RUBY:

From Schwartz Media, I’m Ruby Jones, this is 7am.

The Coalition’s surprise win at the last Federal election is largely attributed to a relentless campaign targeting Labor’s key economic policies.

Much of that campaign was led by Liberal backbencher, Tim Wilson. Now Wilson has launched a new campaign to radically reshape the four trillion dollar superannuation industry.

Today, senior reporter for The Saturday Paper Rick Morton on the Liberal vision for our retirement savings, and how it would impact all of us.

So you’re rolling Rick?

RICK:

We are rolling, yes!

RUBY:

Great! Everyone else happy to go? Okay. Rick, Historically, superannuation is this thing that most people really don't think about much until they're getting close to retirement. Our employers, they deposit money in our accounts and we aren't allowed to touch it until we finish working. But that started to change during the pandemic. What happened exactly?

RICK:

Yeah, that's... that's right. And most people don't actually think about superannuation unless they're really, really forced to. And a lot of people don't even know what super fund they're with or where their money goes when it's put into those accounts.

So up until recently, unless you were under really, really special circumstances, you couldn't touch the money in your super accounts. But then, as we all know by now, Covid-19 hit, the economy went into a tailspin and the government made some pretty radical changes, which completely moved the goalposts about how we thought about super.

Archival Tape -- Newsreader 1

“From Monday, Australians who’ve taken a financial hit due to coronavirus will be able to apply for early access to up to $10,000 from their superannuation.

Archival Tape -- Newsreader 2

“By Friday, almost 900,000 people registered an interest in gaining early access to their nest egg.”

RICK:

So they allowed people who were suffering financial hardship because of the pandemic and because of these, you know, nationwide lockdowns to withdraw up to 20 thousand dollars from their super accounts to spend on whatever they needed to get them through these really trying times. And all up more than three million Australians accessed their superannuation early and they withdrew a total of 36 billion dollars. That's billion with a B. Of course, the problem now, which a lot of people knew, but also many more are discovering in hindsight, is that the people who use the early access super scheme were disproportionately the most vulnerable workers, people who needed money to survive, who had to raid their own retirement savings to to get through the pandemic.

The whole point of super… the only reason it works is that if I invest ten thousand dollars in my early 20s, that ten thousand dollars becomes worth 100,000 dollars in retirement or some factor thereof. And so it gives you a power that you don't have as an ordinary worker, which is time and patience. And because it kind of goes into your account from your employer, you don't technically miss the money.

RUBY:

And, Rick, this change to allow people to access their super in this way, was it just about getting people through the pandemic?

RICK:

Well, that's certainly what the Coalition said, and I've got no reason to disbelieve them. I mean, they were looking for an easy way to save the government budget some money. So they essentially privatised, you know, some of the costs of what would be a government role during an economic crisis.

But, what it actually did do was it represented something new to a lot of people in the Liberal Party or emboldened them to start thinking about super and speaking out loudly about super in ways that they hadn't been able to in years prior, which is that the super is there for people to use and that they could use this kind of template of early access to redefine or redraw what superannuation looks like in this country.

And there's one Liberal MP in particular who has this ambitious plan to take what the Morrison government did and basically turbo charge it. So that would fundamentally reshape how we think about retirement and probably our whole economy.

RUBY:

Ok, so can you tell me about this plan, and the Liberal MP who is driving it?

RICK:

Well, it's been led by Liberal backbencher Tim Wilson.

Archival Tape -- Tim Wilson

“Today, I publicly restate my commitment to free speech, because some of us never lost the faith.”

RICK:

Wilson kind of first came onto the national radar as a spokesperson for the Institute of Public Affairs, which is a kind of a right wing/libertarian think tank with murky funding sources that we don't quite know where they come from.

Archival Tape -- Tim Wilson

“It’s becoming increasingly clear, every day, that Labor is hunting down our vulnerable grandparents to fund their election promises.”

RICK:

Whatever you might think about his policies and his convictions as a person, he's like a little terrier and he's never been afraid to put them out there in the public square. And in fact, he's gotten quite good at it. So he's been honing these skills over quite a while now.
But in particular, you might remember him from the last election, the 2019 federal election, when he orchestrated this nationwide campaign against Bill Shorten's proposed franking credit reforms.

