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Unfair, but for the greater good - where is Labor going with super?

The biggest retirement reform since the age pension, compulsory superannuation is one of the ALP’s greatest achievements. Before it was introduced, as part of the Hawke Government’s Accord with the union…

If the “spirit of reform” is behind any attempts to reform superannuation, why is this potentially being dropped on Australians on budget night?

The biggest retirement reform since the age pension, compulsory superannuation is one of the ALP’s greatest achievements.

Before it was introduced, as part of the Hawke Government’s Accord with the union movement, superannuation was mostly a benefit enjoyed by well-paid, male, white-collar workers such as judges, politicians and public servants.

The scheme is simple; it is essentially a compulsory savings scheme for an ageing population that is not good at saving, made more attractive by concessional tax treatment.

Without compulsory superannuation, most of us would be facing a far tougher time in retirement.

It is another great social policy achieved at the cost of some inequity in the treatment of low and high income households.

It is this very “spirit of reform” Labor is now attempting to evoke amidst building speculation the government will change the superannuation tax arrangements for high income earners in the May 14 budget.

While refusing to confirm reports that income earners in the top 1-2% income brackets may pay more tax, Treasurer Wayne Swan has said the system must be reformed to be sustainable in the long-term.

Prime Minister Julia Gillard also said superannuation as an ALP creation was “safe in Labor’s hands”.

Labor has often accepted some unfairness for the greater good of a policy framework that captures everyone and is politically sustainable.

Superannuation is not fair in the way the rich and poor get treated - but neither is health and education funding and much else that governments get involved with as well.

The ALP’s greatest policy reforms have succeeded because they have been far-sighted, inclusive and framed to pursue national, rather than class, interests - a point made by outgoing cabinet ministers, Simon Crean and Martin Ferguson.

But the problem for the Gillard government is - again - process.

Big social policies are not set in stone and they should be regularly reviewed and improved – the trade-off between social, political and financial objectives is always open to tweaking.

Any review of such a big policy area needs to be done openly and transparently, with clear objectives and guidelines.

So why has the Gillard Government repeated the mistakes it made with the mining tax and the recent media reforms package?

Especially when it comes to superannuation, when people are being asked to make decisions for the decades ahead, and confidence in the basic integrity and longevity of the scheme is critical.

Changes to superannuation shouldn’t just be announced on Budget night, that’s not a twenty-first century approach.

Gillard’s “trust us” approach smacks of hubris and a poor strategic grasp.

Labor should be a party of consultation, not edicts from above.

Labor’s most admired leaders from Fisher to Keating have all understood that great economic and social change can only be made through appeals to a broad national interest.

No-one exemplified this approach more than Bob Hawke with his appeal to reconciliation and consensus to heal the wounds of the divisive Fraser years.

Whitlam opened up higher education by removing fees, delivering a great benefit for high-income households while putting university within the reach of many more families.

Hawke funded a further, even greater, expansion of higher education partly through the introduction of the Higher Education Contribution Scheme (HECS).

HECS made higher education funding a bit fairer in tax terms to lower income households – but not much.

At the time HECS was formulated, Labor specifically rejected a proposal for fees and loans, arguably fairer for taxpayers, made by some of its bureaucratic advisers on the grounds that up-front fees were neither socially desirable nor politically sustainable.

Whitlam gave this country a universal health care scheme. Had it not been for Medibank (now Medicare), which passed Parliament only after the 1974 double dissolution, we would still be back where the USA was before Obamacare.

Yet, Medicare, like higher education funding, is not fair in the way the Gillard government now talks about fairness in reference to compulsory superannuation.

Medicare is partly funded through a levy, at the same rate for low and high-income earners.

The richest among us can use the public health system at the same cost per service as the lowest paid.

Radio broadcaster, Alan Jones, strongly opposes Medicare on this specific ground – the rich get too much benefit.

Unfair it might be, but Medicare has proven to be politically sustainable.

Consultation is particularly important if the Gillard Government intends to drop Labor’s century-long national approach to economic and social reform and start looking for some radically greater perfection in the equity of tax treatment.

Labor’s century-long brand as the party that represents everyone who earns a living by their own efforts is at risk.

Join the conversation

83 Comments sorted by

  1. Michael Shand
    Michael Shand is a Friend of The Conversation.

    Software Tester

    Great article, Im not sure consulting is the right way ot go about things, if the gov had been consulting with different parties it would likely get such a watered down deal that it would be pointless

    Of course if the Gov does give edicts then it gets criticised for not consulting

    But of course if it did consult and didnt get the deal it wanted it would be criticised for being weak

    It doesnt matter what this government does, its apparently never good enough

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    1. Trevor Cook

      Recently awarded doctorate at University of Sydney

      In reply to Michael Shand

      Consulting tends to take the sting out of it, consulting doesn't mean everyone gets a veto. You can always say "we know not everyone agrees but ...". Howard's effort on Workchoices is a good example of a policy that suffered from not being exposed to community debate and criticism before it was announced. This government has too often repeated the mistakes Howard made. I just don't think that people in 21st century Australia buy the proposition that democracy just means voting every few years, I think people expect widespread opportunities for participation on big issues that affect them directly

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    2. Michael Shand
      Michael Shand is a Friend of The Conversation.

