The superannuation gravy train

Quelle surprise! Businesses are just now expressing concern about the costs of the increase in the superannuation guarantee from 9 to 12 per cent. Where were the business lobby groups since this policy was proposed years ago? Catallaxy readers have seen this topic being discussed many times over the past two years. See for example: here,  here,  here,  here,  here, here, here, here, here, and here.

But it only seems now, at the 11th hour, that businesses are waking up to the full implications of increasing the superannuation guarantee.

Let’s face it, the business lobby groups are hopelessly conflicted. Heather Ridout, for example, was the head of the Australian Industry Group but enjoyed a position on the board of Australian Super. As has been noted in a number of Catallaxy blogs, Union leaders enjoy comfortable and well remunerated positions as trustees of superannuation funds.

This is the principal-agent problem writ large and in three directions. The Government is not representing the interests of  taxpayers. Business lobby groups are not representing the interests of businesses. And Unions are not representing the interests of workers.

Now these cowboys – who have over invested in unlisted property trusts – want more money.

Increasing the superannuation guarantee is one of the worst and most destructive policies introduced by this government. As Judith has noted, it was not recommended by the Henry review. As I have noted, it would lead to people having higher incomes in retirement than during their working lives (if, that is, the funds have been wisely invested and earn a decent return – something that cannot be assumed over the typical working life of today’s younger workers).

The burden of the measure falls on the workers, increasing the cost of employing them and (other things being equal) a lower rate of employment growth. This is a job destroying policy.

Frankly, I’m appalled at this disaster of a policy. If Australia has a superannuation problem, it is because we have too much money tied up in superannuation.

 

 

About J

J has an economics background and is a part-time consultant
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40 Responses to The superannuation gravy train

  1. John Comnenus

    Big Business deserves what it gets. Heather Ridout said that industry could work with FWA and Labor. I have no sympathy for big business. To ram home the point, the Coalition should focus all initial competitive reforms on small business before dealing with big business. It should leave the mining tax in place for BHP, RIO and Xstrata only because they voluntarily agreed to it. they should remove it for everyone who didn’t voluntarily agree to it.

  2. Biota

    How can industry super keep advertising that from little things big things grow? My wife is in one of these funds and it would be more apt to say from little things smaller things grow. Only for the benefit of the members, sure! My private fund has peformed much better.

  3. The steady march towards universal mediocrity continues… except for the socialist ruling elite

  4. Bronson

    Just got my half yearly super account returns minus -$5,000 return on investments. I can’t wait until the levy is increased so that I can increase my losses!

  5. Capitalist Piggy

    Flood Tax. Mining Tax. Carbon Tax. Super Tax.

    What’s next?

  6. What’s next?

    Flight to safety… offshore

  7. John Comnenus

    CP a tax surcharge on those who have paid all the extra taxes!

  8. Rabz

    What’s next?

    Increased marginal income tax rates and a massively increased capital gains tax rate.

    They won’t be able to help themselves, the stupid, thieving communist arseholes.

  9. Token

    Don’t forget an expansion of the FBT and dropping of many of the concessions put in place to reduce the market distorting effects of that inefficient tax.

  10. Capitalist Piggy

    Did I forget to mention the Holden Tax?

  11. Raider580

    As more Boomer hit retirement a lot of their super when it comes to be called on will have disapeared.
    As Jessie James said when asked why he robbed banks,”Because thats where the money is”

  12. On your Marx

    Interesting article.

    no evidence to support any sort of problem in Superannuation.

    The Henry tax review didn’t spot any.

    No Mention of support to increasing the SGC from Retail funds at all indeed no mention those dreaded Industry funds usually have equal representation on their boards.

    Their performance overall is right up there with Retail funds as well

    Judith might have noted that but provided, like you , no evidence for that.

    I note Henry doesn’t agree a SGC of 12% would lead to a higher income in retirement than in their working life.

    you do realise that as they have more in their superannuation they get less from the Age pension and it is only those who have incomes much higher than AWOTE that would get neat to having a 100% replacement rates.

    The argument against a higher SGC was not an allegedly repcement rate higher than 100% but
    ‘An increase in compulsory saving would increase potential retirement incomes. However, it would also reduce an employee’s pre-retirement income. Low to middle income earners, who are typically unable to offset the impact of increased compulsory saving by reducing voluntary saving, could be expected to experience larger reductions in pre-retirement consumption opportunities than those experienced by higher income earners.’

    Those dreaded taxers in Canberra
    Tax as a % of GDP is now at levels we haven’t seen since 1978/79.

  13. Rabz

    Tax as a % of GDP is now at levels we haven’t seen since 1978/79.

    I have thoroughly debunked that lie (last Friday). Give it away, please.

  14. .

    no evidence to support any sort of problem in Superannuation.

