quote from a report on this study, which said it had found:

This is a warning sign for the policy makers in the future that older people are looking after themselves where the younger people are not. The report also said the study found:

So we see a situation where the key asset of individual Australians is the home, with superannuation making up a declining percentage of asset accumulation. It went on to say:

This is where the argument about superannuation comes in and this is why the government has looked at this issue and has made this important recommendation. This legislation provides for a contribution of government money to low-income earners. The government will provide $95 million to low-income earners through its co-contribution scheme, and this will rise to $100 million in 2003-04. The current superannuation low-income rebate will be replaced. This new government initiative is for people who earn less than $32,000 per annum and are under 71 years of age. In philosophical terms, this will be part of what I have been advocating. The government will be helping low-income earners and will be trying to redress the imbalance so that wealth is now concentrated at the higher end of the spectrum and low-income earners will be encouraged to invest in superannuation, with some government help, and to take it seriously. This scheme will come into effect from 1 July 2002. It will be administered by the ATO. Like most other superannuation schemes, it will be somewhat difficult to identify the way in which income earners attract the contribution.

This proposition being put forward by the government redresses the difficulty of the bottom end of the superannuation system, where low-income earners do not fully understand superannuation and regard paying for superannuation as their employer's responsibility. Hopefully, employers and the government will help to bring about a cultural change and employees will be encouraged to provide for their old age and to have some source of income rather than rely on a government-funded pension. Governments of all political colours need to ensure that the complexity of superannuation is somewhat eased so that individual Australians can fully understand their entitlements and the tax regime they are dealing with and so that the accounting profession and financial advisers can comprehend the myriad complex and almost unfathomable regulation that surrounds superannuation.

Governments should take a non-partisan view on this matter. There should be a unified approach to superannuation and to providing for the future living standards of young Australians, as they now are. The minister at the table, the Minister for Ageing, has a particular interest in this matter because he is responsible for the current generation of older Australians. It is important to encourage the policy makers to ensure that the tax regime and the ability of the private sector to sustain living standards 40 years hence is part of the policy position of both the government and the opposition in the current and future parliaments. I commend the legislation. I commend the interesting contributions to the debate from other members in the parliament. I would strongly advocate that serious consideration be given to simplifying superannuation arrangements so that average Australians are encouraged to join superannuation schemes, to participate more fully and to understand exactly what the superannuation of their future savings is all about.