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Abbott Says No To Superannuation Levy Increase But Won’t Repeal In Government

Opposition Leader Tony Abbott says the coalition will not support increases to the superannuation levy but nor will it repeal them in government.

Tony Abbott addresses the Financial Services Council

The Gillard government is proposing to increase the compulsory superannuation levy from 9% to 12% over eight years.

Speaking to the Financial Services Council today, Abbott said his party’s instinct “is to provide incentives, not to coerce people. Nevertheless, once these things are there we don’t add to them but we don’t roll them back and that is the approach that we will take to the current legislation. We aren’t going to support it in the Parliament but if it goes through we will not try to rescind it. We do accept that it is very important that people have adequate retirement incomes, particularly with an ageing population.”

  • Listen to Tony Abbott’s speech (18m)
  • Listen to Tony Abbott’s media doorstop (3m)

Transcript of Tony Abbott’s speech to the Financial Services Council.

Well, Craig, thank you so much. John, thank you very much for the invitation to be here. It is good to be amongst so many people who are so important to the retirement savings of our nation. It’s great to have the Shadow Minister for Seniors, Bronwyn Bishop here. It’s also good to have my colleague from Bradfield, Paul Fletcher here.

I really do want to say at the outset just how important you are to all of us. As John pointed out earlier this morning, you have $1.8 trillion of our money in your hands and that’s a heavy responsibility. We want our nest egg to grow and it will grow because of the intelligent decisions that you make. So, you are very important to our people, very important to our country and it gives me great confidence to be here today and to see how obviously enthusiastic you are about the work you do and how extraordinarily conscientious you are about the work you do.

Can I also say, Craig, thank you for the acknowledgement that you gave to the Howard Government. We aren’t given a lot of credit by our political opponents for being interested in superannuation but we very much are interested in people’s retirement incomes. Our approach tends to be rather different to that of our political opponents. We are more into carrots than sticks. We are more into incentives than compulsion. But nevertheless we are just as interested as they are in this whole subject of retirement savings because it is so important to the long term welfare of our people and the long term welfare of our country.

I want to open by just saying a little bit about the superannuation guarantee levy increases which the Government is putting through the Parliament right now. We have been, I believe, perfectly consistent on this subject for the last two decades. We are not instinctive supporters of mandatory superannuation contributions. Our instinct is to provide incentives, not to coerce people. Nevertheless, once these things are there we don’t add to them but we don’t roll them back and that is the approach that we will take to the current legislation. We aren’t going to support it in the Parliament but if it goes through we will not try to rescind it. We do accept that it is very important that people have adequate retirement incomes, particularly with an ageing population.

I should also acknowledge that in a country like Australia with a strong welfare safety net, most people, most of the time, do not save very much and it is perhaps important that we have an element of compulsion if there is going to be the level of national savings that we would like to have but what we always have is an instinct and a preference for – and what we will want to see more of in the system if we are in government – is transparency, small business and deregulation. These are in our DNA. These are in the marrow of our bones and these are often lacking in the superannuation system as we see it right now.

I am very pleased that you have developed such a strong working relationship with my shadow ministerial colleague, Mathias Cormann. He is, as you say, very much on top of his job and I am pleased that you will be talking to him in great detail because those conversations will inform the superannuation policy that we take to the next election.

One of the issues for you and for your customers is volatility of the markets. Obviously, the last thing that people who have invested in superannuation want to see is the kind of wild gyrations in share prices that we’ve been looking at really ever since the global financial crisis first hit in 2008. The global financial crisis and its subsequent ramifications have given us many lessons and the first and most important lesson is the terrible judgement that is pronounced against governments and peoples that live beyond their means. If there is one lesson that the Eurozone crisis should have hammered home to governments right around the world, it is that debt and deficit cannot go on forever.

The government which I served for 12 years almost, the Howard Government, inherited a $10 billion budget deficit and it turned that into a consistent one per cent-plus of GDP budget surplus. We inherited $96 billion of accumulated Commonwealth debt and we turned that into $70 billion worth of net Commonwealth assets, including the Future Fund. So, we have a very strong record as a party, as a political movement, as a government, when it comes to turning deficits into surpluses and turning debt into assets and that is the spirit that we will bring to government should the people entrust us with that honour.

Unfortunately, the current government has no such record. As you would know, they turned a $22 billion surplus into deficits, the largest in our history, topping out at $55 billion a couple of years ago and we are headed for $107 billion of net debt. By comparison to other countries our situation is not too bad but that’s because we started better, not because we have been managed better through the global financial crisis and its aftermath. The net budgetary turnaround has been seven per cent in the United States, six per cent in the United Kingdom and five per cent in Australia. So, our net budgetary deterioration has been almost as bad as that of the countries that we like to compare ourselves with and yet we did not have a banking crisis in this country and we did not have a significant rise in unemployment in this country. So, given the conditions that we have faced, our budgetary management has been worse than budgetary management in the United States and the United Kingdom.

