Slay the super sacred cow
There's one good thing about the local stockmarket falling 15 per cent last year: people are beginning to ask what the point is of compulsory superannuation.
Instead of arguing about things at the margins of superannuation policy, like how to enforce fund transparency and give members choice between funds, we should debate the fundamentals. We should talk about whether compulsory superannuation should even exist.
Compulsory superannuation has become a sacred cow for both sides of politics. It is worshipped because it has given Australia the fourth-largest pension market in the world. And it has created an industry of superannuation rent-seekers. Compulsory super is now a very fat and lazy sacred cow and no one is willing to touch it - let alone slaughter it.
The Labor Party won't do anything to disturb this cosy world. Compulsory super was invented by Paul Keating and Bill Kelty, and they knew exactly what they were doing. The influence of the trade unions in Australia no longer rests on membership. Union power is now exercised through the hundreds of billions of dollars controlled by the industry superannuation funds.
And now that 12 per cent has become accepted as the new level of compulsory contribution, watch how the ALP and the super industry will agitate to set a new standard of 15 per cent and higher.
Why John Howard and Peter Costello did not repeal compulsory superannuation when they came to power in 1996 is a mystery. Why the Liberal Party supports it is a mystery.
Even more mysterious is why Tony Abbott, who has no qualms about opposing every other piece of bad policy from the Gillard government, decided in November last year not to fight Labor's increase in the contribution level to 12 per cent.
The idea that, in addition to levying taxes, the government should also stop people spending their own money by forcing them to save is something that should make Liberals very uncomfortable. And in the current financial climate Australians aren't able to save their superannuation.
They're losing it on the stockmarket. Forced saving, regardless of whether the returns are positive or negative, is inconsistent with any notion of personal freedom of choice.
It's about time Liberals started scrutinising some of the traditional justifications for compulsory super.
There's the paternalistic argument that individuals must be forced to save "for their own good" because otherwise they'll retire and not have enough money to live on. This arguments rests on the assumption that at the age of 65 a person will be financially better off if 12 per cent of that person's wages have been saved in superannuation. In some cases this will be true. But in many other cases it won't be.
In fact, this highlights the Soviet-style one-size-fits-all super policy that applies in this country. Everyone is forced to save at the same rate regardless of their personal circumstances. A person wanting to use their salary to pay for an educational qualification to help them gain a higher income is treated the same way as someone who feeds their weekly pay into a poker machine. Because of the behaviour of a few, the government makes everyone suffer.
The main economic justification for compulsory super is that in the long term it will reduce government spending on the pension. This is questionable. Treasury estimates that in 2050, 75 per cent of retirees will still be able to get all or part of the pension because their super will be inadequate.
That doesn't look much like a system that's reducing the taxpayer's burden.
Compulsory superannuation offends practically every principle of what should be Liberal Party philosophy.
If an Abbott government does keep compulsory superannuation it must, at a minimum, make drastic changes.
For a start, it should impose the same regulatory requirements on union-dominated industry funds as are applied to retail funds. Next, it should liberalise the list of assets in which superannuation can be invested.
If a government is genuinely concerned for the long-term financial security of individuals, then those individuals should be allowed to use their super to invest in their home.
Owning a home provides more financial security than a share portfolio.
If Abbott and the Liberals won't abolish compulsory superannuation, they should at least consider allowing individuals some semblance of choice by providing an opportunity for opting out of the system.