Superannuation Minister Jane Hume finally came clean in these pages on the government’s superannuation endgame (January 22).
In a banal piece where bikinis, of all things, are tied to superannuation policy, Hume argues superannuants should be slaked of all super accumulation before they die.
You die battling to have afforded your own coffin.
This is a twist on the “use it or lose it” principle.
We now know what each of them means by “efficiency” – the key word that drops into their so-called analyses and recommendations. “Efficiency”, they contend, to use Hume’s words, is not to “hoard” capital but to burn through the income and the underlying superannuation capital, so you die without a dollar to your name or for your spouse or dependant or dependants.
It is one thing offering well-intended advice to superannuants about not being too abstemious with retirement capital; it is entirely another thing to exact a penalty on them – chopping off 2.5 per cent of their income for the rest of their working life. But this is what Hume and her baby-faced Liberal confrères are in for.
This is the Morrison government’s version of the old Liberal refrain about individual rights, freedom of choice, freedom to achieve, freedom to do with your assets as you please. Instead, egged on by the Libs’ hatred of unions and industry funds, the government now contemplates a piece of warped social engineering designed simply to shut off employees’ legislative right to an extra 2.5 per cent super, forcing them to not just consume their superannuation but to chew up all their capital along the way.
Walking away from any notion of personal empowerment, where people are able to take charge of their lives without resort to a government agency, to Centrelink or needing to resort to rent assistance, when capital adequacy otherwise would have kept sufficient provision to cover contingent needs.
This breach of long-standing Liberal party principles is employed to declare that 9.5 per cent superannuation is enough. Any more is “too good for them”.
This is not simply a version of “let them eat cake” – now they must eat the plate too.
And just to make sure working people get the message, Callaghan in his report informs them they can reverse-mortgage their house if they run short after their super is used up.
But Hume’s real problem is she traffics in two conflicting stories.
One story has it that people are dying with too much unused super – her so-called “hoarding” – yet at the same time she argues the same people have too little super, living hand to mouth, because of the diversion of wages to super.
The minister has a bad case of policy confusion.
The fact is, only a small number of people die with a substantial superannuation balance. That is the fact of it.
In 2018, men over 75 years had a median balance of $200,000, while women of the same age had $126,000. Certainly not people who are drowning in unused superannuation.
What these numbers firmly indicate is that median superannuation balances are inadequate, and explain why movement to at least 12 per cent super is a policy necessity.
The elephantine social point the government seeks to ignore is that Australians think of retirement arrangements, retirement income and residual capital on a family basis. They do not plan for their later years in single or individual terms. Certainly not in selfish terms.
Karen Maley of The Australian Financial Review had a full back-page piece in the paper a week ago – under the headline “Stick with the 12pc super guarantee rate”.
Maley is as dry as a chip in economic terms, but she baulked at the Callaghan-cum-Hume take on “efficiency” once she understood what the code language really meant.
She worked it out. It means you die broke. And that this, obviously, is the policy direction of the government.
In her dystopian commentary about increases to the superannuation guarantee, Hume again falls back on the argument that any increase would come at the expense of wages.
In the current state of frozen wages growth, this is not true.
Real wages have not moved a jot for eight straight years.
There is no way the enterprise bargaining system in its current state is going to deliver wages growth any time soon.
It is entirely unexceptional to say that in the event working people agree to defer consumption, they do so by forgoing cash growth and current cash income. This has always been the case. You can’t defer income, yet enjoy it at the same time.
But economics is a science about change – the degree of change over time, over a period.
And the degree of change here is that over the past eight years there was no income growth available to workers, and there is not likely to be any time soon.
In other words, were the government able to foil the Parliament into not providing working people with the extra 2.5 per cent of retirement incomes as currently legislated, they will get nothing. The whole workforce – nothing.
And this is despite the fact that 10 percentage points of labour productivity over the past eight years has been allocated entirely to profits – not a cent of it to wages.
This is why the increase of 2.5 per cent in prospect is entirely affordable – especially when paid on the drip at a miserly half a percentage point a year.
The case against the increase in the superannuation guarantee is entirely political – it is not an economic case, as Jane Hume’s anti-hoarding farrago makes clear.
Published in AFR https://www.afr.com/policy/tax-and-super/liberals-will-see-you-die-broke-in-the-name-of-efficiency-20210121-p56vyh