Australia appears set to make the biggest policy mistake possibly since Federation – wilfully eroding our national savings pool in our greatest hour of need.
Twelve years ago this week the global banking behemoth Lehman Brothers collapsed, triggering what was the biggest economic crisis since the Great Depression.
Fortunately, trenchant Liberal opposition to Labor’s stimulus did not succeed and Australia emerged a world economic leader.
While fiscal and monetary policy acting in unison were critical to our economic recovery that led the world, Australia also had a secret weapon thanks to a previous Labor government – our world-leading superannuation system.
When Lehman Brothers collapsed the global banking system teetered on the edge. Thirty major banks were bailed out, all G7 economies recorded negative growth, and the credit implosion entangled both public and private finances in a ‘doom loop’ threatening to collapse the global financial architecture.
As Australia’s then treasurer I had a front-row sat in the national and international crisis that followed. Thanks to massive co-ordinated policy action, both domestically and internationally, our country came out of it in the best condition of any advanced Western nation.
As we find ourselves in an even bigger moment of economic truth – what lessons should we learn from 2008?
And yet we now have a government determined to not only ignore all three lessons, but eager to blow up our key economic advantages along the way.
The cause of the Global Financial Crisis was the unsustainable balance sheets of the financial sector.
So why would we, in the middle of this deepest recession, seek to weaken the balance sheets of our greatest financial asset?
While Labor’s signature fiscal stimulus was central to the economic rescue, the special role superannuation played during the GFC is perhaps the least-known part of the story.
Australia’s system of workers savings provided a critical financial backstop that allowed us to survive the global financial heart attack and then power through the GFC.
Labour and business came together in the boardroom to oversee an Industry Super model delivering higher returns and lower fees than their retail counterparts and then deployed it to help save the country.
As we emerged from the crisis, as treasurer, I was determined to expand this uniquely Australian model of success.
Building on Keating’s reforms, we increased super from 9 to 9.5 per cent, with plans to increase by 0.5 percentage points each year until it reached 12 per cent on July 1, 2019 while also lifting the aged pension.
Assuming the Liberals don’t again delay the rise to 12 per cent, Australia’s collective superannuation savings will reach $5 trillion in the decade ahead, giving working Australians access to Einstein’s eighth wonder of the world: The magic of compound interest.
This is a national triumph that will soon lead to Australia becoming, for the first time since European settlement, a net capital exporter and major global investor – and incredibly those capital returns will pay for the retirements of working people.
Thanks to Labor vision, Australia landed on the policy formula for all seasons – investment returns for working people, capital for business investment and deep financial buffers for the nation. All done with the cooperation and joint supervision of workers and business.
For reasons that can only be described as mindless, ideological and gutless, the Liberals have made it clear they are going to do their best to kill compulsory superannuation.
First, Tony Abbott effectively stole $500 billion from working people by pausing our legislated increases until 2021.
Then the Morrison Liberals came up with their mean decision to force working people to raid their savings to pay the bills.
By delaying stimulus and playing favourites over JobKeeper, the government has coerced Australians into robbing the future to pay for today. All of which will push more future retirees onto the aged pension.
As Paul Keating has said, you never expected the Liberals to believe in much, but as a conservative party you would at least expect them to believe in thrift.
Yet despite their demonisation of our stimulus over a decade ago and the so-called ‘debt emergency’, it’s clear the Liberals debt aversion was nothing more than cynical politics determined to stop good fiscal policy backstopped by strong national savings and demand side management.
Deficits are apparently fine if they’re used for unaffordable tax cuts for the wealthy and loose monetary policy is always the answer if it inflates asset bubbles.
Superannuation and share ownership is encouraged but not for all. In their world board seats and capital management are for kids from Vaucluse, not Wollongong.
I can only conclude that the Liberals want to see any increase in national wealth accumulate only to their top end constituency. Cutting super contributions for the workforce is just another means to the same end.
Just as superannuation helped save Australia from the GFC, industry super funds have the financial might to drive the recovery via a wave of investment and jobs.
In a uniquely Australian story, our industry super funds are set to inject $33 billion of worker savings into the economy by 2025, in a capital expenditure drive that could create hundreds of thousands of jobs.
Government leadership can drive these numbers even higher.
But to do this, we will need co-ordinated action, not ideological attacks done under the cover of crisis.
The constant attempts by the Liberals to demonise superannuation are ideology masquerading as a policy debate – or to quote Galbraith, amount to nothing more than a superior justification for selfishness.
Failure to provide sizeable stimulus and a pipeline of investment will condemn millions of Australians and future generations to higher levels of unemployment and lower living standards for decades.
We have to be on an economic war footing. To effectively shackle and white-ant the national savings pool that drove us through the GFC would be the biggest economic mistake in 100 years.