LAUNCH OF ‘SUPER IDEAS: SECURING AUSTRALIA’S RETIREMENT INCOME SYSTEM’

Thanks Henry [Pinskier] for the introduction and Nick [Dyrenfurth] for the invitation to be here today. I acknowledge the elders and traditions of the Ngunnawal and Ngambri people on whose land we meet. 

 

I appreciate all of you – including a number of my parliamentary colleagues – for joining us to talk about the future of superannuation and to launch an outstanding piece of thinking from Nick, sponsored by Vision Super and published as part of the John Curtin Research Centre’s essay series.

 

The Centre is a newish part of the progressive think tank scene but already making a splash on home ownership and employee representation on boards, and hosting successful events like Richard Marles’ recent speech in Melbourne.

 

I think what we’re seeing is that the old criticism I became familiar with when I ran the Chifley Research Centre – that centre-left think tanks are too thin on the ground – no longer applies. There’s now Curtin, Chifley, McKell, Per Capita, The Australia Institute, and others, all doing great work deepening and shaping and vastly improving the national economic policy conversation. 

 

That’s what Super Ideas: Securing Australia’s Retirement Income System is all about. I’m proud to help launch it, and I’m grateful to Katy Gallagher and Chris Bowen – the shadow ministers responsible for superannuation – for encouraging this opportunity to stray a bit outside the strict confines of my Finance portfolio responsibilities to share a few insights.

 

I come at it from a range of perspectives: a former Shadow Minister for Financial Services; former chief of staff to Treasurer Swan; and having just published with Mike Quigley a book about the future of work, Changing Jobs: The Fair Go in the New Machine Age.

 

In that book we start with the premise that there is tremendous upside to technological change because it will help us produce more goods and services. But, as progressive people, we also care deeply about how the economic gains are distributed. Our core argument is that worsening inequality is not inevitable – that bursts in technology need not result in bursts of inequality, but leadership and foresight is required. Our fear is that Australia, like the rest of the developed world, is dangerously ill-prepared for either a serious decline in the number of jobs or hours, or, perhaps more likely, a step-change in the mix of jobs and the nature of work.

 

That is true of super as well, especially so, and it brings me to the main point I want to make today: it’s not enough to defend super; we need to refashion it and advance it for a time when underemployment and insecure and unpredictable work patterns are more and more prevalent.

 

In the middle of last year I was in San Francisco with the Transport Workers Union and the ACTU meeting with the major gig economy platforms about ways to secure for workers basic entitlements like retirement savings. These conversations revealed that there’s a long way to go. And that we can’t keep pretending that a system designed in and for the 1990s will work in the new machine age.

 

The union movement is onto this, I’m pleased to say, and it’s the essential challenge at the core of Nick’s essay.

 

Labor’s legacy, as so comprehensively outlined in Super Ideas, evokes an immense sense of pride for progressives like those of us in this room. Compulsory superannuation, alongside perhaps Medicare and our performance during the GFC, is one of the crowning achievements of modern Labor.

 

We’re proud to have put in place a system which ensures that working people can retire with dignity, a system which makes sure ordinary Australians and not just the well-off are looked after following decades of hard work.

 

As Nick reminds us in his essay, superannuation was once entirely the “preserve of the elites”. Consider just how far we’ve come since.

 

Government-led inquiries and accords with employers and unions in the 1980s, combined with the emergence of enterprise bargaining in the early 1990s, laid the groundwork for our modern superannuation system with the introduction of a three per cent compulsory employer contribution to industry funds.

 

Then came the introduction of the Superannuation Guarantee in 1992; the pivotal moment in the history of our super system.

 

As Nick points out, this is how Labor had built Australia’s “three pillar” retirement income system: compulsory employer contributions to super funds on top of wages and salaries; further voluntary contributions encouraged by tax and salary sacrifice benefits; and, a safety net of means-tested government-funded age pension.

 

It’s now a system made up of a record $2.5 trillion in assets under management covering something like 13 million people. That savings pool is projected to hit $4 trillion in the next 10 years and $7.6 trillion by 2033.

 

So there’s a lot to be proud of when it comes to our country’s superannuation story and system.  But it has its imperfections.

 

Let me just touch briefly on four of them, which also feature in the essay.

 

The first is inadequacy. According to MLC, almost six in 10 Australians don’t think they’ll have enough to retire on, and about a third think they’ll have “far from enough”. Australians anticipate they’ll need around $1.14 million, excluding the family home, to retire on comfortably. But they expect they’ll only have about $638,000 saved – a shortfall of half-a-million dollars. ASFA figures indicate that, as it stands today, men nearing retirement age – those aged between 60-64 – have just over $270,700 in their accounts, while women have about $157,000.

 

The second issue, which is related, is the gender gap. Women are, on average, retiring with around half as much super as men. Even more troubling is the fact that just one in five single women retiring today has enough savings for a comfortable retirement. These are the issues my colleague Senator Jenny McAllister highlights in her really important work chairing a Parliamentary Committee looking into the retirement income gap, and broader concerns around the gender pay gap and gender segregation in the workforce.

 

Third, unfairness in the way super is taxed. There might have been some improvements in recent years, led as ever by Labor, but we still have a system that sees about half of all superannuation benefits flow to the top 20 per cent of earners.

