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Thursday, 19 June 2003
Page: 16998

Mr COX (10:49 AM) —Today we are considering the Superannuation (Government Co-contribution for Low Income Earners) Bill 2003 and the Superannuation (Government Co-contribution for Low Income Earners) (Consequential Amendments) Bill 2003. These bills implement proposals for a co-contribution for low-income earners who make voluntary contributions to superannuation. The co-contribution replaces an existing tax rebate for superannuation contributions from low-income earners. It will provide for dollar for dollar matching of voluntary super contributions up to a cap of $1,000 where the member has an income, including reportable fringe benefits, of less than $20,000. For those on incomes above this level but below $32,500, the cap is phased down by 8c for each dollar of income.

Labor support the low-income co-contribution and will be supporting these bills. We welcome the government's decision to introduce the co-contribution as a separate bill. We are hopeful that they have abandoned their cynical strategy of linking the co-contribution to their exclusive tax cut for high-income earners contained in the surcharge rate reduction bill. Labor have made it clear that we will not be blackmailed into supporting a reduction in the surcharge tax, and we would hope that the government have taken heed and accepted our support for the co-contribution in the same good faith as it has been offered.

While Labor supports this co-contribution, it would be remiss of me not to remind the House that the proposal before us is a pale imitation of the much more extensive co-contribution arrangement proposed by the ALP when in government in May 1995 in its Saving for Our Future statement. Those 1995 proposals provided for government matching of contributions of up to three per cent of average weekly ordinary-time earnings and about $1,400 per annum in current levels, which did not phase out until the member achieved a wage of twice average weekly ordinary-time earnings or $93,600 in current terms. The current Treasurer committed an incoming coalition government to implementing the 1995 ALP co-contribution proposals. The coalition government subsequently reneged on that promise and implemented instead a savings rebate, which in turn it quickly abolished. Labor's co-contribution was designed to get superannuation contributions up to a level which would ensure that people had a decent standard of living in their retirement, and the member for Blaxland spoke extensively on this last night in the debate on a previous super bill.

When the co-contribution measure was put into the budget in 1995, it was to take effect from 1998-99. In that year, it was to cost the taxpayer $1,080 million, and that was in the budget papers. It was a budget measure of the previous Labor government. When the current Treasurer decided to abolish it, in direct contravention of an election promise, he recorded in the document `Budget measures 1997-98'—which was circulated with his budget—the following financial implications of removing it. It would cost $1 million in 1997-98—which I thought was a little unusual at the time—and it would save $1,079 million in 1998-99. If you add those two amounts together, it would be equal to what the Labor Party had in its budget papers in 1995—so, on costing it in government, the Howard government had decided that the original costing of it by Labor was correct. It would save $2,414 million in 1999-2000, and it would save a further $3,980 million in 2000-01.

We are now a couple of years on from that, and one could expect that the savings produced by that measure would probably be around $5 billion a year. We had a Treasurer who decided that he needed to make some public savings, and he decided to do it very much at the expense of private savings and very much at the expense of the future retirement incomes of a great many working Australians. I think it was one of the most pernicious savings options that this Treasurer has taken. Just as the Treasurer has tried to transfer the cost of medicines, the cost of seeing a doctor and the cost of higher education from the public sector to Australian families, he was more than happy to make public savings at the expense of the retirement savings of ordinary Australians.

In the previous year, he made some quite substantial savings which, in the third out year, were worth about $7 billion. In the subsequent budget, he was very keen to hold the line, but it seems the only way he held his savings line in that year was to abolish the co-contribution scheme. It is a matter of great regret to me, and I think it is one of the most dreadful things that Peter Costello has done to Australians who were saving for their retirement. It is absolutely scandalous. He then proceeded to declare victory over the budget black hole that he had postulated. Having declared victory over it, he has gone on something of a spending rampage ever since—a tax and spend rampage that has helped make Mr Costello Australia's highest-taxing Treasurer. It is worth pointing out that the net effect of new policy decisions made by this government on the budget bottom line has been to the detriment of the budget bottom line for the periods reported in the budget reconciliation and measures tables. Whatever remains of the current financial year when you are bringing down a budget for that year and the next three financial years—the out years—the total net impact on the budget bottom line of all of this government's new policy proposals has been to the detriment of the budget bottom line by $65.4 billion.

Mr Costello's decision to abandon Labor's visionary policy of a co-contribution was an act of supreme dishonesty, but it was not a great surprise. Indeed, he was telling people in the superannuation industry, when he was still contemplating doing something to meet the co-contribution promise that he had made at the election, that he would find another way of doing it but he would make sure that, whatever way he found of doing it, it was not Labor's way of doing it.

