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Wednesday, 26 May 2004
Page: 29194


Ms BURKE (5:12 PM) —I am pleased to rise and discuss the Superannuation Budget Measures Bill 2004 and the amendment before the House today. It is disappointing that we have waited so long to see some superannuation measures and that they are so inadequate. There is nothing in this bill that will assist low-income earners or people in their retirement. The extension of the copayment to low-income earners and the reduction in the superannuation surcharge does nothing to fix the problems in super. The Treasurer said, way back when, that his next big challenge after reforming the tax system—code for introducing the GST—was to tackle the mess that superannuation had unfortunately fallen into. He gave us the Intergenerational Report and then his great mantra, `Demography is destiny', but no real fix or reform of superannuation.

Superannuation has become too complex. It has become bogged down in red tape and taxes. Instead of providing a solution to these problems, the government, in the budget, gives another tax cut to the wealthy—that is all it does—through the reduction in the superannuation surcharge and a promise to match savings for low-income earners. The promise to match savings is nothing more than a promise, because I am not sure of too many low-income earners who are going to find $1,000 to put away into their super fund. The ability to save even $1,000 on their income can sometimes be quite mind-boggling. I do not know how anyone earning an income of $28,000 and probably supporting a family, paying rent or paying a mortgage, is ever going to find $1,000 to put into superannuation, so neither of these measures will go any way to help those who need help with their retirement savings.

The answer, `Work till you drop,' is no answer. The Treasurer has continually cited the case of a 55-year-old executive who could keep working but in a less demanding role. Hello? How many people end up being executives? How many 55-year-olds still get to be in the work force? I know of countless 45-pluses who have been consigned to the work force scrapheap. They have been made redundant through a myriad of cost-cutting measures—get that all important share price up—and these individuals can never find a job again. We live in a bit of a sheltered workshop within this parliament, sometimes thinking that people over the age of 45 can get jobs because the average age of parliamentarians is 49, but the majority of people in the work force do not get to be that age. There is a massive exodus of people over 40 from the work force. This notion that you work till you drop is fantastic. It presupposes that you still have a job.

There is a wonderful organisation called 45-Plus that is located in the member for Kooyong's electorate. It has been trying to assist people—victims, I would say—of this work force backlash that says that at 45 you are on the redundant heap. It has had a terrific success rate without a cent of federal government funding to assist people who are 45-plus back into the work force. The Victorian state government has come to its aid, as has the local Boroondara council, but not this government. Not one red cent from this government, which is in fact responsible for employment issues, has gone to this terrific organisation. I call yet again on the government to reconsider the funding of 45-Plus, which does so much work for these people who just cannot find work.

The Treasurer's notion that you can work till you drop is an absolute myth. Work till you drop is merely a handball. It is no real fix to super. So we do not need to fix super because everybody is just going to keep working. We do not need to worry about funding pensions. Nobody is going to need a pension because they are still going to be in the work force. The Treasurer's own Intergenerational Report has made it clear that Australia, with a withering work force, does not have sufficient means to support the growing number of retirees into the future and their increasing demands on health and aged care services. I think the stats that I have been shown by various organisations say that by 2020 there will be more over-65s than under-65s in this country. There will not be the tax base to support people on pensions, but this government is doing nothing about it. It is saying, `Work till you drop,' and it is doing nothing about it in the vital area of superannuation. This bill does nothing to assist us in ensuring that there is sufficient super for people to retire on.

So the government says: `Don't let anyone retire. We can all just keep working.' That is great if you have a job or one that does not demand physical fitness to continue in. What if you do not have a job or after years of hard yakka you need and deserve a rest? Treasurer, not all workers work in nice airconditioned offices where the most you have to carry is a ream of paper. A lot do tough manual work or are on their feet all day. Or take, as an example, a friend of mine, a pharmacist of many years who was held up at gunpoint just last Friday. She says that she does not think she will ever be able to go back to work again. It was a fairly traumatic experience, and it is something that happens to people quite often. Lots of things happen to people within their working lives that mean they can never work again. She is assessing whether she will be able to walk back into a pharmacy ever again, because she has been having quite a lot of nightmares about that experience.

The work force is a very different place to the one the Treasurer imagines, where everybody ends up being a chief executive or an executive by the age of 55. What of our great army of volunteers who are predominately retirees? How do you replace that work force who save the government billions of dollars each year through their efforts, if they are all continuing in the work force? How do you fill that gap? I do not know how you fill that gap. I certainly know that the volunteers in my electorate are predominantly made up of retirees. They are magnificent people. If they had to continue in the work force because they did not have super or a pension, I do not know how you would replace the thousands of hours of work they provide in ferrying people to hospital appointments, looking after children in need, running the myriad of op-shops that support the wonderful works of Rotary and Lions, and on and on it goes. How do you replace them if we all have to keep working?

