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On the record with Paul Keating

By Christine St Anne
 — 1 minute read
As chief architect of Australia's $1 trillion superannuation system, former prime minister Paul Keating has a lot to say about the industry he created.
Australia's superannuation system is now worth $1 trillion. As the architect of this system, does such an achievement warm the cockles of your heart?

Public life is about public progress; that's the only reward. Everything else is puffery. It was my Labor principles that drove me to introduce universal superannuation, a system similar to Medicare. Superannuation used to be an elite system only open to public servants and those working at the top of their professions. Like Medicare, we wanted all Australians to have access to the scheme. Now everyone including the bloke running behind the garbage truck can have superannuation.

The Labor Party will not increase the superannuation guarantee from its current 9 per cent rate. What is your view?

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Well I call that a failure of imagination. It's got nothing to do with arithmetic and everything to do with grey matter. Imagine what I had to do back then when we started from nothing. We got it done because we had the imagination. Instead we are jammed at 9 per cent when we should be 15 per cent.

Do you think the co-contribution should be expanded?

When it comes to salary sacrifice, 40 to 50 per cent of people cannot afford it so they don't take the option. However, when it comes through as a wage adjustment, such as a superannuation co-contribution, then they'll get there. A government of goodwill can top up a co-contribution through the tax system. If this can be done, then we can blast through from 12 per cent to 15 per cent in superannuation co-contributions before we can say boo. That's what I call imagination.

What are your thoughts on the Association of Superannuation Funds of Australia's proposal to introduce a 3 per cent soft compulsion scheme?

I would legislate that by tomorrow morning.

Do you think that unions still play a role in wage negotiations, particularly in negotiating for more superannuation co-contribution?

Absolutely. This is where the public sector can also play a role, particularly in the health and education sector. During the next round of negotiations, unions in these sectors could build into a wage agreement that allows workers to get an extra 3 per cent directed into superannuation over four years.

Would the Government's Workchoices frustrate such negotiations?

John Howard has an ideological hang-up about people having the ability to collectively bargain. The ability for a group of employees to negotiate with their employer is the basic tenet of any civil society. Under a collective system, people can come together and negotiate for higher wages and productivity increases. Everyone can tuck in and help. Workchoices makes this virtually impossible.

Do you believe affordable financial advice is possible?

Ordinary men and women do need professional advice, particularly as they accumulate larger superannuation savings and they near their retirement age. The core underlying question in wealth, however, has always been asset allocation. That's got nothing to do with the tax system but everything to do with good advice.

With a mass system like ours we want low cost. We want super funds to charge low fees that are appropriate to their level of effort, particularly if they are just buying stock market indexes. At the same time we want advisory to charge fees based on an economic, not opportunistic, rate. When we get to this, as I am sure we will, then we will end up with the kind of maturity that a $1 trillion market demands.

What are your thoughts on the Government's superannuation changes announced in the May budget?

The Liberals always look after the people at the top. There are not many men who run after the garbage truck that can afford to put $1 million into their super. And how many aged care workers or school teachers do you know that could also afford $1 million into super?

Do you think the budget measures are sustainable?

Show me a policy that has to be implemented in 12 months and I'll show you a policy that will fail. Policies are only sustainable when people take a long-term perspective. If we can leave super untaxed at the back end that's all well and good, but is it sustainable in budget terms over the long term?

Why did you remove the 80/20 rule where superannuation funds were required to allocate 20 per cent of their portfolio to commonwealth bonds?

This rule was just a way for the government to fund its deficits in the 1970s and early 1980s under John Howard. I thought people in superannuation funds had the right to shop around and get the best rates and make the best investment decisions. That is why I removed that rule.

Do you think the Labor Party will win office this year?

I think they will win. There is no great love for this government anymore. Providing Labor can handle the cookie jar. As long as Labor does not drop the cookie jar where all the money falls out, then I think the Australian community will opt for a change of government.

 

On the record with Paul Keating
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