Unfunded Super $121 billion
The prospective sale of Telstra has brought to light a national debt of $121 billion, which is usually well hidden from public view. Whilst Telstra is half privatised and operates like a company it still has a debt of unfunded super owed by the government of $3.4 billion relating to employees' service before privatisation. It is only recently that the Reserve Bank has been keeping tally of the unfunded liabilities for current and ex public servants' superannuation. The $121 billion figure at 30 June 2002 is up from $94 billion in 1995 when the RBA's figures commence.
Unlike the private sector where all benefits promised to employees are funded with contributions from the employer, the majority of government employees have large portions of their promised benefits unfunded. Future generations of taxpayers will need to pay extra taxes to make up for these debts. This works fine if demographics stay constant and the benefits are paid as annual pensions (like the age pension, which is also unfunded). However the problem Australia has is that a lot of public sector employees can take lump sums and the baby boomers will leave a smaller workforce to pay for the unfunded liability.
The answer to this problem is not to beat up on public servants and government but to encourage gradual funding of these liabilities and resistance to granting any more unfunded benefits in future, at least until private sector employees can catch up to similar levels of retirement provision.
Posted Monday, 11 November 2002
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