This legislation does nothing to remedy the problem of retiree incomes—a problem the Treasurer knows exists. It does nothing to help those most in need, and it does nothing to repair the problems with the current superannuation system. As John Piggott wrote in the Financial Review on Saturday, 22 May, this is `policy tinkering, not reform'. He said:

Population ageing has been on the political agenda now for more than a decade. The demographic facts are beyond serious dispute: there will be more growth in the retired population than in the number of people we currently regard as of working age. Workers will have more elderly to support—the current Australian age dependency ratio of 18 per cent will move to 35 per cent or higher in coming decades.

This must rank as a major demographic change. But there has been a recent tendency to suggest that economically this will not be a major adjustment after all. Perhaps this is why policy tinkering, rather than policy reform, has characterised the Australian approach to retirement policy over the past few years.

The interesting thing about that is that I do not know where there is the economic reform or the economic will to ensure that we have enough for retirement incomes and pensions. The Intergenerational Report quite clearly states that we will not. It quite clearly indicates that we will not have funds into the outer years to support all the programs that people in their older years need. It is just not there. So policy tinkering, not reform is exactly what we have before us today.

The co-contribution put up by the government is absolutely flawed, and everyone bar the Treasurer seems to know it. The fascinating thing about expanding this co-contribution and making it even better, according to the Treasurer, is that we have not had an experience of one year of this scheme being in place. So we do not even know to date how this scheme has fared. We do not know the take-up rate, we do not know how much money is going out, because we have not got to the end of the year to determine if it has been a success. If we do not know its efficiency or effectiveness, why have we expanded it already? It doesn't have anything to do with an election coming up or anything, does it? We certainly know that it is flawed and so do most of the senior writers, senior economists and senior people working within the superannuation industry. I would like to quote from an article by Brian Toohey from the West Australian. He said:

The problem is that many people on low incomes don't have a spare $1000. Yet the Budget papers assume that everyone gets the maximum possible extra subsidy. This looks good, but the Treasury does not believe everyone will get the maximum available co-contribution when it comes to calculating the cost of the new measure to the Budget.

The cost of $2.1 billion over four years is not trivial. But it is nothing like what it would cost if everyone qualified for the payment—as assumed in the 14 pages of examples.

But there is no bar to people being given the $1000 by a relative—or borrowing it. A number of super funds are offering loans of $1000 to attract the matching grant of $1500. Unless the fund performs really badly, that's a pretty good deal.

If the idea catches on, it won't be long before the cost to the Budget doubles or triples.

Yes, you can probably borrow the money from someone—at 14 per cent if you are really lucky; maybe 24 per cent if you go to a loanshark—and end up having to pay more back to get a matching $1,500. That is what we are going to see happening. People are going to be lulled into these schemes when they hear someone say, `Get $1,000 off us and you'll get $1,500 out of the government.' But at what cost? That is the scary part. Another good example comes from Shauna Black in the Advertiser, who wrote:

Tower Trust manager of superannuation services Peter Burgess says the co-contribution can only be paid after you have filed your tax return to verify your income, your superannuation fund has filed its return to verify your contribution and the government has decided into which fund it will pay your co-contribution.

... ... ...

Your superannuation fund must be able to accept personal contributions.

... ... ...

Mr Burgess points out that even those who earn too much to qualify may be able to contribute $1000 to a low-income spouse's account so the spouse can get the benefit.

“In that way, it's not means tested and many families will be able to use it,” he says.

That is right. Again, only the wealthy will benefit from this because only the wealthy might have $1,000 extra to put into the account of their low-income spouse. It is probably only the wealthy who will benefit from this, because there will be no means test to say, `If your partner earns well over the cut-off range, they don't qualify so you don't qualify.' There is nothing in this that will assist low-income earners. There is nothing in this that will ensure there are savings into the future.

A fairly telling point is that it is the government that decides into which fund it goes, and your fund has to be able to take those dollars. A lot of funds exclude you putting in large lump sums. Also, if you are a defined benefit, there is absolutely no point putting money into that fund. So this is not for everyone. It will not work, and we do not even know how it is working yet we are expanding it.

