What is really motivating the Retirement Income Review?
When the former chief of staff to a former Federal Liberal Treasurer is appointed to head up a Review of the Australian Retirement Incomes and that person is to be assisted by an activist academic and a lawyer/banker then the financial services industry should pay very close attention.
The influence of former Federal Treasurer, Peter Costello, is writ large on the retirement incomes inquiry not just because the man appointed to head up the inquiry, Michael Callaghan was once Costello’s chief of staff but because another member of the inquiry panel, Carolyn Kay, is on the board of the Future Fund which is now chaired by Costello.
Then, too, academic Deborah Ralston is chair of the SMSF Association and was a significant voice during the 2019 election campaign against the issue of the Australian Labor Party’s highly controversial policy proposals to pare back dividend imputation.
When those factors are taken into account with many of the recent utterances of key Coalition backbenchers around superannuation, there would seem to be some justification in the nervousness which has been expressed by more than a few superannuation fund executives about what the Government really wants to achieve from the inquiry exercise.
In particular, there is nervousness about whether the Government will seek to leverage the inquiry to abandon its timetable for increasing the superannuation guarantee (SG) to 12% by 2025 – something which some Coalition back-benchers have suggested ought not occur and against which Ralston has also spoken.
Indeed, barely days after the Treasurer, Josh Frydenberg, announced her appointment to the review panel Ralston was quoted in the national media echoing the views of the Grattan Institute that it would force low-income workers to forego too much money.
All of this needs to be seen against the background of a growing view in the superannuation industry that the Government has two key objectives it wishes to achieve from the retirement incomes review – scope to exit the SG increase timetable well before it reaches 10% together with the ability to reduce the beneficial tax treatment of superannuation, particularly for large balance holders.
If some of the Government’s more vocal back-benchers have their way, the review might also traverse the question of whether superannuation should be made entirely opt-in for low balance holders and those aged under 25.
There are, of course, entirely legitimate reasons why the Government should be holding the retirement incomes review not least the better harmonisation of the superannuation/age pension/health cost settings to reflect the challenges and complexities of an ageing population.
If that is the Treasurer’s motivation then the inquiry is both timely and welcome. But it is hard to look past some of the political motivations for doing so, not least seeking to curb the power and influence of industry superannuation funds and the perception that they act as a funding conduit for the Australian Labor party.
The Government should not allow the review of retirement incomes to become a political battle ground. Doing so carries with it the risk of undermining an industry which has delivered long-term benefits to Australia including helping it weather the global financial crisis.
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