Chris Bowen (Prospect, Australian Labor Party, Shadow Assistant Treasurer) Share this | Link to this | Hansard source

The Superannuation Laws Amendment (2007 Budget Co-contribution Measure) Bill 2007 seeks approval for a one-off additional government contribution to the superannuation accounts of those people who made eligible contributions in the 2005-06 income year, as announced in last night’s budget. This legislation will effectively double the government contribution for those who have already made voluntary contributions in the 2005-06 financial year. The cost is estimated at $1.1 billion, with most payments being made in this financial year at a cost of $990 million. Labor is supporting this bill.

The co-contribution scheme grants a $1.50 government contribution for a $1.00 employee contribution, capped at a maximum government payment of $1,500. The current scheme allows the maximum government co-contribution of $1,500 to be paid up to the income threshold of $28,000 and phasing down at a rate of 5c for every dollar of income above the threshold and then completely phasing out at $58,000.

Up until 1987, the benefits of superannuation generally flowed to only 40 per cent of the workforce—in the main, middle- and high-income earners. The majority of low- to middle-income earners—often people in casual and part-time occupations such as retail, hospitality and transport, of which over 60 per cent were women—did not receive superannuation payments. It is one of the most abiding and proud achievements of the Hawke and Keating governments that that is no longer the case. Labor introduced a compulsory superannuation scheme using the principle of basic fairness to spread superannuation coverage to all employees earning more than $450 a month. This represents not just a critical social policy but also a very important economic policy. One of the biggest challenges that was facing this nation in the 1980s and 1990s was how to lift our savings rates, and the superannuation scheme was a huge addition to the national effort to do that.

Savings is no longer the issue that it was in the 1980s and 1990s. Today there is in excess of $1 trillion in superannuation savings, which has been overwhelmingly driven by the Superannuation Guarantee—the reform of the last Labor government. The government now pretend to be friends of superannuation. They vigorously opposed these reforms at the time. They criticise us for opposing some of their measures and say that they supported all of our good reforms in the eighties and nineties. They supported some of them but they did not support superannuation.

The one-off increase in the legislation that we are discussing tonight does deserve some comment. The one-off increase represents a rebuff to my honourable friend the Assistant Treasurer, who in a splashas I recall, it was a front page splash—in the Australian earlier in the year sought an ongoing expansion of the scheme for those up to 45 years of age. It was not a one-off payment but an ongoing expansion for many years to come—a major addition. This is not what we saw in the budget. The Assistant Treasurer, unfortunately, was clearly rebuffed in the Expenditure Review Committee.

The co-contribution scheme is supported by Labor and will be continued if Labor are successful in winning office later this year. We support any sensible and reasonable measure to increase the superannuation savings of Australians and, as such, we support this bill. However, there are a couple of inconsistencies that we feel duty bound to point out. Yesterday in the Australian, on the morning of the budget, there was a drop—a conveniently leaked article—which described the impending announcement as:

It is a way ... to help ... encourage younger people to invest in superannuation ...

Let us call this measure for what it is. This is an important addition to the superannuation savings of low-income earners. We accept that. That is why we are supporting it. But let us not pretend that it is something that it is not. Let us call it what it is. It is not an encouragement for people to put more money into superannuation. If that is what it is, it would be prospective not retrospective. We would be saying: ‘If you put in more money in the coming financial year, we’ll match it to a greater level than we have in the past. We’ll double our matching.’ But that is not what this is.

Steven Ciobo (Moncrieff, Liberal Party) Share this | Link to this | Hansard source

Yes, it is.

Chris Bowen (Prospect, Australian Labor Party, Shadow Assistant Treasurer) Share this | Link to this | Hansard source

I look forward to hearing the honourable member for Moncrieff tell us how it is and why the Chief Executive of the Australian Superannuation Funds Association is wrong. Tell us why Philippa Smith is incorrect. I will not be able to stay in the chamber to hear it, but I will be listening in. Philippa Smith said:

There was disappointment because it was only a one-off for past contributions ... the budget had missed an opportunity to change savings behaviour.

