Thursday, February 21, 2008

And Super could lock up the surplus as well

Laura Tingle, in this morning's Financial Review:

Budget plan to funnel surplus into superannuation

The Rudd government is examining ways to convert the fiscal surplus into private savings as part of its first budget, a measure that may result in part of the surplus being distributed to millions of Australians as government superannuation contributions.

The revelation comes as Labor has continued to staunchly defend - and insist it will deliver - its proposed $31 billion tax cuts, including reductions worth about $7 billion due on July 1, despite increasing concern from private sector economists about their potentially inflationary impact...

The transfer of public-sector savings to private-sector savings would not of itself directly boost the overall level of national savings.

However, there is a view that the transfer would more efficiently lock the savings into place for the future, where they would be unable to be raided by future governments.

Politically, this is a good idea, if it could be done. It would be seen to enrich Australians and would infuriate the Coalition. Labor really would have locked away the surplus - from it.

(Nick Gruen has another great idea about super. Give people the option of taking their tax cuts in that form. But making it the default option.)

Personally, I don't think super is the answer for very much. We've already got about enough in super, the money is creamed off by middlemen, boosting it inflates asset prices and lowers returns, and while saving money will help an individual retiree cope with a future world short of workers (the can buy preferred access to their services) it can't help an entire society in the same way.

But then I am just a superannuation stick-in-the-mud. Everyone else, especially Labor, is on the bandwagon.