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Wednesday, 2 November 2011
Page: 12420


Mr SHORTEN (MaribyrnongAssistant Treasurer and Minister for Financial Services and Superannuation) (09:31): I move:

That this bill be now read a second time.

I am introducing this bill because the parliament should pass laws which are optimistic, positive and constructive about Australia's future.

It proposes to increase the superannuation guarantee charge from nine percent to 12 percent.

And this bill abolishes the superannuation guarantee age limit.

This bill passes the test of being optimistic, positive and constructive.

We are living longer than ever before. Australians are reorganising their lives to adapt to longer life. So we should change our laws to move with the new rhythms of life.

Those of us over 65 now are only three million in number, but by 2050 there will be 8.1 million.

Today there are 50 of us in work for every 10 of us in retirement. By 2050, there will be 27 of us in work for every 10 of us in retirement.

These days we are probably at school, or in an apprenticeship, or in university or in learning until we are 20 or 25.

We then work for 35 years, and after that we have another 20 or even 30 years to think about things, play bowls, go fishing, join reading groups, write family histories and the rest of it. Thirty years, perhaps. Forty, maybe.

Life itself, our life in the best country on earth, has been redefined by these new unchangeable figures of a long and largely healthy life.

Longer life full of quality and meaning is the great gift of 20th century Australians to 21st century Australians. And we should celebrate it.

Therefore the goal of lifetime income security celebrates a long and quality life.

This bill declares that the Australian people understand change is inevitable.

This bill declares Australians reject the proposition that Australians should stay frozen in the moment.

This bill declares that Australians do not believe change is too hard.

This bill declares that Australians understand that as we are living longer, we need to smooth our prosperity over longer life.

Until 1985, private retirement income under the superannuation provisions only applied to the very wealthy and some well-paid employees in the public sector.

Until 1985 the great majority of working Australians had no viable access to the generosity of the superannuation tax provisions.

Until 1985 most Australians had to rely on the taxpayer provided age pension as their principal postemployment income system.

The first move towards universal access under the superannuation provisions came as part of the Hawke government's accord with Australian trade unions.

The Labor government of the day and the trade unions agreed that the profit share in the economy had to be restored to re-ignite private investment. At the time, unemployment and inflation were both hovering around 10 per cent.

In return for this restraint the government supported the ACTU's claim that the national wage increase of that year, three percentage points of wages, should be contributed by employers to a superannuation account in the name of each worker. Let the record reflect that the union movement of Australia fall went a wage rise in that year so that all Australians—union and non-union—could enjoy the basis of a decent retirement.

This was 1985. Then on 20 August 1991; the Hawke government's ninth budget laid the groundwork for the modern superannuation industry as we know it now. Not long after becoming Prime Minister, Paul Keating announced the introduction of the superannuation guarantee charge.

Under this path-breaking legislation, employer contributions to superannuation would rise from three percentage points of ordinary time earnings in 1992-93 to nine percentage points of ordinary time earnings by 2002-03.

Over the period when the superannuation guarantee charge grew from three to nine percent of employer contributions, unit labour costs fell. This meant that the cost of superannuation was rarely borne by employers. It was absorbed into the overall wage cost.

Had employers not paid nine percentage points of wages as superannuation contributions to employee super accounts they would have to have paid it in cash as wages.

As former Prime Minister Keating said in 2007, 'When you hear conservatives these days speak of superannuation as a tax on employers they are either ill-informed or they are lying. The fall in unit labour costs and the upward shift in the profit share during the period of the superannuation guarantee charge is simply a matter of statistical record. It is not a matter of argument.' Today the national savings pool is worth more than $1.3 trillion.

Our retirement savings system is the fourth biggest pool of funds under management on the planet.

The original superannuation guarantee legislation has since proven fundamental to the sustainability of our private retirement income.

Superannuation has proved to be a terrific idea, blessing Australia with a national institution that almost every developed economy in the rest of the world would give their eye teeth for.

It is now a mature idea.

Yet in terms of providing adequate retirement safety, the system still has great capacity to grow, to mature and to perform better for individuals who get to retire after a whole working life of superannuation behind them.

Compulsory superannuation's gradual introduction between 1992 and 2003 has smoothed the transition path and demonstrated how long-run reforms can be successfully introduced in our country. I only regret that these reforms were not introduced in 1972 so that those retiring now would have 40 years of superannuation rather than what they currently have.

Running the system as efficiently as possible is essential as it grows bigger balances and maximises the return to the taxpayers of the 15 per cent concessional tax rate.

