John Watson (Tasmania, Liberal Party) Share this | Link to this | Hansard source

I move:

That the Senate take note of the document.

As part of the last budget, the government released a plan to streamline superannuation by sweeping away the current tax complexities faced by retirees, by improving retirement incomes, by giving greater flexibility over how superannuation savings can be drawn down and by improving incentives to work and to save. These came on top of a number of other big initiatives in recent years. The proposals represent the most significant reform of Australia’s superannuation system in about 20 years. They build on the previous tax cuts in the superannuation system and the introduction of co-contribution, which this report is all about, for low income earners. This is part of the coalition’s ongoing plan to build a strong future for Australia. The complexity associated with taxing superannuation benefits confuses retirement decisions, clouds incentives to invest in super and imposes unnecessary costs on retirees.

The superannuation co-contribution scheme is an excellent initiative, and I was pleased to see the actual detail handed down by the Commissioner of Taxation in the quarterly and annual reports during the April-June quarter of 2006, when 147,588 people were beneficiaries of super co-contributions, which amounted to $128,805,000. This figure becomes even more impressive when you look at the annual report for the year. The annual report states that the total number of beneficiaries in 2004 was 45,273. In the next year, 2005, the number grew to 1,193,304. I must commend the Treasurer for his excellent selling of this government initiative, which will see over a million low-income earners accrue nearly $1 billion dollars extra to their superannuation.

In the past, the government’s co-contribution scheme unfortunately has come under attack from those on the other side. Indeed, Senator Sherry has said in this place that the scheme will not help middle Australia, and that too few lower income earners will be able to benefit from it. Senator Sherry, it appears that 171,844 people earning less than $20,000 per annum disagree with you. Indeed, the total number of people earning less than $58,000 a year using this scheme is well over one million—I repeat: one million.

I also note that the industry super funds strongly support Treasurer Costello’s bold super initiatives—first the co-contribution and its extension, and a year later the simplification changes. Gary Weaven, former ACTU industry fund advocate, said:

... the Government’s Budget initiatives have proved the Liberal Party is now the official party for superannuation.

The Investment and Financial Services Association CEO, Richard Gilbert, said:

The co-contributions partnership between Government and Australians saving for their retirement will foster a savings culture—with benefits beyond better retirement incomes.

On the other hand, we have an earlier quote from the Association of Superannuation Funds of Australia chief executive, Philippa Smith. She said that the ALP’s proposed cuts to the co-contribution scheme in the 2004 election were ‘disappointing and excessive’. She went on:

Just at a time when we should be helping to boost people’s savings, the ALP fails to deliver on a national priority.

It is not surprising that the Liberal-National coalition is now the party of superannuation. I would comment further on Labor’s position on the co-contribution scheme, but it has been 125 days since the budget was announced, and the Leader of the Opposition has not given us his opinion on the recent changes.

We see that the co-contribution scheme, as part of the government’s policy, has broad support from industry. This money will pay real dividends to our society as it is an effective measure to help ameliorate the effects of our ageing population. We are in great need of initiatives like this scheme, and I hope that the evidence presented in this report will ensure that it has the full support of everyone in this chamber.

Nick Sherry (Tasmania, Australian Labor Party, Shadow Minister for Banking and Financial Services) Share this | Link to this | Hansard source

I disagree with some of the points Senator Watson has made, and I will comment on those as I go. That is despite my considerable respect for Senator Watson and his knowledge of superannuation—I would acknowledge that; certainly he is the most knowledgeable on the government side.

In dealing with the issue of the existing co-contribution, let me refer to the just over 1.1 million low- to middle-income earners. They are not all low- to middle-income earners if you look at the family tax arrangements, Senator Watson, and that detail is provided. In fact, about one in 10 partners of low- to middle-income earners earn incomes higher than $58,000, which is the phase-out level. When you have the couple’s family income details provided, it is clear that on that basis some people at a higher income level are indirectly benefiting. But put that issue aside.

John Watson (Tasmania, Liberal Party) Share this | Link to this | Hansard source

Senator Watson interjecting—

Nick Sherry (Tasmania, Australian Labor Party, Shadow Minister for Banking and Financial Services) Share this | Link to this | Hansard source

Yes, you are right, Senator Watson: 1.1 million people is a lot of people. But I seem to recall the Labor Party having a co-contribution scheme, which we announced in 1995 and the Liberal Party signed up to prior to the election in 1996, which was to provide a co-contribution to some eight to nine million Australians. I want to contrast that with the outcome of the existing co-contribution, which is solid and substantial. I acknowledge that; indeed, the Labor Party has announced we will be keeping what is effectively a much watered down co-contribution compared to the co-contribution that Labor announced some 11 years ago, which this government, despite the fact that it signed up to it prior to the 1996 election, then scrapped in 1997—not in 1996, when the budget balancing measures occurred; it scrapped it a year later. I will just point out for the record that, as I said, that would have delivered a co-contribution to eight to nine million working Australians and, on figures at the time, would have delivered an additional contribution to superannuation of approximately $4½ billion to $5 billion per year.

It is in that context that I remind the Senate, and Senator Watson in particular, that what in fact the government have done is scrapped a massive Labor initiative and announcement, even though they promised and committed to it prior to the 1996 election, and then effectively delivered a considerably watered down version of Labor’s co-contribution. But I accept the generally positive contribution of Senator Watson that the current scheme has made a difference to a substantial number of people. I make my comments in that context, and Labor is committed to continuing the scheme.

I would also point out that, if we look at the latest APRA figures on the total level of savings in superannuation—I think it is at around $910 billion or $915 billion, approximately—and if you analyse the APRA figures for the growth in superannuation from about $35 billion or $40 billion just prior to the introduction of compulsory superannuation, which was a Labor initiative back in 1987, the overwhelming reason for the growth in superannuation assets in this country is not the co-contribution; it is not the spouse rebate; it is that superannuation is compulsory in this country. That is the fundamental reason why we have seen such a big growth in superannuation assets over the last 20 years. The other major reason is that we have had good, positive rates of return, at least in the last three years. They are the fundamental drivers of the asset growth in superannuation in this country. Whilst the government’s watered down co-contribution, as compared to Labor’s proposed initiative, is useful for those people—we acknowledge and accept that, and we endorse the scheme—it should be seen in that context.

Finally, we look forward to seeing the legislation and the detailed costings of the government’s superannuation announcement. I think it is reasonable to actually receive those details before the shadow ministry considers the government’s announcements. We are in general support of those changes, but we want to see those details before the shadow ministry considers them. (Time expired)

Question agreed to.