We should look to Germany for our economic road map
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We should look to Germany for our economic road map

It is difficult to disagree with the recent contention (Alexander Dunn, Comment, 28/12) that Australia needs to reset its economic settings and discourse. Our 26 years of continuous, record growth belie a more fragile outlook. Our exports are less diversified than since the wool boom of the 1950s. Inequality is rising, wages growth is sluggish, hurting the economy generally.

And Dunn is right to point to the success of our superannuation industry and its vast untapped potential as a source of future growth and wealth, notably from Asia.

Our economic future cannot depend, however, on its further financialisation. Nor we should be taking our cue from the late Lee Kuan Yew's authoritarian brand of Singaporean capitalism or the City of London. The "City of London Corporation", far from acting as "Britain's economic engine", was in large part to blame for the impact of the global financial crisis, revealing the consequences of having a rapacious, unaccountable financial sector as the driver of one's national economy. The corporation is an offshore Cayman Islands inside Britain and connected to tax havens globally. Britain's working people paid the price, while highly-leveraged financiers who concealed their assets enjoyed a billion pound bail-out.

Moreover, there are bigger challenges to the future of super and better means of harnessing its power. In the early 1990s the federal Labor government began to build a system of compulsory superannuation contributions. More than 95 per cent of workers hold super accounts, double that of 20 years ago.

Illustration: Andrew Dyson.

Illustration: Andrew Dyson.

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Australia boasts the fourth largest pool of savings in the world – despite making up just 0.3 per cent of its population – and the globe's largest per capita. Australia's savings pool is Asia's biggest and is projected to hit $7.6 trillion by 2033. That's a world-beating achievement. Yet super must be fit-for-purpose in the 21st century.

The first challenge is to maintain its integrity and equity. We need to renew efforts to increase the Super Guarantee (SG) rate to where it should be, from 9.5 to 12 per cent. Superannuation compliance is another issue. Australian workers have been fleeced of about $17 billion worth of payments since 2009; an average of $2.81 billion every year between 2009 and 2015.

Then there is the disappearance of traditional nine-to-five jobs in favour of a so-called "gig economy" dominated by casual and part-time workers. This has encouraged a situation whereby a third of young people are not eligible for SG contributions because they earn below the threshold of $450 or more before tax in a month paid by a single employer, or are working as contractors. Either way, they don't accrue any super.

This is not only unfair and bad news for individual employees, but bad for our nation: $37 billion in lost taxes due to lower super contributions and higher age pension payouts. Then there is the opportunity cost – we are missing out on $100 billion to invest in wealth-creating infrastructure projects.

Germany's manufacturing-driven economy continues to grow strongly.

Germany's manufacturing-driven economy continues to grow strongly.

Photo: Dario Pignatelli

Australia is being held back by a lack of long-term focused, well-planned investment in productive infrastructure. The public infrastructure investment deficit is estimated to be $80 billion or around 7 per cent of Australia's existing stock of infrastructure. Superannuation has a critical role to play in tackling this problem.

For example, industry funds have added $51 billion to national super savings over the past 19 years, and have invested in quality long-term infrastructure. Those savings have underpinned a large range of businesses, from infrastructure to manufacturing and now renewable energy sources, and provided a vital source of capital. Indeed those savings helped us avoid the worst effects of the GFC. Rather than conjuring tax concession loopholes, we must ensure that superannuation can play an even stronger role in creating quality, job-creating, nation-building infrastructure.

German companies, such as BMW, consciously invest for the long term.

German companies, such as BMW, consciously invest for the long term.

Photo: Dario Pignatelli

The Australian superannuation industry cannot be one run by and for asset-rich elites. To renew our national success story, and build a modern, thriving and diverse economy that creates and sustains well-paid, secure jobs in a globalised world, we require a model which brings together business and labour in a spirit of co-operation. That model comes not from Singapore or London but the economic powerhouse of Germany.

Germany's manufacturing-driven economy continues to grow strongly, unemployment is low and its trade surplus is the envy of the world. Germany has largely bucked the developed world trend of steady losses of well-paid blue-collar jobs to automation and to cheaper imports. Why? German companies consciously invest for the long term, including in research, development and training, and include its workers in its corporate governance including through laws mandating workers on boards such as pension funds.

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Though inequality has increased in Germany over the past two decades, as it has in most developed economies, the increase has not been as pronounced as in say Britain. In other words, a prosperous, fair economy Australians deserve.

Nick Dyrenfurth is executive director of the John Curtin Research Centre and author of its forthcoming policy report, Super Ideas: Securing Australia's Retirement Incomes System.

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