The Government finally achieved a key election promise yesterday in repealing the mining tax, but it came at a cost – on several fronts.
The first is a hit to the budget bottom line of about $6.5 billion to retain a range of payments, such as the schoolkids bonus, which the Palmer United Party senators demanded in return for their support.
The other costs may include the Coalition’s political cred and whether voters believe they’ve broken one promise to keep another.
Rises in the compulsory superannuation rate have been delayed by a further three years on top of earlier delays in the budget. It’s now put off for six years. The government planned to delay the first 0.5% rise in 2015 until 2018, but now it’s been put back to July 2021. The goal of 12% now won’t happen until 2025, when Labor wanted it in place by 2019.
If you believe those constant stories saying we haven’t saved enough for retirement, then this decision isn’t going to change that.
Labor leader Bill Shorten accused the government of making a “dirty deal” with Clive Palmer after prime minister Tony Abbott had previously promised repeatedly there would be no “adverse changes to superannuation”.
But the PM denies the charge, saying there are “no adverse changes” and the delay keeps more money in workers’ pockets.
It will certainly put more money in the Government’s pockets too, since superannuation is taxed at 15%, a lower rate than wages. You’ll have more in your pocket for a few more years – assuming the delay is passed on to workers in wage rises rather than the super increase – but you’ll be paying more tax for the privilege.
That’s probably one reason why treasurer Joe Hockey started floating the delay with the crossbench senators a few weeks back and finance minister Matthias Cormann added it to yesterday’s deal. It helps with taxation revenue.
There’s another cost for workers too. Industry Super Australia (ISA) says that for an average income earner, aged 25, the delay will cost them around $100,000 in retirement savings over their working life – $36,000 in today’s money.
They calculate a loss of $150 billion to national savings by 2025.
“This decision is about a short-term budget fix that will have long-term budget impacts on age pension outlays,” ISA boss David Whiteley said.
In other words, some of the structural budget problems the Government likes to cite are embedded in this delay.
But Clive Palmer’s cool with that, saying “Super is just a way to allow merchant banks to make large fees out of the Australian population, or many union movements that manage their own super to have a good time”.
Palmer ignores the simple fact that around $600 million of the $1.8 trillion invested through super funds is in the Australian stock market and that helps drive the economy.
And if “large fees” were such a concern for the Fairfax MP, voters would be entitled to ask why Palmer’s senators chose to back the finance minister Cormann’s FoFA rollback just a few weeks ago, despite warnings from ISA that it would cost super holders an extra $530 million in fees a year.
But then the mining billionaire is fond of offering “factiness” in public debate.
Palmer’s other observation yesterday was “we know it is a statistical fact that over 50% of Australians will be dead by the time they get access to their super”.
When the average life expectancy of Australians is 79.9 years for men and 84.3 for women, that sounds like more Palmer factiness, as well as ignoring the beneficiaries of the deceased, who inherit those funds – and the default life insurance attached to it – when the most need it after losing a family breadwinner.
While the mining tax was predicted to raise less than $700 million, at least billionaire miners such as Palmer, Andrew Forrest and Gina Rinehart will have enough cash left leftover for their retirement.
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