Archival Tape -- Tim Wilson

“Abolition of refundable franking credits is fundamentally regressive.”

RICK:

And that campaign is now widely seen as being central to tipping the polls in the Coalition's favour. You know, Scott Morrison wasn't expected to win that election by most people, and he did. And the franking credits scare campaign was a huge part of that success. And now, Tim Wilson is back and he wants to fundamentally change how superannuation works in this country.

RUBY:

Mm. So he's got form as a pretty effective political operator. What is it exactly that he's proposing this time?

Archival Tape -- Tim Wilson

“Hello.”

Archival Tape -- Rick Morton

“Hello Tim Wilson how are you?”

Archival Tape -- Tim Wilson

“I’m well Rick. Now I think there’s a chance I’m going to have a division. If that were to occur, I’ll of course have to temporarily suspend and make a return phone call. How are you Rick?”

RICK:

I actually had a big chat with Tim Wilson about exactly what he wants to do and how he proposes to do it, and, you know, I find it, you know, somewhat illuminating.

Archival Tape -- Tim Wilson

“Super has a place. It has a place in providing retirement security. But it's at the moment, it's you know, it's super at the expense of the critical other life priorities. And I simply don't understand that logic.”

RICK:

So Super is currently nine point five percent of people's wages, and it's something that your employer pays for you so you don't actually see the money. It just goes into these accounts and under quite historic legislation now that has been set to rise to 10 percent from July one this year, all the way up to 12 percent by 2025. But there is certainly a lot of movement in the coalition and thinking that this would be a job killer and a wages killer and they want it scrapped.

Archival Tape -- Tim Wilson

“If you have an increase in the super guarantee, no matter which direction wages go, it still has the same fundamental effect. This is based on a percentage basis, but ultimately it's a cost that's carried by employers and it's passed through at the expense of wages.”

RICK:

So that's one plank of Tim Wilson's plan, which is keeping super at nine point five percent. But actually, what he really wants is to go well beyond that. So he also wants people to be allowed to access the super way before they retire and use it as a first home deposit.

Archival Tape -- Tim Wilson

“The principle is right, which is we need to get home ownership first or home first and super second. It makes no sense to prioritise superannuation of home ownership.”

RICK:

He wants you to be able to access all of it if need be. And essentially what he's doing, he's trying to replace the safety net of super with the safety net of home ownership or at least re-prioritise them.

Archival Tape -- Tim Wilson

“Super should fit into the slipstream of people's lives where it doesn't come at the expense of home ownership or at the... so that people can save for a home and then save for their retirement”.

RICK:

What he is saying is that home ownership is the biggest indicator of poverty in retirement. It creates stability beyond, you know, economic returns and that we should do that first as a priority and then we can focus on our retirement savings. And the super system can kind of work for us after we've got these other priorities while we're alive and working, when we need the help. It's actually quite an alluring concept, particularly for a young person in theory.

But there are a lot of problems with this idea. It's very simplistic. And it would actually, according to some economic experts I spoke to, would actually leave a lot of people worse off without actually doing much to increase home ownership.

RUBY:

We’ll be back after this.

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RUBY:

Rick what would the consequences of Tim Wilson’s proposed reforms, to allow people to use their super funds to buy a house, actually be? You said it could create a number of problems?

RICK:

Yes, there are problems. You know, I was talking to Brenan Coates from the Grattan Institute and he said it's undeniable that the super system we currently have has made it harder for some people to buy a house.

Archival Tape -- Brendan Coates

“So I think it's undeniable that compulsory super makes it harder for some people to purchase a house when they would like. Yeah, because you are taking, you know, 10 percent of their income and putting it away.”

RICK:

There is international evidence and the Grattan Institute's own modelling, super comes from wages, not all of it, but most of it, and that's fine because you need to have a good retirement, right.

Now, Tim Wilson obviously wants people to be able to buy a house and take out some of these funds, and that would fundamentally change how much people have left over when they get to retire. The problem with that is, you know, if you let me access my super to buy a house, I would be so happy as long as you didn't let anyone else do it.

Archival Tape -- Brendan Coates

“The more people you will have access their super to buy a house, then the more you're adding to the demand for housing”

RICK:

Because if you let everyone else do it, then the money gets flooded into the market, demand goes up, supply is still constrained, and then you've got price rises. That's literally how it works.

