Gordon Campbell | Parliament TV | Parliament Today | News Video | Crime | Employers | Housing | Immigration | Legal | Local Govt. | Maori | Welfare | Unions | Youth | Search

 


Q+A John Brogden Interview Transcript 13/10/13

Sunday 13 October, 2013

Australia’s compulsory superannuation scheme has been ‘an incredibly beneficial policy’, says head of Australia’s Financial Services Council.

John Brogden told TVNZ’s Q+A programme that since the Australian Labor party introduced the compulsory retirement scheme, the country had amassed $1.6 trillion in superannuation and helped the country avert a recession during the Global Financial Crisis.

Mr Brogden told host Susan Wood: “One of the reasons we didn’t have a recession in Australia during the financial crisis is because when listed companies deleveraged, the flow of funds that came into superannuation allowed superannuation funds to buy those shares,” he says.

The then Labor Government brokered a tripartite deal with unions and businesses in 1992. Mr Brogden says the scheme retains 84 per cent public support but that small businesses in Australia ‘hates superannuation”.

“They see it as a tax. And it’s really a shared contribution, if you like. By law, it’s actually a complete contribution by the employer. So the employer is required to do that. So if you go for a job in Australia, it will be $50,000+ super, or it will be $55,000 including super, roughly speaking. So people understand that, and small businesses tend to see it as a tax on a small business. They hate the fact that it’s going up, but there’s never a good time to make this decision, Susan. That’s the critical thing. There’ll never be a good time for NZ or any country in the world to make this decision. Australia had the guts to make it. A Labor Government, to their credit, made that decision 21 years ago, and it has put Australia in an incredible position worldwide. We’ve got the fourth-largest private pension system in the world. That’ll be the third-largest soon enough, and it will provide Australians with an affordable and a comfortable retirement,” Mr Brogden said.

Tomorrow, the NZ Financial Services Council will offer its solutions to increase retirement savings and incomes at a one day conference in Auckland.

Q+A, 9-10am Sundays on TV ONE and one hour later on TV ONE plus 1. Repeated Sunday evening at 11:30pm. Streamed live at www.tvnz.co.nz   

Thanks to the support from NZ On Air.

Q+A is on Facebook, http://www.facebook.com/NZQandA#!/NZQandA and on Twitter, http://twitter.com/#!/NZQandA

Q+A

SUSAN WOOD INTERVIEWS JOHN BROGDEN

SUSAN WOOD
Good morning to you.

JOHN BROGDEN - CEO, Australian Financial Services Council
Good morning.

SUSAN           You saw that story there. It’s not uncommon in this country, sadly. Is it lack of financial knowledge or that we earn so much less?

JOHN              Oh, look, I think it’s a combination of factors. There’s no doubt from an Australian perspective when the then-Labor Government back in 1992 made the decision to put in place a compulsory superannuation system, starting for most people at zero and moving to 9 per cent of their salary by 2001, that that was a brave decision, I think. It wasn’t a bipartisan decision. The then Liberal Opposition opposed it, but when they came into government in 1996, they continued the acceleration up to 9 per cent. It’s become a very significant part of the Australian psyche that people support their superannuation system. The last piece of polling we did showed that 82 per cent of Australians support the superannuation system. It’s up to 9.25 per cent now and on the way to 12 per cent, and that’s supported by 84 per cent of the population, which is an incredible concept. You’re basically saying to people from the day they start working - let’s say that’s 18 - that you have to put soon to be 12 per cent of every dollar you earn away. You can’t touch it till you’re 60, probably 65 by the time young people get there, and it’s a defined contribution scheme, not a defined benefit scheme, so there’s no guarantee what will come out the other end. Yet, it remains so popular because I think people don’t want to be, as your story just showed, completely reliant on the pension.

SUSAN           So is that what we need here? A government to make a brave decision and bring in compulsion?

JOHN              My father’s a Taranaki boy, so I’m very conscious of coming to NZ-

SUSAN           And telling us what to do. I’m asking you, though. I’m asking you. Because the example there would indicate it is what we need to do.