The Treasurer and this coalition government do not really believe in super—as with Medicare—as a policy to boost the retirement savings of ordinary Australians. They opposed compulsory super from opposition and they are determined to undermine it from government. While the co-contribution measure is welcome, it does nothing for those who are unable to make additional voluntary contributions or whose incomes are above the very modest figure of $32,500 a year. If you earn around that figure and you have a spouse and two children, you do not get a health care card and are, therefore, unable to bulk-bill.

Millions of working Australians are groaning under the weight of the contributions tax on top of the negative investment returns in the last financial year. Many are carrying the additional burden of excessive fees and advisers' commissions. Measures are needed to boost retirement savings for all fund members and to restore confidence in superannuation. Instead, the government has only offered a benefit for low-income earners who can find some spare cash for voluntary contributions; yet it can find $525 million over three years for an exclusive tax cut for people on higher incomes, whether or not they make additional contributions. The matter of the cut to the co-contributions tax was discussed in the debate earlier, which we have completed.

Labor have a better plan. We support the co-contribution, with some reservations, as I will explain later. We oppose the government's tax cuts for high-income earners. We will continue to vote against it, as we did when it was last brought before this House. As outlined by the Leader of the Opposition, Simon Crean, in his budget reply, Labor will redirect the cost of the government's exclusive tax cut and the cost of unfair and unnecessary changes to public sector superannuation into cutting the contributions tax paid by all working Australians, from 15 per cent to 13 per cent over four years. Labor's plan to cut the contributions tax is the best way to deliver higher retirement incomes to millions of working Australians.

At a time when negative returns and high fees and charges are eating into super nest eggs, action is needed to ease the superannuation tax burden on all working Australians. Labor's plan is affordable and will add thousands of dollars to the retirement savings of ordinary Australians over the period of their working lives. If the Liberal government were willing to adopt the Labor plan for a fairer tax cut, we could have the best of both our proposals—a tax cut for all fund members and an additional incentive for low-income earners to top up their contributions.

While Labor support this bill, we do so mindful of a number of concerns about this measure that were raised in many of the submissions to the Senate Select Committee on Superannuation. These concerns went to the effectiveness and equity of the proposed co-contribution scheme. A number of submissions to the committee argued that the proposed co-contribution arrangements leave considerable scope for abuse, in that comparatively well-off people will make contributions in respect of family members in part-time employment. The ability of sole breadwinners in the salary target range to make contributions to superannuation in order to qualify for the matching co-contribution is untested and, as the evidence put to the committee showed, is unlikely for most in that range. The number of people estimated to have received the full $1,000 is only 75,000, according to evidence provided by the Association of Superannuation Funds of Australia. That is from a total pool of 4.4 million people with incomes of less than $32,500, according to ATO evidence. The Association of Superannuation Funds of Australia have indeed done a wide range of very thorough research, and I am sure they can totally support their evidence to the Senate committee.

Noting these concerns, we believe that enough people in genuine need of assistance will benefit from this measure to justify our giving it a go. However, it is of the utmost importance that the effectiveness and fairness of this measure be tested in an informed public debate following its implementation. To this end the Labor Party will move an amendment to the bill to include a provision that would require the government to report on the operation of the co-contribution arrangements. These amendments will ensure that parliament and the wider public have accurate information on the take-up of the co-contribution. The reporting required by these amendments will show the proportion of the target group who are receiving the co-contribution and whether the benefit is going to those in genuine need.

It is worth pointing out here that, despite its rhetoric about its Charter of Budget Honesty, this government has not lived up to its promises to the Australian people about transparency in all sorts of financial issues. This is one area where, if we are going to have an informed debate about the value of superannuation—how to tax it, how to provide incentives for it, how to give people confidence in it and how to encourage people to save the maximum amount for their retirements—we need proper figures and open and transparent reporting. Labor's amendment will provide that. No doubt the government will say that these amendments are unnecessary, and that it will conduct an internal review of the co-contribution anyway, but this is not enough. Only legislated reporting will ensure that the outcomes from this policy are given the public consideration required.

The government is asking us to take a leap of faith in supporting this measure. It is asking us to support the proposition that, with targeted assistance, low-income earners will contribute more to super and that relatively well-off households will not abuse the measure through income-splitting and other arrangements. In taking this leap of faith, we have a right to know down the track whether the proposition was well founded. Despite these concerns, we hope the co-contribution works, and we will support this legislation.