Winding back the higher legislated super rate increase will not improve wages growth - would you really believe business will give more pay increase for additional costs that are only avoided? No, won't happen unless the increase in rate has been implemented and then removed so business can truly recognise the savings and even then probably only pass on the savings to higher wages in the following year - but IMO we can bet that progressing with the legislated super rate increase will serve to lower wages growth because businesses will aim for cost neutrality. So if one is at the lower end of the food chain as most salaried people are, then we probably won't win (as much as we hope) in the latter case and definitely not so in the former.
Politicians of the day would seek policies to improve short term economic outlook (prospective higher tax revenues and higher disposable incomes boosting short term economic recovery) and placing less emphasis on the future. Younger people hoping for and getting seduced by prospect of higher wages in the absence of a higher super rate ought not to fall for the narrative, simply because in challenging times, businesses will not be thinking of avoided costs to pass on higher wages when they are struggling to eke out a return, and for some even expecting a much higher return to compensate for loss opportunities during the lockdown.
A higher super rate would leave our super system stronger that would be the envy of the world and places less strain on age pension in the decades ahead.
Limitless potential for a scare campaign on superOne suspects that had the scheduled increase to 12 per cent not been legislated, the government would not implement it. But politically, it's like taking away a tax cut.
Phillip CooreyPolitical editor
Nov 20, 2020 – 3.38pm
One problem with commissioning a report such as the
Retirement Income Review is that it creates a expectation that the government must act.
And that raises the prospect of sparking a raging war over retirement savings in the run-up to the next federal election.
The Callaghan report is comprehensive but does little to shed new light on the pros and cons of compulsory super and the retirement income system at large. It is a very good fact sheet.
That it was released on a Friday morning while the nation was still digesting the
shocking findings of the war crimes inquiry underscores what has long been an ambivalence inside government over whether to freeze, delay or end the legislated increase in the compulsory superannuation rate.
To the chagrin of Liberals who have always opposed compulsory super, the report makes the point that without it, middle-income earners, the very group Paul Keating targeted when he devised the scheme, "will not be able to maintain their living standard in retirement by relying on the Age Pension alone''.
That is a big endorsement of compulsory super, leaving the argument from here being over the contribution rate and issues surrounding it, such as whether a steeper drawdown rate is better than a higher contribution rate.
Already, Scott Morrison has kicked the can down the road until next May's federal budget, when the state of the economic recovery and the outlook on wages will be better known.
One suspects that had the scheduled increase from 9.5 per cent to 12 per cent between July next year and 2025 not been legislated, the government would not implement it.
But it has already been locked in and that means Morrison would have to fight the Senate in the lead-up to an election to take something away from people. That's how Labor, the industry and unions will portray it.
Politically, it's not unlike revoking a legislated tax cut.
There is almost limitless potential for a scare campaign depicting hard-working, single mums having their nest egg plundered by political fat cats who, by the way, enjoy an indexed, 15 per cent plus compulsory contribution from taxpayers.
In the too hard basketAlready, a group of unions which overwhelmingly represent low-paid women mocked the report's suggestion that increased home ownership and improved financial literacy were a better fix.
"Any delay on the pathway to 12 per cent by 2025 will disproportionally impact women, who we know are already at greater risk of retiring in poverty and homelessness,'' they said.
The Liberals who are leading the charge against compulsory super, believe they can counter this sentiment by tapping into the Millennials who want their money now and believe they will never grow old.
Treasurer Josh Frydenberg claimed the report, on balance, suggested the increase be kneecapped.
"The weight of evidence suggests an increase in the SG [superannuation guarantee] rate will result in lower wages growth, impacting standards of living,'' he said.
Maybe so. But there's a big decision to be made next year and right now, inside government, it's very much an attitude of "we'll worry about it when we have to''.
