Australians are crying out for a fairer system. Luckily, the road map is right here

After nearly 33 years, the Keating-inspired Superannuation Guarantee Contribution has reached its original proposed maximum of 12 per cent of wages and salaries - the level which will provide dignified retirement for the broad mass of working people.

The scheme underpinned by the tax system has built up a massive ($4.1 trillion) investment portfolio. It should reduce the taxpayers' burden on providing retirement income.

The Pharmaceutical Benefits Scheme, Medibank-Medicare, the National Disability Insurance Scheme, the GST, and gun control are equally landmark, but none of those provides so much benefit on both sides of the ledger as the superannuation scheme.

The way the scheme was developed and put into effect exemplify many of the obstacles now facing Treasurer Jim Chalmers and his quest for greater productivity and a fairer tax system. As a Keating biographer he should grasp the lessons.

Trade-offs. Any reform, most of all tax, requires trade-offs. In 1992, the superannuation proposal came with the first 2 per cent coming from a trade-off with lower wage rises.

Indeed, the whole Hawke-Keating economic reform agenda - freer trade, the deregulated financial sector, lower income-tax rates, franking credits, and privatisation - was put into effect with a series of trade-offs. Superannuation and Medicare were essential parts.

John Howard's assertions that it was only his agreement that allowed it to happen is not quite right. The Coalition only agreed to the parts that benefited business and the well-off: lower taxes and lower tariffs and deregulating the financial system. It vigorously fought Medicare, superannuation and other worker benefits, without which no Labor caucus would have agreed to many of the financial changes.

So, any increases to consumption taxes must be traded for significant reductions in tax on lower incomes and significant increases in pensions and welfare.

Gradualism: The distant future is the reformer's friend. If changes are legislated to come in at a future date, the heat goes off. People in favour of change are often only lukewarm about it, whereas those against it are usually vehemently against. This is because potential losers see immediate loss and potential winners are sceptical of future gains until they actually get them.

The support, even if lukewarm, of potential winners remains unchanged if the winning is to come much later. The heat of the opposition, however, cools if the changes are seen as a long way off.

So, any changes to taxing capital should be staged.

Opposition: Expect the Coalition and the Greens to oppose and cherry-pick as they have done the past. Any proposal for tax changes will be met with the Coalition supporting the lower-taxing bits and opposing tax increases that affect the well-off. And the Greens will seek higher taxes and a greater government role.

The Greens are notorious for allowing the pursuit of their idea of the perfect defeat what most people would see as the good. The Coalition will oppose anything that puts the collective over the individual.

At present, the Government needs either the support of the Greens or the support of the Coalition to get anything through the Senate.

But there is a way through this which was deliciously illustrated by the history of the stage three tax cuts. When faced with the prospect of enacted law delivering something the Greens opposed, they joined with Labor to at least water it down rather than let it remain, even if they did not get everything they demand.

Thus, the unfair stage three tax cuts were changed.

This could work with the Coalition as well. Take the superannuation changes, for example. Say the Greens demand a $2 million threshold for the higher tax rate rather than the $3 million the Government proposes. And the Coalition opposes the $3 million threshold outright. The government's proposed new super tax would face defeat.

But if, instead of walking away, the government agreed to legislate the Greens demands, it could then turn to the Coalition and say: "Would you like to amend this enacted legislation back to Labor's $3 million threshold, or would you like to be blamed for hitting your wealthy constituency with more super tax than they need have."

Bingo, the Coalition would agree to the $3 million threshold, and it would become law rather than allowing the Greens and the Coalition to gang up to defeat reform from the extremes.

Playing off and bluffing the Greens and Coalition like this may look cynical but will become a necessary part of getting much needed reform through.

Australia must tax capital and consumption more and income less. We are taxing people whose earnings put them below the poverty line.

We are allowing people on million-dollar incomes to pay no income tax and to pay consumption tax at 10 per cent or zero on a lot of things to which the GST should apply: school fees, health products, and fresh food.

We are taxing employment with payroll tax and efficient use of housing through stamp duties.

Expect white-anting and be prepared to reverse the changes. The Coalition has white-anted Medicare and superannuation from the get-go - age penalties, tax-deductible private insurance, age penalties, SMSFs, dental and housing withdrawals from super and so on. None has been reversed. The lot should go.

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Unforeseen consequences. Every tax change will be met with a change in behaviour. The combination of cash franking credits; capital-gains discounts; trusts; negative gearing; and self-managed superannuation has led to the flocking to these avoidance devices and a massive bleeding of the tax base which has compromised the way the government can deliver services.

It will be difficult, but Australians are waiting for a fairer system, and the lessons from superannuation show the way.