JOHN              There’s no doubt that it has been an incredibly beneficial policy. Most Australians retiring now will have only had compulsory super for about half of their working life. Let’s say it started 20 years ago when they were in their 40s. So they’ll end up, for most of them, having a super fund and part pension, and for many of them, it will run out at about 75. So it’s always been a long-term policy. It won’t really reach maturity for another 20 or 30 years. So people who started working at zero per cent, got up to 9, on the way to 12. So there’s no doubt it’s provided a significant benefit. The other thing it’s done, and this isn’t spoken about much. The amount of money in superannuation in Australia is $1.6 trillion.

SUSAN           And this is giving Australia enormous clout, isn’t it, having that war fund, if you like, to fund businesses, to invest offshore. It’s huge for the country.

JOHN              So, one of the reasons we didn’t have a recession in Australia during the financial crisis is because when listed companies deleveraged, the flow of funds that came into superannuation allowed superannuation funds to buy those shares. So it provides an incredible- I don’t even think the Labor Government when they brought it in 20 years ago though it would be so significant.

SUSAN           It’s a financial buffer, isn’t it, really?

JOHN              It is, and the gross domestic product of Australia, so the size of the economy, is about $1.3 trillion. The stock exchange is at about $1.3, $1.4 trillion. There’s more money in superannuation that there is deposited in banks. That’ll be $3 trillion in 2020, seven years away.

SUSAN           That’s the thing. Once it starts growing and compounding-

JOHN              Oh, it’s extraordinary, and up to $7 trillion in 2030, 2035.

SUSAN           There’s a tax bias in this country, also, against saving, against KiwiSaver- Well, that’s slightly different. But there’s a tax bias towards property. Is that something-? I know you don’t want to tell NZ what to do, but is that something we should be addressing?

JOHN              Well, look, in Australia, your family home is tax-free. If you invest in investment property, then you can claim against the tax on your depreciation. So there are tax preferences towards property. However, superannuation is tax preferred. You pay 15 per cent on the way in. Now, if your marginal tax rate’s 48 cents in the dollar, you’ll actually get a discount, a benefit, to putting money in super. And you can put up to $25,000, so you can put above your basic requirement in law. It’s 15 per cent tax when it’s in and nothing when it comes out.

SUSAN           That’s a real incentive to invest, isn’t it?

JOHN              So what the government said 20 years ago is we have one of two choices. We can try and pay the age pension for this incredible number of people, particularly the baby boomers, when they retire and live longer. That’s the other point, of course. We’re all living longer. The healthier we are, the medical improvements we have, the welfare system, the medical system all help us live longer. So what we have to consider is you’re retired for a very long time now. So the government said, ‘Well, we can find the money in 30, 40, 50, 60, 70 years to pay the age pension for those people, or we can take our tax benefit now, in fact, forgo government revenue now by giving a concession and forcing people to save.’

SUSAN           A big part of the equation - business. Because it’s not just the employee that’s putting it in; the employer is as well. We’re a land of very small business, and we will often hear, ‘Well, we just can’t afford it.’

JOHN              Look, small business in Australia hates superannuation. They see it as a tax. And it’s really a shared contribution, if you like. By law, it’s actually a complete contribution by the employer. So the employer is required to do that. So if you go for a job in Australia, it will be $50,000+ super, or it will be $55,000 including super, roughly speaking. So people understand that, and small businesses tend to see it as a tax on a small business. They hate the fact that it’s going up, but there’s never a good time to make this decision, Susan. That’s the critical thing. There’ll never be a good time for NZ or any country in the world to make this decision. Australia had the guts to make it. A Labor Government, to their credit, made that decision 21 years ago, and it has put Australia in an incredible position worldwide. We’ve got the fourth-largest private pension system in the world. That’ll be the third-largest soon enough, and it will provide Australians with an affordable and a comfortable retirement. Not exactly champagne and caviar for everybody. The other thing it does is, as we move to the future, Australia has five working Australians for every retired Australian at the moment. By 2050, that will be 2.7 to one. I think NZ’s age, you get to 2.7 to one at about 2035 or 2040.

