Superannuation change proposed for Australia

A leading independent economist says the superannuation should be abolished and the money in the accounts given straight back to Australians to manage themselves.

Cameron Murray, chief economist at Fresh Economic Thinking, said mandatory retirement costs about $30 billion to $40 billion a year in administrative costs and fees.

“It’s become quite a gravy train and there are $30 or $40 billion reasons a year to keep the show going.

He said there has been little research into how super funds spend their members’ money.

“There are plenty of middle management positions, with titles like ‘modernization director’ or whatever the current trend is,” Murray said.

Mr Murray expressed his disdain for fund managers.

“I call them spreadsheet monkeys,” he said.

‘You get a small team and you sit there and bore your friends and get some nice Powerpoints to reassure everyone that the fund is nice. It’s ridiculous.’

‘They think they’re hot stuff, they buy and sell the same shares of each other, back and forth.

“We’re spending $30 to $40 billion on those guys. It’s pretty wild.”

Mandatory superannuation, a system where employers must contribute 11.5% of an employee’s wages to a retirement savings and investment fund, was introduced in 1992 by the Keating Labor government.

Murray pointed out the contradiction in the position of the left party, which advocates privatizing pensions by encouraging people to entrust their money to private fund managers.

“It’s a very ugly stain on the Labor Party, they have a two-sided view here,” Murray said.

‘If it suits them for the base, they say: “We win for you, we get extra out of the annoying employers, super is something extra”.

“While they’re telling the treasury and policy nerds that this is just diverting wages from bank account A to bank account B, where a fund manager can do whatever he wants with it until the contributor is 60 or however old he is.”

Murray said people have been “brainwashed for decades” by the Labor Party into believing that super is something extra rather than something taken from a pay packet.

“When Super started, one of Paul Keating’s main motivations was to delay spending,” Murray said.

“So the deal with the unions was, ‘You can get your raise,’ but you can’t spend it in the economy because that would be inflationary.

‘So it is a pay increase that you get in your bank account and that you cannot spend.

‘We have an idea that really stimulates investments. It is intended to suppress spending and suppress economic growth because we were afraid of inflation.”

Mr Murray pointed out that people were accessing their super to stimulate the economy during the pandemic period.

Mr Murray argued that if the money tied up in the supermarket were put back into general circulation it would grow the economy and allow it to pay for a much better and more widely accessible old age pension.

According to Murray, abolishing super would not lead to a nation of impoverished pensioners, even if pensions were not increased.

‘People can save voluntarily; they will still have their money,” he said.

‘About 75 to 85 percent of the money saved was already saved outside of super.

Mr Murray endorsed the Coalition’s proposal to allow people to withdraw up to $50,000 from their pension (up to a maximum of 40 per cent of their balance) to buy their first home.

“A home is the best asset to own in retirement,” Murray said.

‘In Singapore, with their mandatory savings system, their first goal is to own a house.

“In Australia, super won’t let you buy a home for yourself if you’re young and need a home, but with a self-managed fund you can buy a home for someone else.”

Mr Murray said one particular inequality was the different ages at which people could access super and age pension.

“I think it’s ridiculous that you can get your super at 60 and your pension at 67,” he said.

‘You have rich people who have seven years to spend their tax-advantaged savings before they can claim the government pension.

“It’s a total rip-off of the middle class. You must be at least the same age.’

Mr Murray suggested super could be abolished by simply giving people access to their money.

However, he believed that this should be a phased withdrawal.

“You can’t just have everyone spend all the money at once,” he said.

‘There would be a huge spending spree as everyone under 30 would spend an extra $50,000 this year.

“You have to have an annual spending limit to clear the accounts over a four- to five-year period for people who want to clear them.”

He also said random sampling could be carried out to ensure companies are paying salaries with the added super.