Further, she said:

This initiative rewards individuals who accessed the co-contribution a year ago, but it is difficult to see how it will encourage younger people to invest in their retirement future going forward.

I am sure the honourable member for Moncrieff will take up a substantial part of his 20 minutes explaining why the Australian Superannuation Funds Association is wrong. I am sure that we will see the headlines in the Australian tomorrow: ‘Ciobo attacks Smith’. It is not the member for Perth—and what is Tony’s seat?

Steven Ciobo (Moncrieff, Liberal Party) Share this | Link to this | Hansard source

Casey.

Chris Bowen (Prospect, Australian Labor Party, Shadow Assistant Treasurer) Share this | Link to this | Hansard source

and not the member for Casey. It is Philippa Smith, from the Australian Superannuation Funds Association. We are prepared to support this legislation. It adds to the savings of low- and middle-income earners—and that is a good thing. We are prepared, as a responsible opposition, to say when the government does a good thing. We are prepared to say that we will support this bill and vote for it. But let us not pretend and let us not get high and mighty and say that this is a great reform which is encouraging more savings when it is not. It is an addition to savings that have already been made and, on that basis, we will support it.

Steven Ciobo (Moncrieff, Liberal Party) Share this | Link to this | Hansard source

I am very pleased to add my support to the Superannuation Laws Amendment (2007 Budget Co-contribution Measure) Bill 2007 and to address the previous speaker’s comments. This is an important bill. It is one day after the introduction of the budget and the government is already delivering on its promises. Last evening the Treasurer spoke of the importance of making sure that younger generations of Australians in particular are incentivised to provide for their retirement. We know that we have an ageing population in Australia. We know in Australia, as in many other Western democracies around the world, that those aged 65 and over will represent an increasingly larger percentage of our total population base. One of the most fundamental things that the government can do to address the ageing of the population is to ensure that, as much as possible, it encourages Australians to provide for their retirement.

One key way in which the Howard government and particularly the Treasurer, Peter Costello, have done this is through the government’s co-contribution scheme for superannuation contributions. Australia is regarded as having one of the finest superannuation and savings systems in the world. I am even happy to pay credit to the Australian Labor Party for the introduction of compulsory superannuation. They had the idea and it was supported by us when we were in opposition. The coalition supported the idea because we saw it as a beneficial reform. So I am happy to acknowledge that the Australian Labor Party started this process.

What we have in Australia is a situation whereby we have been facilitating, over a number of years now, the increasing transfer of wealth into people’s retirement savings accounts in the form of superannuation. And that is a very good thing because, as the population ages, we will increasingly see the need for Australians to draw down, in terms of an annuity, a lump sum payment or something like that—either of the two or some combination thereof—their retirement savings. The simple fact is that, with an ageing population, the more we can encourage people to provide for their retirement, the better off the nation will be. The co-contribution is one very meaningful and important initiative of this government that has helped to facilitate people to place money into their retirement savings accounts to provide for their retirements so that they are not all drawing on the public purse.

What we know is that, as the Australian population ages, and as the percentage of those aged 65 and over grows, there will become a bigger draw-down on the public purse. And with more people moving into retirement, and more people drawing down on the public purse, there will be fewer people in the labour force who will be paying the taxes that will be used to fund the draw-down. That really, in essence, is the reason we need to incentivise and encourage people to provide for their retirements.

The co-contribution—as I mentioned, an initiative of Peter Costello and this government—is particularly targeted at rewarding the effort of lower and middle income Australians in providing for their retirements. We did say that we took the initiative to introduce the co-contribution because we particularly wanted those on lower and middle incomes to make sure that they are also recognising the power of compound interest and recognising the power that comes from them providing for their retirements in a more meaningful way. Certainly, a nine per cent contribution, at the minium level, is a start, but it is not enough.