I think it is obligatory to recognise the future's lament if we in the federal parliament do not take this opportunity to pass the law that will deliver 12 per cent compulsory superannuation contribution.

Of all the human emotions, it is perhaps regret we should fear the most.

It can be both instant and long-lasting.

In politics, the worst regret is always the regret for the path not taken, the timidity of the moment that cost the skirmish, the skirmish that cost the battle, the battle that cost the war.

Too often in politics we deal, or we end up dealing, not with the problem, but the politics of the problem.

The rhetoric of the problem—dare I even say—the spin.

We try to paper over with bravado the fragility within.

We lose the moment, and in doing so, the future.

No big economic reform is easy.

I understand that no change to our public life, no social contract—indeed no progress—can ever be taken for granted.

Labor has to fight for reform with all the guile and persistence of Fred Hollows, and with all the brash force of Henry Chauvel, racing his horses to Beersheba.

Victory is never certain in the field of Labor reform.

And to be fair, probably all of us—whatever our political leanings—who have the privilege to serve fully in this place, sooner or later realise that the big public policy struggles are inevitable, and intricate, and close-fought, and exhausting.

Long lasting economic change, whether floating the dollar or deregulating financial markets, require all the powers of political persuasion.

We in the Gillard government believe nine to 12 per cent is profoundly necessary, and we wish to calm the anxiety and explain the detail of what this reform would do.

This bill is pressing the advantage of doing the right thing by the nation and future generations, even if vested interests and the loud voices opposite shouting no make the going all the slower, all the tougher.

But this bill has an army of good voices and minds behind it, not the least some of the representatives of the Rail, Tram and Bus Union in the gallery today and other representatives interested in the retirement security of workers.

Just as an army of commonsense, real world voices raised their game to advocate for and help deliver compulsory superannuation 20 years ago.

It is to our political generation falls the challenge to finish the job of lifting superannuation.

I am inspired that always and every time the agents of change in our national story already written—from both sides of the political divide—have had to consistently and persistently argue the merits of the case, keep a firm grip on the detail and sketch out—with daily alacrity—what would happen if the changes were actually implemented.

The superannuation reforms the Gillard government is announcing—lifting the superannuation guarantee from nine up to 12 per cent and through revenue generated through the mining tax—have been met with a fiercely hostile opposition. So once again we find the going harder than such a good idea deserves.

Yet as the Minister for Financial Services and Superannuation I am finding that the strongest argument for these retirement savings reforms is not purely through a recitation of the detail.

But it is a simple plea that we must, for the dignity of hardworking Australians in retirement and to place less pressure on the age pension, secure the goal of adequate lifetime retirement savings. We measure adequacy through a simple test: what percentage of your income can you generate in your post-working life? This is what is known as the replacement rate.

Something in the order of 65 per cent or, even better, 70 per cent of average earnings prior to retirement, I believe, constitutes the winning tape for adequate retirement.

This plea is especially applicable now because of the arithmetic we are in, in this parliament, compared with the years, in the 1980s and 1990s, of large majorities in the lower house, and of civilised reason in the Senate.

When it comes to lifting super to 12 per cent, I know that most of our nation outside of the parliament absolutely get it.

Australians understand this right in their bones.

We believe that longer life is a gift that should be celebrated.

We believe there is little purpose in working hard your whole life and retiring poor.

We want Australians to live long lives that have quality and meaning.

We want those lives to go up to and last beyond 90 and 100 years and we want those lives to have been well lived, at the start, at the middle and at the end.

Which means, as the numbers of the old go up, we want to deliver a better deal, a new deal, on superannuation.

Our starting point is that nine per cent is simply not enough, especially for women, who have breaks in their career rearing the next generation when they are not earning, and therefore cannot put away the nine per cent for their future.

That is why we are finishing, as Paul Keating planned many years before, the nine per cent up to 12 per cent. And in doing this we are strengthening superannuation.

The superannuation guarantee charge percentage will be increased gradually and modestly with initial increments of 0.25 per cent on 1 July 2013 and 1 July 2014. Further increments of 0.5 percentage points will apply annually up to 2019-20, when the SG rate will be set at 12 per cent.

These superannuation measures and others contained in the earlier Stronger, Fairer, Simpler package of reform, along with the increases in the age pension which the government introduced in 2009, and the Stronger Super package of reforms will allow Australians to secure higher standards of living in their retirement than at any time ever before in Australian history. This bill also will make superannuation fairer for Australians of all ages.

Currently, the superannuation guarantee only applies to people under 70. The current legislation will lift the SG limit to 75.