      Software Tester

      In reply to Trevor Cook

      "Majority rule doesnt work in mental insitutions" - line from the song, the idiots are taking over by Nofx

      I dont think people are qualified, informed, or logical enough to participate in these decisions - especially given the state of the media and vested interests.

      How did vested interests get millions of people to question Obama's birthplace and rally for 0% tax on capital gains - why would a working class person demand 0% tax on capital gains or campaign against the estate tax? things that…

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    3. Trevor Cook

      Recently awarded doctorate at University of Sydney

      In reply to Michael Shand

      I said they don't get a veto, I didn't say they didn't get an input.

      Why do people vote against their own interests? There's been some good stuff written on this in the US by people like Thomas Frank, Joan Walsh, Joe Bageant and along similar lines by Owen Jones in the UK - all worth a read. It's more interesting than tired cliches about 'manufacturing consent'

      Besides people already participate by voting, I'd just like to see that participation deepened and made more meaningful - but ultimately Governments will always make decisions - hopefully informed by experts and so on.

      I hold to the quaint view of JS Mill that participation is actually educational and informative - I cannot accept your note of despair about your fellow citizens

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    4. Michael Shand
      Michael Shand is a Friend of The Conversation.

      Software Tester

      In reply to Trevor Cook

      So just to clarify...who would get to give input and how?

      Its easy to say, ahhh they should of consulted the people first....but how in gods name would that happen?

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    5. Rubens Camejo

      logged in via Facebook

      In reply to Trevor Cook

      Trevor
      I agree with your take on consultation.

      The thing that perplexes me more than anything about this particular initiative is the fact Labor missed how easy a sell this would have been had they began the conversation with a report on the sustainability or otherwise of the superannuation system as it stands.

      Given the facts, most people would have seen and agreed with the need for "tweaking", as you put it. Those adversely affected would have made the same level of noise that is currently…

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    6. Peter Redshaw

      Retired

      In reply to Trevor Cook

      Trevor, I am normally a big supporter of consultation, but as far as I can see in the current climate it has little chance of working. The negativity pushed by both Abbott as well as the media, so pervades any political debate that it distorts any chance of consultation working. Maybe Gillard and labor could have done things differently, but I do not think it would have made a bit of difference.

      I am a person that is very interested in policy. I am someone that votes solely on policy and not…

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  2. George Harley
    George Harley is a Friend of The Conversation.

    Retired Dogsbody

    Hi Trevor.
    I take it that the panel that awarded your recently awarded doctorate did not read this article?
    It looks like a bad PowerPoint presentation and even after several readings, I still do not know what you want me to know.
    Mind you, I did leave school real early.
    Nothing personal.
    Regards.

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    1. Henry Verberne

      Former IT Professional

      In reply to George Harley

      George,

      Its fairly clear to me that Trevor rightly points to Labor's commendable track record of introducing many reforms which have been, on balance, of high value to most of us.

      However, he also rightly deplores the track record of the Gillard government in making the case for reforms- the potential super changes being the most recent example- in selling the reforms, in anticipating the reaction of the vested interests which will inevitably be mobilised, the likely shallow fear campaign that would come from Abbott etc.

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    2. Trevor Cook

      Recently awarded doctorate at University of Sydney

      In reply to Henry Verberne

      Thanks Henry I think that the lesson is that social programs and reforms that err (hopefully not too much) on providing some benefits to those who might be able to afford to pay for themselves helps to protect those reforms when the inevitable change of govt comes (Medicare, HECS and super being three great examples). This is an idea that underpins much of the social infrastructure of northern and western Europe. Too close an examination of who gets what tends to reduce public support for programs and lends credibility to political forces who would like to get rid of them altogether

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    3. George Harley
      George Harley is a Friend of The Conversation.

      Retired Dogsbody

      In reply to Henry Verberne

      Thanks Henry.
      The fact that it is "fairly clear" to you probably supports my point that it will fail to attract supporters from the less pedagogical amongst us.
      We are not all academics, I was unaware that was a prerequisite of joining, or indeed, supporting The Conversation.
      I may or may not support a position expounded on this site, but may I at least require the proponent to deliver his argument in such a manner so that even us dumb bastards can try and assess its value?
      Regards

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    4. Stephen Moore

      Financial planner

      In reply to Trevor Cook

      Good point Trevor - this idea does underpin much of Europe's social infrastructure. For the same group of countries that has been steadily going broke even as they increase social services and the requisite bureaucracy.

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    5. Trevor Cook

      Recently awarded doctorate at University of Sydney

      In reply to Stephen Moore

      I don't think northern and western Europe are going broke - eg Germany, Scandinavia. The big problems seem to be in Britain and the US which have been robustly dismantling the welfare state and replacing social infrastructure with personal responsibility and user pays. Of course, we have to have a bit of that ... but there is no reason to think that robust social infrastructure is incompatible with a healthy economy quite the reverse in fact.

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  3. Trevor Kerr

    ISTP

    If you want a vibrant metaphor for the "process" of consultation at play here, how about 'piñata'?