    Yes Homer, there is no principal agent problem. You golden turkey, business isn’t happy with Ridout and unionists aren’t happy with their leadership, how are industry funds etc meant to represent most Australians who are unincorporated or not in a union? It is like there is a double principal and agent problem.

    No Mention of support to increasing the SGC from Retail funds at all indeed no mention those dreaded Industry funds usually have equal representation on their boards.

    Equal representation? So what? Is it an investment class or is it a float at the goddamn mardi gras?

    I note Henry doesn’t agree a SGC of 12% would lead to a higher income in retirement than in their working life.

    We could give you bozos 21% and you’d still fuck it up and give parsimonious terms on life insurance. What matters is the tax rate and investment return because these are applied after contributions.

    you do realise that as they have more in their superannuation they get less from the Age pension and it is only those who have incomes much higher than AWOTE that would get neat to having a 100% replacement rates.

    What does my pension have to do with AWOTE? Stop using it as a reference rate because is totally artificial bullshit you’ve made up. My father had better than 100% replacement rates but he voluntarily contributed about 6% extra on his super (which was tax effective). If that is inequitable, is it because the tax rates cut in way too early.

    The argument against a higher SGC was not an allegedly repcement rate higher than 100% but

    Waffle. Get rid of the taxes and the implied SCG rate goes up to 15.21%.

    The argument against a higher SGC was not an allegedly repcement rate higher than 100% but

    Not only is this BULLSHIT, it is first rate trickery, Anna Bligh has 90 bn in debt which would become sovereign debt if QLD defaulted. The NBN is off balance sheet. The debt ceiling has a few months before it is reached. Flood tax, fire tax, mining, carbon taxes, an increases SCG, unfunded liabilities to Holden and Ford…

  15. sean

    Ole’ red ridout hasn’t seen a tax payer bailout she doesn’t like.

    I agree with some of what John C is saying. Big business cash in when the ALP are in power to take advantage of the union white anting of big and stable companies, happily screwing others on the way.

  16. Samuel J

    On your Marx – you can see my calculations to show that a SG of 12 per cent leads to higher retirement incomes here: http://catallaxyfiles.com/2010/11/19/12-per-cent-superannuation-guarantee/

    This issue was not addressed in Henry.

  17. Samuel J

    Mother Hubbard’s Dog: fixed thanks

  18. .

    haha my final invective comment to Homer was over the tax/GDP ratio, I did poor cut and paste job.

  19. On your Marx

    MYEFO

    1978/79 tax as a % of GDP 20%

    2010/11 ta as a % of GDP 20%

    Facts 1 Rabz 0

    Samuel,

    Actually it doesn’t.
    I find it interesting people start with such a large figure for a start and then you take no notice of how much or little a person would get in Age pension.

    For those who have a poor understanding , in the industry people always talk about how much a person earns as a % of AWOTE

  20. Hey the commenters here would fit right in at occupy wall street as the arguements are exactly the same and correct about crony capitalism. (this is excluding the straight out socialists at ows) I personally think the super guarantee is good but it needs a lot of regulatory adjustments and haven’t made my mind up completely about if it should be increased. As does banking in the US.

  21. .

    For those who have a poor understanding , in the industry people always talk about how much a person earns as a % of AWOTE

    No you idiot, die the in the ditch labor incompetents use that term and no one else gives a fuck.

    Kelly Liddle you sicken me. If you can’t wake up to how much of a scam superannuation is, then you’re simply illiterate.

  22. Kelly Liddle you sicken me. If you can’t wake up to how much of a scam superannuation is, then you’re simply illiterate.

    Not sure how to take this does it sicken you that it is crony capitalism or that someone is forced to save money? If it is the first I agree if it is the second then I do not as I do not want to pay taxes for oldies who didn’t save they should be kept to a minimum. Like my other arguements about health and education I am happy it represents only half of the average percent spending as a proportion of GDP. Australia is in the bottom 4 of the OECD for government spending on oldies pensions. True it is terrible not to be on the bottom but done correctly the 12% can get us there.

  23. I missed Shorten announcing his MORE SUPER website earlier this week.

    MORE SUPER = LOWER WAGES (at least according to Treasury)

    Swan-Gillard are introducing a 3 per cent pay cut.

  24. MORE SUPER = LOWER WAGES (at least according to Treasury)

    Super is a part of wages just like workers compensation etc.

  25. John Mc

    Yep, just wages you can’t use to maintain your mortgage. Meaning more interest on the mortgage. Then more tax on the interest. Ensuring those naive middle class who do productive work are firmly entrenched on the treadmill.

    I read once that 9 years of a 27 year mortgage goes to the government. Maybe a smart money type can say if that’s true.

  26. .

