The deferral of increasing the superannuation guarantee is merely the first step in a campaign to weaken superannuation. It is highly likely that there’ll also be a clampdown on how much higher-income earners can contribute to super, which may be regarded as a trade-off.
In real terms, abandoning the mining tax will cost nothing. The tax Julia Gillard negotiated would have only generated significant dollars if the iron ore and coal prices boomed. In fact they went the other way.
Australians believed the mining tax would raise large amounts of money because Treasury completely miscalculated the likely tax revenues and as a result of those miscalculations the former Labour government spent money it had no hope of raising. But now the mining tax lies dead, unless another boom takes place again. But that could be a decade or two away.
The move is also closely related to Australian labour costs and the fact that they are boosting our unemployment to levels to above that of the US. Australian parliaments have been major contributors to an increase in the cost of labour via labour laws, superannuation, and a host of regulations. This is the first time we have taken a step to reduce the cost of labour, albeit by creating less money to fund retirement further down the track.
I have been a great believer that superannuation represents the only way that Australians can fund the enormous retirement bills we face given our ageing population. To that extent, the delay in increasing super contributions is a sad event. But Australia’s labor laws have substantially reduced the flexibility of employment in many areas. Indeed, penalty rates have had such an impact on labour intensive businesses such as cafes and restaurants that a vast number of smaller operators are disobeying those very laws.
Higher super contributions would have increased that café community’s revolt, which is already developing at a momentum not dissimilar to prohibition in the US. Because of the nature of Australian politics, changing the rules to make Australian labour more competitive is going to be difficult, especially if the Australian dollar holds near its current levels. The super deferral is at least a step in the right direction, albeit at a longer-term cost.
Strangely, this latest move comes at a time when the role of superannuation in Australia is being attacked. Most of these attacks are focused on SMSFs but that is a smokescreen for a much deeper questioning of how we should organise our superannuation. We are seeing franking credits being tested, and in due course, almost certainly lump sum payments will be the subject of much greater debate. And of course in that context, the levels of super contributions at the top end will be challenged.