Ideas@TheCentre – The Centre for Independent Studies


Ideas@TheCentre brings you ammunition for conversations around the table.  3 short articles from CIS researchers emailed every Friday on the issues of the week.

Superannuation Guarantee delay will not leave workers worse off

12 September 2014

matthew-taylor Speaking in parliament last week, the Leader of the Opposition asked the Prime Minister if he could 'confirm that for an average income earner – aged 25 – that his decision to freeze the superannuation guarantee will cost that person $100,000 by the time they retire.' This assertion is incorrect.
Under current policy the minimum percentage of an employee's remuneration that must be placed into a superannuation account – the Superannuation Guarantee (SG) rate – is 9.5%. This was set to increase by 0.5% each financial year until it reached 12% in 2019-20.
As part of a deal struck with the cross-benches to secure the repeal of the Minerals Resource Rent Tax the government will now delay these increases until 2021-22 so that the SG rate reaches 12% in 2025-26.
Far from costing workers money, most workers will instead receive the superannuation forgone as higher levels of take-home pay. Superannuation is not money that comes from the government. It might be collected by employers but it comes from the wages of workers.
The government's decision to delay these increases will allow workers to choose how they wish to spend more of their own money. As noted by Finance Minister Senator Mathias Cormann 'it will leave Australian workers with more money pre-retirement, which they can spend on paying down their mortgage, spending on other matters or saving for their retirement though superannuation as they see fit.' There is nothing in the SG rate freeze that prevents individuals from contributing an additional 2.5% into their superannuation accounts right now.
The impact of superannuation guarantee increases on the rates of dependency on the age pension should not be overstated. Even in the absence of government's temporary freeze on the SG rate modelling cited by the National Commission of Audit forecasted that by 2047 four in five Australians of age pension age will still be receiving the age pension – even if some will move to a part-pension.
There are far more important reforms to retirement incomes policy that remain undone.

Matthew Taylor is a research fellow at The Centre for Independent Studies.



Time-limits the alternative to waiting times for the dole

12 September 2014

jha-trishaAmong the most controversial of the measures announced in the May budget was the move to deny 15 to 29-year-olds access to unemployment benefits for up to six months.
This waiting period would be subject to a discount of one month for every full time equivalent year worked to a maximum of five months. There would also be a six month cycle-on cycle-off period over a year.
The Abbott government has thus far not had much luck convincing the crucial crossbench senators of the merits of this scheme, which has been characterised as 'punishing' the jobless for being out of work.
The policy is about reform rather than budget cuts, as it is only estimated to save $1.2 billion over four years. It is mainly about hassling the under-30s to find work. There is some evidence to suggest that periods of joblessness early in life can have a scarring effect on people's future work prospects.
About 60% of recipients of Youth Allowance Other (the payment for 15 to 21-year-olds) have been unemployed for twelve months or more, even though people in this age bracket are aided in job search by youth wage rates. (In general, though, minimum wage rates are a barrier to employment.)
But, there are other policies the government could consider to address youth joblessness.
A CIS report last year detailed how more and more people on unemployment benefits are not required to look for work. Current policy settings mean young people without a Year 12 or equivalent qualification are not required to look for work as a condition of receiving payment. Making job search mandatory as part of the activity test for Youth Allowance Other is a good idea and one that could receive crossbench support.
The Abbott government has also proposed new 'earn or learn' measures to push young people into education and training schemes in order to retain the dole. However, this merely kicks the can down the road and means taxpayers subsidise expensive training courses that fail to produce the desired outcome. Work by CIS Senior Fellow Peter Saunders has shown that education and training are not very effective at increasing job prospects, except for a select few.
Instead of 'more training', the government should consider implementing time limits on Youth Allowance and Newstart for under-30s as an alternative to a waiting period. This would still keep assistance available to those who simply need time to find work. But it would also be clear that this assistance is strictly short-term and intended to assist with a transition to work.
Long-term welfare reliance among youth is a serious problem. Given the cross-bench hostility to waiting times for the dole, alternatives are needed. Time-limits on the dole may be more politically palatable as well, because rather than penalising those out of work, they simply encourage the unemployed to hurry up and get a job.

Trisha Jha is a Policy Analyst at The Centre for Independent Studies.

Widening war in Iraq and Syria is a necessary path to peace

12 September 2014


US President Barack Obama was pilloried two weeks ago for admitting that his administration lacked a strategy to combat Islamic State in Syria.

In Washington on Wednesday, he hit back at his critics and Islamic State alike.
Obama now says that the United States will take the fight to Islamic State militants 'wherever they are.' The airstrikes against Islamic State in Iraq will be extended to Syria, while Congress will debate US$500 million worth of military aid for moderate rebels in Syria caught in a three-way battle against the authoritarian Assad regime and extremist jihadi groups.
The Australian government has not yet received a formal request for additional assistance, but Prime Minister Tony Abbott has mooted expanded Australian involvement.
Rather than immediately assuming that this ramped-up foreign intervention will fuel further instability, we should develop a realistic framework for assessing Obama's — and by extension, Abbott's — strategy in Iraq and Syria.
Syria is embroiled in a brutal civil war that has lasted more than three years and cost more than 190,000 lives; Iraq is bitterly divided along sectarian lines and is being progressively dismembered; and both nations are plagued by Islamist fighters with genocidal tendencies.
Given this cocktail of political chaos and cruelty, foreign intervention could never be expected to deliver perfect peace and stability.
Nevertheless, the international community has the means and the moral obligation to at least push back against Iraq and Syria's march to hell.
The United States and its allies and partners can and should empower the Iraqi army and Kurdish Peshmerga fighters to resist Islamic State's murderous blitzkrieg across western Iraq, while also offering long sought-after financial and material support to the Free Syrian Army (FSA) to root out Islamist elements in the uprising and hold the line against the Assad regime.
Wisely, this is precisely what Obama has proposed and what Abbott has supported.
Of course, the Iraqi state, Kurdish forces and the FSA are not irreproachable partners. The government in Baghdad is hamstrung by ongoing sectarian divisions; the Kurds are expected to eventually further destabilise Iraq with a concerted push for fully fledged independence; and in the event of an FSA victory, the Assad regime-linked Alawite minority will probably be persecuted.
Refusing to intervene would allow the international community to avoid entangling itself in these complexities. But as Obama and Abbott understand, the security and human costs could be as high as the establishment of a brutal terrorist quasi-state spanning Iraq and Syria and the slaughter of tens of thousands of civilians and religious minorities.

Dr Benjamin Herscovitch is a Beijing-based research fellow at The Centre for Independent Studies.