SUPERANNUATION (GOVERNMENT CO-CONTRIBUTION FOR LOW INCOME EARNERS) BILL 2002Cognate bill:SUPERANNUATION LEGISLATION AMENDMENT BILL 2002: Second Reading
Mr CADMAN (Mitchell) (5.53 p.m.) —I rise to speak on the Superannuation (Government Co-contribution for Low Income Earners) Bill 2002 and the Superannuation Legislation Amendment Bill 2002. Mr Deputy Speaker Wilkie, I know you cannot comment on the remarks made previously by one of our colleagues, but I am sure that there would be no way a person of your status and standing could possibly agree with those remarks.
The industry and commentators in all areas have remarked on the commonsense of the government in moving to assist in two important areas that are affected by superannuation, these being the overtaxing and the overcommitment of people. The government is moving on a commitment it made over 12 months ago to assist people at both ends of the spectrum as far superannuation is concerned. [start page 8042]
The Australian Labor Party want to pick bits out of the legislation and to add bits. If it is so bad, let it go through and let the government wear the criticism. The Labor Party should do that. The Labor Party have painted a picture of how unfair this process is. They are going to fiddle with it, negotiate with the Democrats, as they have indicated, and try to effect change to it. They seem to be saying that it is grossly unfair and that it very much favours the wealthy. They are not quite the words that the Labor Party used, but that appears to be what they think. They want to increase the advantage for the lower end and completely readjust the government's program, despite what commentators right across the board have said. There is an almost unanimous point of view as to the fairness of what the government is proposing, but the Labor Party think that it is grossly unfair. My comment is that if it is grossly unfair, the community will see that and the Labor Party will have a wonderful platform to run to the election with. They will be able to make great play in an election campaign of how unfair these proposals are. The Labor Party should not play with amendments; they should just let this process carry on and then they will be able to say to the Australian community, `We told you this was bad. It has turned out to be bad and you should not, as a community, support the government.'
The package that we are dealing with today is part of a better superannuation system that was announced on 5 November 2001. The government contribution is expected to increase the numbers of low-income earners making personal superannuation contributions. The government contribution will replace the existing taxation rebate for personal superannuation contributions made by low-income earners. The co-contribution will be more generous than the rebate it is replacing. The maximum co-contribution of $1,000 compares with the maximum rebate of $100. That is a very substantial increase. The government co-contribution will match personal superannuation contributions made on or after 1 July 2002 by eligible people with incomes of less than $32,500. That is what this legislation is about. That will mean that the maximum contribution of $1,000 will be payable to those with an income of $20,000 or less. The maximum contribution will reduce by 8c for each $1 of income over $20,000, with a sliding scale of contribution finally vanishing at $32,500. A minimum co-contribution of $20 will also apply, as long as the person is below the income threshold and has made some personal superannuation contributions during the year.
This is a marvellous program of support that links in with a package of superannuation reform that the government has been undertaking. Why is this necessary? The Treasurer released the Intergenerational Report at time of the last budget. That report tells us that the proportion of the population that is ageing is expected to increase and that the proportion of the budget spent on the age pension will increase from the current 2.9 per cent of GDP to 4.6 per cent of GDP by the year 2042. That imposes a huge policy challenge which, it appears, the Australian Labor Party are unwilling to tackle. I have read Senator Sherry's proposals. The proposals being put forward by the Labor Party in no way tackle the long-term problems of superannuation investment in Australia; they seem to fiddle with government policy. The Labor Party hope to attract votes through the changes that Senator Sherry wants to make. One of the biggest criticisms that can be made of the current opposition by the community—and the way the opposition are figuring in public support indicates this—is that they have not done the hard yards as far as policy development is concerned. The community is not attracted to policies that fiddle with the current government's policies. The Labor Party think that they are going to score with the proposals put forward by Senator Sherry, but that will not happen.
The OECD economic survey on Australia, released in August last year, found that:
Australia's age pension and superannuation systems combine to provide Australians, especially low income earners, with replacement rates above frequently-used benchmarks.
It reported that:
Replacement income rates are expected to rise over time as the superannuation element matures.
That is a good report, and that is good news. It indicates that we have a world-class superannuation system and retirement package. But the government feels—and rightly so—that more should be done. Most Australians feel there is more to be done. The package presented by the government prior to the last election was designed to encourage an attitude in Australians of saving and preparing for the future, because of the demographic changes so well identified by the Intergenerational Report. Unless we do that and start to make a move soon, the impost on future generations of Australians of sudden changes will be most severe. It seems to be the purpose of the Australian Labor Party to delay those changes by obstruction, which is forcing the government into more and more difficult budgetary decisions instead of allowing it to plan and prepare for the future in a rational and sensible way. The government is spending $28.7 million over four years to undertake an education campaign to ensure that employees, employers, and superannuation funds and their members understand these changes. I think the government must do that. Australians need to understand that change is inevitable and that it is better to prepare for it in an orderly and measured way than to have it foisted on them suddenly.
