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RUBY:

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

A week ago, superannuation reform was just an idea, the government wanted a so-called national conversation and the prime minister certainly wasn’t proposing anything.

But the conversation turned out to be brief, and a decision was swift.

Australia’s wealthiest people will not get tax breaks on wealth being stored in their super accounts.

So what convinced Anthony Albanese that his government had to act? And was it worth the risk of being accused of breaking a promise?

Today, columnist for The Saturday Paper, Paul Bongiorno, on how Albanese made his decision, and why we could be talking about it for years to come.

It’s Friday, March 3.

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Archival tape – 7News Reporter:

“Good evening, the Prime Minister has announced landmark changes to superannuation rules-...”

Archival tape – SKY Reporter:

“The Government is adamant they have not broken an election promise as it announced an increase to superannuation tax accounts-...”

Archival tape – ABC Reporter:

“Some pretty big changes to our superannuation industry is getting a lot of pushback, particularly from the Opposition-...”

RUBY:

So Paul, when we spoke this time last week, the Federal Government was floating the idea of making changes to superannuation. But at that time the prime minister, Anthony Albanese, he was quick to say that there was no proposal on the table, and that his government was just pointing out the cost of the current arrangement. A lot has changed in a week. It turns out that a change to super is definitely coming. So tell me about what's happened.

PAUL:

Well Ruby, as the saying goes, a week is a long time in politics, although it seems a day is just as long. But Albanese came to the realisation in recent weeks that a crunch was coming. Especially as Treasury was finalising the revamped tax expenditure and inside statement, ahead of the May budget. Now this annual opening of the books is a key element of the budget process these days. Well, the statement was a shock, even though we knew the budget was in deep deficit. Well we now have a clearer idea of what's contributing to it. Looking at Australia's foregone tax revenue, the concessions and deductions for superannuation have a $50 billion annual price tag. And it was the breakdown within the superannuation arrangements that Albanese says was news to him, and convinced him the Government had to act.

RUBY:

And Paul, the change itself, after the Government had floated different ideas about where to cut off the tax concessions on super, they have now locked themselves into a proposal. So superannuation holdings over $3 million won't get those same breaks anymore. So how did the Government come to that position?

PAUL:

Well, yes, as we saw last week, ideas were floated. A cap of some kind certainly seemed to be the preference of the Treasurer, and even the industry itself. And you'd have to say the Government's made a pretty good fist of communicating this problem. As the Treasurer began telling the story of superannuation, for example, there are 17 Australians who have over $100 million in their accounts, and one has over $400 million. The case for limiting tax concessions for these ultra wealthy superannuants was undeniably watertight. But still in Cabinet, on Tuesday morning, there was some pushback as the proposal was discussed. Considerable attention was paid to the politics of this announcement in an effort to contain the fallout and define the government as fiscally responsible and even conservative.

Archival tape – Anthony Albanese:

“The Cabinet has met this morning and had a discussion about superannuation, you might have noticed has been occurring.”

PAUL:

So when Albanese and Chalmers came to the Prime Minister's courtyard news conference, they had a carefully crafted plan, you might say a cunning plan, Ruby.

Archival tape – Anthony Albanese:

“And today I'm announcing the earnings on super balances above $3 million will have a concessional rate of 30% rather than 15%.”

PAUL:

They said the change was about the sustainability of the system. It was not retrospective and only applied to future earnings beyond July 2025.

Archival tape – Anthony Albanese:

“Labor built the superannuation system and we've fought to keep it strong. But Australians who are having to make tough decisions around the kitchen table expect their government to be prepared to make tough decisions around the cabinet table.”

PAUL:

The Government has repeatedly emphasised super is about people's retirement incomes, and shouldn't be a tax shelter for the very wealthy.

Archival tape – Anthony Albanese:

“The savings that are made from the reduction in these tax breaks will contribute $900 million to the bottom line over the forward estimates, and some $2 billion when it is operating on a full year period. This is an important reform.”

