Australia’s moral challenge

Today, while staying at my mother’s place, I have been reading The Australian and The Australian Financial Review. What has caught my attention in particular is Paul Kelly’s exclusive interview with the Prime Minister, Malcolm Turnbull. In that report, which appeared in the Weekend Australian, we are told that reducing the national debt is our pivotal duty. According to the PM, it is  a necessity: “an economic, moral and fairness necessity”.

Now it could be argued that there are other imperatives that should take precedence, such as implementing the climate agreement that was signed in Paris by 193 nations, or closing the offshore detention camps in Manus and Nauru and bringing the refugees here to stop the trauma and abuse,  but let’s leave these aside for now. Let’s take the PM at his word and accept that we should stop being so thoughtless. While we can, we should cease piling billions of dollars onto the scarily large national debt which looks like being passed on to our children and grandchildren. Reducing that debt will have at least two obvious advantages: It will show that we care about our children and their descendants, that we worry about the issue of intergenerational unfairness. It also will reduce our dependence on overseas lenders.

Now, it is of course true, that a leader who issues a moral challenge needs to be credible if he expects others to join forces with him. Any leader who says, “now the way we care for our children is ensuring that we do not burden them with a mountain of debt”, as the PM told Paul Kelly, would clearly be willing to start close to home. For example, at the top of his agenda, we might hope, would be dealing with the disproportionate salary increases that top public servants have been awarded by the Remuneration Tribunal since the start of the global financial crisis.  Robert Gottliebsen has helpfully supplied some useful figures. Those pay rises, which are up to an additional $300 000 a year, have increased each top public servant’s superannuation by as much as $3 million, a concession that is neither affordable nor well-targeted. This pension scheme exposes the government to a liability that is estimated to be more than $400 billion, and is increasing by $6 billion a year. This growing liability cannot be fully covered by the Future Fund, which on March 31, 2016 only had a balance of $117.4 billion.

We do have a moral challenge, especially  when top public servants who are eligible for superannuation payouts of around $10 million advise the Government to cut back on the superannuation entitlements of non-public-servant Australians, limit their lifetime tax-paid contributions to $.5 million from May 3, 2016 and cap their  tax-deductible contributions at $25 000, while leaving their own benefits intact. We might hope that the Turnbull Government would seek to do what Qantas did; that is, to limit the national debt by freezing the salaries of those who are in these bonanza, defined benefit superannuation schemes. That would be a fair and equitable way of starting to deal with the moral challenge that the PM has identified, and it is the course of action suggested by the former treasurer, Joe Hockey, in May 2014. “Whatever we are asking the electorate to contribute to the budget repair task, we are going to contribute ourselves as well”, Joe Hockey said at the time. ” I think that’s an important message to send,’’ he told the Nine Network. I agree with him.

However, such pay freezes will always be contested by those who argue that significant increases for heads of government departments and agencies are always  warranted because this is the “proper relative remuneration” for “those most senior officers”. There will also be contractual and trust-related difficulties ahead for anyone seeking to negotiate top-level pay freezes. It would take a Prime Minister with extraordinary moral fortitude to take on this challenge.

One self-funded retiree who is frustrated with changes to his superannuation is Dr Dale Kerwin. In response he has focused on politicians’ salaries, using 2014 figures. However, it is important to bear in mind, as Noel Towell reported in the Canberra Times on February 8 this year, that as a result of new pay rises, “those at the top of the public service pile, the secretaries of the Department of the Prime Minster and Cabinet and the Treasury, will be paid salaries of $861,000 and $840,000”.

 

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