During the week, Tony Abbott warned voters that Bill Shorten has his eye on their retirement savings: 'He regards your super as his piggy bank to break open whenever he needs money’.
For his part, the Labor leader claims to have his eye on superannuation concessions for the wealthy, which will soon cost the government more than the aged pension.
The truth is that funding required for both the aged pension for the poor and middle income earners, and super concessions for the wealthy, is ballooning, and each side of politics has a different plan to do something about it.
The Government revealed its aspirations in the 2014 Budget, when it unveiled a plan to increase the pension age to 70 and link increases to prices rather than wages, while declining to look for savings in superannuation concessions. These cost almost as much as the aged pension but are growing more rapidly and will overtake the cost of the pension within two years.
While the Government has freshly ruled out super tax changes beyond next year’s election, Labor has just announced it would bite the super concessions bullet and make two significant changes to the rules. Under a Labor Government, more people would be required to pay a higher tax rate on contributions, and the tax-free treatment of earnings would end.
This follows a consistent and blunt message from multiple sources: the financial system Inquiry, the tax discussion paper, Treasury secretary John Fraser, and respected economists. They all agree that the current concessions are unsustainable because they have become more like tax minimisation schemes than the savings incentives they were meant to be. In short, they are doing little to help ease reliance on the aged pension.
While it is always good for voters to be given a real choice in what the major parties are offering, the options need to be linked to solid policy thinking, and not merely so-called thought bubbles or captain’s calls, or even political imperatives. A comment from Liberal Senator Arthur Sinodinos seems to suggest that is exactly what the PM’s pledge to protect people’s piggy banks is about. He told Sky News: ‘It’s a strategic decision … I think it's really something that has come from the leadership.’
The Sinodinos comment is consistent with Shadow Treasurer Chris Bowen’s criticism that the Government too easily makes promises it can’t keep that are lacking solid policy foundation. 'They don't have the courage or ability to make and win cases for their policies during an election. Their preferred playbook is to spring surprises on the public after an election.'
If it had come from Government’s considerable policy making resources mentioned above, including its own financial system Inquiry, the PM’s message and rhetoric would be very different. Tony Abbott once praised the Nationals’ Barnaby Joyce as a 'uniquely gifted retail politician’, as if governing the country is about selling and not much more. More attention to wholesaling would help to get both pensions and super concessions on to a more sustainable footing.
Michael Mullins is editor of Eureka Street.
Piggy bank image by Shutterstock.