SUSAN           Yes, we do.

JOHN              That means there are fewer and fewer people paying tax to pay for the pension.

SUSAN           Because it becomes, I think, percentage of GDP. It doubles in the very short space of time, actually, relatively.

JOHN              Correct. So, really, for people in their 20s and 30s who think, ‘Why the hell am I paying 9.25 per cent of my salary now? I should be knocking it off the mortgage or buying a car or whatever it might be.’ The reality is they are saving for their future. And the figures are extraordinary. I mean, here we are 20 years on. It is a complicated system. If you stopped 10 people in George Street in Sydney today, they’d tell you it’s a complicated system. But clearly they’d prefer to have it than simply be relying on the age pension.

SUSAN           Very good to talk to you.

JOHN              Thank you.

SUSAN           Made me quite envious. (BOTH CHUCKLE)

ENDS

© Scoop Media

 
 
 
 
 
Parliament Headlines | Politics Headlines | Regional Headlines

Gordon Campbell:
On The Last Rites For The TPP

The Trans Pacific Partnership trade deal is one of those litmus issues that has always had more to do with one’s place on the political spectrum than with any imminent reality.

To date, the Greens have opposed (a) a wide range of the leaked content of the TPP (b) the secretive way it has been negotiated and (c) the undemocratic way in which any final document would be ratified. Labour has shared some of those concerns, but while remaining generally supportive of the deal itself.

National has, for its part, been very enthusiastic about the TPP, while still giving assurances about Pharmac being protected... For the TPP’s friends and foes alike though, the end now seems nigh. More>>

 
 

Gordon Campbell: On The Farcical Elevation Of David Seymour

With the election won, it’s time to find jobs for the boy. David Seymour is the Act Party’s latest scrounger to be rewarded by the National Party, and not only with a seat in Parliament. More>>

ALSO:

As Key Mulls Joining ISIS Fighting: McCully Speech To UN Backs Security Council Bid

It is an honour to address you today on behalf of the Prime Minister and Government of New Zealand. Our General Election took place last week - our Prime Minister Rt Hon John Key is engaged in forming a government and that is why he is unable to be here in New York... More>>

ALSO:

Labour: Cunliffe Triggers Party Wide Leadership Contest

David Cunliffe has resigned as Labour Leader, but says he will seek re-election... If there is any contest the election will have to go through a process involving the party membership and union affiliates. More>>

ALSO:

Flyover Appeal: Progress And Certainty, Or Confusion And More Delays?

Lindsay Shelton: The Transport Agency, embarrassed by the rejection of its flyover alongside the Basin Reserve, says it’s appealing because the decision could “constrain progress.” Yet for most clear-sighted Wellingtonians a 300-metre-long concrete structure above Kent and Cambridge Terraces would in no way be seen as progress… More>>

ALSO:

Gordon Campbell: On Cunliffe’s Last Stand

Right now, embattled Labour leader David Cunliffe has three options. None of them are particularly attractive for him personally, or for the Labour Party... More>>

ALSO:

Key Seeking 'New Ideas': Look To Children’s Commissioner On Poverty - Greens

John Key should not reinvent the wheel when it comes to ideas for tackling child poverty, and instead look to the recommendations of the Children’s Commissioner’s Expert Group on Child Poverty, Green Party co-leader Metiria Turei says. More>>

ALSO:

'Safe To Re-Enter' - OIA Docs: Safety Is Absolute Priority At Pike River Mine

“We understand that the time it is taking to complete our evaluation of the risks is frustrating for the family members and we are trying to complete this work as quickly as we can,” Ms Dunphy says. “It is Solid Energy’s responsibility to make this decision and we will do so, once we have all the information required to make a fully-informed decision.” More>>

ALSO:

Get More From Scoop

 

LATEST HEADLINES

 
 
 
 
More RSS  RSS
 
 
 
 
Politics
Search Scoop  
 
 
Powered by Vodafone
NZ independent news