For years, senior representatives of the federal Coalition have denied they intend to dismantle compulsory superannuation. As recently as July, the opposition’s official financial services spokesperson, Luke Howarth, told Investment Magazine sister publication Professional Planner he was a believer in compulsory super, even praising mega-fund AustralianSuper for the level of service he once received before inevitably (for a Liberal-leaning former small business owner) setting up an SMSF.
And when in government, then-superannuation minister Jane Hume repeatedly denied that voluntary super was on the Coalition’s agenda. While she and former Treasurer Josh Frydenberg oversaw the controversial early release scheme during the pandemic and introduced major new regulations for the sector under the Your Future Your Super regime, the government’s line was that compulsory superannuation demanded scrutiny and accountability – and rightly so – but not that it should be overturned.
Arguably these overtures were regularly undermined by the super industry’s favourite federal politician, Senator Andrew Bragg, who continued to throw barbs from the backbench and even advocate for voluntary super in his printed polemic, Bad Egg.
But, unlike Labor, the Liberal Party does not have a policy of solidarity and backbenchers are reasonably free to say what they like and even cross the floor. Those who follow politics closely will know there is a big difference between an outspoken MP getting some publicity on talkback radio and the official messaging of the party’s leadership.
Shadow Treasurer Angus Taylor has now crossed that line. In presenting the annual Warren Hogan Memorial Lecture in economics at the University of Sydney on Wednesday night, Taylor listed the superannuation system as part of the Coalition’s plan to firm up housing security.
It is of course already well-known that the Coalition is taking a policy to the election that would allow first-home buyers to withdraw $50,000 (and possibly more) from their super to purchase residential real estate. This was originally a Bragg thought bubble endorsed by then-PM Scott Morrison in the dying days of the last election and re-committed to by Peter Dutton in opposition.
Global alignment
But in his lecture on Wednesday, Taylor went further, describing the Coalition’s goal ambition to “[align] superannuation with other global retirement schemes – like 401(k)”.
Granted, the disclosure was a throwaway line in a broader speech about the state of the economy. And perhaps Taylor only meant that the Coalition wishes to resemble other global schemes in that one element of allowing retirement savings to fund home purchases.
But his invocation of the 401K scheme in the United States is telling. There are multiple ways in which the US system differs from ours, but the most profound is surely that it is not mandatory. Indeed, the very term “401(k)”, which Taylor chose to utter, is arguably synonymous with a voluntary approach in which employers choose to offer a retirement plan as a “work perk” to attract talent.
It is a central tenet of America’s culture of free-market enterprise and relatively deregulated industrial relations – and could not be more different in this way to the paternalistic but widely lauded system of mandated contributions advocated for and hard-won by the trade union movement in this country.
Taylor’s comments will inevitably raise eyebrows among the super industry and others who have long suspected senior Coalition figures secretly dream of dismantling compulsory super – a landmark Labor policy achievement.
Sources close to the parliamentary Liberal caucus privately estimate that a large number – perhaps a majority – of their colleagues do not support compulsory super on principle. And that is not that surprising, really. The party has a historic scepticism of government mandates and fought the introduction of the policy in the 1990s.
Plus, there is a crude political equation that the rising power of industry super is good for the unions and Labor and therefore bad for the Libs.
And to be clear, it is entirely fair and appropriate that these MPs harbour these views. Many of them have been elected on a platform of small government and deregulation, and millions of Australians would no doubt agree with them.
However, just how many millions is the elephant in the room.
While political parties should feel free to espouse any view or policy in a democratic system and seek a mandate from voters for it, the problem is that few have been willing to say in public what they are rumoured to be saying in private – probably because they simply don’t think they have the numbers among the general public.
Another sacred cow
In that sense, the super wars closely resemble the longstanding tension over Medicare, in which many in the Coalition deep down resent or disagree with the policy but accept that it has broad appeal and is seen as a “sacred cow” by the public.
The problem with these kinds of clandestine policy platforms is not simply that they are non-transparent. They also pervert public policy in the interim.
Arguably, the big issue in the heated superannuation policy sphere is that we rarely have the actual debate at the heart of the political dispute – whether super should be mandatory or voluntary for employers.
Instead, the industry and consumers are subjected to a seemingly never-ending series of proxy wars, such as tinkering with tax settings, introducing a performance test (which, ironically, also could be seen as a draconian government intervention in the economy) or weakening the default settings.
These policies may have merit in their own right. But if they are ultimately motivated by a desire to weaken the system, rather than their stated objectives on the tin, then it is little wonder there are so many flaws and disagreements when it comes to legislative drafting.
There also may be serious benefits to adopting some elements of a 401(k)-style system. Workplace super is rife for a comeback and, as ASIC Commissioner Simone Constant told the Conexus Retirement Conference in August, the system would benefit from a little more competitive tension and focus on members as “customers” not just cogs in a default wheel.
Taylor’s comments are refreshing, at least insofar as they start to disclose the alternative government’s true motivations on retirement, which were hinted at but never made explicit by “super for housing”.
But if it really believes ending compulsory super is in the national interest, then it should summon the courage to be truthful about it and take the policy to an election. Let the retirement savers of Australia ultimately decide.