Superannuation is one of Australia’s genuine policy success stories. The compulsory retirement savings system — introduced by the Keating Labor government in 1992 and gradually built up to the current 11.5% contribution rate — has created the world’s fourth-largest pool of pension savings, currently sitting at around $3.9 trillion. It has transformed Australia from a country with one of the developed world’s least secure retirement income systems to one of its stronger performers, and has substantially reduced the long-term burden on the age pension.
It has also, virtually without interruption, been used as a political football by both major parties whenever they needed money, needed to win an argument, or needed to reward a constituency. The history of superannuation policy in Australia is a history of good structure being progressively undermined by short-term political thinking from every direction.
How Both Sides Have Raided It
The right’s version of attacking superannuation typically involves reducing contributions, expanding access to funds before retirement, and arguing that people should be trusted to manage their own money. The Morrison government’s COVID-era early release scheme — which allowed members to withdraw up to $20,000 from their super — was presented as emergency economic support. It was also a profound long-term harm to the retirement savings of around 3.5 million Australians, particularly younger people who had less super to begin with and lost decades of compound growth on those withdrawals. Analysis by the Grattan Institute estimated that many participants will have $100,000 less at retirement as a result.
The right has also repeatedly sought to expand the use of super for housing deposits — a policy that sounds superficially appealing but whose primary effect would be to push more money into the housing market, exacerbating affordability problems, while permanently reducing retirement savings for those who use it. It treats the symptom (difficulty buying a house) in a way that aggravates the disease (inadequate housing supply and tax distortions) while creating a new problem (retirement poverty).
The left’s version of attacking superannuation involves treating the accumulated savings of working Australians as a pool of capital available for social investment goals. The Albanese government’s proposal to increase taxes on super balances above $3 million — applying a 30% tax rate rather than the current 15% — has a reasonable basis in equity: super tax concessions are extraordinarily generous to those with very large balances, and there is a legitimate public interest argument for limiting concessions on balances that are clearly beyond anyone’s retirement income needs. But the proposal to apply this tax to unrealised gains — meaning super funds would be taxed on paper profits that haven’t been crystallised — is genuinely problematic and represents the kind of policy design that makes even defenders of the principle uncomfortable.
What Superannuation Is Actually For
Superannuation has one purpose: to fund retirement incomes so that Australians do not have to rely entirely on the age pension in old age. Everything else — using it for housing, using it for COVID emergency payments, using it as a vehicle for tax concessions on very large balances, investing it in “nation-building” projects — is a distraction from or a distortion of that purpose.
The system works when it is allowed to do its job: money goes in at a reasonable rate, it grows in a low-fee environment with decent long-term investment returns, and it comes out at retirement to fund a decent standard of living. The things that undermine it are: allowing early withdrawals, reducing contribution rates, allowing fees to eat into returns (the MySuper reforms addressed this partially), and using it as a convenient policy tool for problems it wasn’t designed to solve.
The Honest Policy Positions
A centrist, evidence-based approach to superannuation would do a few things. It would continue the contribution rate increase to 12% as legislated. It would cap the super tax concessions available on very large balances — $3 million is a reasonable threshold, though the design of the tax needs work. It would firmly resist all proposals to allow early access for purposes other than genuine hardship, on the grounds that the long-term cost to retirement incomes is too high. It would fix the housing problem through housing policy rather than by cannibalising retirement savings. And it would resist the temptation to direct super fund investment toward politically favoured projects rather than optimal risk-adjusted returns for members.
Most Australians understand instinctively that their super is their money, held in trust for their retirement. They are right about this. Politicians on both sides who treat that money as available for other purposes whenever it is politically convenient are betraying a fundamental trust — and they should be held accountable for it.
