Despite Kerry O'Brien's fine interviewing expertise Paul Keating left his ABC interviews with an apparent unblemished record as Treasurer and Prime Minister. Indeed he came across as an almost god-like statesman. Certainly he believes this to be true. Yet his most damaging legacies deserve critical exposure while giving credit to his leadership on the issues of indigenous rights, becoming a republic and redirecting our foreign policy towards Asia.
Keating's introduction of compulsory superannuation was certainly a sound idea. But its implementation has been an ongoing disaster with immeasurable cost to the economy and to many superannuants. Super contributions this year will be well over $130 billion.To put this in perspective the current estimated cost of a fast rail between Brisbane, Sydney, Canberra and Melbourne is $84 billion-- about 64% of this year's super contributions. If it were built over 10 years it would cost much less than 6% of each year's super contributions-since they rise each year with increases in wages and the work force.
This demonstrates how a government authority established to harness our superannuation contributions, perhaps called The National Superannuation Development Fund (NSDF), could have massively contributed to nation building. Instead Keating chose to privatise these funds where their predominant impact was, and is, simply to raise share prices as they are fed into the volatile and risky share casino. Such an authority would now hold well over $1.75 trillion of assets and contributions. The NSDF management board ideally would have included some of our most eminent public servants.
There would have been no management fees and commissions with a publically run super fund. Herald feature writer Michael West recently revealed these fees currently absorb half of each superannuant's annual return . Moreover, thousands of superannuants have lost all, and others a large part, of their superannuation (which is, for most, their life savings) as a result of careless or fraudulent advice-for which they innocently, but compulsively, paid. This is not only a devastating personal loss but it has also cost taxpayers dearly since these superannuants have become pensioners. A NSDF could have guaranteed the principal as well as an interest rate which more than covered inflation.
The latter could have been funded by the increased productivity, and therefore tax revenue, from wisely selected infrastructure investment together with, perhaps, the return from investment in established highly profitable parts of the mining industry where 70% foreign ownership leads to the overseas remittance of a major part of profits. Even now the government could set up a NSDF, as a competitor to existing funds, which would doubtless attract a substantial portion of annual contributions.
Another of Keating's harmful legacies was his full deregulation of the the banking sector. He removed the controls which Dr Coombs, the first governor of our reconstructed post-war central bank, imposed to guarantee the viability of our banking sector and to reduce the economy's volatility . The key measure involved freezing a proportion of deposits when excess demand produced inflationary pressures and releasing these deposits when demand became inadequate to prevent growing unemployment.
The central bank (the Reserve Bank) could then avoid escalating interest rates when demand was inflationary--a policy which particularly hurts home buyers, the farm sector and export industries. Ironically, a few years after this deregulation interest rates hit an all-time high of 17% creating a large increase in unemployment. Subsequently Keating became famous for his absurd statement, "this was the recession we had to have". The recession was largely a consequence of this deregulatory move combined with a failure to use adequate fiscal measures to counteract the resulting unemployment.
Keating's sale of major publically owned enterprises has led to continuing pain for consumers, taxpayers and the government. The sale of the government-owned Commonwealth Bank, the largest of the privatisations, commenced just before the 1996 elections. The Howard government completed the sale following its electoral success. Australian banks then developed into the most profitable in the world primarily at the expense of their customers; and CEO salaries reached heights previously unmatched in Australia. Qantas was sold and soon much of its aircraft maintenance went offshore. A string of very scary air incidents followed.
The Commonwealth Serum Laboratories were sold and within a few years became one of Australia's most profitable companies partly through the freedom to charge the Commonwealth's PBS (and thus taxpayers) a very profitable price for its vaccines and other pharmaceuticals. Following the sale of The Australian National Shipping Line there was no national carrier to set a freight benchmark for shipping around our ports.
These are some of Keating's not-so-brilliant legacies. His personal self-congratulation stands in striking contrast to the enduring costs and missed opportunities of his policies.
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