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  4. Terry Mills

    lawyer retired

    We elect governments to introduce initiatives and make decisions that are for the overall benefit of our society. If they fail to do this we vote them out of office. Consultation only brings out the vested interests and results in a watered down, sloppy compromise a la MRRT.
    The mere fact that Tony Abbott has stated that a future coalition government would not seek to repeal any changes introduced in the budget relating to super indicates that, in principle at least, they are relaxed about the changes unless of course he hopes to topple the government with the no-confidence motion in May.

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    1. Trevor Cook

      Recently awarded doctorate at University of Sydney

      In reply to Terry Mills

      I can't agree with you. 1) it is better that interests have to put their case in the public domain where it can be scrutinised (its the backroom deals we need to worry about) 2) We live an era characterised by an explosion of social media and online media sites such as this one - I think that suggests a hunger for participation that governments ignore at their own peril

      I think Abbott's remarks suggests that he acknowledges compulsory super as another medicare that has wide community support.

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  5. Paul Regis

    Business Analyst

    Don't get it - why is it bad if Medicare is imposed at a fixed rate and rich incur the same cost as poor? Do you want 'rich' to pay double to see a GP? Or to pay triple for a heart bypass? Why not extend that and get them to pay more for food etc. I am not rich, by any stretch of the imagination, but when we talk about "greater benefit" it's a reflection of the fact that rich people are being relived of the higher tax they'd otherwise pay. I don't like the politics of envy. Have seen enough of that in Europe and disappointing to see it being promoted in Australia too. All that will do is make everyone unhappy.

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    1. Trevor Cook

      Recently awarded doctorate at University of Sydney

      In reply to Paul Regis

      No I support Medicare. I think we should apply a similar logic to superannuation. Let's not destroy an important piece of social infrastructure by getting overly obsessed by the benefits to the rich. Rich people often use public schools, and the left encourages them to do so, so why not encourage people at all income levels to save as much as possible for their retirement? Why does the left treat retirement differently to education and health?

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    2. Bruce Daniel

      Engineer

      In reply to Trevor Cook

      "Medicare is partly funded through a levy, at the same rate for low and high-income earners."

      Hi Tevor,

      Correct me if I'm wrong, but the medicare levy surcharge applies to higher income earners?

      PS: It's a nice experience for authors to engage actively in the online conversation; thank you. most of my comments on other forums seem to fall into the void! (perhaps I'm not being controversial enough?)

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    3. Trevor Cook

      Recently awarded doctorate at University of Sydney

      In reply to Bruce Daniel

      Bruce - I enjoy the comment interaction more than writing the piece.

      Yes the medicare levy surcharge is paid by high income earners. High being about $85k pa for single and $170k for families. It is said to be there to encourage people who can afford it to take out private health insurance and rewards them by allowing them to opt out of the survcharge. In a sense, in the same way that tax concessions on super are said to be there to encourage high income earners to save for their own retirement and so not burden the taxpayer by relying on the pension.

      So the medicare surcharge and the super tax concession are in the sense of their purposes equivalent

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    4. Robert Tony Brklje
      Robert Tony Brklje is a Friend of The Conversation.

      retired

      In reply to Paul Regis

      Here is how it functions for those who can not see beyond their own greed.
      Humanity is a social species, everything we achieve we achieve together. Individually the only thing you are truly capable of is to run screaming naked through a forest being chased by a true predator.
      Together we create societies which provide benefits to the individual. However in the current capitalist society there are always going to be unnatural tilts and distortions in terms of benefits received.
      Whom is of most…

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    5. Trevor Cook

      Recently awarded doctorate at University of Sydney

      In reply to Robert Tony Brklje

      We do best when we encourage individual freedom and social groupings. Tough to do, that's why society or government can ever be perfect. You place too much emphasis on the social. It sounds too authoritarian. The idea that society owns everything just doesn't make sense to most people. "If I grow the vegetables they are my vegetables" is a proposition that resonates with people, "If I grow the vegetables they are still society's vegetables but I get to eat some of them" sounds like horse manure to most people. The reason we willingly contribute some of our vegetables to society is so that we get to live in a better society. That's why government universal (or broadly inclusive) programs on health education transport have some hope of winning broad public support. Programs that simply take from the rich to give to the poor are just charities and will always be more vulnerable politically.

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    6. Michael Shand
      Michael Shand is a Friend of The Conversation.

      Software Tester

      In reply to Trevor Cook

      The left? idealogical much? yes, left v right, liberal v conservative, us v them, the world is black and white

      you do yourself a disservice by playing into a 2 dimensional view of the world

      those leftist communist scummy socialists.....so I take it that because you describe "Left" as others that you consider yourself right wing?

      This form of tribalism that you adhere to is inherently dogmatic and fundamentalist, anyone who goes around talking about the right or the left has a flawed view of reality

      I mean, why does reality have a well known left wing bias?

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    7. Tom Slater

      Line Producer

      In reply to Michael Shand

      Michael, Trevor was a policy advisor to Crean and Dawkins back in the Hawke days. I'd wager that he doesn't count himself as a member of the right.

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    8. Michael Shand
      Michael Shand is a Friend of The Conversation.

      Software Tester

      In reply to Tom Slater

      Thanks Tom, I was incorrect there and thanks for correcting me, I still get annoyed when people talk about what the left do or what the right think, its completely redundent

      the statement that "Rich people often use public schools, and the left encourages them to do so" - How have "The left" - whoever they are, how have they encouraged rich people to attend public schools?

      followed up by

      "so why not encourage people at all income levels to save as much as possible for their retirement? " - who isnt encouraging people to save as much as possible for their retirement? "the left"?

      It presents a false diachotomy and a world view that doesnt map onto reality in any sense - hence, redundent

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    9. Rubens Camejo

      logged in via Facebook

      In reply to Trevor Cook

      Now you got my undivided attention, Trevor.

      You ask:

      “Why does the left treat retirement differently to education and health?”

      Health:

      Medicare pays for hospitals, medicines, doctors and nurses.
      The better off don't pay the same as the poor. The Medicare levy is based on percentage of earnings. Once you earn a certain amount if you don't also take out health insurance there is a surcharge that applies to you.

      Once the hospital we all helped to fund is open for business, why not let…

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    10. Rubens Camejo

      logged in via Facebook

      In reply to Michael Shand

      Michael, I think you are being a little over-sensitive.

      Whilst I agree with the fact that the left-right divide and the characterisation of it is annoying and should be done away with, it remains none the less, a fact that there is a divide.

      I don't consider myself right or left, (just immodestly correct on most points).

      Seriously though, these days, especially since the unabated campaign the conservative forces in this country has engaged in since the last federal election, that debate…

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    11. Rubens Camejo

      logged in via Facebook

      In reply to Trevor Cook

      The difference is that if you are earning $180k or more you would never set up your retirement finances to rely on the pension's $20k.

      Should you do that, you'd never enjoy either because you'd be locked up in 'The House for the Bewildered', as the Irish would say.

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    12. Michael Shand
      Michael Shand is a Friend of The Conversation.

      Software Tester

      In reply to Rubens Camejo

      Your definitely correct, talking about the world as LvR sets the frame work for people to be put in boxes and subsequently be assigned all the perceived and real baggage that comes with that box. which allows people to equate things like, julia is an atheist, pol pot was an atheist, they were both left of centre...OMG JG is pol pot

      or "Rich people often use public schools, and the left encourages them to do so...so why not encourage people at all income levels to save as much as possible for their retirement?"

      its just lazy thinking with a mess of unfounded implications

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    13. Michael Shand
      Michael Shand is a Friend of The Conversation.

      Software Tester

      In reply to Rubens Camejo

      My real gripe with this Author is the claim that there would not of been any controversy if the government haqd just consulted....

      consulted whom? How? when? why would we expect the media to act any differently just because someone was consulted?

      Its just really really lazy thinking, its very easy to say that the government should of consulted someone but to think that this would alleviate all the bite back from the media, from the opposition

      I mean we have Abbot describing this as Labour…

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    14. Trevor Cook

      Recently awarded doctorate at University of Sydney

      In reply to Michael Shand

      Michael there are pretty standard processes in our system which are regularly used. This govt has used them, or some of them, eg Henry, Finklestein etc but it then tends to dog it at the end and do something like the mining tax release report and announce the decisions on the same day. We have regularly seen at federal and state levels the classic green paper (discussion), white paper (statement of govt intentions), exposure draft (of legislation looking for unintended consequences etc) all pretty well-established stuff. And JG as you recall promised community consultation leading to consensus on carbon before the last election and then dumped the process - classic! None of this guarantees success but it minimises political risk and leads to far better public policy. You might be interested in my blog post today on a similar theme http://trevorcook.typepad.com/weblog/2013/04/the-gillard-governments-strange-lack-of-political-skills.html

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    15. Michael Shand
      Michael Shand is a Friend of The Conversation.

      Software Tester

      In reply to Trevor Cook

      Thanks for the response, I read the blog.

      My main question is, what process of consultation do you think should of been done here?

      Whether that would of alleviated the bite back is a different question

      Just what consultation should of been done here? who should of been consultated and how?

      Also, I went to a conference called "Think inc" a few years ago where Tim Flannery spoke explaining the carbon tax and climate change. He was doing it as part the climate commission Australian round tour he was doing speaking at community halls and events anywhere he could to hear community feedback and provide information....so what were saying about not consulting the public regarding the carbon tax? cos they did this, explicitly, maybe it wasnt to your expectations or how you would of done it but dont lie, dont state they didnt consult the public about the carbon tax, thats simply not true

      getting back to the point - what sort of consultation - who - how?

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    16. Robert Tony Brklje
      Robert Tony Brklje is a Friend of The Conversation.

      retired

      In reply to Trevor Cook

      Never confuse the true evolutionary social nature of human beings with the layered on top distortions of mass marketing and psychopathic violence and dominance. The true left wing versus right wing political spread is "caring and sharing" vs "selfishness and greed" and the "selfishness and greed" is based around two sub species of humanity psychopaths and narcissists brought on by genetic brain defects.