It’s not just the spending, it’s the waste which is the problem. Now, I know that the roof batts disaster has passed into legend – a government that couldn’t even install pink batts for free. Then, of course, there was the school halls disaster where the Government spent roughly twice what it should to build these overpriced school halls. We have the ongoing National Broadband Network expenditure. Now, all of us are in favour of better broadband but what we are essentially seeing here is $50 billion-plus spent on digging up our streets so that fibre can be connected to every home or almost every home whether they need it, want it or can afford to pay extra for it. This is not sensible, prudent, competent government and it is why so many of the Australian people – particularly so many people in business – believe that this is a government which just doesn’t get it.

There is one recent example which I believe is emblematic of the approach of this Government and which deserves to be better and better known. Just last year the Australian Parliament sold two billiard tables for the combined total of $5,000. Maybe it was a good deal, maybe it wasn’t, but they then spent $102,500 trying to inquire into whether they had got good value for money. Truly, a “moonbeam from the larger lunacy”, ladies and gentlemen.

The latest survey from the Business Council of Australia shows that fully 83 per cent of large companies believe that the current government does not understand them, 49 per cent of large companies nominate the Government itself as one of the three principle problems facing business. So, as I said, this is a Government which just doesn’t get it.

It’s a Government which has predicted a surplus for next year and yet we all know that government revenues are under great pressure as a result of continuing market problems and if the Government is serious about delivering a surplus we really need to have a serious round of spending cuts. I call on the Government to deliver those spending cuts and to bring back the Parliament so that a mini-budget can be presented to the Parliament and scrutinised by the Parliament.

But there’s another area in which the Government should come clean as well as on the question of whether a surplus will actually be achieved and that is the whole question of the impact of its carbon tax. Now, ladies and gentlemen, you would know something about economic modelling. This is a sophisticated financial audience and you understand how important it is to get the assumptions right if the outcomes are going to be as you expect. This is a government which has modelled the impact of the carbon tax on the assumption that the other major economies of the world will have a carbon tax or an emissions trading scheme. The assumptions are that the world will have a carbon price.

If you actually look at the carbon tax modelling that the Government distributed on Carbon Sunday you will see that it critically depends upon the ability of Australian businesses to buy carbon credits from overseas. The Government’s figures are that we produce 578 million tonnes of emissions at the present time. In 2020, on the Government’s own figures, we will actually be producing 621 million tonnes of emissions. The only way we get the five per cent cut which they have committed to is by buying almost 100 million tonnes of credits from overseas. So, there has to be an international carbon market in order for their system to work and yet as President Obama made quite clear on his visit to Australia this week the United States aren’t moving to a carbon tax, they aren’t moving to an economy-wide emissions trading scheme. So, this fundamental assumption on which all of the Government’s figures are based does not match the real world.

The Government, as you know, thinks that the carbon price will be $29 a tonne in 2020 based on this assumption which is simply unrealistic. The Centre for International Economics has done modelling assuming that there will be no international carbon market. They say that the carbon price won’t be $29 a tonne, it’ll be $43 a tonne by 2020. They say that under the carbon tax without an international carbon market, our GDP will be $180 billion lower cumulatively by 2020 than would otherwise be the case. They say that wages will be two per cent lower by 2020 than would otherwise be the case.

Now, if all of this is correct the Government’s compensation package does not work. If all of this is correct the Government and its carbon tax are simply ripping off the Australian public. It is important that the Government is held to the same standard of probity and integrity that you are held to. It is important that people get from the Government the same level of intellectual honesty that you are expected to deliver. That is why I say it is absolutely vital now that President Obama has belled the cat that the Government redo its carbon tax modelling and if necessary redo its compensation package if the Australian people are not to be ripped off.

Ladies and gentlemen, the big difference between the Coalition and our political rivals is in the attitude to business; is in the attitude to profit. We believe in the marrow of our bones that you cannot have a strong and cohesive society without a strong economy to sustain it and you cannot have strong economies without profitable businesses. We understand this in the marrow of our bones. As you know from your dealings with this Government they assume that there will always be money available for them to distribute. As we know from our experience of the real world this just isn’t so.

So, ladies and gentlemen, what you can expect from the Coalition is a constant readiness to talk to business. We won’t always do everything that every business would like. We can’t always do everything that every business would like but we do understand in a way that our rivals never will that you do need healthy business if our economy is to prosper and if our society is to be cohesive. This fundamentally is why you can trust us with the future of our country in a way that you can’t be so confident with our rivals.

Ladies and gentlemen, I appreciate the opportunity to speak to you this morning. Again, I want to say how important you are to the future of our country and again I want to congratulate you on the relationship you’ve got with my shadow minister and I look forward to the policy fruits that we will see in good time before the next election.

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Malcolm Farnsworth
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