This article examines developments in retirement policy since the period of economic restructuring, which began in earnest in the 1980s. It focuses attention on how policies aimed specifically at retirement, such as compulsory superannuation, have interacted with broader policy developments. From this perspective, retirement policy has been far less egalitarian. By expanding the role of occupational welfare at a time of broader deregulation, superannuation has tended to reinforce growing labour market inequalities. Indeed, where once economic policy settings reflected social policy priorities, the reverse is now the case. This has meant that superannuation is partly used to increase national savings, while capital market deregulation has removed previous subsidies that supported widespread home ownership. Both superannuation and housing policy--two of the main elements of retirement income for most Australians--have also become subject to a new partisan dynamic, which subverts equality. Australia's emerging 'dual welfare state' sees conservative parties extend subsidies for private welfare spending alongside direct spending programs. The nature of retirement policy reform has made it particularly susceptible to this dynamic, resulting in an explosion in social support offered through the tax system, which is both inequitable and inefficient.
It is in this light that we argue that the current review of tax arrangements surrounding retirement policy should be examined. A series of recent reviews have emphasised the soundness of the basic structures of retirement policy. While there are suggestions to reduce some of the worst inequities of the current tax expenditures for superannuation and housing, the reviews support continued tax support for saving, and greater reliance on private savings for retirement. This article begins with an overview of retirement policy. It then outlines different conceptual understandings of the role of retirement policy, and how these conceptions may conflict. Using this framework, the article then explains how retirement policy has moved from a 'wage earner' framework to a 'dual welfare' framework, and finally assesses current policy proposals in this light. Our analysis suggests that current proposals will likely entrench much greater inequalities in older age and expose older Australians to greater market risk.
Public Policy and Retirement Incomes in Australia
The Commonwealth government mainly supports the income security of retirees by funding public transfers and subsidising both private superannuation and housing (see Table 1). The means-tested Age Pension is the primary public transfer for retirees, costing $25 billion in 2007-08 (AIHW 2009: 95). In the same year, the Age Pension was claimed by 78 per cent of those eligible, with 56 per cent receiving the full rate (ibid.: 82, 95). The pension provides a modest income stream; its full fortnightly rate was $562.10 for singles and $469.50 each for couples in January 2009 (ibid.: 95).
Superannuation and housing are mostly subsidised through tax expenditures, which refer to selective tax breaks for purchasing private assets or services. Although not a subsidy, the Superannuation Guarantee mandates that 9 per cent of wages be invested in private super. Tax concessions apply to all stages of the superannuation stream; a concessional 15 per cent tax applies to super contributions (up to defined limits) and super fund earnings, while super benefits are exempt from tax if claimed after turning 60. These tax concessions cost around $39 billion of revenue forgone in 2007-08 (Treasury 2011: 4). From 2012, lowincome earners will also receive a 15 per cent rebate on super contributions and a co-contribution for voluntary contributions.
Housing is the other main retirement savings vehicle subsidised by tax expenditures. The tax exemptions for capital gains earned on the primary residence and imputed rent were estimated to cost $41 billion of revenue forgone in 2007-08 (ibid. …