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  6. Gary Cassidy

    A recent comment I herd from the Treasurer went something like this - "This government will continue to share the opportunity"

    I find this subtly deceiving - The government is implementing policy to share "wealth" not opportunity.

    Most Australians have the opportunity to create their own wealth in a number of varied ways (and have had that opportunity for quite some time) - Just be prepared to share that wealth if you're successful.

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    1. Michael Shand
      Michael Shand is a Friend of The Conversation.

      Software Tester

      In reply to Gary Cassidy

      We dont live on a level playing field adn your success are not your own for the most part.

      The child born into a rich well connected family will have ample more oppertunity and success than one born into a working class family, they will have different standards of education, they will be less likely to be well cared for, they will be less likely to have important connections.

      Sure anyone can start day trading and make a big profit....assuming you have the start up capital, the connections/tips…

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    2. Gary Cassidy

      In reply to Michael Shand

      I totally agree that there is a lot of luck involved. A low income earner born in Australia is much luckier than an average income earner in many other countries.

      I'm all for sharing of wealth (to a degree) but I don't like Government deception in dressing it up as sharing the "opportunity". Opportunity hasn't been addressed, and as you point out has a lot to do with luck anyway.

      BTW, most of the cola mine workers I meet in QLD are very well paid.

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    3. Michael Shand
      Michael Shand is a Friend of The Conversation.

      Software Tester

      In reply to Gary Cassidy

      Well its good we agree except for the semantics

      Oppertunity or options are restricted by resources

      Time is a resource, if you dont have any spare time you have less oppertunity to do the things you want

      Money is a resource, if you dont have any spare money then you also have less oppertunity to do the things you want

      Getting past wants, if you have limited time/money/food/sleep you may not have the oppertunity to live a dignified life

      So yes, they want to extend the franchise and provide…

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    4. Rubens Camejo

      logged in via Facebook

      In reply to Gary Cassidy

      Gary

      I agree that was a silly statement if anyone did make it.... opportunity cannot be shared, it can only be provided.

      However, you are right if cynically so, it would appear, (who says you cannot detect tone in the written word?), when you say; "be prepared to share that wealth if you are successful"

      Please keep two things in mind that are unavoidably true:

      1 - Not everyone can be successful, in financial terms. That would be an impossibility as we cannot all be rich or wealthy…

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  7. Pera Lozac

    Heat management assistant

    "Radio broadcaster, Alan Jones, strongly opposes Medicare on this specific ground – the rich get too much benefit."

    Where this came from? Who cares what that fascist clown opposes or approves?

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  8. davidlen

    logged in via Twitter

    Trevor if the Govt was to have this 'open discussion' perhaps you can advise how all the points arising from said discussion, for and against, can possibly be given a fair balanced, unbiased coverage by todays mainstream media.
    It has been impossible for the Gillard Govt to get such coverage thus far, do you have a magic wand?

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    1. Trevor Cook

      Recently awarded doctorate at University of Sydney

      In reply to davidlen

      The Government should not be allowed to use the media as an excuse for poor governmental processes.

      The Government has enormous resources at its disposal - from their own websites, paid advertising, spin doctors, conferences and all the rest of it

      Plus they have had some recent success in getting the message out through social media.

      Plus the media is not uniform and there are great proliferations of online sites and outlets like this one.

      This after all is politics - people always oppose you - and arguably some previous Labor Governments got just as bad treatment or worse coverage from the media or sections of it.

      Whitlam said if he walked across Lake Burley Griffin the Australian's headline next day would be "PM can't swim"

      The more things change ...

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    2. davidlen

      logged in via Twitter

      In reply to Trevor Cook

      Trevor I'm impressed with your confidence in Social Media and the 5th Estate, if somewhat over inflated. These media are in their infancy and their readership can hardly be called 'extensive' at this stage
      As you are well aware there is a blanket lack of coverage of Govt positives in the MSM.
      You say "This after all is politics - people always oppose you" really? Tell me if any Govt has been 'opposed' to the degree the MSM have indulged with this Labor Govt.
      I appreciate you will have sympathy for your former boss Crean, I don't., but your views are clearly a mirror of his.
      Fair enough it's your column.

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    3. Trevor Cook

      Recently awarded doctorate at University of Sydney

      In reply to davidlen

      I don't have any particular sympathy for Simon Crean because I worked for him for a short while. I think his efforts in the non-challenge were a bit bizarre to be frank; but I do share his concern about the processes and rhetoric of the current government.

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    4. Michael Shand
      Michael Shand is a Friend of The Conversation.

      Software Tester

      In reply to Trevor Cook

      Can you provide an example of this rhetoric that you are displeased with? you seem to be floating imaginary concerns here,

      first the idea that people should be consulted on policy somehow, not stating who or how or when?

      again its very easy to say "Should of consulted more" the same way I could say you should of read more before writing this...read more what? why? how?

      second, this notion that the governments process and rhetoric is concerning...whats the concern here? for instance, I find…

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  9. Peter Sommerville

    Scientist & Technologist

    There can be no argument that compulsory superannuation was a singular achievement of the ALP. Had it been accompanied by a conversion of all Defined Benefits Funds into accumulation funds, including the politicians' funds, then much of the sting would be taken out of this debate. Private companies recognise DBF's were unsustainable and moved accordingly. The public service has been seriously remiss in this area.

