Americans could stand to save a lot more money than they do now.
In 1697, black swans were first discovered in Western Australia. In 1983, Australians discovered a golden goose. This is the true story of the Eighth Wonder of the World: Australian Superannuation. In a new political history, Keating’s and Kelty’s Super Legacy: The Birth and Relentless Threats to the Australian System of Superannuation, former MP Mary Easson demonstrates an insider’s eyes and ears for the backroom brawls fought by big personalities over a big idea made real: retirement savings and investment for all workers, funded by mandatory employer contributions.
In America, limited 401k options are available to mostly white collar professionals. In Australia, retail, construction, and office workers alike enjoy the highest per capita investment in managed funds with access to university endowment-style asset allocation, including Australian and international public equities, fixed income, real estate, infrastructure, hedge funds, private equity, and cash. While the average U.S. savings rate is a meager 5.7 percent, Australians automatically save 9.5 percent in their superannuation accounts, a number set to increase to 12 percent by 2025. Employees can add their own contributions (tax-advantaged for employee and employer) to maximize their savings. Their accounts are fully portable, following modern workers as they change jobs or drop in and out of the workforce to care for children or elderly parents. Upon retirement, the lump sum in each account can be converted into an annuity for long-lasting retirement income, eliminating the risk of outliving one’s savings.
This system of compulsory superannuation is the beating heart of Australia’s world-leading approach to retirement income, supplemented with a limited government pension and individual savings.
What binds Americans in 2017 and beyond? Are we only united against scapegoats and trumped up enemies, or can we create new opportunities for solidarity and prosperity? In November, voters sent a clear message: We want to work and save to provide for our families, our communities, and our country. With the Republican party in its strongest position since the Roaring Twenties, GOP leaders should learn from the failure of President George W. Bush’s ambitiously articulated but ultimately abandoned “Ownership Society.” Bush’s proposal to create individual accounts for Social Security failed to gain support, and a precious opportunity for new multi-generational wealth creation was instead squandered, as Americans threw their money away on teaser-rate mortgages and home-equity loans. While we ate our seed corn, Australians gathered billions of dollars in annual contributions. With over $2.2 trillion currently invested, Australian unions, employers, and politicians have created a prosperous “Shareholder Society.”
The GOP is paralyzed by tone-deaf discussions of “entitlement reform” while anxious Americans worry more about the balance of their savings account than balancing the national budget. Across the aisle, Massachusetts senator Elizabeth Warren demands higher capital requirements for banks, but ignores the opportunity to capitalize Social Security as an endowment for future generations. Now we risk the degradation of Social Security into a means-tested welfare scheme, unused and neglected by the affluent, abandoned to the poor. But in the “national savings nation” at the end of the world, both white-collar professionals and blue-collar workers enjoy access to the power of compounding returns on capital. While our scheme forces retiring Baby Boomers into actuarial battle against their progeny, Australian superannuation is a Burkean “contract between the past, the present, and those yet unborn.” By deferring compensation (and consumption), Australian workers accumulate assets that weave more resiliency into the social safety net, rather than piling up unfunded liabilities which threaten to tear it down in the times of demographic or economic stress when they are needed most.
Union voters in key swing states powered President Trump’s electoral victory. As he looks for helpful models of political leadership, he should draw inspiration from the tough talk and impressive achievements of the Australian union bosses who helped enact superannuation in the early 1980s. Lest he flee from action to distraction, he should recall the advice of an Aussie union leader to a fellow activist: “History is short, mate.” Arguing with a rival who preferred an immediate wage increase to deferred savings, Australian union leader Bill Kelty roared in response: “Stuff you! You’re not getting the money!” Union official Tom McDonald helpfully clarified that, “If we had [demanded a wage increase at the time], we would have got bugger all!” They also had to police their own against abuses of the system, rejecting requests to use superannuation funds to bail out failing businesses. “[T]here was a suggestion to buy an apple-picking factory at Batlow to save 40 jobs . . . and I said, ‘Pig’s arse!’” manufacturing union leader Bert Evans recalled. Behind the loud voices, though, was sound thinking: “It came back to the fairly fundamental precept that says, ‘unions are about distribution, but you can’t influence distribution effectively unless you are growing the show.’ . . . So we had to be part of the wealth-creation thrust.”
The lasting achievement of Australian superannuation was to unite labor and capital in a common goal: providing all citizens with a better retirement income and increasing national savings and investment. Here is Terra Firma Australis for Buy American boosters and supply-siders to stand upon together: National growth powered by an increased flow of domestic savings! Workers receiving a significant improvement in retirement income! Businesses reinvesting additional capital in higher productivity and employment! Effective government social programs relieved of the burden of servicing foreign debt! Americans made to save again, and America made great again!
Sounds super, doesn’t it?
— Stephen Schmalhofer writes from Brooklyn, N.Y.
READ MORE: