Tribalism and defensiveness of Paul Keating’s legacy is making it impossible to have a nuanced conversation about superannuation reforms, according to Brendan Coates, economic policy program director at the Grattan Institute and author of an influential report questioning whether the superannuation guarantee should be raised to 12 per cent.
Coates engaged in a wide-ranging debate with Julia Fox, board member at REST and national assistant secretary of the SDA – the union for workers in retail, fast food and warehousing – where he said the superannuation industry is “very tribal” and could play a greater role pushing for policy changes that benefit members more broadly, rather than just pushing for things that benefit the industry itself. Coates and Fox didn’t always see eye to eye in the discussion hosted by Investment Magazine in partnership with AIA Australia as part of its Future of Super podcast series.
Coates said the superannuation industry’s focus on CIPRs and insistence on Keating’s vision that the superannuation guarantee ultimately reach 12 per cent had been to the detriment of focusing on fixing other parts of the system likely to have a greater impact on the wellbeing of lower socio-economic groups, such as raising rent assistance and bolstering the disability support pension.
“The industry is very careful and very defensive of preservation, and Paul Keating as you know is very defensive of that too, and you know you can’t have a nuanced conversation in the way you should,” Coates said.
Accessing super for housing deposits
He said superannuation should be accessible for a narrowly-defined cohort to use for a house deposit, for example people who are on low incomes and over the age of 40. Making it accessible to a larger cohort would risk pushing up the market and exacerbating the problem it is trying to fix.
He also said a minimum level of preservation could be set, say 9 per cent, allowing people to then opt to take out money above that and potentially invest it in self-education or paying down a mortgage in the prime of their lives.
But any mention of issues like this tends to be “like lighting a match under a bonfire,” he said.
Coates said superannuation deals with a behavioural bias against saving adequately for the future, and disputed that the superannuation system is primarily there for low-income people. The aged pension “is definitely the number one thing that is helping that cohort, and we should not shy away from that,” Coates said.
Aiming to increase compulsory superannuation to the point that a fairly universal aged pension becomes a pension for only a small minority risks the unintended consequence of a Coalition government one day cutting the pension, he said.
Effective, sound and sustainable
Fox said the superannuation system is effective, sound and sustainable and has offered superannuation widely where before the 1980s it was largely reserved for public servants and people working in multinational firms.
“I think that’s the purpose of super,” Fox said. “It’s for low and middle-income Australians to be able to have a decent retirement life and I think the system is definitely not at full maturity yet.”
But there is room for improvement, as super is not paid on every dollar, not paid to every worker, and shouldn’t have a $450 a month threshold for super guarantee eligibility. Superannuation should also be paid on parental leave–both paid and unpaid–which would go some way to address gender equity issues in the system, she said.
The super guarantee should ultimately be raised to 15 per cent, she said. She is also against super being accessible for paying home deposits.
“You know, I was doing some talking to some younger members of our union and working in retail and fast food who just scoffed at the idea about accessing their super, when they’ve got a balance of $3,000. How is that going to help with a one million dollar property or the average, you know, property in Sydney? That’s just ridiculous.”