Superannuation should not pay for a Federal Budget surplus
The Federal Treasurer Wayne Swan and the Treasury must shelve any plans they may have to alter the superannuation tax regime to achieve a Budget surplus, warns Mike Taylor.
The Federal Treasurer Wayne Swan was always drawing a long bow when he promised a return to a Budget surplus in the current financial year.
It made for nice political rhetoric but few economists have ever believed it was sensibly possible.
Knowing this, the Treasurer and his advisers within the Federal Treasury should shelve any plans they may be formulating to alter Australia's superannuation tax regime to achieve the surplus.
The cost will far outweigh any of the political benefits the Gillard Government may be hoping to extract from such an exercise.
Having witnessed a succession of minor and major changes to the superannuation regime since 2008, Money Management – along with much of the financial services industry – has been strongly urging the Federal Government to stop tinkering with superannuation.
Notwithstanding a promise by former prime minister, Kevin Rudd, that a Labor government would alter the superannuation regime "not one tiddle", the reality has proved to be very different, with fiddling having occurred across key elements such as concessional contributions caps, the co-contributions regime and the excess contributions penalty formula.
The net result has been that many Australians approaching retirement have had to change their superannuation settings at least two or three times in less than four years.
Many planners report that their clients have become jaundiced about the benefits of superannuation because they do not trust that the Government will not keep changing the system.
The architects of the superannuation guarantee – former prime minister and treasurer, Paul Keating and former Australian Council of Trade Unions secretary, Bill Kelty – can hardly be happy with the undermining of a system they intended would provide workers with a comfortable retirement while relieving pressure on social welfare outlays, including the age pension.
And while a vocal campaign has been developed around suggesting that the superannuation regime is in some way a lucrative rort for high income earners, this runs counter to all the available evidence provided by successive intergenerational reports and long-term economic modeling.
It is in these circumstances that Treasurer Swan should reflect upon the importance of superannuation to Australia's underlying economic health and the manner in which this will be undermined by an act of political expediency aimed at generating a Budget surplus in an election year.
Indeed, Swan might care to reflect that the Australian Labor Party's claim to have been the father of superannuation risks being forever tarnished if he seeks to again alter the system to achieve an illusory short-term outcome.
No-one is under any illusion about how tempting more than $1.4 trillion in funds under management must be to a government facing electoral calamity, but such temptations must be resisted for the economic greater good.
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