The Government backs away from a superannuation guarantee rise
The Government’s broader spin machine appears to be positioning the electorate for the news (hardly surprising) that while the Henry Tax Review may be in the business of recommending targeted tax breaks to keep people working, it will not be recommending an increase in the superannuation guarantee.
The Federal Government spent much of the latter part of January positioning itself for the release of both the Henry Tax Review and a third intergenerational report from the Federal Treasury.
While the Prime Minister, Kevin Rudd, chose to spin his comments around the burgeoning health costs that must inevitably flow from an ageing population, the Government’s broader spin machine appeared to position the electorate for the news (hardly surprising) that while the Henry Tax Review may be in the business of recommending targeted tax breaks to keep people working, it will not be recommending an increase in the superannuation guarantee.
Despite all the spin and apparent leaks, it is significant that no one within the Government chose to link the concepts of long-run health costs and retirement incomes adequacy — notwithstanding that the two are inextricably linked.
The economic rationale is really very simple. The more people can fund their own retirements and pay their own health bills, the less impact an ageing population will have on the nation’s social welfare budget.
It follows that a higher superannuation guarantee will make a significant contribution to the level of retirement incomes adequacy in Australia.
And perhaps the starting point for a rise in the superannuation guarantee should be the 15.4 per cent employer contribution enjoyed by those working within Treasury itself.
Most Australians belong to defined contributions schemes and most do not make voluntary contributions.
For them, any rise in the superannuation guarantee above the existing 9 per cent will make an enormous difference. A rise to the Treasury standard of 15.4 per cent would be an absolute boon.
As the Rudd Labor Government positions itself ahead of the May Budget and then clears the decks ahead of the next Federal Election, there will be many within its own ranks who will be wondering why, after so many years, it has failed to embrace one of the central tenets of the Keating Government’s retirement incomes policy.
National savings generated by the compulsory superannuation guarantee represent one of the key reasons why Australia has weathered the global financial crisis better than most.
An increase in the super guarantee may not be the policy flavour of the month in Treasury, but it is both necessary and long overdue.
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