Mr Deputy Speaker Somlyay, I acknowledge that you and I sit on the House of Representatives Economics Committee, which undertook an inquiry into the superannuation savings of generations X and Y. As I am sure you would be aware, Mr Deputy Speaker, we found that there does need to be incentive. A payment like this is particularly important as well for women, because a large number of Australian women transition into and out of the Australian workforce. Particularly at those times when, for example, many would choose to stay at home to raise a family and not be in paid employment, the co-contribution does play an important role in helping to boost the superannuation savings—especially for women, for example, who may be undertaking part-time work. It is for that reason that this is a very good initiative and one that I am very pleased to support.

The bill that is moving through the House this evening, which I am certain will be passed given that the opposition is also supporting it, recognising it to be a very good decision by this government—I am sure that is why the opposition is supporting it—will ensure that we top up superannuation savings that are being made. So, for those people who have already made a voluntary contribution to their superannuation, and received a $1,500 top-up from the Australian government, this bill will ensure that they receive an additional $1,500 on top of that again. That means that, for the $1,000 they have invested, they are receiving a $3,000 top-up from the Australian government. That clearly is an incentive to make voluntary contributions. It is that simple: if you receive a return of three to one then that is an incentive to be doing what you are doing. Whether it is prospective or retrospective is really neither here nor there. The fact is that those who have taken advantage of the co-contribution stand to gain the most. This additional $1,500 top-up that can be received will go a long way to ensuring that there is more money in the accounts of those Australians, especially lower and middle income earning Australians, who have made the decision to voluntarily make contributions towards their superannuation. This comes at a cost of some $1.1 billion. That is for the time frame specified, which was for the last financial year.

I listened with great interest to the Australian Labor Party, because what I heard from the shadow parliamentary secretary was that in fact more should have been done. I heard the shadow parliamentary secretary. Basically, if you read between the lines of what he said, his statement was that this is a good idea, and that is why the Australian Labor Party is supporting it, but we should have made it prospective, we should be ensuring that it is a three to one contribution for all the years in the forward estimates. This is again the problem that we have with the Australian Labor Party. We recognise that this is a good contribution. We recognise that it creates incentive. That is why the Australian Labor Party says there should be even more of it. But the problem we have as a government is that we are fiscally disciplined. If there is one fault that we have as a government it is that we are fiscally disciplined and we make tough decisions about what is good, what is achievable, what is affordable and what is sustainable. This $1.1 billion that the government is pouring in to help these lower and middle income earning Australians will pay big dividends for those people, especially those at the lower end of the age spectrum, who have made contributions—big dividends indeed, when it comes to their retirements.

The Australian Labor Party, I take it from the comments of the shadow parliamentary secretary, is obviously of the view that its policy will be for there to be a three-to-one ratio going forward. I take it that is the Labor Party’s position. I take it that the Labor Party’s position—perhaps the policy that is being announced by Labor—is for there to be a three-to-one contribution from this point forward. I look forward, if that is what the Labor Party is going to do, to seeing that announcement. But I suspect that that is not actually the Labor Party’s policy. It is just another case, like the hollow drum beating, of the Australian Labor Party banging on and basically saying that we should have done more. We have done a lot—we have now tipped in another $1.1 billion—but the Labor Party still says, ‘You should’ve done more.’ I look forward to seeing the Labor Party’s announcement of policy. I look forward to hearing that the Labor Party’s co-contribution will in fact be $3 on a prospective basis. I am sure many people would be interested in a policy like that. It is just a case, of course, of these things being costed.

I am proud to be part of a government that has done more for Australian superannuation than any other government. And it is not just the co-contribution that I am referring to now; it is the fact that this government, in last year’s budget, introduced the simplified superannuation reforms. These simplified superannuation reforms, which the Australian Labor Party took nearly six months to agree to, will make a very big difference. The abolition of tax on withdrawals from a superannuation fund means so much to Australians that it is extraordinary to think that the Australian Labor Party would have taken nearly six months to agree.

I note that the Assistant Treasurer is walking into the chamber. I know he worked tirelessly for months to try to get the Australian Labor Party on board with this government’s reforms. I know the Assistant Treasurer kept as much pressure as he possibly could on the Australian Labor Party, who dragged their feet every step of the way before finally, after about six months, agreeing to support this government’s very sound, reasonable, wise and sustainable reforms that made superannuation exceptionally simplified and, most importantly, delivered in spades to the Australian people.

