Senator SHERRY (9:03 PM) —There are a couple of matters I do want to raise with the minister. One is the over-arching issue of the effect of these measures on private saving. There are two major schedules in this legislation that affect or impact on private saving. One relates to the rebate which formerly was to be delivered as a superannuation co-contribution. The other is in respect of the government's changes implementing `choice' with respect to superannuation, which must have some impact on private saving.

Quite specifically, I would like the minister to outline in detail—it may not be tonight, it may be tomorrow or next week, hopefully not next year—with respect to the savings rebate: what is the precise addition to private and national saving of the savings rebate? I do appreciate certain assumptions would have to be made about the addition to private saving and to national saving, but it would be useful to have that modelling very precisely.

Related to that, the government maintains with respect to its `choice' superannuation regime—and I am only paraphrasing from memory, I am not quoting exactly—that efficiencies will be enhanced and competition will drive down costs. The logic of that argument is that if costs do go down—I do not accept it but let us assume, Senator Kemp, the position of your government—as a result of competition, returns will be improved. What will be the net effect to private saving and national saving as a consequence of your proposed changes to the retail delivery of superannuation, which is in effect the proposed model of `choice' that you are offering in this legislation? This is an important issue.

There are a couple of other issues I would like Senator Kemp to address in the context of private saving. I do not know whether he is aware but, in budget paper No. 1, it is predicted that private saving will go down. That, I think we would both agree, is a matter of concern and it has serious long-term ramifications. If private saving is going down it has an impact on investment and jobs, it has an impact on current account and it has an impact on the level of Australian ownership, vis-a-vis overseas ownership. It has those important impacts.

But I am concerned about the words in Budget Paper No. 1, page 3-11, in respect of private saving—and I would like you to address each of these points, Senator Kemp. It says:

There is also the prospect that the improvement in public saving at the Commonwealth level will be complemented by structural increases in private saving over the medium term.

There is `a prospect', Senator Kemp. I would like you to explain the measures in the legislation we are considering. What is the view of the government, the Treasury, about how they will assist private saving? What is the medium term? Is it three, five or 10 years time? I think that is important.

There are other issues relating to private saving. There is an acknowledgment that the superannuation guarantee will add 2.1 percentage points to private saving. It would have been nice if there had been an acknowledgment that this was a Labor initiative. Whenever you blame us for something that you allege is wrong, it is a Labor initiative. Whenever there is something that you hold onto, you do not acknowledge and give credit. You have carefully modelled the superannuation guarantee and its impact—I think it was actually modelled when we were in government, and you have continued to quote but not acknowledge the government that introduced it—so you certainly should be able to give us some sort of reasonable approximation of the effect of the rebate, how it will increase private saving and the measures you are introducing in the name of choice.

The next subpoint in respect of the prospect of private saving increasing is the savings rebate itself, and I have dealt with that. But, Senator Kemp, the next sentence says:

More generally, the tax reform now in prospect has the potential to enhance private saving.

My assumption is that this is a reference to a goods and services tax. I do not want to debate that in any detail because this is not the time or the place, but I would like you to specifically address how a GST increases private saving and what comparative evidence you have for this assertion to be made in the budget paper.

Finally, there is the issue of private saving. I have to acknowledge, Senator Kemp, that you did deal with the general issue of private saving in your concluding remarks in the second reading debate on this legislation. The final point made about the prospects for increase in private saving puzzles me. It says:

Finally, quite apart from these policy influences, demographic change over the next decade or so is likely to see a rise in the proportion of the population in age groups which historically have been high savers and a decline in younger, low-saving age cohorts.

I do not think there is any argument that we have got an ageing population. I think the current number is about 12 per cent over 65 and, by the year 2050, the number will be 22 or 23 per cent—close to one in four. They are net dissavers, and that is a slow and steady demographic ageing of our population. How can it be claimed that the steadily ageing population, who are, as I understand it, dissavers—historically, they are high savers while they are working, but then they run down their savings when they reach retirement age—will increase private saving?

If you look at page 4-55 in Budget Paper No. 1, Senator Kemp, you will see that this is very well illustrated, because page 4-55 outlines assistance to the aged. By way of example, aged pensions and allowances in 1997-98 will cost the budget $13.4 billion. In 1998-99, this budget, they will cost $14.1 billion, rising in three years time—2001-02—to $16.5 billion. That is an increase in payment of aged pensions and allowances because of the ageing population. There is no doubt there is an increase in the number of people over the age of 65. That is an increase in four or years—five financial years—of $2.1 billion in assistance to the aged. I acknowledge it is quite proper and correct that that assistance should increase. It is not because of an increase in pension payments as a per centage of average weekly earnings. Then we have residential care and subsidies for the aged. They will go up as well over that five-year period. Home and community care is going up. There is also the partnering allowance.

They are examples of increasing costs to the budget because of our ageing society. They are further evidence as to why I question the claim that demographic changes are likely to lead to higher private saving over the next decade or so. I would like you to deal with those issues in the context of savings.

There is another matter, Senator Kemp. As you would be well aware, the Workplace Relations Amendment (Superannuation) Bill 1997 is part of the parcel of legislation that we are considering here, albeit it separately. It requires the removal of superannuation as an allowable matter from the workplace relations bill. I would have appreciated knowing that you had changed the operative date of the super choice regime—you have put the date back to 1 July 1999 for new employees. What is the precise position of the government with respect to the operative date for Workplace Relations Amendment Bill 1997 [No. 2] ? You have changed the date for the operation of choice, but I have seen no announcement about the operative date for workplace relations excluding superannuation as an allowance matter should that pass the Senate. Again, I would like a response on that.

Removing superannuation as an industrial matter is an important issue. We will be considering the choice regime during the committee stage tonight. For this to work, there have to be changes to the Workplace Relations Amendment Bill. You have proposed removing superannuation altogether. The Senate select committee will be reporting on this bill tomorrow, and I will probably take the opportunity to speak to it at that stage. I will give you notice of my concerns now because we are effectively dealing with the same package of legislation. Whilst you are looking at the effect of private saving modelling as a consequence of the rebate and choice, have you taken into account in that modelling, if you have carried it out, the effect of removing superannuation as an industrial matter? It has a number of effects which I think you would have to acknowledge.

The removal of superannuation as an industrial matter effectively removes issues from a number of awards. Certainly the two industries that were highlighted, but by no means the only industries, were the retail industry and the hospitality industry. There was evidence—and it was not refuted—that there would be tens of thousands of employees in the retail industry and the hospitality industry who would be covered by the SG minimum of $450 per month for super contributions. There are some tens of thousands of people who would miss out on superannuation contributions who currently receive it as a consequence of removing super as an industrial matter. I would like to know whether you have taken that into account in the modelling you have done of private saving. I am raising all of these matters now because they relate to the very important issue of the modelling of private saving.

A related issue is that, with the allowable move towards payment of superannuation half yearly or yearly rather than monthly or quarterly, the information that the superannuation committee received was that this would result in a reduction in end benefit of between 3½ and four per cent of superannuation over the total saving period. Have you modelled the impact of that as a consequence of payments of superannuation occurring not monthly or quarterly but half yearly and yearly? As a consequence, interest on interest is reduced, and therefore the savings in the accounts are reduced. This morning I had material incorporated in Hansard which gave examples of an industry fund at a consistent earnings rate of eight per cent, assuming 41 years in the fund, versus—(Time expired)