By Eva Cheng
Changes to workers' superannuation announced in the federal budget last week amount to a new tax levied on lower income workers and foreshadow the eventual abolition of the age pension.
Under the scheme, workers will pay 1%, 2% and 3% of their incomes beginning in 1997, 1998 and 1999. Unlike other taxes, the levy is not to be paid to government, but to privately operated superannuation funds.
The government will match lower-paid workers' contributions dollar-for-dollar. Added to this is nine cents in a dollar coming from employers by the turn of the century, so that eventually all employees are to have 15% of their income paid into superannuation.
The sums involved are enormous — estimated at $186 billion by 2002.
The government claims that the new levy will not reduce pay packets, since it will be more than covered by pay rises of between $8 and $10 in the three years to 1999 — these rises being offered under the upcoming version of the Accord, Mark VIII.
But all 15% will in reality be paid by workers. The employers' contribution is a trade-off under earlier versions of the Accord against wage rises that could and would have been won.
As for the government's eventual 3%, it originated as a promised tax cut in 1992 as a trade-off for wage "restraint" (i.e. real wage cuts). The government then unilaterally "postponed" the tax cuts until 1998. Now the amount — considerably reduced — is to be handed over to super funds, supposedly on our behalf. That's assuming that the government doesn't decide to do something else with it as soon as the next election is past.
Treasurer Ralph Willis muttered vague assurances about retaining the age pension, but it is a virtual certainty that this or a future government will tighten the means test. The day when every old person had a right to some security in retirement will be gone.
Also gone will be the relative equality of the pension. Retirement income will be proportional to income during the individual's working life: those who were on low wages or had long periods of unemployment will lose out in old age too.
Paid for through the tax system, the pension draws funding from across the board, tapping to some extent into company profits. The super scheme, as indicated above, is self-funded by the workers.
This sort of scheme is sometimes referred to as "forced savings", but there is not even a guaranteed connection between what workers save and what they eventually get back. One fund will be luckier or cleverer with its investments; another will increase contributors' savings little or not at all; some may even go broke, wiping out all or part of the "savings".
The government's argument that the scheme will boost national savings, which are supposedly needed for investment, is also distorted. There are already employers' profits which are invested overseas because companies judge that there are better prospects for profits there. Are workers' "savings" to go into poor-paying investments in Australia? Or will they be used to boost the clout and profits of Australian companies offshore investments? Either way, workers lose.
National savings aren't just our money in the bank (those are household savings), but include as well corporate and public components. Corporate savings are retained earnings, while public savings are the surplus of government income over expenditure.
Super only increases household savings. Key to turning around the long-term decline in Australia's national savings are public savings. These have been declining for a decade because the government has been reducing taxes on corporations and the wealthy.