    Furthermore, if the ALP had bitten the bullet and decided to make all contributions, up to a limit, tax free, let the earnings of the funds be tax free and taxed the income finally drawn from the funds, then we would have no need for this argument.

    Of course this is hindsight. However, the resultant hotchpotch is what we have, and fiddling with it now is retrospective rewriting of an implicit contract between citizens and government. The current government deserves all the criticism it is copping.

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    1. Trevor Cook

      Recently awarded doctorate at University of Sydney

      In reply to Peter Sommerville

      Excellent points Peter. Hindsight sure but this is the sort of debate we should be having not just some misguided tinkering dressed up as some sort of Robin Hood exercise.

      Of course, Gillard and Swan are open to the charge of gross hypocrisy because of their DBF schemes. They are better off in terms of taxpayer subsidies than anyone else. It sounds preposterous to be talking about 'sustainability' when you're the happy beneficiary of a type of scheme which was pronounced unsustainable in the private sector decades ago.

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    2. Paul Regis

      Business Analyst

      In reply to Peter Sommerville

      Yes, so true. It's as if they only half thought about it in the first place. They didn't think about the consequences and in so doing created today's mess. It would have been so easy to make contributions tax-free and instead tax at point of income drawdown.

      But I see that societies around the world are busy re-writing contracts between government and citizens. It's difficult, but perhaps better to fix this silly situation than to continue building a tower of Babel on the silly foundations that were cast in the first place.

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    3. Rubens Camejo

      logged in via Facebook

      In reply to Peter Sommerville

      Peter, You said:

      "The current government deserves all the criticism it is copping."

      Does it deserve any praise for the things it has got right?

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    4. Peter Sommerville

      Scientist & Technologist

      In reply to Trevor Cook

      Trevor,
      You are to be congratulated for the effort you have put into participating in this debate. Your commitment is relatively rare. Most of the academics publish their piece and then become strangely absent. Perhaps this is why so much discussion drifts off the point. I know "The Conversation" is a metaphor but many academic contributors don't seem to understand that. Congratulations.

      Frankly I believe there are structural problems with our superannuation system that need to be addressed, to make it equitable yet efficient. Unfortunately our current government sees it as a honey pot to be robbed. Their justifications for this (refer The resident clown Craig Emerson) is arrant spin and deserves to be condemned.

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    5. Peter Sommerville

      Scientist & Technologist

      In reply to Rubens Camejo

      Rubens,

      Of course. In the context of superannuation I thought I had done so. But that was an earlier government where the intellectual muscle was substantially greater than that of the current crowd. The problem with Hawke and Keating was they had the right concept, and it was manifestly difficult to implement at the time, but they simply did not think it through. They were reluctant to totally forgo the tax in the short term and build something that would be simple to administer and still provide for tax equity in the long term.

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    6. Peter Sommerville

      Scientist & Technologist

      In reply to Paul Regis

      I agree Paul,
      But that requires consultation and careful planning so that those who are part of the existing compact are not damaged. In my view neither our PM, our Treasurer or any of the current cabinet have the intellectual and social capability to do so. Their blunders during their term of office are manifest.

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    7. Trevor Cook

      Recently awarded doctorate at University of Sydney

      In reply to Peter Sommerville

      Thanks Peter

      I enjoy debate, it's always more fun than the 'lecture' in whatever format - plus you do actually learn from participation. New ideas and perspectives from others but also you're forced to go and check some of your own assertions etc

      I think many academics are not used to debate they prefer the lectern and the powerpoint presentation.

      I've even heard this referred to rather pompously by some academics as 'my pedagogical approach',

      The only rationale for a lecture is the absence of technology to do it better - those days are gone.

      All the evidence is that discussion is the way we learn best.

      OTH many comments are rude, or abusive or add little - but there are usually a few as we see here willing to hop in for some robust to and fro

      As you say it's bemusing that a site called the conversation doesn't expect more of it from its contributors - but hopefully that will come with the broader changes in the way we communicate on the internet

      cheers

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  10. Sam Lin

    logged in via email @gmail.com

    Imagine a Medicare system in which rich people both pay less (like the gap between super and income tax rates) and use substantially more often (rich people can contribute a lot more to super). That would be a Medicare system with unfairness comparable to superannuation. Further, the purpose of super is to encourage people to save so that they are not dependent on the pension and its present unfairness doesn't contribute to its efficacy in any way. If the richest 1-2% no longer received super concessions…

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  11. Tom Slater

    Line Producer

    Trevor I think the greater point here is that the tax breaks profit the very wealthy, at the expense of tax revenues, without the payoff of social benefit. These are not people who will otherwise need to rely on the pension, thereby saving Australia money in the long-term. They are the wealthiest 1% of the country who are having their savings padded by the rest of the country.

    The social benefit of superannuation - negating the future costs of ageing generations on the pension system - doesn't apply here, so why should the people fund it?

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    1. Tom Slater

      Line Producer

      In reply to Tom Slater

      Further, in Medicare rich people don't get more than others. Everyone is able to receive the same benefit. Superannuation reform would be about removing a benefit that only the rich are receiving, at the expense of everyone else.

