Super self-own
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4 March 2023
4:00 AM
The libertarians are having an ‘I told you so’ moment.
A friend of mine who has long championed not putting one more cent into superannuation than the law requires, has been walking around in recent days with a smug grin of Cheshire Cat proportions.
‘If you think allowing any government to control your savings is ever a good idea, you deserve everything you get,’ he chortled.
Schadenfreude perversions aside, I have to admit he is right. He deserves this moment of self-righteous gloating.
Governments simply cannot be trusted with our money, and the actions of the Prime Minister and Treasurer this week over superannuation have further cemented this libertarian truth.
Governments can do all sorts of irrational things and get away with it. They’re only accountable to the people once every three or four years and, even then, they’re only accountable as a collective, rather than for specific misdeeds.
On the other hand, the ‘free market’ carries daily pressures to keep customers happy and continuous accountability to investors, workers, and the government. Anyone who has worked in the private sector for more than five minutes, knows the importance of reputation and trust. They can take years to build, but only minutes to destroy.
However, it’s too easy to dismiss Jim Chalmers as a reckless socialist reformer – despite this latest tax-the-rich initiative and his recent 6000-word essay outlining his socialist plans for our nation’s economy.
Yes, it’s true that Chalmers lacks work experience outside of academia or politics. Since the mid-1990s when he left school, Chalmers first gained a double undergraduate degree from Brisbane’s Griffith University (a Bachelor of Arts and a Bachelor of Communications) before beginning his career as a junior researcher in the office of then-Queensland Premier Peter Beattie. A succession of Labor Party ‘professional development’ roles followed: ALP party research manager, Media Adviser to Shadow Treasurer Wayne Swan, Deputy Chief-of-Staff to Kim Beazley when he was Opposition Leader, and Senior Adviser to NSW Premier Morris Iemma. Somewhere in this period he achieved a PhD in Politics Science from the Australian National University in Canberra.
Chalmers then hit the big time when Labor won the 2007 Federal Election: a role first as Deputy Chief-of-Staff and Principal Adviser, then later as Chief of Staff, to Treasurer Wayne Swan. This kept him going until 2013, when he ran for a federal seat of his own and won, albeit into nine years of opposition rather than government.
For someone with zero private sector experience, that’s still a pretty good CV for a politician. And he’s a very shrewd politician, not to be underestimated on his own turf.
He is the ultimate libertarian citizen’s nightmare. And he’s in power at a time when the government is financially weaker than ever. Private capital is simply not safe in Australia anymore. It will be taken away, and without a hint of guilt or shame on the part of the government.
Chalmers’ changes to super will target around 80,000 of the wealthiest Australians. There are 23.3 million super accounts in Australia according to the industry body, ASFA. Around one million are self-managed with an average of $1 million in each.
By targeting only those with a balance of $3 million or more, most of the 12.4 million Industry Super accounts won’t be affected. This is important because Industry Superannuation funds are big donors to unions who are in turn, big donors to the ALP.
Before last year’s federal election, NSW Senator Andrew Bragg warned that according to Australian Electoral Commission data, $12.9 million was paid from super funds to unions in the 2020-21 financial year.
‘This is a new record, up from $11 million in the previous year. This means super funds have paid $40 million to Labor Party affiliated unions in the past four years,’ the Senator warned last March. ‘Super funds are becoming the biggest political donors in the country. This is a disgrace.’
Industry Super Funds also have media clout. Online newspaper The New Daily was started by AustralianSuper, Cbus, and Industry Super Holdings and in 2016 became wholly owned by Industry Super Holdings.
Unsurprisingly, the superannuation changes story wasn’t prominent on the newspaper’s site Friday night, ranking 9th out of 10 headlines on its political page, under the headline ‘Libs fight super tax despite little sympathy for rich’. Too cute.
The scariest element of this superannuation change was made clear by business columnist Robert Gottliebsen in The Australian: the new 30 per cent tax will apply to all portfolio gains, including unrealised capital gains.
This is a scary step into unchartered territory and may signal Labor’s future intended approach to all taxes on assets. No other tax is imposed on unrealised gains. Gottliebsen argues it’s more likely the result of some speedy and sloppy decision-making, however the readiness to adopt such a policy approach without grave concern about the unintended consequences, is enough to worry any classical liberal. It tells us all we need to know about Jim Chalmers’ Robin Hood worldview.
Politicians know that most Australians are happy to see the wealthy made to pay more tax, and the political cost of this initial move will be minimal.
What they don’t know – if they’ve never worked in business – is the importance of trust. Imagine a bank telling its clients ‘we know we told you when you locked up your savings in a 10-year term deposit the interest rate would be 5 per cent, but we’ve got a huge debt we need to pay off, so we’ll only be giving you 3 per cent’. They may get away with it once, but they won’t see any return business. Faith and confidence in any future deal’s terms is lost. Forever.
So, the superannuation industry perhaps shouldn’t celebrate this attack on self-managed funds too soon. Capital tends to flow to reliable, trustworthy investment vehicles that honour their deals. My libertarian friend notes it’s one of the natural checks and balances in life that keeps free markets honest and effective. The damage to ‘brand super’ may be bigger – and far more widely felt – than they expect.
Nelle's journey 