I have to say that for my constituents on the Gold Coast the simplified superannuation reforms were welcomed with open arms. They knew these were vital reforms. They welcomed them. It was music to their ears, as this government provided further incentives for Australians to ensure that they provided for their superannuation. Like many of my constituents I was very disappointed that the Australian Labor Party took six months to agree to these very sound proposals. I am very pleased that they may have learned a lesson from that. And I am pleased that within a day of the budget being announced they are now on board with this additional co-contribution that the government has announced. I commend the bill to the House in a resounding way.

Brendan O'Connor (Gorton, Australian Labor Party, Shadow Parliamentary Secretary for Industrial Relations) Share this | Link to this | Hansard source

Can I firstly correct the comments made by the member for Moncrieff with respect to his reference to the previous speaker, the member for Prospect. The member for Prospect is the shadow Assistant Treasurer. I am sure he will want to take that up with the member for Moncrieff at a later date.

I also indicate to the member for Moncrieff and the House that Labor’s concerns about the policy being retrospective rather than prospective is an issue. You cannot suggest, as the government is suggesting, that there is an incentive to encourage younger people to invest in superannuation if the amount is paid after the investment has already been made. Therefore, it is wrong to say that the one-off payments made already in 2005-06 will encourage young people to save. It would make more sense to say to young people, ‘If you make a voluntary contribution from a certain date then we will match this.’ This would then be classified as an incentive, as you would be encouraging bonuses for extra contributions made in the future. But the government has chosen to give the bonus payment for contributions already made. There were a number of concerns I had with the contribution by the member for Moncrieff. The two I have already mentioned are axiomatic, wrong statements, and I thought I would correct them for his benefit.

I also say to the House that we support the Superannuation Laws Amendment (2007 Budget Co-contribution Measure) Bill 2007. It is a bill that provides a one-off additional government co-contribution into the superannuation accounts of those people who made eligible contributions in 2005-06. We support, in principle, the co-contribution. The legislation will effectively double the government’s co-contribution for those who have already made voluntary contributions in the 2005-06 year.

I will just reiterate the co-contribution scheme. The scheme grants a $1.50 government contribution for a $1 employee voluntary contribution, capped at a maximum government payment of $1,500. The current scheme allows a maximum government co-contribution of $1,500 to be paid up to the income threshold of $28,000, phasing down at a rate of 5c for every dollar of income above the threshold and completely phasing out at $58,000 per annum.

The original policy of co-contribution was announced by the then Keating Labor government in 1995. It was to be a compulsory three per cent government scheme for all employees, phased in between 1996 and 2002, delivering an extra $4.6 billion per year—in 1996-dollar values—when fully implemented. It was to build on Labor’s compulsory nine per cent superannuation guarantee, initially introduced at three per cent in 1987. Twenty years ago, almost to the day, a Labor government introduced compulsory superannuation into this country and was opposed by the coalition. We understand that the coalition parties supported the principle of super, but they did not support the legislation that was proposed by the then government to ensure that lower- and middle-income families had proper retirement savings. Indeed, there has been resistance by government with respect to superannuation for many a year. Indeed, the Prime Minister, when he was Treasurer in the 1970s and 1980s, did not support a scheme that would provide superannuation to employees. There was no suggestion by any coalition government preceding the Hawke-Keating government that there would be superannuation, and there was resistance by those parties, in opposition, to Keating’s proposal to introduce superannuation.

If we are going to consider the superannuation scheme and some of the add-ons that the government suggests—and which Labor supports—we should put the superannuation debate in context and remind the government and the people of Australia that it was a Labor government that introduced the super scheme, with resistance from coalition parties. Indeed, it is such good public policy to ensure that low- and middle-income families are able to secure their retirement that it is difficult, even for a government that opposes such policies, to change. So it is not surprising that, along with Medicare, the compulsory superannuation scheme introduced by Labor governments preceding the Howard government’s election in 1996, have not been altered adversely to affect low- and middle-income families. But there is no doubt that that government has failed to continue providing a contribution that will ensure the security of low-and middle-income families in Australia. There has been no support for the initial scheme to have a 15 per cent contribution that would provide the security for low- and middle-income families in Australia. That is a personal disappointment; I supported the scheme that was put together.