Archival Tape -- Brendan Coates

“So at the same time as you help some people access the home that would have otherwise got a home, you would also be pushing up prices which benefit sellers of those homes, which tend to be boomers at the expense of younger Australians”.

RICK:

If we are left in this position where Tim's plan ever becomes some kind of reality, then it's much tougher to work out whether you actually be better off in the long run because you'll be paying more for your house when you do manage to buy it.

But there are other issues as well, because, you know, we saw during the pandemic that poor people and women were the most likely to raid their super because rich people have enough money for a deposit and super and the current system, the way the tax breaks are set up and because it's contributory, as Brendan Coates says, you get out of it what you put in.

Archival Tape -- Brendan Coates

“So if you don’t earn much, you’re not going to have a lot.”

RICK:

So of course if you’re wealthier super is going to be better for you. But what Tim Wilson says he's worried about is poverty in retirement. And it's true. So the facts are if you don't own a house when you retire, you are far more likely to live in poverty. Like the rates are obscene. The easiest way to fix that from a policy point of view is to double the rate of the Commonwealth rental assistance, which would cost about five billion dollars a year. But that's government money.

And Tim Wilson's idea and this kind of Liberal Party ideology more generally is that they want less government and they want people to use their own money to do things that might traditionally have been the reserve of government, which is to help people.

RUBY:

And Rick, Tim Wilson, he's framing this whole thing as though it is a choice between superannuation, a well funded retirement or home ownership. But is that the right way to think about this? Are the two really in contention? Does it have to be one or the other?

RICK:

Look, I mean, no, it doesn't. It needs to be both and it has to be both. It does create stability as someone who grew up with a single parent who rented, you know, moving house was torture, both financially, but also for kids. But my mum buying her first time was the best thing that ever happened to us as a family. And she only managed to do it because she got a 7000 dollar first home owner grant, and seventy one thousand dollar loan.

So the house cost like, what, seventy eight thousand dollars. And that created a foundation. So, like, that's important. But you need to have money in retirement. Now yes. If you own a house or you're not paying a mortgage or you're not paying rent, then the age pension is adequate. It's not a heap of money, but it's enough money that you don't live in poverty and you can actually enjoy your retirement if you don't have other savings.

So to a degree, there is an argument to be made there that if you encourage home ownership, then you do reduce stress or future demand on the pension that might be there when the rate just simply isn't enough. And historically, we've had really high rates of home ownership amongst retirees, but that is falling and it's falling fast.

And, you know, if you kind of drain the bath, as Paul Keating said, with those super accounts in your 20s or in your early 30s, that is going to make a huge difference to what you ultimately have left over by the time you reach 67 and a half or whatever the age is now that... that you retire at. So, the issue now is equity and fairness. And I don't think that Tim Wilson's superannuation policy, even though it sounds great as a headline, I don't think it comes with any further detail about the implications, the consequences or what might otherwise be done in a much more efficient way to make sure that young people can get the stability of a first home.

RUBY:

Rick, if this plan that Tim Wilson is proposing, if it does go ahead, does it mean that we will no longer have a superannuation system in Australia, at least, in the way it was traditionally conceived?

RICK:

Well, it doesn't mean the end of super, but it means the end of super as we know it. I guess the fundamental thing that holds super together is preservation. You preserve it, you keep it there. And once you start fiddling with those parameters, then technically anything is possible.

And I guess, you know, it's not quite the Overton Window, but if you shift what's acceptable in a debate about super, then you shift what's possible. And I think that's what Tim Wilson knows very well. And he understands that as you know, a campaigner. And that's you know, that's what's happening right now.

RUBY:

Rick, thank you so much for your time today.

RICK:

Thanks Ruby, I always love talking about super.

RUBY:

Me too.

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RUBY:

Also in the news today — the Victorian government has confirmed that all three hotel quarantine workers who contracted Covid-19 in recent days acquired the more contagious UK variant of the virus. A new policy of testing all staff regularly, including on their days off, will now be implemented.

And in the US the second impeachment trial of Donald Trump will begin this week with the Senate voting to confirm the rules of debate. Democrats and Republicans announced a deal yesterday which gives lawyers on each side up to 16 hours each to present their cases.

I’m Ruby Jones, this is 7am. See ya tomorrow.