Mining tax repeal 'a great day for Australia'
The deal hammered out with the Palmer United Party will cost the budget but the Treasurer and Finance Minister agree it's a good outcome.PT1M45S http://www.canberratimes.com.au/action/externalEmbeddedPlayer?id=d-3erce 620 349 September 2, 2014
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We've dodged a bullet. Had compulsory super contributions climbed as legislated, Australian workers would have lost 0.5 per cent of wages from their next pay increase, 0.5 per cent from the following one then 0.5 per cent from each of the following three. By 2019 they would be earning 2.5 per cent less than if the government had left compulsory super alone.
Labor legislated to increase compulsory super recklessly. After being stalled at 9 per cent of pay since 2002, Labor wanted to lift it to 12 per cent, lifting it at first by 0.25 per cent of pay in June 2013 and 2014 then by 0.5 per cent in each of the next five years.
Labor knew the money would come out of wage rises. Its superannuation minister Bill Shorten said so.
But he said we would get healthy wages increases nonetheless. He told Fairfax Radio in 2012 the impost was just "a quarter of a per cent"
"So I'm assuming without, you know, and again this is a forecast, I'm assuming that wages in 2013-14 will probably move somewhere between 3 and 4 per cent. I am assuming that a quarter of per cent of that 3 to 4 per cent may well go into your compulsory savings, which is concessionary taxed, so that's a plus."
It didn't sound that bad. But he was wrong.
In 2013-14 wages climbed by just 2.6 per cent. Prices climbed 3 per cent, meaning real wages went backwards.
One of the reasons they went backwards was that employers were asked to fork out an extra 0.25 per cent for super on July 2013 and knew they would be again on July 2014.
From next year they were to be asked to fork out twice as much extra each year, an extra 0.5 per cent for each of the next five years.
Had it happened, the regular imposts would have depressed wage increases and quite possibly depressed real wages for half a decade.
The Henry tax review found against any further increase in the super contributions beyond 9 per cent. It said, although 12 per cent would increase employees retirement incomes in retirement, it would do so "by reducing their standard of living before retirement".
The Coalition has pushed the whole thing out into the never never. Super contributions won't begin climbing again until 2021. After that they are legislated to climb by 0.5 per cent a year until they reach 12 per cent, but it's a fair chance they never will. Anyone who wants to save extra is welcome to. The Coalition and Clive Palmer has made it more likely they'll have the wage increases to afford it.
And those wage increases will be taxed at standard rates rather than untaxed, as it would have been extra super strengthening the government's finances.
Maintaining the low income super rebate, the income support bonus and the Schoolkids Bonus until after the next election also makes sense. People can vote on whether they want them to stay.
The compromise leaves the government $7 billion worse off than if it had got what it wanted but $10 billion better off than if it had got nothing at all. Those figures cover the next four years. The government says, a decade on, its projections look pretty much as at budget time.
Peter Martin is economics editor of The Age