PAUL:

As Jim Chalmers said this week, for the 17 people with self-managed funds that have $100 million balances. The tax break as it stands is worth upwards of $1.5 million a year to each of them. Chalmers explained It takes 100 average wage earners paying an average amount of tax to pay for it each year. And the scenario convinced some media — that usually love a good scare campaign — to actually focus on who was using superannuation to hoard their wealth, rather than bag the government for a change.

Archival tape – Today Show Reporter:

“Oh, look, it's tough out here on the streets of Double Bay this morning, Karl and Sarah. You know the community, they are counting their pennies. They are counting the stacks of $100 bills that they have strategically placed throughout their penthouses and mansions in case of a rainy day, because this is basically a class warfare. And let's face it, no one likes it when the rich are the targets…”

PAUL:

Of course, not everybody came to the party.

Archival tape – SKY Reporter:

“It's a rort through and through. It is not what the superannuation strategy was meant to be. It is theft-...”

Archival tape – Sunrise Reporter:

“Is this just the thin end of the wedge? Can we trust our politicians not to reduce that cap to bring in more people-...”

Archival tape – SKY Reporter:

“Labor is deciding what a dignified retirement would be. The hypocrisy…”

PAUL:

And the Murdoch tabloids unleashed one of their more creative journalists, if I can put it that way, James Morrow, to run the horrible prospect that the family home would be the next to be taxed. His story ran in News Corp tabloids across the nation, but Albanese was alert to the danger. This change could be seen as something of a superspreader event to other concessions, and he nipped it in the bud. I'd have to say he did it more effectively than the Treasurer; he was asked about Jim Chalmers refusal on other TV shows during the week to rule anything in or out.

Archival tape – Patricia Karvelas:

“Your Treasurer has spoken on Sunrise this morning. He would not rule out capital gains tax, changing on family, on the family home…”

PAUL:

On RN Breakfast the Prime Minister assured his inquisitor, Patricia Karvelas, "we're not going to impact the family home, full stop."

Archival tape – Anthony Albanese:

“We are not going to impact the family home.”

Archival tape – Patricia Karvelas:

“Why not?”

Archival tape – Anthony Albanese:

“Full stop, exclamation mark. Because we're not going to.”

Archival tape – Patricia Karvelas:

“Because why not place the policy?”

Archival tape – Anthony Albanese:

“Because it's a bad idea.”

RUBY:

Right. And so with the announcement made, Paul, and a policy adopted, is this pretty much guaranteed now to be passed into law, or could the proposal still fall over?

PAUL:

Well Ruby, I think the government will have no problem getting this tax hike through the Parliament. The Greens, and most of the crossbench in the Senate, have signalled their support. But the Government on the recommendations of Jim Chalmers has designed the change not to come into effect until after the next election in July 2025. Albanese says this means he's not breaking a promise not to do anything about super this term.

PAUL:

So the only thing that could stop it really would be Labor losing the next election. And Peter Dutton has already promised to repeal it if he becomes prime Minister. But it would be a very expensive promise to deliver both fiscally and politically. You'd have to find other savings for the loss of the annual $3.2 billion in the projected medium term revenue. The political wedge is even more exquisite. Labor has promised 99.5% of people will be unaffected by this reform. So this would leave the Liberals pushing to reintroduce a super sized tax lurk for some of the richest people in the country. Whether they could turn that into a winning message Ruby, well, it'd be something of a challenge.

RUBY:

We'll be back in a moment.

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RUBY:

So, Paul, it seems like these super reforms, they will inevitably be passed. But could we take a step back here and talk about the significance of what the Albanese Government is trying to do because the Prime Minister, he could be charged with breaking an election promise over this, and he's clearly decided that it's worth the risk. So how significant is that choice for him, and why do you think he's made it on this particular issue?

PAUL:

Yeah, well, setting aside the polling from the Murdoch press and the coalition, you have to concede there is a real risk of eroding the Prime Minister's credibility. But changing course when the situation demands it is something no serious leader of the country can avoid. John Howard faced it with considerable dexterity after the 1996 election, when he had to postpone many promises to begin repairing a budget in surprisingly deep deficit at the time.

Archival tape – John Howard:

“No way that the GST will ever be part of our policy. Never, ever. Never, ever-...”

