Leon Compton
Can a treasurer cut what have been promised in law for people throughout their working life?

Saul Eslake
To be honest, Leon, I don’t know. Not being a lawyer, I said in the review of Tasmania’s finances that I did for the Parliament in 2024 that the government should look and see whether that was feasible. In particular, it should, I said, consider the potential for closing defined benefit schemes that were closed to new members in 1999, but in which people who were working for the public sector at the time have been allowed to remain members. Now, that’s different from saying to public servants who are now retired that the government is going to change their pensions in some way. I suspect, although again I emphasise I’m not a lawyer, that that would be illegal and the government would find itself in the Supreme Court, challenged by a very large number of people if it sought to do that. But I don’t think it would be unreasonable, again I’m not saying I know whether it’s legal, for the government to say to people who are still in the public sector, who are still members of defined benefit schemes, that they can keep what they’ve earned up to this point, but from this point onwards they go on to the same superannuation arrangements that every new entrant to the public service since 1999 has been on, and almost everyone in the private sector is on.

Leon Compton
In other words you’ve been on a good wicket, what you’ve got you can preserve, but from here on in you’re moving over to a regular contribution-based, performance-based, we’ll see how the markets go and that over time. We’ll get tax benefits but then you get a portion of that back until it hits zero. So Les, just a final question for you this morning, how significant, can you explain to people in simple terms, for the Treasurer, indeed for anyone in government, how significant is this unfunded super liability story in the context of the whole budget picture and debt?

Saul Eslake
Yes, the unfunded superannuation liability was estimated at the end of the 2024 financial year to be $7 billion. The most recent budget forecasts that it will still be $6.8 billion at the end of 2029, that the liability won’t be extinguished until sometime in the 2070s, don’t ask me why that’s so. The budget papers also show that over the four years to 2028-29, the government will spend $1.6 billion making payments to members of defined benefit schemes. You could build a stadium for that amount of money. Now, as I say, I suspect the government can’t, what would be regarded in law as default on those obligations, but it was put to me while I was doing the independent review 18 months or so ago, that the government could conceivably, over the life of these schemes out to the 2070s, save between $2 and $3 billion if it were able to make changes to it. Now, I wasn’t able independently to verify those estimates. I simply said, given the sums involved, the government should be investigating the extent to which it can.