 

We still have the biggest concessions going to those who need them least.

 

In that vein I thought Peter Martin from Fairfax made a great point when he wrote:

 

 

For our part in the Labor Party, we’ve committed to a range of measures that will impact a small amount of people at the top, but will make the system much more sustainable and provide a significant boost to the Budget bottom line – music to the ears of a Shadow Minister for Finance.

 

The fourth imperfection is non-compliance. One in three workers aren’t paid the super they’re entitled to. The ATO reckons employers ripped-off workers by almost $17 billion between 2009 and 2015 by short-changing them on their super. Many of them are low-paid and many of them are women, exacerbating the other challenges.

 

Nick has done a terrific job in his essay pointing out these concerns and highlighting others, including the challenge of accounting for an ageing, bigger population; the fallout from the Super Guarantee rate stalling; and the general lack of financial literacy among many Australian workers, particularly our youngest.

 

But he’s also highlighted a key emerging threat to people’s ability to retire comfortably – the changing nature of work itself with the rise of the gig economy and the increasing casualisation of work. About 40 per cent of the professional workforce is predicted to become on-demand, freelance workers by 2025 – a huge shift that will have significant implications for retirement savings.

 

With all of these issues weighing on our world-leading, but imperfect, superannuation system, you would think the Liberals would focus their attention on addressing them. It’s disappointing, but perhaps not surprising, that their efforts are instead centred on their ongoing ideological attacks on super.

 

At each step, the Liberals have either stood in the way or tore at the foundations. They opposed universal compulsory super; voted against increasing the Super Guarantee above three per cent; tried to abolish the low-income superannuation contribution scheme; delayed the Super Guarantee increase to 12 per cent; and tried to weaken penalties for employers who don’t pay the right amount of super, before we beat them back.

 

More recently, the Liberals want to undermine super by allowing people to access their account for a house deposit.

 

They never really believed in super, and they never really will.

 

And after being dragged kicking and screaming to set up a Royal Commission into the banks, they’ve set their sights on industry funds there too, despite them having the best returns.  Remember, industry funds returned 10.7 per cent in the year to June 2017, while retail funds only returned 7.8 per cent.

 

Given the Liberals aren’t interested in dealing with the real challenges, it’s refreshing to see people like Nick and groups like the John Curtin Research Centre are.

 

Nick’s essay pitches up some well-considered recommendations on how to address the issues we face in our super system, including:

 

[if !supportLists]·         [endif]Unfreezing the Super Guarantee;

[if !supportLists]·         [endif]Requiring that, by law, the full rate be paid to working women (and men) during the first six months of paid parental leave;

[if !supportLists]·         [endif]Introducing financial literacy into the school curriculum; and

[if !supportLists]·         [endif]Prosecuting a zero-tolerance approach on employers who short-change workers by not paying them the super they’re entitled to.

 

He also recommends removing the $450/month earning threshold for super contributions. Or, in lieu of that, a new model for the gig economy that would see workers paid super from each of their employers on a pro-rata basis if they earn more than $450 per month working multiple jobs.

 

All ideas worth further discussion and debate.

 

Obviously, I can’t tick off on them on behalf of the Labor Party today. I wouldn’t be doing my job as Shadow Minister for Finance if I didn’t consider the Budget and the tight fiscal constraints we face. None of this is cheap, and I’m not about to convene a meeting of the Shadow ERC in this room tonight to get what could be essentially billions of dollars of commitments ticked off. Sorry!

 

But I can, and do, applaud the thinking behind and the effort underpinning Nick’s recommendations. Like all of us on the progressive side of politics, he understands that we can’t be reliant on some kind of nostalgic complacency when it comes to delivering a comfortable retirement for ordinary Australians. We need new thinking to make sure that our super system built last century can deal with the challenges of a workforce and society in this one.

 

Mike Quigley and I had a go at this in our book.  We pitched up 33 ideas and policy directions on how government, our education system and individuals can prepare for the new machine age. Specifically on superannuation, we thought it was worth considering the introduction of a shared security system of portable entitlements. This would involve workers in multiple, insecure jobs accruing all of the benefits they might receive in a full-time job – sick leave, health insurance, employment insurance, annual leave, superannuation – in one centralised account that would move with them between jobs.

 

A bit like the proposal in Super Ideas, companies would make pro-rata contributions for each entitlement, helping workers save for employment and insure against sickness and other risks. We also talk more broadly about the pressing need to address the security of employee entitlements and making sure people are saving for their retirement in an increasingly casualised workforce.

 

It’s reassuring that friends in the wider labour movement have taken up this challenge too. We saw only recently a push from the TWU and AWU to raise the minimum wage for food delivery workers, and make platforms like Deliveroo, Uber Eats and Foodora provide drivers with super and minimum shift hours.

 

For our part in the parliamentary wing, we need to ensure we have robust legislated worker protections across the board, especially in the gig economy, so workers don’t miss out on, among other things, the retirement incomes they need and deserve.

 

So I want to commend Nick, the John Curtin Research Centre – and Vision Super – for this really insightful report. It’s more than a timely reminder that we should celebrate the triumphs of our superannuation system. It urges us not to dismiss or ignore super’s imperfections. If we want to ensure Australians – all Australians – can enter retirement comfortably, then we have to do more.