    Maybe Kelly I was expecting a more blind visceral rage towards the untruths and union filth Homer Paxton was spouting? I thought a lot of you. We used to be cool.

  27. Rabz

    For the benefit of our resident marxist moron, here’s the relevant excerpt from my aforementioned debunking last Friday:

    However, what really gets on my goat is the lie that we are a low taxed populace. Again this statement is absolute bollocks and anyone who believes it is either deluded, insane, or both.

    If you itemised a list of the various governments’ taxes and charges we pay you would be staggered at how pervasive they are.

    Here’s a primer:

    Income Tax
    Medicare levy
    ‘One Off’ levies
    GST
    Petrol excise
    Stamp duty
    Local council rates
    Motor vehicle taxes
    Various license fees
    Utilities taxes (hidden charges in power bills for example)
    National Park Fees
    Land tax
    Insurance levies
    etc, etc, etc.

    What is the real incidence and subsequent tax burden on individuals in any year (as a proportion of income), given the existence of these myriad taxes and charges?

    The conclusion would horrify people, I’m sure.

    Seven of the thirteen taxes/levies identified above are NOT imposed by the federal gubberment.

    The MYEFO figures you’ve quoted are based on federal taxation measures only – and those are on an upward spiral.

    21.7% in this financial year (20.6% in 10-11)
    23.1% in 12-13 (official goose guesstimate)
    23.4% in 13-14 (ditto)

    So, are you deluded, insane, or both?

    My money’s on both.

  28. .

    Good fisking of MBA grad homer paxton, devoted worshipper of philosophy major and grad dip econ grad JM Keynes, rabz.

    Brilliant stuff.

    QLD has a 90 bn debt which they cannot really pay. Let’s assume it is sovereign debt. Plus the NBN.

    All of this shit has simply been backloaded.

  29. On your Marx

    Wrong
    OECD figures on Total Taxation of GDP has tax as a % of GDP in 200 at 30.3% 2005 29.8 2008 27% 2009 25.9.

    Same trend

    some-one is certainly deluded or insane or simply innumerate.

  30. Rabz

    OECD figures…

    The OECD is a f*cking joke.

    Those figures DO NOT reflect the full tax burden or the full extent of taxes, duties, levies etc, imposed by the three levels of grubment in this country.

    As I have already stated, GIVE IT AWAY.

  31. mundi

    Your claim about people having more money in retirement than they do now is waaaaaaaay off.

    Super fund average for the last 15 years it 5.5% PA, inflation average is 2.9% PA. The real-terms increase is just 1.6% PA.

    The retirement age is 60 and life expectancy is 81. To have the same expenses for 21 years in retirement requires a super of about 36% of income. 12% gets you no-where.

  32. Super fund average for the last 15 years it 5.5% PA

    If that number is true it is pretty bad and the question should be asked why is it so bad.

  33. JC

    As I have already stated, GIVE IT AWAY.

    He won’t. He keeps on trucking with the same repetitive crap.

    It’s like going back to aisle 6 with him and always doing so.

  34. On your Marx

    the old communist line again.

    all the figures are wrong but I am the only one right.

    you have been shown up.

    If you actually understood state finances then you would know they move up and down with the economy.

    If the Economy hasn’t had 3% growth since March 2008 then their revenue would be down as well not up.

    Just admit you were wrong and move on.

  35. .

    You deadshit Homer that is YOUR argument.

    If you actually understood state finances then you would know they move up and down with the economy.

    So is this why QLD has 90 bn of debt?

    Imbecile.

  36. On your Marx

    Ah a person who believes both at the same time a State has booming tax revenues but ever higher debt.

    Another communist without evidence but plenty of ideological baggage.

    You can admit you were badly wrong on the tax measures as well.

  37. JC

    Homer:

    You’re so pathetic. You can never ever debate something on its merits and either have to send people to out of date treasury papers or infer they got something wrong 15 years ago when in fact the opposite is true: that you fucked up.

    You’re so pathetic.

    You’ve been beaten to a pulp every time you show up here and that reminds me. What are you doing here anyway, as you were banned.

  38. On your Marx

    Another communist antic is to tell all and sundry how you have ‘won’ despite not producing a shred of evidence.

    In this area of taxation the evidence shows that tax as a % of GDP has fallen.

    So what we have here is people disputing the statistics but insisting they know better.

    As happens here without exception they are wrong.

  39. .

    You’re a fucking idiot Paxton. QLD is 90 bn in the hole. Shut the fuck up you imbecile.

  40. JC

    Paxton:

    If the commodity boom falls over, the Federal government will end up picking up the tab for the indebted states you lunatic.

    If the markets refuse to rollover the debt, you think the feds will let them default? Go stack the toilet paper shelf, you economic hillbilly.

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