Archival tape – John Howard:

When the GST begins, the wholesale sales tax with all its complexities and different rates will be totally abolished.

PAUL:

Tony Abbott in 2013 was not so nimble about it. There was no surprise deficit. We already knew how big it was, but he junked all his key promises in his government's first budget. You might remember some of them: no cuts to health, no cuts to education, or the ABC, or SBS, and a few other things.

Archival tape – Tony Abbott:

“Now, on the subject of broken promises, I accept that what we're doing with the ABC is at odds with what I said immediately prior to the election…”

PAUL:

But ultimately Albanese decided that failing to embark on budget repair would have serious economic consequences for inflation and interest rates, and that would be far more damaging for his government — and it has to be said, the nation — than risking the threat of breaking a promise. One source told me Anthony is determined to lay the foundations for a longer term government. A point the Prime Minister made in several interviews where he said he's dealing not only with the short term, but also what is in the long term best interests of the nation.

RUBY:

Right. And the obvious context here, Paul, is that the government wants to fund its agenda. So the changes it wants to make to Medicare, to the NDIS. So does the success of those changes depend on the government's ability to make these kinds of savings effectively?

PAUL:

Well, yes. Albanese, though, believes to achieve his reforms he needs to hasten slowly. For any to be sustainable they need to be bedded in beyond one term, and in discussions with colleagues he cites the Whitlam government. It introduced the original national health insurance scheme, Medibank, and it was abolished by the incoming Fraser Coalition. On the other hand, the longer surviving Hawke Keating government's version, renamed ‘Medicare’, is still with us today. And its viability is a hot button issue for both sides of politics. But fiscal reforms are never easy, especially when it means taking something off people. That's when it needs to be done in a way that is reasonable and credible.

RUBY:

And so finally, Paul, we know that the politics of all of this is yet to play out. And there is a long time between now and the next election, which is when these changes would actually be poised to come into effect. So do you see this coming back to haunt this government, particularly if they do bend or break any more promises between now and then?

PAUL:

Well, I have to say, running scare campaigns against Labor is always easier for the Liberals when the Coalition is in government and Labor are the opposition. Angus Taylor keeps repeating the old Liberal shibboleth that when the Labor Party runs out of money, it comes after yours. He says “We're going to see a lot more of it.” And then adds, “They're not talking about managing their spending and managing their budget.” But surely that's exactly what the Labor government is talking about. The spending they're trying to manage is, among other things, the $50 billion annually. The Liberal government shovelled out the door to mostly benefit wealthy Australians at the expense of everyone else. And as we've seen, Chalmers has spelled out how much tax the average wage earner has to pay to fund the $21.5 million worth of tax breaks for the 17 multi-millionaires with those hundred million dollar super balances. And you know, Ruby, what we're really seeing here is inverse Robin Hood. The class war is not being waged against the rich, but the poor. And only the self-interested and the entitled could be impressed by it.

RUBY:

Paul, thank you so much for your time.

PAUL:

Thank you, Ruby. Bye.

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RUBY:

Also in the news today,

Former Human Services minister Stuart Robert has admitted to making false statements on TV about the Robodebt scheme, after being told it was unlawful.

In testimony at the royal commission he said, quote: “I have no choice as a cabinet minister but to defend government policy.”

And…

International Atomic Energy Agency inspectors have found uranium particles enriched to near-weapons grade purity at a facility in Iran.

While the UN nuclear watchdog has warned Iran may now have enough uranium to produce “several” nuclear bombs if it chooses, it would likely take months more to build and facilitate any potential weapons.

7am is a daily show from The Monthly and The Saturday Paper.

It’s produced by Kara Jensen-Mackinnon, Zoltan Fecso, Cheyne Anderson, and Elle Marsh.

Our technical producer is Atticus Bastow, our editor is Scott Mitchell.

Sarah McVeigh is our Head of Audio, and Erik Jensen is our editor-in-chief.

Mixing this week by Laura Hancock and Zoltan Fecso.

Our theme music is by Ned Beckley and Josh Hogan of Envelope Audio.

I’m Ruby Jones, see ya next week.

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