I think people should remember how that came about. I think people are quite ready to forget, if they are not reminded, how superannuation came about in this country. It certainly was not initiated by the mob on the other side. Indeed, there was resistance by the coalition parties at the time. Let us remember that the first compulsory contribution component was introduced in 1987 by the Keating government in consultation with industry and unions. As the government likes to remind us, there were occasions in which wages were suspended or suppressed to ensure that other benefits would flow on to working families and the nation as a whole.

Recalling the 1987 legislation, we should be reminded that people forwent a wage increase to commence the first stages of what has become one of the most amazing national retirement schemes in the world. In December last year the amount of money that Australians invested in superannuation passed the $1 trillion mark. That is $1,000 billion under super funds management, or $50,000 for every man, woman and child in this country. Whilst we support the add-on that has occurred today, it is important to place this debate in the context of the fact that, without some bold initiatives by a forward-thinking government, this scheme would not be there to add on to. If we had had to wait for the Prime Minister when he was Treasurer in the eighties or if we had listened to the opposition during the Hawke-Keating period there would not be this national retirement scheme.

It is also important to note that this scheme has ensured more security for low- and middle-income families in this nation as a result of the benefits of the funds. Looking at why there has been 15 years of consecutive economic growth, the trillion dollars amassed by super funds has underpinned such economic prosperity. We should note that it fuels the stock market, it encourages business investment and it builds on an unprecedented bank of national savings. Along the way it has potentially transformed retirement for cashed-up baby boomers, shifting reliance away from the age pension and providing higher living standards. Those things should be remembered when we debate this bill. This bill is just a brick that has been put on top of the Empire State Building. It is not a major reform, but we do support it. It will actually provide some benefit to young people and people who have already placed money into superannuation funds, but I think it is important to place the debate in the context of why we have such a good national retirement scheme.

I also want to place on the record what Australia was like in the late eighties, when we did not have this scheme to reform. As the member for Prospect indicated, the majority of workers did not receive superannuation. My parents and many of their friends were not in a superannuation scheme. They did not work in the public sector; they were not managers or working in senior positions. Whilst in the factories in which they worked their senior managers would have been in receipt of superannuation, in that period my parents and others like them were not in receipt of any superannuation benefit. It is such a critical issue for low- and middle-income families because they do not always have the capacity to save in the way in which higher income families do; they do not have the wherewithal to put away a lot of money because they are expending it on goods and services required for their families. They are not in the position that higher income earners are. People in the eighties were looking for schemes that would provide them future assistance. Unfortunately for my parents and people of that age, they probably did not benefit as much as those who have come after them. Those people born in the late forties, the fifties and the sixties have been greater beneficiaries of the reforms of the superannuation scheme in the Hawke-Keating period. I am glad to see that this government has realised it is a scheme worth amending, reforming and improving wherever it can.

But I am concerned, and I am sure Labor is concerned, that we did not go further with the nine per cent. Whilst these one-off payments can, if the money is given after the investment is made, create an incentive for people to invest in their retirement savings, whilst these one-off payments are okay and whilst these co-contribution efforts have increased the likelihood of people saving, which I think is a good thing, it is a shame we have not gone beyond the nine per cent since it was promised in 1995. It was something that we should have proceeded with as a nation, but we failed to do so. Having said that, it is a remarkable thing that we now find ourselves with more than $1,000 billion dollars in our national retirement savings scheme.

It is important to note that the effort today is a rather meagre one in the context of the entire area of superannuation, but it is supported by Labor. It will benefit a significant number of people, but I think the government could have gone further in tackling it since its election to its first term in 1996. I do not think the government was ideologically predisposed to support a compulsory superannuation scheme. That is unfortunate, because we would have found many more millions of Australians better off  had the government chosen to continue on with the good work of the Hawke and Keating governments, which created this scheme in the first place.