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    2. Jon Ford

      Researcher

      In reply to Tom Slater

      Nice that Sam and Tom got onto this point. Trevor, the examples you use such as Medicare and tertiary education apply evenly across all income brackets. As I understand it, the cost to the taxpayer for superannuation tax concessions come disproportionately from those on high incomes. In addition Abbott is now wanting to impose superannuation tax on the lowest income bracket. Labour's policy change appears to be targeting only the top 1% of earners. How can this policy change, particularly when compared to the coalition's position be problematic to the majority of voters? Unless of course there is a media beat up.

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    3. Trevor Cook

      Recently awarded doctorate at University of Sydney

      In reply to Tom Slater

      Why doesn't it apply? I can't see how super is different to any other area where a well-off person gets a benefit like health and education

      Why can the rich send their kids to uni and selective, public schools without paying the full cost?

      Why can a rich woman walk into a hospital and get an operation fully funded by low income earners?

      If well-off people don't need super why should it be compulsory for them? or for anyone?

      People like Peter Martin who write so passionately on this issue are opposed to compulsory superannuation/

      Are you?

      Once you start unravelling the system, where does it end?

      Why not rid the subsidy altogether, why does anyone get a tax benefit for saving for their retirement?

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    4. Tom Slater

      Line Producer

      In reply to Jon Ford

      That's it Jon - it's a concession that is costing the entire system a significant amount of money for no social benefit. If superannuation exists to reduce the cost of an ageing population, and the highest 1% of earners are not people who will be claiming the pension, then subsidising their savings - with far higher amounts than the rest of the people in the country receive - is a waste of money.

      Everyone receiving free medical care is of social benefit. The highest earners receiving free money for when they retire is of no social benefit, especially when they are receiving more free money than the rest.

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    5. Jon Ford

      Researcher

      In reply to Trevor Cook

      Point taken however I wouldn't have thought this applies to Medicare. And my point regarding the political acceptability of the Labour vs Coalition position to me still stands.

      I will be affected by the proposed changes in superannuation. But I find it baffling that the majority of voters who won't be affected reject a policy that is in the best interest of the country. It seems that this all changed with John Howard's "class wars" and appeals to "aspirational voters". Brilliant politics. Bad policy in my view.

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    6. Tom Slater

      Line Producer

      In reply to Trevor Cook

      This is a strange tack, but ok. We consider a healthy public to be in the national interest, and as a corollary to that we consider part-funding of that health to be worthwhile. Being an egalitarian lot, we see it as worthwhile that everyone have access to subsidised health care. Likewise, everyone is entitled to a free education. Rich people (and here's where your rebuttal falls flat) don't get more health care or more education.

      Compare that to superannuation, where presently everyone has access…

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    7. Trevor Cook

      Recently awarded doctorate at University of Sydney

      In reply to Jon Ford

      For all this talk about the 'rich' and so on and how they don't need the pension so no social benefit etc let's look at some figures from Treasury: http://www.treasury.gov.au/Policy-Topics/SuperannuationAndRetirement/Superannuation-Roundtable/Distributional-analysis-of-superannuation-taxation-concessions

      2009/10 - the average superannuation balance for someone in the top 1% of income earners was 550K. That gets you about 25k per year in term deposit interest. Or about 1,000 per fn.

      Wealthy?

      Well singles can earn over $1,700 per fn and still get a part pension, this rises to $2700 per fn for couples.

      A lot of people in the top 1% are get under the pension income test easily

      What about the asset test?

      Singles can have nearly 900k and still get a part pension, couples $1.25m

      So some reality please.

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    8. Tom Slater

      Line Producer

      In reply to Trevor Cook

      That's an interesting point, although I can't help but feel that 550k isn't indicative of the actual retirement amount. It's also staggering to see the differences in contribution concessions for the top 1% as compared to every other level.

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    9. Trevor Cook

      Recently awarded doctorate at University of Sydney

      In reply to Tom Slater

      People do get different amounts of education and health care. Someone who does a phd gets a lot more than someone who leaves school at 17. Some people need more health care, some people get better access (eg people living in the city). On your argument we should give out vouchers akin to your idea to limit super subsidies, and make those who use more and can afford to do so pay the extra.

      Either you favour universalism in basic social infrastructure or you don't, drawing a distinction between super and health is artificial

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    10. Trevor Cook

      Recently awarded doctorate at University of Sydney

      In reply to Tom Slater

      It would be indicative of the actual retirement amount for anyone close to retirement - for younger people obviously they will accumulate more.

      Also the figures might have been affected by GFC at that time?

      But the point is that we need to get away from the characterisation of all these people rolling around in big super slush funds - a lot of these people will still end up on the pension either now or in ten or twenty years when the super amount runs out.

      Sure the top earners get more in concession income but these are the people we are trying to get off the pension - even with those concessions a lot are still going to hit the taxpayer for at least some pension.

      I think there are good arguments for tightening those pension eligibility requirements - I was surprised at the generosity.

      Plus of course retirement ages across the board should be gradually lifted.

