Superannuation and the Morrison Government's Determination to Make Working People Pay for the Crisis
Lisbeth Latham
A central plank of the Morrison Government’s response to the economic uncertainty and crisis unleashed by the COVID pandemic has been its policy of allowing working people to draw down their superannuation accounts by $10, 000 in each of the 2019/2020 and 2020/2021 financial years. Hundreds of thousands of people have now accessed their accounts for a range of spending, and while the individual decision to draw down super accounts has been criticised by some commentators, the real question is what Australia now does in a context where the problem of retirement poverty is likely to have been exacerbated?
The government’s announcement that people could draw down their superannuation account - particularly by such relatively large amounts, was a tacit admission by the government that its broader economic response to the current crisis was an entirely inadequate response. The most notable example of this being JobKeeper the program, which actively excluded millions of workers and for millions more it was inadequate to enable them to meet their financial obligations. Why else would the government believe that people would need to draw up to $20, 000 from their retirement savings than if they knew that they were not going to meet their financial obligations drawing on the welfare system?
Drawing down superannuation savings wasn’t just an individual tragedy for those workers, there was and continues to be a real danger that the individual decisions to draw down accounts would cause liquidity problems for Australia’s massive superannuation system, and further exacerbate the decline of the financial markets with up to $50 billion drawn down. This situation has led to individual criticisms of workers who chose to draw down their accounts. With some media outlets critical of both people accessing funds without experiencing a personal loss of income and individual spending decisions. Apart from a severe misreading of what this spending represented - the majority of it consisted of either paying down debt, making significant large purchases that would otherwise incur debt, or meeting day to day, or week to week living expenses. Criticising individuals for drawing down their life savings in a context generalised system failure appears to be at best misguided if not totally disingenuous and malicious. People facing a collapse in their disposable income given access to their super were always going to access it - it that is why the government made it available. If anyone should be blamed for the money being accessed and spent it is the government.
The problem with the spending is not what people spent their superannuation money on, but that it was necessary. We know that a significant number of the people drawing down their superannuation accounts will have been women and people in less secure and lower-paid employment. These are groups are all at greater risk of experiencing poverty in retirement in a system that already produces some of the largest proportion of people over the age of 65 living in poverty within the OECD. With 2.5 million people expected to draw down their super, and more than 480, 000 people now having a zero superannuation balance. This problem of retirement poverty in Australia can only be expected to get worse. In addition, the running down of workers superannuation balances could have an immediate impact, as workers with less than $6, 000 in their superannuation accounts are no longer provided with default insurance by their fund.
Country
65+ Living in Poverty
The problem of hundreds of thousands of older Australians retiring into poverty has been an issue in policy development. The main solution that has been put forward has been to lift the compulsory employer superannuation contribution from 9.5% to a higher figure, the most notable one being 12% which had been legislated to increase incrementally by the Rudd government. This increase was subsequently delayed by the Abbott government, with the increase to 10% not scheduled until July of 2021. It is unclear that this will go ahead, and the need to increase to 12% has been the focus of a number unions, most notably the Australian Services Union, Finance Sector Union, and Shop, Distributive, and Allied Employees Union. While there is an undoubted logic that the easiest and best way to address retirement poverty is to boost the amount of money going into workers’ superannuation accounts, this ignores the fundamental problems with the superannuation system:
- It shifts the problem of supporting working people in their retirement from society as a whole to workers during their working life - which has contributed to and justified the inadequate pension system within Australia;
- It reproduces and exacerbates the income inequality that already exists in the Australian economy, most notably the gender wage gap;
- Australia’s super system props up financial markets - with the funds being worth $2.7 trillion in March 2020 - and makes workers retirement income and wealth entirely dependent on the stability of these markets (which experience shows is not at all reliable)
Given these serious limitations, limitations that have existed, and were built into, the superannuation system from its inception, what is the solution? It has to be a significant re-envisioning of Australia’s entire pension and welfare system to view that all people deserve a liveable income which guarantees a minimum quality of life irrespective of the ability of an individual to work. Work would then enable people to enhance and improve on that standard of living both now and into retirement. However, this universal welfare system would be funded both by steeply incrementing progressive income tax system combined with a concerted effort to ensure that corporations are levied increased tax levels which they are actually required to pay.
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