Former Prime Minister Paul Keating has launched a blistering attack on the Abbott government, labelling the federal government's deal with the Palmer United Party to pause the rise in superannuation contributions at 9.5 per cent until 2021 "wilful sabotage of the nation's universal savings scheme".
The intervention came as Prime Minister Tony Abbott said the deal meant workers would have more money in their pockets that would otherwise have been squirrelled away in superannuation funds, and as Labor attacked the government for effectively reducing Australians' retirement savings.
The pause in superannuation was agreed by the Coalition and the PUP on Tuesday as part of a deal to repeal the mining tax but keep three spending measures associated with the tax - the Schoolkids Bonus, the low-income superannuation contribution and the income support bonus - at cost of $6.5 billion to the budget bottom line.
In his letter Mr Keating - the father of Australia's compulsory super system - said the deal would adversely cost baby boomers as well as their children.
A super contribution of 9.5 per cent over a 35 year working life for someone earning $100,000 would provide a retirement income of just 50 per cent of their pre-retirement income, he said, "way below the the 70 per cent a of pre-retirement income replacement a superannuation guarantee at 12 per cent would provide".
"The government's connivance with PUP to spike superannuation at 9.5 per cent has little to do with the budget balance this year, or in the early out years, and everything to do with cheap ideology," he said.
"The Prime Minister and Mr Palmer trotted out the tawdry argument that working people are better off with more cash in their hand today than savings for tomorrow ... yesterday's decision is an appalling one by a government lacking any genuine or conscientious concern for the nation's workforce."
In question time, Mr Abbott said the decision ensured that for the next 10 years money would "stay in the pockets of the workers of Australia".
"If the workers of Australia wish to invest that money in superannuation they are perfectly free to do so but, as far as I am concerned, for the next 10 years that money should stay in the pockets of the workers of Australia," he said.
"We support a decent retirement policy. We support security for older Australians. We do support moving the superannuation contribution to 12 per cent, but in the right time, consistent with returning this budget to long-term sustainability."
Treasurer Joe Hockey dismissed out of hand a warning from the Financial Services Council - the super industry's biggest lobby group - that workers would miss out on $128 billion in savings over a decade from the pause.
"The suggestion that people are losing ... $128 billion, I completely reject, because they're getting it in their pockets," he said.
Labor focused its political attack on the case studies to illustrate the impact the pause in contributions would have on Australians, with Opposition Leader Bill Shorten arguing a 25-year-old on an average income would miss out on $100,000 in savings by the time they retired.
Mr Shorten labelled the extended pause to super a political broken promise that would have "catastrophic consequences" for Australians' retirement savings and that he didn't "trust this government to support increase in workers' wages".
Deputy Opposition Leader Tanya Plibersek pressed the Prime Minister on the fact that a woman earning $37,000 a year, who would miss out on the low-income superannuation contribution when it was scrapped, would lose $500 each year from 2017.