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    11. Jon Ford

      Researcher

      In reply to Trevor Cook

      So turning this argument the other way round Trevor I assume you disagree with increased superannuation tax benefit for those on low incomes, and that the medicare levy should be evenly applied across all income groups? The point you seem to be arguing is that subsidising services should be independent of income.

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    12. Tom Slater

      Line Producer

      In reply to Trevor Cook

      Access is the key though.

      Sick people do get more healthcare, but that's why we have a social healthcare system - so those who need it can use it. Education representation is a problem, I agree with you there, but the solution to that isn't to say "see, we like giving higher levels of support to wealthy people" and then to apply it to superannuation. In theory, higher education is accessible to all, and in practice there are social conditions that are actually making it easier for wealthy people to stay in higher education. That's another conversation.

      Increasing the tax on contributions to 30% will mean there is still a significant concession, because it's less than the 40-something that income is otherwise taxed at at that level in any given year. Wealthy earners will still be contributing to their own superannuation, it will just cease to be as expensive to the country for them to do so.

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    13. Tom Slater

      Line Producer

      In reply to Trevor Cook

      Retirement age - absolutely. I'm in my 20s, and I don't in any way intend to be hanging up my boots at even 60. Couldn't afford it!

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    14. Trevor Cook

      Recently awarded doctorate at University of Sydney

      In reply to Jon Ford

      No my original point was that inclusive social programs are more likely to win broad public acceptance and therefore be politically sustainable.

      I think there is a good case for saying that the generosity of the system for high earners needs to be addressed (over time, recognising that many people close to retirement don't have big super balances even if they are now on good incomes)

      And I think helping people on low incomes get more super is a good idea.

      Personally, I think the medicare levy could be a bit more progressive rather than flat.

      I also think capital gains tax could be toughened up.

      But politically if you do these things by punishing the rich, support evaporates because lots of people aspire to send kids to wealthy schools etc so they vote against Labor because Labor is seen as anti aspiration etc.

      If you do things properly and talk about overall system design, long term etc then you can win the argument.

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    15. Jon Ford

      Researcher

      In reply to Trevor Cook

      Fantastic Trevor. I agree entirely. So perhaps the media (including people like Michelle Grattan) could acknowledge these essential policy concepts and then provide informed commentary on how such policy could be adopted in a politically palatable way? I haven't seen a lot of this.

      To me much of the commentary is written in a way that can be misread as being against progressive tax policy (in fact this was how I interpreted your article above until you provided the above explanation)

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    16. Trevor Cook

      Recently awarded doctorate at University of Sydney

      In reply to Tom Slater

      well you may think differently after a quick 30 years in the workforce

      my perspective is shaped by my age (nearly 59)

      had it not been for compulsory super - I'd be stuffed

      I hope the system doesn't get undermined because we keep stuffing around with it.

      There's lot's of people who would be happy to see it dispensed with or just turned into some sort of contribution based welfare provision for the poor.

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    17. Gary Cassidy

      In reply to Trevor Cook

      Things seem to have a different perspective when absolute numbers are used. It is easy for a low income earner to cry foul that their super contributions are being taxed at the same rate as a high income earner - less so if things are presented in absolute terms - eg:

      Low income earner:
      Pays $5000 to super, contributes $750 to society (the government)

      High income earner:
      Pays $40000 to super, contributes $6000 to society.

      In this example the high income earner contributes 800% more wealth to share.

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    18. Rubens Camejo

      logged in via Facebook

      In reply to Trevor Cook

      Because as you say, a little unfairness in the system makes it resistant to attacks. In any case, they did contribute a larger real amount towards it than the average punter and thanks to that the facility is there as it is. Their larger contribution has helped us so it is only fair we helped them

      Someone's superannuation account balance that has been padded more generously that to others by the tax payer is not socially beneficial.

      You have to remember that these people, that you say are not so rich, are probably sitting on very expensive homes they fully own as well as most likely, other assets that if realised would put them well above the eligibility thresholds.

      What the concessions padding serves to do in some cases is to subsidise the kind of comforts that others that pay towards them could never enjoy.

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    19. Rubens Camejo

      logged in via Facebook

      In reply to Trevor Cook

      "I think there is a good case for saying that the generosity of the system for high earners needs to be addressed (over time, recognising that many people close to retirement don't have big super balances even if they are now on good incomes)"

      And why is that?

      Take a single 55 year old person on $150k, getting $13,500 put into his super account by his employer. Why can't that person put in a matching amount of his own money into that account, even after tax? I mean, on the income he'd gross…

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  12. John C Smith

    Auditor

    Compulsosory super another great con from Haw-Keat.Around 10% of ones earnings is a lot to be thrown away to the hogs who have a good life on the earnings of poor. If you are below the average wage it is penalty on your current life. One has to live a reasonable life before thinking of the future, like buying a house, getting married (paired) and having kids. If you earn say 40k 4k to super, 4k to GST and 4k tax left with 28 k to buy your Maka and Starbuck and rent one of those negatively geared roof and use Myki money (VIC) or chase a old Hyundai accent.
    Let us get rid of this super fine so low incme earner can enjoy a bit of thier life until they get the heavanly retirement with super Super of Haw-Keat.

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