Blast from your past

The Weekend Australian - Review - - Books - Mike Steke­tee

Un­fin­ished Busi­ness: Paul Keat­ing’s In­ter­rupted Revo­lu­tion By David Love Scribe, 265pp, $ 32.95

LIKE many other jour­nal­ists in Can­berra dur­ing the 1980s and ’ 90s — not to men­tion mem­bers of the La­bor Party and the odd Lib­eral — I re­ceived the treat­ment. The Paul Keat­ing treat­ment, that is.

It typ­i­cally came in two parts. First there was the per­sonal brief­ing: the case, sup­ported by com­pelling logic and a flour­ish of hand- drawn fig­ures and graphs, for what­ever he was sell­ing at the time. It might have been why a GST was es­sen­tial as part of the ev­ery- piece- fits- to­gether tax re­form pack­age he crafted as trea­surer in the mid-’ 80s. Or why the GST as pro­posed by Op­po­si­tion leader John Hew­son was evil per­son­i­fied when Keat­ing, as prime min­is­ter, was cam­paign­ing for an im­prob­a­ble elec­tion victory in 1993. The ar­gu­ments al­ways sounded per­sua­sive, not least be­cause Keat­ing con­vinced him­self they were true.

Part two of the treat­ment came when Keat­ing’s ire was pro­voked over some­thing writ­ten or said, and he would re­act with an ex­plod­ing vol­cano of words. Re­sis­tance was fu­tile: even if you were able to get a word in, there was no di­vert­ing the shower of sparks and ash be­fore it was spent.

David Love re­ceived the treat­ment — cer­tainly the first part of it — and has turned it into a book. Love has been a dis­tin­guished eco­nomic com­men­ta­tor: a for­mer eco­nomics ed­i­tor of The Aus­tralian Fi­nan­cial Re­view , he founded Syntec, a con­sul­tancy that pub­lished a news­let­ter for sub­scribers and built a sub­stan­tial rep­u­ta­tion dur­ing the ’ 70s.

His book is a polemic for the Keat­ing re­forms, fo­cus­ing par­tic­u­larly on his in­tro­duc­tion of com­pul­sory su­per­an­nu­a­tion. The un­fin­ished busi­ness in the ti­tle is the fail­ure of Keat­ing’s suc­ces­sors to take up his pro­posal to lift the rate of con­tri­bu­tions from 9 per cent of in­come to 15 per cent.

You can hear the sound of Keat­ing spruik­ing his mes­sage through Love: how com­pul­sory su­per­an­nu­a­tion al­ready has built up the largest pool of in­vest­ment funds in Asia and the fourth largest in the world; how 15 per cent su­per­an­nu­a­tion would se­cure the fu­ture for re­tired Aus­tralians; how, even more sig­nif­i­cantly, it would guar­an­tee Aus­tralia’s eco­nomic fu­ture be­cause the ad­di­tional na­tional sav­ings would re­duce our vul­ner­a­bil­ity to over­seas bor­row­ings.

Keat­ing as per­suader is un­mis­tak­able in the idea of the golden cir­cle: ris­ing house­hold sav­ings lead­ing to a ris­ing sup­ply of cap­i­tal, a stronger in­ter­na­tional po­si­tion, sta­ble in­ter­est rates and back to ris­ing house­hold wealth.

Keat­ing in this story be­comes the un­recog­nised cre­ator of the mir­a­cle econ­omy, spurned by the Coali­tion and his own party over his urg­ings to raise su­per­an­nu­a­tion to 15 per cent. The ‘‘ long years of pain and frus­tra­tion’’ burst out even­tu­ally into an at­tack in 2007 on Nick Sherry, then Op­po­si­tion su­per­an­nu­a­tion spokesman and now Su­per­an­nu­a­tion Min­is­ter, as ‘‘ dead or­di­nary’’. The Keat­ing view is cap­tured more fully in Love’s char­ac­ter­i­sa­tion of Sherry’s ap­proach as ‘‘ in­no­cent stu­pid­ity’’.

