Sort super, then tackle an even bigger retirement problem


The Productivity Commission has delivered a wide-ranging final report to the Morrison government that, if correct, could deliver billions of dollars worth of benefits to Australians.

Its findings around account duplication, lack of competition, "zombie" insurance policies that eat account balances rather than brains and the way many in the superannuation industry worry more about themselves than their customers are compelling.

If implemented in full, the proposals would upend the current system that has failed far too many while lining the pockets of a select few.

It would also put pressure on our regulators which, again, have been found to spend more time focused on protecting the interests of key players rather than ordinary Australians.

But it's clear the Productivity Commission has more to say.

The terms of reference for this inquiry were broad - about superannuation. While the $2.7 trillion sector that lives off a compulsorily acquired portion of our collective wages has got a fair going over, it's not the only element to our national savings or retirement income strategy.

You have to go back to the FitzGerald report of 1993 to have a full and proper review of these key elements of the Australian economy.

The commission makes clear it wants the government to go further, to put everything in this space on the table.

As it notes in recommendation 30 of its final report, it believes a full inquiry that canvasses the retirement incomes system, the impact of the superannuation guarantee on private and public savings and how super interacts with the age pension is needed.

The commission also believes this inquiry needs to look at the way super affects public finances. In other words, whether the revenue foregone because of the concessional way super is taxed is actually delivering the benefit supporters of the policy argue.

It would consider the way superannuation affects other areas such as housing and aged care.

Factor in whether super is actually funding what it is supposed to - our retirements - and it's a big question posed by the commission.

And it wants it done before the super guarantee is increased to 10 per cent from 9.5 per cent in mid-2021.

Going down this rabbit hole could deliver a government of either political persuasion problems that would drive Alice, Dormouse and the March Hare to something stronger than a cup of tea.

For the Coalition, which had massive internal troubles when as treasurer Scott Morrison correctly sought to wind back superannuation tax benefits to high income earners in the wake of the 2016 election, reducing benefits even further would be more than problematic.

Labor, which proudly argues its role in setting up our current superannuation system, would have political conniptions if an independent review suggested an increase in the super guarantee might do little but line the pockets of higher income earners.

The Productivity Commission proposal to look at retirement incomes could prove tricky for Scott Morrison and Bill Shorten.

The Productivity Commission proposal to look at retirement incomes could prove tricky for Scott Morrison and Bill Shorten. Credit:AAP

But as the Productivity Commission notes, it has been 25 years since questions like these have been asked.

The Harmer inquiry which the Rudd government used to lift the rate of the age pension touched on an aspect of retirement incomes. The Henry review looked at the superannuation side of the equation and came up with a suggestion that was politically unpalatable to both sides.

The commission has done a fine job by asking the correct questions about superannuation. Yet the ultimate question - whether superannuation is worth the fiscal costs it imposes on taxpayers - remains unanswered.

That goes to the heart of where the commission wants to go next.

There's no sign that either the Coalition or Labor want to gaze into that looking glass.