The Australian government is considering mandating employee contributions to its Superannuation Guarantee system several years ahead of schedule.
Employee contributions initially were not expected to be required until the turn of the century. Now they could be required in 1995 or 1996.
But any change in the timetable will be against the wishes of the trade union movement and is causing some organizational concerns within the superannuation industry.
Compulsory employer contributions to the system of 3% of all wage earners' pay began in 1992-'93, and will rise to 5% for small employers and 6% for large employers starting June 30.
Under the scheme, contributions are scheduled to reach 12% soon after the turn of the century, comprising 9% from employers and 3% from employees. The government is now considering whether to phase in the 3% earlier.
Contributions now are channeled into corporate funds; industry funds, which are jointly run by companies and unions with independent investment managers handling the funds; or life insurance funds and policies. While life insurers and investment managers would welcome an increase in mandated SG contributions into the basically privately run superfunds, there is some speculation the government may use the Australian Taxation Office to collect the contributions along with personal tax deductions.
The basic reason for the move to the employee contributions is a begrudging recognition by the government that Australia needs to improve its level of national savings. This is allied with a desire to curb total demand and slow economic growth by removing some of consumers' available funds.
With a federal election likely by mid-1996, the government is keen to avoid a straight-out increase in taxes and has seized on the employee superannuation contribution as an alternative.
However, there could be further pain in the May budget. Treasurer Ralph Willis a month ago forecast an A$8 billion blow-out - to A$26 billion (U.S.$19 billion) - in the nation's current account deficit with the rest of the world and foreshadowed "further significant tightening" in the coming budget to produce a surplus in 1996-'97, two years ahead of earlier plans.
Subsequent speculation has suggested a wide range of possibilities, including increasing the top personal tax rate (now 48.4%), new taxes, and a look at some tax measures dear to investors' hearts, such as deductibility of interest paid on loans to buy shares and property.