At the risk of en­coun­ter­ing an­other Keat­ing spray, I think Love has been sold a pup. That is not to say com­pul­sory su­per­an­nu­a­tion was not a sig­nif­i­cant re­form, as were many oth­ers in which Keat­ing was the prime mover and which trans­formed the econ­omy.

The prob­lem is that the na­tion in fu­ture is un­likely to be able to af­ford the present gen­eros­ity of the su­per­an­nu­a­tion sys­tem, let alone one with much larger ben­e­fits. Not only are the tax con­ces­sions large, but they are skewed heav­ily to­wards higher in­come earn­ers. Those on lower in­comes get lit­tle or no re­duc­tion in their tax, while the ben­e­fits mul­ti­ply with ris­ing mar­ginal tax rates and in­creas­ing in­comes. The eas­ing of means tests means many mid­dle to higher in­come earn­ers gain by re­ceiv­ing the age pen­sion as well as large tax con­ces­sions.

The in­equity of the su­per­an­nu­a­tion sys­tem has been made much worse by Peter Costello’s in­tro­duc­tion of tax- free su­per­an­nu­a­tion ben­e­fits from age 60, which tips the ben­e­fits even more strongly into higher in­come earn­ers’ pock­ets. A rapidly grow­ing num­ber of re­tirees sup­ported by a shrink­ing pro­por­tion of work­ing- age peo­ple makes it dif­fi­cult to see how this is sus­tain­able in the long run.

Love quotes Keat­ing as crit­i­cis­ing the Costello changes but at no stage does he sug­gest that fairer and less gen­er­ous tax treat­ment of su­per­an­nu­a­tion should be a pre­req­ui­site for ex­tend­ing its reach. Sherry and Trea­surer Wayne Swan quite rightly as their first pri­or­ity are fo­cus­ing on rais­ing the age pen­sion rate, par­tic­u­larly for sin­gles. In any case, the ev­i­dence sug­gests that 9 per cent su­per­an­nu­a­tion will pro­vide a more than ad­e­quate re­tire­ment in­come for those who have made the con­tri­bu­tion all their work­ing lives. If peo­ple want a higher in­come in re­tire­ment than dur­ing their work­ing lives, they are en­ti­tled to save for it. But there should be no obli­ga­tion on tax­pay­ers to tip in what can add up to hun­dreds of thou­sands — and oc­ca­sion­ally mil­lions — of dol­lars to help them reach this per­sonal goal.

Love is a flu­ent writer and presents the Keat­ing ar­gu­ments elo­quently. But he has fallen too much un­der the Keat­ing spell. Bob Hawke, La­bor’s long­est serv­ing prime min­is­ter and a part­ner in many of the eco­nomic re­forms, rates barely a men­tion. Love is plain wrong in giv­ing Keat­ing sole credit for the most sig­nif­i­cant eco­nomic re­form: the float­ing of the dol­lar in 1983. The truth is that the new trea­surer was re­luc­tant to con­tra­dict the head of his depart­ment, John Stone, who was op­posed. Al­though Keat­ing agreed with the fi­nal de­ci­sion, most of the im­pe­tus for the float came from the Re­serve Bank, the prime min­is­ter, and Hawke’s eco­nomic ad­viser Ross Gar­naut.

Keat­ing, through Love, blames then Re­serve Bank head Bernie Fraser for the re­ces­sion he said we had to have, even though it was Keat­ing who ap­pointed Fraser and fa­mously said he had the Re­serve Bank in his pocket. In at­tack­ing the La­bor Party for shun­ning Keat­ing’s record and his en­treaties on su­per­an­nu­a­tion, Love ig­nores the po­lit­i­cal re­al­i­ties: that, how­ever sig­nif­i­cant his legacy, Keat­ing be­came elec­toral poi­son.

As for­mer Trea­sury sec­re­tary Ted Evans tells Love, Keat­ing was ‘‘ unique as a per­suader within his party’’. And out­side. Mike Steke­tee is The Aus­tralian’s na­tional af­fairs ed­i­tor.

Cling­ing to a su­per model: Paul Keat­ing has his bi­og­ra­pher un­der his spell

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