Op-Ed: Savings under attack by an anti-aspiration ALP

When Labor’s Deputy Leader Tanya Plibersek admits, “Honestly, this aspiration term…it mystifies me’, it is pretty clear how much Labor’s values have changed from the days of Bob Hawke and Paul Keating.

For more than 30 years, Australians have been encouraged by both sides of politics to invest in their future by saving for their retirement.

Australians who are able to do this are doing something good for themselves – and by taking pressure off the age pension they are also doing something good for the nation.

Our age pension system today costs $47 billion a year – around ten per cent of the entire federal budget – which has to be paid for by taxpayers.

We must always have the age pension as a strong safety net for older Australians who are not in a position to self-fund their retirement.

But the best way to guarantee the sustainability and affordability of the system comes from as many Australians as possible getting themselves into a position where they do not need the age pension.

Thankfully, many aspirational Australians do just that, saving and investing over decades of their working life so they can provide for their own income in retirement.

Many do this through buying shares – typically in companies paying regular franked dividends.

Yet under Bill Shorten’s leadership Labor will discourage this. Their unfair Retiree Tax will hit some 900,000 Australians – reducing the value of their dividends by abolishing the refund of franking credits. 

If you are just starting out in the workforce, or you are mid-career, you might think Labor’s tax agenda doesn’t apply to you.

But you would be wrong: Labor’s tax grabs are aimed at every hard-working Australian trying to have a go.

A classic pathway to self-funded retirement has been to buy an investment property – using negative gearing to reduce the after tax cost of servicing the loan taken out to buy the property.

It is not surprising that more than 40 per cent of people who claim deductions for rental properties are aged 45 to 59 – because at this stage of life people have a focus on saving for their retirement.

If Labor gets into government this will be a much harder task.  Through its Housing Tax Labor has promised to abolish negative gearing on the purchase of established property.

If you choose shares instead of property, Labor will still hit you hard.  Its promised 50 per cent increase in capital gains tax will cut the likely return Australians can expect on assets like shares or property.

Saving money over a lifetime – and carefully investing that money in income-generating assets which can fund your retirement – is not an easy thing to do. It requires discipline and commitment. 

Both sides of politics used to encourage this aspirational behaviour – recognising that it is good policy to encourage Australians to take responsibility for their own future.

But as Paul Keating’s biographer Troy Bramston has written, Keating thinks that today “Labor seems to champion welfare dependency more than it does middle class aspiration.” 

Rather than encouraging people to get ahead, Labor under Bill Shorten is more interested in stoking the politics of envy.

It is a foolish policy – from a Labor Party which no longer understands what aspiration means.

Paul Fletcher is Minister for Families and Social Services in the Liberal National Government

Originally published in The Daily Telegraph on 26 February 2019