The politics of superannuation have been largely hidden because of bi-partisan support for leaving it alone. Superannuation was a Labor initiative that quickly became appealing to the finance sector, which traditionally supports the Coalition. And as the pool of super funds burgeoned -- it is approaching $2 trillion -- it became a quiet leaviathin underpinning a great deal of what goes on in our capital markets and business.
But that bi-partisanship is about to end. Which means that we are about to see exactly how big a political elephant in the room super actually is. It is not just a wealth distribution issue. It is very much an ageing population issue. Super is for retirement, and as the population ages that means a growing proportion of the population. That will have some profound political implications, whihc Labor will no doubt be aware of. The AFR reports:
"Labor has accepted the government's challenge to fight the next election over retirement incomes, with the declaration "bring it on".
In his formal response to last week's federal budget, shadow treasurer Chris Bowen will declare the government's new strategy of ruling out super tax changes beyond the next election is neither sustainable nor believable.
"The taxation concession on superannuation earnings in retirement is unsustainable. We can't afford it as a nation," he will tell the National Press Club on Wednesday.
"Someone has to show the courage to say it and to deal with it, and Labor has decided not only to do that but to do it before an election and seek a mandate to deal with it.
"Tony Abbott wants to make superannuation an election issue. Bring it on."
After Mr Bowen announced in April that Labor would make two tax changes to superannuation if elected, the government decided to make it a key election issue.
It dumped plans for an inquiry into retirement incomes and toughened its policy of making no adverse changes to super this term to one of making no changes beyond the next election either, thus rendering industry submissions to the tax white paper irrelevant.
Mr Abbott and his senior ministers have subsequently accused Labor of planning to plunder people's retirement savings to balance the budget."
The issue with ageing, however, is that most retirees will not get much benefit from their super because they do not have enough. And if the Coalition does not target super, then it will be tempted to look at pensions. So we will have a battle of the lobby groups:
"The shift has angered much of the industry and seniors groups have withdrawn their in-principle support for changes to the part pension negotiated by Social Services Minister Scott Morrison. These changes were an alternative to reducing the indexation rate of all age pensions.
Seniors groups only supported the changes so long as super was looked at as well.
"We are very, very disappointed that the government would pick the low-hanging fruit of pensions and ignore super completely," Michael O'Neill, the chief executive of National Seniors Australia, told The Australian Financial Review.
"You can't effectively disconnect the two of them. They are inextricably linked."
Labor has promised to introduce a concessional tax rate of 15 per cent tax on all income derived by from super of over $75,000 a year, which would affect people with about $1.5 million in their accounts. It will also drop from $300,000 to $250,000 the income threshold at which the 30 per cent concessional rate applies to contributions.
Mr Bowen will point out that last week's budget noted that tax foregone on super would reach $50.6 billion a year by 2018, overtaking the estimated $50.4 billion annual cost of the age pension."
There is a case for looking at super, but that does not mean it is politically smart to do so. There is an even better case to look at negative gearing, and neither side is showing much appetite for that because of the political fall out. It will make for a fascinating series of political manouevres.