However, as a result of the strong representations from the members of the Labor caucus and backbench, including not least the member for Petrie and the member for Blair, and from the crossbench the member for Lyne and the member for New England, we have decided to remove the age limit for superannuation contributions altogether.

This means that an additional 18,000 Australians over the age of 75 will get the benefit of superannuation if they continue working. This will commence on 1 July 2013 to provide sufficient lead time for older Australians and their employers to adjust.

Making superannuation contributions compulsory for these mature-age workers will improve the adequacy and equity of the retirement income system and provide an incentive for those older Australians who wish to remain in the workforce longer not to be discriminated against if they do so.

The actuaries tell us that the average Australian needs a replacement rate of between 65 and 70 per cent of their pre-retirement accustomed income to live comfortably.

Being satisfied therefore with just nine per cent means being satisfied with the idea that a large percentage of Australians will outlive the money set aside for them in their third age.

As we live longer, nine per cent just simply does not build enough.

It is why the minerals resource rent tax is so important to our nation's future.

The mining tax will pay for the tax concessional treatment of the additional three per cent superannuation guarantee—with workers retirement contributions taxed at 15 per cent instead of their marginal personal income tax rate.

It is a concern to me, and I know it is a great concern to the Prime Minister, that whilst women live longer than men, as I have said earlier, their superannuation balances are in fact on average 40 per cent lower.

With our changes, a 30-year-old woman earning around $70,000 will have an extra $108,000 retirement savings, providing her with an extra $2,900 to spend each year of her retirement, thanks to the passage of this legislation.

This is what good law is about, from a government that is confident about Australia's future.

In 2011, looking at the great economic reforms of the Hawke and Keating and Kelty era—reforms like superannuation—is sometimes a bit like looking at the silverware in our nation's economic trophy cabinet.

But I believe each generation has the opportunity to make its own history and to win its own economic trophies. We have an opportunity in this parliament at this time to build new achievements about which future generations will say: 'Thank goodness they passed that law when they did. Thank goodness they did not defer the decision and further compound the crisis.'

We can respect our history—as families, as tribes, as nations—while still making our own history in this place. We do not want to look back in 20 years time and regret the missed opportunity to lift superannuation from nine to 12 per cent.

We would rather be able to say, 'Do you remember when we lifted superannuation to 12 per cent—to where it should be headed?'

Do any of us really think that Australians would have saved $1.3 trillion without compulsory superannuation?

I would submit to the House that there are four pillars which today ensure a quality of Australian life for our fellow citizens:

the minimum wage

the age pension

Medicare, and

compulsory superannuation.

I might add that I think a national disability insurance scheme has the potential to be a new fifth pillar.

But let me be clear: the mission of adequate retirement savings is not yet completed, but the journey here has been a great national direction.

We will know that we have succeeded when all Australians understand that superannuation is as vital a pillar of our quality of life as Medicare and the minimum wage.

And let me say that when that happens, when the 12 per cent is achieved, Australians will have greater comfort than they enjoy now.

We are not quite there yet, but this reform agenda, together with the good work by the superannuation industry, is building a brand which will help Australians be secure in retirement.

In conclusion, our superannuation reforms will deliver a great good to Australians upon their retirement and to the Australian economy more generally.

The great good of a more comfortable post-work life.

The great good of concessional tax, compound interest and dividend imputation.

The great good of seeing Australia become even better at financial services.

The great good of reducing the cost of capital.

The great good of capital becoming available for nation-building infrastructure.

The great good of low inflation, high savings and a future that some around the world could only dream of.

The great good of a 30-year-old retiring at 65 with an extra $108,000 in their superannuation.

The government understands the forces of change that we have to navigate to secure our future prosperity.

The ageing of our population is one of those undeniable forces, and therefore the need for greater retirement savings is irresistible.

And, I submit, logically inevitable.

We always hear a lot from financial planners and investment strategists about savings and investment, but it is the politicians in the parliament who can make the real difference. And it is the politicians who need to grasp the relative immediacy of longer life spans—with their all too predictable dislocating consequences.

Under Prime Minister Gillard's leadership our national government is acting for the long term and we are strategically placing the nation where the challenges and opportunities of the future can be met with confidence and conquered with common sense.

Lifting the superannuation guarantee to 12 per cent is profoundly sensible.

Australians are optimistic about the future. We in this place should be as optimistic as they are.

This bill keeps the faith that Australians should and can live long lives full of quality and meaning. This bill keeps faith with the goal that lifetime income security for Australians is achievable.

And this parliament, I believe, should not miss the opportunity to do good.

I commend the ideas to you and I commend this bill to the House.

Debate adjourned.