Reducing the tax on the superannuation surcharge gives relief to four per cent of the work force, to those on the highest salary—like us. So we are getting the double whammy. We get the tax cut and the superannuation surcharge reduction. That is obscene. We are not the people in the community who need assistance. The assistance is not going to those who need it most. Barbara Smith of onlinesuper summed it up well when she stated:

... these measures are ill-targeted in helping those in greatest need.

... ... ...

The budget also did nothing to address the small superannuation savings of many baby boomers, who only started off contributing the mandatory 3% of their income to super funds within the last decade or so when it became compulsory.

Much higher co-contributions are urgently needed for Australians over 50 so that they can build up significant savings in their remaining working years and ease the burden on government pensions when they retire. Even if they do qualify for the maximum co-payment, $1500 a year won't make much difference to their super nest egg if they've only got a few years left in the workforce.

More importantly, we need an immediate reduction in the tax on super funds so they can grow to a size which will generate a sufficient retirement income stream, plus a reduction of taxes on complying superannuation pensions or annuities.

She summed it up well when she said:

... these measures are ill-targeted in helping those in greatest need.

The government has done nothing to stress the amount of savings you actually need to ensure you have a good retirement income. It has done nothing to assist the most important area—that is, the taxation burden on superannuation. For an effective measure to assist all, the government should follow the ALP's lead and reduce the contributions tax. This has the greatest benefit for all—the greatest benefit across the spectrum of all income groups. Again, as the Australian Institute of Superannuation Trustees stated:

There is no relief on the contributions tax which is the biggest single charge on superannuation funds, and affects all members including the lowest paid. The government continues its tax take of 15% of all contributions.

... ... ...

The Budget provides some relief from the superannuation surcharge tax ... Again this measure assists the higher paid only.

Funds still have to deal with the high cost of administering the surcharge.

Despite industry advocacy, no measures were provided to encourage retirees in allocated pensions or income streams to re enter the work force by enabling their allocated pension or income stream to be stopped temporarily. This goes against the government's stated objective of encouraging retirees to return to the work force to ease the burden on the age pension system.

... ... ...

Trustees want to see measures to improve the retirement savings of the entire work force, especially those, primarily women who have broken work patterns and have missed out on superannuation in the past.

So the whole industry is shaking its head saying: `Why has the government introduced these measures? They are not going to assist in any way, shape or form.' The government and especially the Treasurer should be embarrassed about their lack of genuine action on super. As I said at the start, the Treasurer said his next big thing was to reform super. If this is his reform, he needs to go back to school and understand what the word means because there is nothing here. He should be embarrassed as should the government for their lack of action.

The ALP has always been the champion of superannuation. It is the ALP which has extended superannuation to all. We can hold our heads high, because the policy we announced some time ago outlines genuine reform which will greatly improve this system and assist all in retirement. I will quote just some of our policy which is designed to reform and help super:

Labor will for the first time in the history of retirement incomes in Australia set an appropriate retirement incomes goal for Australians.

... ... ...

Labor believes that the long-term retirement income goal for all Australians should be a minimum of approximately two thirds (sixty five percent) of the gross income that individual was receiving on retirement at sixty five years of age—that is “65 at 65”.

... ... ...

Labor's goal is to eventually eliminate the contributions tax on savings.

... ... ...

Labor will begin by reducing the contributions tax by two per cent—from the current fifteen percent to thirteen percent—in our first four years of government.

... ... ...

Labor will protect superannuation balances from excessive fees and charges and commissions applied to SG contributions.

We have said that we will fix superannuation. We will go the hard yards and do things that people have been crying out about. People have been crying out about two things, and one of them is the lack of return on their investments. None of us can fix that with a magic wand. It is fairly disheartening to get your super statement for your fund to find you are going backwards instead of forwards in terms of outcomes. There is not a lot you can do about that; the market plays those games. But you can certainly do a lot about taking off the massive burden that fees and charges impose on superannuation. A one per cent fee can reduce your retirement income by about $30,000. You think, `One per cent—it's not much of a fee,' but it can reduce your retirement savings by a massive amount.

So we need to do things like reduce the contributions tax, tackle fees and charges, and ensure that people are saving appropriately for their retirement incomes now. We are telling people who enter the work force now, in their 20s, `Now is the time to save; don't wait.' If you start saving, compound interest has that glorious effect of ensuring that you have a decent retirement income. It is not something you can put off for a rainy day; it is something you need to do now. This is poor, ill-directed legislation that does nothing to fix the problem which must pay for our future way of life, and it should be rejected. The amendment moved by the member for Hotham should be supported.