The worst global economic crisis since the Great Depression; super fund returns to slump to record lows, a rapidly deflating Australian dollar and dipping into the budget surplus – all bad news …….so it was a welcome relief to hear some good news amidst all the financial doom and gloom with the release of the Productivity Commissions report on Paid Parental leave.
Some might argue that now is the not the time to be talking about improving the lot of women, particularly in retirement, however its been a long time coming and its worth remembering that with, or without, any shortterm turnaround in share or commodity prices, Australia’s population is rapidly aging and more Australian women than ever are moving into retirement. Currently there are one million retired Australian women, with this figure expected to double to 2 million over the next two decades, and for the bulk of these women, retirement will mean an immediate, significant and sustained drop in living standards.
According to 2006 data, the average retirement payout for women was $63,000, less than half that for men. Even with assistance from the Age Pension, that’s not a lot of money to spread across 20-plus years – the time spent in retirement for most Australian women. Like their elder sisters, female baby boomers have largely missed out on the benefits of compulsory superannuation, but younger Gen X and Y women – and even recent school leavers – would be wrong to assume that our current system of compulsory super will guarantee them a rosy retirement, particularly for those who want to take time out of the workforce to raise children.
Encouragingly, the Productivity Commission has recognised that if Australia is serious about lifting female workforce participation rates, productivity and retirement outcomes for women, then we need a paid maternity leave scheme. It has also recognised that new mothers need to be compensated for the super they forgo when they leave the paid workforce to have a child and that super is part of our working wage.
The Commission’s recent recommendations to provide new mothers with up to18 weeks paid maternity leave, complete with a superannuation component, is to be applauded, and there were certainly some loud cheers coming from my office. In fact the Commission’s recommendations for women in the paid workforce were more than I had hoped for. On the downside the proposed scheme does not cover all new mothers.
Those not currently in the workforce are excluded from the superannuation component. AIST has recommended that the Government consider providing a one-off ‘Super Baby Bonus’ for this particular group of new mothers, and will again reinforce this view when responding to the commissions report. Paid maternity leave of course is just the tip of the iceberg, particularly when you consider that a woman who takes a six year career break faces an average loss in retirement payout of $77,000.
As good as our compulsory superannuation system is it fails to recognise that women are disadvantaged because they spend less time in the paid workforce, earn less, and live longer. It’s been calculated that you need to save 12 percent of your annual income for 40 years of your working life in order to achieve a comfortable retirement. Given that many men who follow the traditional full-time career trajectory will struggle to achieve this under the current system, where does this leave most women? While female workforce participation rates will almost certainly rise in the years ahead, current Rice Warner projections are that 15 years from now, the average retirement balance of a 60 year old woman will still be only twothirds that of her male counterpart. Some commentators are fond of saying that this is the 21st century and it’s time we stop thinking in terms of women and men.
But, until measures such as paid maternity leave become law and the gender pay gap closes, unless we are content for our sick or elderly parents to fend for themselves or for women to have no option but to send their children to crèche before they can even crawl – then it’s time to start thinking creatively about how our system including our superannuation system might be changed to give women –- a better deal.
Paid maternity leave is definitely a step in the right direction. Let’s hope that the current financial crisis doesn’t mean that the Productivity Commission recommendations are put in the bottom drawer and forgotten about. Forever being the optimist, that I am, I hope that the Government in its review of the adequacy of retirement incomes takes further measures to assist women, and other low paid workers to retire with dignity. AIST will certainly be advocating for a range of measures in its submission to the Government.