There are two parts of that policy suggestion that Gruen and co have made (see here http://petermartin.blogspot.com/2008/12/cut-super-levy-pm-told.html) that I don't like:

1) It's pretty clear to anyone with a pair of brain cells to rub together that now is the time to be keeping super contributions up, if not increasing them, for the simple reason that superannuation unit prices are very low at the moment. (I agree with the statement that they should be increased over time)

Simply put, putting the same amount of money in today will buy you more units in your super fund. As the share market (the predominant investment vehicle of most super funds) rebounds (and it will), these extra units will scale up the dollars invested by the investor and the investor will be better off in the long run.

2) Super funds pay out money to retirees, and if to fund these outflows they have to have a 'fire sale' (rather than relying on inflows) then that could magnify the losses in the super industry.

This is pretty poorly thought out. What I don't understand is that there are some smart people behind this so how could they miss such obvious problems with their suggestion?

*our over-reliance on foreign borrowing*

Ah, they are the key words. I gather that our banks need to go begging
for around 80 billion $ from overseas this year. It shows in
our current account figures.

Perhaps the author should ask those people around him, why they
don't save more? Why do they prefer to borrow, to negatively
gear a house etc?

Its quite simple, people are not silly. If they are gaining 6%
on their bank deposit, inflation takes at least half, marginal
rates of tax take a good proportion of the other half.

So if saving is pointless, they might as well live it up, buy that
plasma screen or whatever, or negatevely gear a house, to make
saving worthwhile.

If Govt allowed for inflation in taxing bank deposits, it would
make saving worthwhile and give people a reason to save.

It would also be about fiscal honesty, for clearly those savers
who do tuck away for a rainy day, are having their hard earned
pennies eroded by inflation.

We might then finally see a savings culture, rather then our
present borrowing culture.

Fiddling with superanuation is not going to solve our
fundemantal economic problems, nor will giving away 10 billion$.

Personally I don't want to see employer based superannuation schemes because at times like these companies dip into [steal] their employees super fund contributions to prop up their operating expenditure.
An employer based super fund assumes that employers grow and remain in business, that patently isn't so.
Last night Alan Kohler explained that GM in the US has 3 times as many pensioners as it has workers and the bail out plan will pay the pensions. Perhaps GM should have developed a sustainable business model.
The ATO has sent companies into receivership when they have stolen their employees superannuation contributions, examples include Bradmill - National Mills and recently Johns Valves.
The French owners of Australian subsidiaries are asking that all moneys be remitted to the parent company risking the subsidiaries ability to meet its superannuation and long service leave obligations.

The related danger with Super Funds (Units) and much more so with Provident Funds (Garanteed Retire Income) is that with the employer making a contribution, the Fund can be come under subscribed, wherein the employer will asset strip the fund or avoid paying-out now, for future commitment, by retrenching middle managment with long-service. Westpac did this in 1992. In so doing, the Bank turned a $500 million dollar operational loss into a $200 million dollar profit. So, if you are 40-45 y.o., on a good salary package, and, have twenty years of service - watch out!

*Last night Alan Kohler explained that GM in the US has 3 times as many pensioners as it has workers and the bail out plan will pay the pensions. Perhaps GM should have developed a sustainable business model.*

There is an interesting history to that scheme. It was originally
offered to employees by management in the 50s, when GM reigned
supreme. Times change and numbers change. When the scheme
started, there were 10 workers for every retiree. Southern US
States offered Toyota and others huge subisidies to set up new
plants. 50 years later the cost of the scheme is so large that
it could well bankrupt GM, certainly prevent them from competing
with non union plants.

The point is, GM on the stock exchange basically hardly has
a value. If they go broke, it won't be shareholders who have
much to lose. It will be creditors, workers, suppliers etc.

The unions have simply pushed too hard for too long and now the
golden goose is nearly dead. So now the taxpayer will be milked
for a while. Sometimes workers are their own worst enemies, but they
don't twig, until its far too late.

My point was that employer based super schemes are not effective,
because employers might not remain in business like GM,
actively target older workers for retrenchment to reduce their super liabilities like Coles-Myer or GE
actively target long term workers for retrenchment to avoid their long service leave liabilities like Sunicrust Bakeries or GE

In the case of GE they decided in the 1970s to stop manufacturing consumer electrical goods, fire the workers and reinvent themselves as GE Money, the people behind the Money GEnie, store credit cards.

So do workers
1. work until they drop dead or get to sick to work
2. save for their old age through the employer-based super fund
3. save for their old age through taxation system
4. save for their old age through insurance company based funds

Clearly option 2 doesn't work, option 1 is not socially acceptable. Option 4 operates in Australia at the moment but needs to be regulated so workers get their pensions

How do we expect those workers that are surplus to manufacturing requirements to live. Do we put them in the Soylent Green plant, place them in the Poor House or prison or expect them to rob the fortunate burghers who will be living in gated suburbs?