Malcolm Turnbull is set on making super another ETS moment for himself – John Roskam

Australian Financial Review

Home News Policy Opinion Jul 14 2016 at 3:19 PM Updated Jul 14 2016 at 5:34 PM

A quite retirement has become a turbulent political issue.
by John Roskam

In 2009 as the leader of the opposition Malcolm Turnbull supported the introduction of an emissions trading scheme. He maintained his support for an ETS in the face of overwhelming opposition from the grassroots members of his own party, and against the grave concerns of many of his parliamentary colleagues. It did not end well for Turnbull.

Seven years later, superannuation does not need to be, and should not be, another ETS-like moment for the Prime Minister. If he’s as determined as he says he is to increase taxes on superannuation and throw into disarray the retirement plans of hundreds of thousands of Australians, the least he can do is make a commitment to listen to their concerns.

The Coalition’s superannuation changes were made in the rush of a budget and an election campaign. Prior to budget night Coalition MPs, and for that matter the public, had no inkling the PM and his Treasurer were planning to break the Coalition’s 2013 election promise not to make any adverse changes to superannuation. It was a promise the Treasurer repeated almost up until the time he announced he was going to break it.

The Coalition has convinced itself superannuation played no role in the government’s near demise at the election – but three different polls and surveys say something different.

During the election campaign Turnbull was hamstrung from attacking Labor’s higher taxes on capital gains because he was proposing tax increases of his own.

There’s absolutely no reason why any final decision on the Coalition’s superannuation policies must be reached at Monday’s meeting of Coalition MPs. Given the PM has promised he won’t make any more changes to superannuation after these current changes, if the government is deciding on policy settings it hopes will last for years to come, the details of the policy should be the result of more than a five-minute discussion.

It is bizarre the Coalition is attempting to portray its imposition of higher taxes as “reform” and that a Liberal Party Prime Minister appears to want to make his desire to increase taxes a test of his authority as leader.

The government says higher taxes on superannuation are “broadly accepted by all sections of the community”. That’s debatable. In any case the policy elites of Greece, Italy and Spain all think higher taxes are a good idea too.

The government also claims its changes are necessary to repair the budget. But any administration that really wanted to achieve budget repair would focus on government spending.

Over the next four years, Commonwealth government revenue from taxes and other receipts will increase from 23.5 per cent of GDP to 25.1 per cent of GDP.

Meanwhile spending will only fall from 25.8 per cent of GDP to 25.2 per cent of GDP. No one can call that “budget repair”. And even if this small reduction in government spending is achieved, the government will still be substantially larger than it was prior to the GFC. The truth, which the government won’t admit, is that what little budget repair there is, will be accomplished by raising taxes, not cutting the size of government.

To get an indication of what real budget repair looks like we can go to the United Kingdom. In 2009 UK government spending as a share of GDP was 49.6 per cent. Last year that figure was 43.2 per cent.

Beyond the issue of superannuation, there’s a much bigger question – and it goes to trust.

When politicians break their promises they lose the trust of the public. First there was Julia Gillard’s carbon tax promise, then there was Tony Abbott’s “no cuts to education and health” promise. Now there’s superannuation.

Ian McAllister, a professor of political science at the Australian National University who operates an extensive program of surveys of voters, has argued convincingly that the electorate’s trust in politicians is collapsing. One manifestation of that collapsing trust is the growing vote for non-traditional political parties.

Labor’s claims during the election campaign about what Turnbull would do to Medicare were outrageous and wrong. But unfortunately they fell on fertile ground. The PM was asking the public to believe the Coalition’s promise on Medicare even though the Coalition had just broken its promise on superannuation.

As McAllister has said “Voters don’t forget these things. Labor’s success with the ‘Mediscare’ campaign has to be seen in context. People saw a history of broken promises.”

Broken trust risks feeding into a cynicism about the processes of democracy itself. Forty per cent of Australians think it makes no difference which party wins the federal election, and nearly half believe their vote doesn’t matter.

For reform to succeed there needs to be trust between the politicians and the people who elect them.

Reform inevitably takes the public into the unknown because reform is change. If you’re going to follow someone into the unknown you need to trust them.

If the Coalition goes ahead with its proposed tax increases on superannuation it risks destroying for a generation the opportunity for any real economic reform.

John Roskam is executive director of the Institute of Public Affairs

AFR Contributor