Point of View 20/07 – Do we really need more reform?

What issue has been the subject of more government enquiries than Sydney's second international airport? The answer has got to be Australia's superannuation system. However, for most politicians, it is a subject that is so complicated, so boring and so unconnected with the winning of votes, that even a simple mention of it causes their eyes to glaze over.

Searching around for his next big challenge, the Federal Treasurer was recently indiscrete enough to mention the "S" word as a possible focus for reform.

Seeking to dampen speculation, he then went on to say that any enquiry might not occur while he was Treasurer. Given our tabloid media's penchant for conspiracy theories, it is surprising that this remark did not immediately trigger leadership speculation!

Nevertheless, having let the cat out of the bag, the Government is going to find it very hard to put it back. Chances are that after the tumult and shouting surrounding the GST have settled down, yet another government sponsored superannuation enquiry will indeed take place. Not that we don't know all the questions and the answers already. It's just that our system of government seems to thrive on enquiries, if only as a technique for delaying unpalatable changes or ensuring, by careful choice of committee membership, that "appropriate" recommendations are likely to be made.

Heaven knows that the "big picture" of our superannuation system has been debated interminably. Most commentators now accept that the compulsory Superannuation Guarantee scheme has worked well over the last 15 years and that as a consequence, a solid start has been made in the building of private savings in this country.

It would be a tragedy if some ideologically driven committee appointees were to recommend cessation of the Superannuation Guarantee scheme, although the prospect of its demise is diminishing. This is because the SGC has become the backbone of the superannuation industry, which would look extremely sick if compulsion were to be dismantled. Whereas at the beginning of the current Government's term, noises were made about the need to remove compulsion in order to achieve an ideologically pure free enterprise system, now such noises are rare.

Indeed, any attempt to do away with the SGC would be met with howls of disapproval, not only from the Government's enemies, but also from its allies at the big end of town. This is particularly so for the insurance companies and banks whose business strategies of mergers, acquisitions, growth and profitability are built on the maintenance and extension of compulsory superannuation contributions.

Nowadays, the SGC is not the "socialist plot" that it was in the 1980s. It has been transformed into one of the sturdiest pillars of the capitalist system in this country. It is not uncommon to hear bank CEOs referring to the SGC as a "great system endowing excellent benefits on the people of Australia" - a sure sign that it's good for business.

So, assuming that the SGC is an immovable rock, what else should there be an enquiry about? As indicated earlier, we know all the questions and we know all the answers. We know that the surcharge tax is an administrative nightmare. We know that Australia is the only member of the OECD that taxes superannuation.

We know that Australia is the only country in the world that taxes superannuation at three points. We know that we've made 3,000 changes in superannuation laws since 1985. We know that workers don't love their superannuation. We know that there is a need to dovetail superannuation and the aged pension system. We know that tax rates on superannuation should be moderated as a result of low individual tax rates. And we know that people should be encouraged to take income streams, rather than lump sums. All of this we know.

So why do we need to enquire into it all again? The need is to be found in the desirability of having one last go at getting the "big picture" right. It is utterly naive to think that we could reach bi-partisan support on the subject. There is simply too much tax revenue, too many vested interests and too much power involved to realistically expect such an outcome.

However, with the SGC in place as the fundamental foundation of Australia's national retirement incomes system, most of the picture has been painted. The challenge now is to get some kind of settlement on the important details, so that people can indeed "plan for their futures with certainty and confidence", as promised by Treasurer Paul Keating in his 1988 Federal Budget speech.

<I>Robert M.C. Brown is executive director of Bridgeport - Advisers & Asset Managers.