Superannuation is too important for populism

Australian workers have amassed an impressive pile of retirement savings.

The nation’s superannuation pool has reached $4.8 trillion and is forecast to hit $8 trillion by the end of this decade.

Since its introduction in the early 1990s, compulsory super has become a cornerstone of Australia’s economic architecture. Most Australians view it as an essential pillar of financial security in retirement. But as the pool grows, the politics of superannuation is becoming increasingly contested.

This week, One Nation proposed a radical change to the retirement savings system; under its plan, those who rent or pay a mortgage would be able to take a quarter of their compulsory super contributions as take-home pay for up to three years.

One Nation leader Pauline Hanson claimed this would “give people some breathing room” to deal with persistent cost-of-living pressures.

The proposal has been roundly criticised – and rightly so. If implemented, it would stoke inflation, perhaps Australia’s biggest economic challenge right now, and put upward pressure on interest rates. Rather than alleviating the cost-of-living crunch, One Nation’s super policy would worsen it.

But it would also cause long-term damage by reducing retirement incomes.

The Herald’s senior economics correspondent, Shane Wright, observed earlier this week that One Nation’s policy “confirms that superannuation is fast becoming the magic pudding of Australian politics, that it can do anything and everything”.

At the past two federal elections, the Coalition has promised to change super rules so that aspiring home buyers could withdraw a portion of their superannuation and put it towards a deposit.

Economists criticised the Coalition’s plan, warning it would stoke demand for housing and push up prices, making the policy counterproductive. Even so, Liberal leader Angus Taylor has indicated an “open mind” to pursuing the scheme again, though the party is yet to announce a position.

While Labor likes to style itself as the defender of the superannuation system, it has long encouraged super funds to invest in some of the “big national projects” that it favours, such as renewable energy and housing. But the nation’s retirement savings pool is not a political piggy bank.

While populist superannuation policies must be resisted, that is not to say retirement savings policy should not be debated. It is not a sacred cow.

Compulsory contributions were 3 per cent when the current superannuation system began in 1992, rising to 9 per cent by 2002 and 10 per cent by 2022. Now every Australian worker contributes a minimum of 12 per cent of their pay packet to super. It is entirely legitimate to examine whether that level is appropriate.

Public debate about superannuation rules often focuses on the concerns of middle- and high-income earners, but super policy must always serve the needs of low-income workers as well, especially women who still have lower average super balances than men.

Australia’s superannuation pool is an invaluable national asset. Even small adjustments to the system should be made with great caution and only after careful consideration.

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