Costello's budgets have shown that despite massive revenue flowing from high economic growth and record Government revenue to GDP levels, the budget surpluses, largely, cannot be preserved. After new spending, the surplus is invariably left running on empty. Even now it only stands at about half a per cent of GDP after 12 consecutive years of economic growth.
In national savings terms, these surpluses would have been much safer paid as tax cuts preserved in individual super accounts to age 55. Instead they have been whittled away on the cabinet table by spending ministers, especially around election time.
It doesn't matter which way you cut the super equation, 9 per cent is not enough. Even so, it is a miracle for Australia that the 9 per cent is in place. At the time, the employer bodies opposed it, as did the Liberal opposition. Other large industrial countries have nothing like it.
The pity for Australia is that the political system is focused only on ways to get at the money rather than finding ways to add to it.
A further 6 per cent of compulsory savings would not only dramatically improve retirement incomes, it would also substantially lift national savings, for capital formation and for dealing with the current account deficit.
Both political parties should be making a start on the 6 per cent. And making it as early as possible.
I could not believe Costello's speech. The guy has a tin ear when it comes to politics. Fiddling at the margins of the superannuation systen and then telling people they might have to work forever just does not strike me as brilliant policy or brilliant politics.
As Ross Gittins wrote about the Costello speech:
This is gesture politics. It's about creating a general impression that you're getting on with fixing the big economic issues when, in truth, you've run out of puff and run out of nerve.