1 October 2018
Robert Gottliebsen – Business Columnist
Both the government and the opposition have the same problem — they both have difficulty in devising sensible superannuation and retirement policies.
And this raises the question of why can’t they get it right? Why do they make so many mistakes?
In the Weekend Australian I set out how shadow treasurer Chris Bowen simply got his franking credits policy wrong.
But go back a few years and the then treasurer Scott Morrison and his assistant Kelly O’Dwyer put forward a set of horrendous superannuation policies and even went as far as saying they were not retrospective when of course everyone knew they were.
Those bad policies almost cost the Coalition the election. They were lucky because many of their backbenchers took the trouble to talk to people and understand what was happening and forced through policy adjustments that were at least a substantial improvement on the original ideas.
And in the current ALP fiasco my understanding is that, in a similar way to the Coalition, intelligent backbenchers are talking to the voters and are starting to understand the looming disaster and are desperately looking for a way around the problem without admitting error.
Let me help them. The best way is to abandon the policy altogether, but if you need a compromise then limit the amount of cash franking credits that can be claimed to, say, about $15,000.
The cap being floated in ALP circles is $10,000 but I think that is too low. But whether it be $10,000 or $15,000, the problem is we are introducing legislation that is complex, will raise very little money and makes retirement just that much more complex.
We can fix that over time, and a $15,000 annual cap to cash franking credits will solve most of the problems among the battlers who are struggling to fund their own retirement. The problem both the Coalition and the ALP face in superannuation matters is that, in the first instance, the politicians have very generous super arrangements and don’t do their homework on the rest of the population. Even worse, in the public service the people at the top are mostly on incredibly generous benefits and are members of the so-called “$10 million club” with benefits that are way in excess of what is available to the general public.
While that has been changed for the most recent recruits, the people at the top of the public service are mostly living in a different world to the rest of the country. So when they look at super and retirement matters they simply have no idea what is taking place. My understanding is Chris Bowen, when devising his super franking credit disaster, actually went to the public service to have it evaluated and they came back with the thumbs up, which made him confident that the concept was a legitimate tax arrangement that would take money from the rich.
As we all now know, the policy is a savage blow to ordinary Australians trying to fund retirement, with about 1.4 million people in the ALP’s sights and hardly a rich person among them.
I believe we are looking at a phenomenon that cripples both parties. The first step in solving the problem is that ministers in areas like superannuation need to understand that the public service is of limited value to them.
They have to send their people out into the real world and, as the Coalition found, the best advice came from the backbenchers who usually have the time to be in touch with the electorate.
Ministers and shadow ministers in Canberra (and also in state governments) surround themselves with ministerial staff who second-guess the public service. Too often the ministerial staff are “yes” people with no depth to their knowledge outside of politics.
This situation has caused many talented people to either leave the public service or simply not join it. Once we had a proud public service that was as far as possible independent, but we are now seeing in so many areas public service advice simply doesn’t have the same standards it once did.
Nothing is going to happen in the short term, but down the track ministers are going to have to think about how they restore the quality of public service advice so that they don’t get caught in situations as we have seen in superannuation and retirement from both parties. When Australians reach their 40 and 50s they make long-term plans for their retirement in accordance with rules that exist at the time. When past governments changed rules the old rules were grandfathered so they were not retrospective.
It was the Coalition that decided there should be retrospective legislation. At least Bowen is being honest and is saying he is changing the rules retrospectively, but that doesn’t validate his policy. For what it is worth I admire the shadow treasurer for the fact that he is open about the tax measures he is planning to undertake.
Traditionally opposition treasurers keep their mouths shut and introduce the nasties once they get into office.