Mr SOMLYAY (1:10 PM) —It is always very good to follow the speeches of the shadow Treasurer. They are always remarkable, not for what he says but for what he leaves out. We are here debating the Superannuation Budget Measures Bill 2004 today because the Howard government and Treasurer Costello introduced, in 1997, a superannuation surcharge. The question that has to be answered is why that surcharge was necessary. The surcharge was necessary because the government commissioned the Commission of Audit to identify areas where savings could be made in the government's budget because the budget, as left by the government of the now shadow Treasurer, was in deficit by $11 billion. The fact that the previous Labor government had racked up $96 billion worth of debt over a five-year period meant that drastic measures had to be taken. There had to be large cuts in the budget and in expenditure as well as asset sales to get the budget back into surplus.

One measure that the Treasurer introduced was the superannuation surcharge. That was introduced as a contribution by high-income earners to national savings. National savings would pay off the debt that had been accumulated by the previous Labor government over such a long period. I personally opposed the introduction of a surcharge. Many people on this side of the House opposed the principle of the introduction of a surcharge. But we had no choice because of the economic conditions left to us by the previous Labor government and the debt left to us by successive Hawke-Keating governments. It was always the intention that the superannuation surcharge would be a temporary surcharge. When national savings had been achieved and the debt was paid off, the superannuation surcharge would be abolished or phased out. That is what this bill in part does.

We all know that Australia has an ageing population. We know that there is a diminishing percentage of younger workers to shoulder the responsibility of caring for that ageing population, paying for that care and paying for their pensions. I believe few would dispute the fact that we need to help people live with dignity and security in their old age. Differing opinions usually arise only with regard to how the Australian community can achieve and sustain that dignity and security for our elderly in the future.

This government believes that we can achieve these goals only through a partnership between the government and the people that is working towards the same end. It believes that we will have to examine our expectations and our ways of achieving those expectations. If we cannot be sure that the government will have the taxpayer funds in future to pay for our pensions then we need to examine what other means are available to us to ensure our security once we leave the paid work force.

Of course, there is another way. Labor governments have a history of simply taking the easy way out—that is, borrowing money to pay for votes today and not worrying about leaving the debt for a future generation or, as usually happens, for a good Liberal coalition government to come back and pay. The $96 billion debt left by the last federal Labor government is a prime example. In contrast, the Howard government have worked very hard and taken many tough decisions to pay off $73 billion of that $96 billion debt so that the next generation is not burdened with Labor's easy way out, and so we can put $7 billion or so into the budget with annual savings on interest.

This government believes there has to be a better way than simply dumping the burden of debt and expectations on Australia's next generation—the so-called post baby boomers. Our way is to help people help themselves. That means starting now and not waiting until middle age or older. That is why the first part of this bill, the extension of the government's superannuation co-contribution, is so important. It encourages low-income workers, many of whom are young, to save for their retirement.

There are two parts to this bill: schedule 1 extends the government's superannuation co-contribution scheme and schedule 2 reduces the rates of the superannuation surcharge. Currently, under the superannuation co-contribution scheme, the government matches personal superannuation contributions made by qualifying employees on a dollar-for-dollar basis up to a maximum government contribution of $1,000. This is available to qualifying employees on incomes of up to $27,500 a year, after which the government's contribution phases out at a rate of 8c for every dollar of income above $27,500. It currently completely phases out at $40,000.

The amendments in this bill mean that the government will not be matching contributions dollar for dollar. No, instead it will be contributing $1.50 for each dollar of personal contribution. The government will be giving a maximum contribution of $1,500, instead of $1,000, per year. This full contribution will apply to qualifying employees earning up to $28,000, instead of the current $27,500. Thereafter, it will phase out more slowly, at 5c in the dollar instead of the current rate of 8c in the dollar. On top of that, this bill means the scheme will not completely phase out until an income of $58,000 is reached, instead of $40,000 as currently applies.

There has been criticism that the government's co-contribution scheme will not benefit everyone and that those on low incomes are least able to contribute $1,000 per year to superannuation. This scheme is targeted to encourage and assist those on low incomes. A family person may not be able to contribute $1,000 per year, but the government will still pay $1.50 for every dollar of personal contribution. Over the years, this does add up. It encourages people, especially those whose focus is on more immediate bills and priorities, to consider some form of at least token superannuation planning and saving. I would like to see young people, particularly single people, made aware of this superannuation co-contribution scheme so they can start early. Starting small does not matter. It is about starting early so that the invested contributions compound and grow, and that is very important.

This scheme was introduced in last year's budget. These amendments mean that the government will be providing a boost of $2.1 billion to co-contributions over a four-year period. They mean that more people will be eligible to receive the government's co-contribution and they will also receive an increased benefit. Even a very grudging newspaper article said:

The second purpose of this bill, as I referred to earlier, is to reduce the maximum superannuation and termination payment surcharge rates. As announced in the budget, this will be done in three stages. In 2004-05 it will be reduced from 14.5 per cent to 12.5 per cent, in the next year it will reduce to 10 per cent and in 2006-07 and subsequent years it will come down to 7.5 per cent.

The measures contained in this bill may not fulfil the wish list of members of this House or members of the community regarding superannuation. I know we have a lot more to do to encourage people to plan and save for their retirement so that everyone has dignity and security in their old age. We do not just need to encourage or motivate people to invest in superannuation; we need to remove disincentives. I believe fear, complexity and a lack of stability are major disincentives to people becoming self-funded retirees. Superannuation and taxation laws are highly complex and always changing. When people fear the complexity of the unknown, they are less likely to enter it. It is often too hard and they just hope that they get the pension. We must make it simple, stable and reliable to encourage people to invest in their retirement.

I have many self-funded retirees in my electorate. Most are not wealthy, but many have gone without much in their earlier lives to save and provide for their retirement. They are important members of our communities and are usually very involved in a range of volunteer and community work. Constant changes and the increasing complexity of superannuation can not only affect their income but also create fear and uncertainty which is detrimental to their health. This government recognises the efforts of those who choose to save during their working lives so that they can become self-funded retirees and minimise any burden on the community during their retirement years.

This bill does not pretend to solve all the problems of an ageing and retiring work force. It actually takes two measures—responsible and costed steps—towards helping people provide for their retirement. It is part of this government's process of continued improvement to superannuation. I look forward to further steps in this process of ensuring dignity and security for all Australians as we grow older. I commend this bill to the House.