Changes not dealt with in this legislation but part of the total package include choice and portability of funds. Senator Sherry makes some remarks about that in the Labor Party's policy, in particular about disclosure, about choice requiring portability, and about the safety and preservation of superannuation funds. He says that the forward agenda for superannuation needs to be given serious attention. In a recent submission to the Senate Select Committee on Superannuation, the Department of the Treasury concluded: [start page 8043]
The SG in combination with the Age Pension can produce replacement rates in excess of 60 per cent for—
Australians on median earnings—
of 25, 30 and 40 years ...
That was a significant contribution, as was legislation passed already in this House to change the upper age rate at which people may work and continue to make personal contributions to superannuation from 70 to 75 years. Broadly, that is the package the government has prepared.
The measures currently before the House have been noted by the Investment and Financial Services Association Chief Executive Officer, Richard Gilbert, who said:
Passing this bill could relieve burdens on two heavily taxed groups at opposite ends of the income scale.
This was one of the organisations I was referring to when I said that the industry is enthusiastic about the goals that these changes will achieve. The government has already agreed to changes to the minimum wage eligibility for superannuation entitlements—that it be no longer $450 a month but $1,350 a quarter—despite some claims that there would be increased administrative costs. The CEO of the Investment and Financial Services Association says that:
It is a sensible result and it ensures savings are both widened and deepened.
That is just one of the many comments made about the decision to give people on low incomes the opportunity to enter superannuation schemes. The legislation also removes the disincentive for those at the upper end of the income scale. The superannuation surcharge—which was part of a government strategy in desperate times to cover a terrible budgetary inheritance from the Australian Labor Party—was put in place to recover the budget, which it did successfully. Now is the time to relieve of the penalty the people whom we want to encourage to invest in the institutions which put so much back into Australia—the superannuation funds.
The Australian Labor Party would rather people at the upper end of the income scale invested in things other than superannuation, but they have got it wrong. We need to encourage people at all income levels to invest in superannuation because the return, measured over a period of years, is much more satisfactory for the future economic development of Australia than investment in real estate. If the Australian Labor Party were to bring about the changes they are talking about, they would discourage those at the upper end of the income range from investing in superannuation. That is wrong. They have not devised a process which is logical, which hangs together and which would allow all income groups to invest fairly and properly in superannuation.
Over a period of time, the government have changed the superannuation guarantee from eight to nine per cent, increased the age limit for personal undeducted contributions from 70 to 75 years of age and permitted contributions of up to $3,000 in a three-year period per child under 18 years. These are enlightened processes which will encourage people into the superannuation system. We have increased the deductions for super contributions for self-employed people and, from next July, employer contributions will switch from annual to quarterly contributions.
The Superannuation (Government Co-contribution for Low Income Earners) Bill has been on hold. It should have been passed back in July, but it has been delayed because of the games being played in the committees of the Senate and because of problems with the Australian Democrats and the Australian Labor Party. The Labor Party seem to blame the Australian Democrats for everything, but the fact is that the Labor Party are the initiators of resistance. They are the initiators of the wish to obstruct. Without the Australian Labor Party, the Democrats could do very little in the Senate. The co-contribution for low-income earners will see the government match the $1,000 deposits of those earning less than $20,000, while the contribution will be reduced to nil for those earning $32,500. The surcharge will be reduced for upper income earners from 15 to 11.5 per cent over three years.
It defies logic that the Australian Labor Party are going to move an in principle amendment saying that this proposal is wrong but that they are then going to move detail amendments. It is obvious that this proposal is going to strike trouble again in the committees of the Senate, and I think that that is an inappropriate and improper way of dealing with something as important as retirement benefits. It is wrong that a total package, part of which has passed the parliament, should be held up for the sake of the perverse attitudes of a few senators. We need to have a comprehensive approach to saving, and it seems that the Australian Labor Party are encouraging the government to deal with low-income earners—and we should. I think it is a great proposal, but we need to keep high-income earners within the scope of superannuation as well. We should not be encouraging them to look for other packages and other investments. There is no compulsion for higher income people to have superannuation. The surcharge is a limitation on them, and I believe that if they were relieved of that surcharge over a period of time people would reinvest in superannuation. That would be beneficial to the funds, to future investment and to the advancement of Australia, as well as to the individuals and their families. The nation will benefit from the process. I recommend the legislation. I reject the arguments that I have heard today from the Australian Labor Party. They are not cohesive; they are mishmash, they are fiddling at the margin. There is no comprehensive approach to superannuation and they should be rejected.
Author: Alan Cadman MP
Source: House Hansard - 22nd October 2002
Release Date: 24 Oct 2002