Blast from your past
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.
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