There is a super way out of Labor's tax cut dilemma

Protecting our members from higher interest rates and bigger mortgages - which eat away at wage packets - is a key issue for the AWU.

Both the Melbourne Age and the Sydney Morning Herald have today run a feature piece written by the Australian Workers' Union National Secretary on how the new Federal Government could tackle this problem.

The Federal Government should allow Australian voters to opt out of the election promise to deliver more money into their pockets, via a tax cut later this year - and instead have those tax cuts go straight into retirement savings.

The Wage Price Index (WPI) figures released on Wednesday will add to community concerns that the Reserve Bank want to choke inflation with another interest rate rise, which will hurt the working families in my union - especially the thousands trying to pay off the family home.

Within minutes of the WPI figure being released commentators were again lecturing the Rudd Government on how best to control roaring inflation rate left to them by the previous government.

In the last six months we've incurred three major interest rate rises and we can now predict a fourth around the corner - and we can watch mortgage rates rise to possibly over 9 per cent.

At the National Press Club in January I launched our AWU Discussion paper expressing concern that the promised tax cuts would rapidly disappear from AWU members' pockets, and put more pressure on their mortgages by stoking further interest rate rises.

However senior Rudd Government ministers say they are very concerned by any proposal which would lead to election promises not being kept. Labor insiders want to avoid an electoral backlash from the community if they don't deliver on their election charter.

But in the current economic environment the Prime Minister and the Treasurer need to be creative in how they deliver their promises to voters.

Now is the time for the PM and the Treasurer to lead the Australian community in an open discussion about the option of a tax cut delivered as an increase to retirement packages, via our superannuation savings.

Community concern about mortgages - and the threat to the family home - is such that I believe Australia's working families, the backbone of support for this Labor government, would appreciate being brought into this discussion - to look at alternatives to the tax cuts so as to dampen inflation and rising interest rates.

Because of the reaction from Canberra to my original proposal at the National Press Club, that all the tax cuts should be ditched - and instead all go into superannuation savings - I have now stepped back and propose to amend the idea.

Each individual Australian taxpayer should be allowed to tick an opt out box for the tax cut, and choose instead to have it delivered into their superannuation savings.

The Federal Government could alongside the superannuation industry, adopt a communications plan, to strongly argue the case in favour of increased retirement savings - as something good for individuals and good for the country.

Significant incentives - such as possible additional government funding from a huge Budget surplus - might be the trigger to get large numbers of Australians, if not the majority, to choose this path.

The current 9 per cent minimum employer contribution to superannuation is simply insufficient to provide adequate retirement benefits, so any Australian government intervention to turn the tax cuts into retirement savings and provide extra government incentives to push up our superannuation accounts is good social policy.

I am heartened that Bernie Fraser, the former Reserve Bank Governor, and now superannuation guru, on Tuesday came out in support of the idea of completely scrapping the tax cuts - and turning them into retirement savings.

But I accept that political imperatives might constrain the Prime Minister from such a black-and-white solution. That's why the proposal to provide an opt out choice may be an attractive middle way solution.

Our proposal combined with the Rudd Government's Home Saver Account Scheme will help to significantly improve savings in this country - an important ingredient for long term economic sustainability.

This is a proposal, which I urge the Prime Minister and Treasurer to consider and to openly discuss with the Australian community.

Read the website versions of this Opinion piece at the two newspapers who ran it today

Sydney Morning Herald: There is a super way out of Labor's tax cut dilemma