(Bloomberg) -- Prime Minister Malcolm Turnbull has amended a planned overhaul of Australia’s retirement pension system amid opposition from his own coalition as he attempts to rein in the budget deficit.
The government dropped the unpopular measure previously announced in May before the July election that would have capped the amount workers could pump into their retirement savings at a concessional tax rate at A$500,000 ($374,000).
“When you’re in government you have to solve problems, you have to work issues and you have to get to conclusions and that’s what we’ve done today,” Treasurer Scott Morrison told reporters in Canberra on Thursday. The government has acted on the concerns of coalition lawmakers, who’d “been listening to their communities and to their constituents.”
With his political credibility on the line after voters reduced his parliamentary majority to one seat in the election, Turnbull, 61, is hoping to build momentum for a second-term agenda that includes boosting economic growth and employment, and cutting government spending.
S&P Global Ratings cut the outlook on Australia’s AAA credit score in July to negative from stable, saying the poll result potentially dented the government’s prospects for shrinking a deficit forecast to reach A$37.1 billion next year.
The reforms to the retirement pension system, known as superannuation, were designed to reduce the budget deficit by A$6 billion over four years.
The planned A$500,000 lifetime non-concessional cap will be replaced by an annual cap of A$100,000 a year, Morrison said. That will reduce the planned savings to the budget by A$400 million over the forward estimates, which he said would be offset by other measures including deferring some previously announced concessions.
The superannuation legislation will be introduced this year and the government expects it will be supported by the main Labor opposition, Morrison said. The coalition lacks a majority in the upper house, meaning it needs the support of rival lawmakers to pass legislation.
An omnibus bill that wraps together a further A$6.3 billion of savings is expected to pass the Senate as early as today.