I would also like to reinforce the concerns that were expressed by the Chief Executive Officer of the Association of Superannuation Funds of Australia, Ms Philippa Smith, who stated, ‘There was disappointment because it was only a one-off for past contributions’—as I have already indicated, the concern that it was not really creating a genuine incentive. Indeed, she went on to say that ‘the budget had missed an opportunity to change savings behaviour’. I think those comments are apt. It is a bill that we can support, but it is not bold. It does not deliver what it really should be delivering. In the end, it is something that Labor will support, but Labor just thinks it falls short of the mark of what is required for our superannuation scheme in this country.

Peter Dutton (Dickson, Liberal Party, Minister for Revenue and Assistant Treasurer) Share this | Link to this | Hansard source

in reply—I would like to thank all of the members who have taken part in the debate on the Superannuation Laws Amendment (2007 Budget Co-contribution Measure) Bill 2007. This bill will further boost superannuation savings by doubling the government superannuation co-contribution payable to low- and middle- income earners in respect of eligible contributions made in the 2005-06 year—for example, if a person was otherwise eligible for a co-contribution of $1,500 for the 2005-06 year, they will now receive an extra co-contribution of $1,500 so that the total contribution for that year would be $3,000. This rewards eligible low- to middle-income Australians who have saved for their retirement and builds on the already successful government co-contribution scheme and the significant improvements to superannuation that the government has made through the recent simplified superannuation reforms.

This government introduced the co-contribution scheme in 2003-04. It then increased the co-contribution from $1 to $1.50 in 2004-05 and raised the upper income threshold from $40,000 to $58,000. From 1 July 2007, eligibility for the co-contribution scheme will be extended to the self-employed, and the income thresholds will be indexed each year in line with growth in wages. Over 2.7 million co-contribution payments worth approximately $2 billion have already been paid under the scheme. This measure will increase payments under this scheme to $3.1 billion.

The only way that this government has been able to afford such a generous scheme to provide support to low- and middle-income earners is because it has run a successful economy. This policy would never have been contemplated by the Labor Party, because during their term in government they ran up $96 billion of debt and required $8½ billion a year to service that debt. If a government is servicing $8½ billion in interest payments each year, it could never contemplate providing support to lower income earners with this sort of policy.

The co-contribution scheme builds, as I said earlier, on the superannuation reforms that we announced in the last budget and that we have built on since that time. It will set up the next generation, those people who will be facing the threats of the ageing of the population in this nation, and it will provide people with a greater capacity to enjoy a better lifestyle in retirement. It will provide them with an opportunity also to be supported by the taxpayer, if they have not saved enough through their superannuation, through the age pension system. But this is a system which has worked well. It is only affordable because of the good economic management of the Howard government. It only remains affordable whilst the economy is well managed. The system, like most in this place, would be under threat if the Labor Party were to be returned to power, because they do not have the skills to run a trillion-dollar economy.

In closing, can I just provide by way of example two or three electorates where this has provided real outcomes to low- and middle-income earners. I will start with the wonderful electorate of Dickson in the state of Queensland. In that electorate, there are 9,537 low- and middle-income earners who stand to benefit from this measure—those people who would not otherwise have had an opportunity to accumulate and to compound this money to help them in their retirement. The second one which I think is also relevant as part of today’s debate is the electorate of the member for Griffith, where 9,849 low- and middle-income earners will benefit from the measure. In the electorate of the member for Lilley, there are 12,154 low- and middle-income earners. It should be the responsibility of the member for Lilley and the member for Griffith to explain to their respective electorates why the Labor Party would have no hope of continuing this policy in government—because they would again not be in a position economically to afford such a policy to help low- and middle-income earners retire more comfortably than they otherwise would be able to. I commend the bill to the House.

Question agreed to.

Bill read a second time.

Message from the Governor-General recommending appropriation announced.