The treasonous ACTU has backed Paul Keating’s call to lift Australia’s superannuation guarantee (i.e. compulsory superannuation contributions) from 9.5% to 12%, claiming it would ensure workers retire with dignity:
…the average superannuation balance today for men is $112,000 and women $68,000 and only 20 per cent of current retirees are fully funded…
It is those inadequate levels of retirement savings that led to the Rudd-Gillard Government promising to raise the compulsory superannuation guarantee from 9 per cent to 12. That was due to take effect in July next year until the Abbott Government put the brakes on, so we won’t see super at 12 per cent until 2025. Too late for many.
The increase to 12 per cent is far from radical policy — when super was first introduced under Paul Keating, it was intended to increase to 15 per cent over time.
That plan was skittled under the Howard Government, which left it at 9 per cent.
Seeing a pattern here? Every time we’re on the verge of increasing super to a level that would provide Australians the dignity in retirement they deserve, it has been delayed and de-prioritised…
It’s time for Australia to be more ambitious.
Our retirement system is the envy of much of the world, but it is far from perfect and it was designed to increase to 12 per cent or more some decades ago.
We must fulfil the original promise of superannuation and ensure it is truly universal and provides for an adequate retirement.
Does the ACTU not realise that compulsory superannuation is paid for by workers (not employers) via lower take-home pay (less disposable income), with harmful implications for people on lower income earners?
Don’t just take my word for it – the Henry Tax Review drew similar conclusions:
Although employers are required to make superannuation guarantee contributions, employees bear the cost of these contributions through lower wage growth. This means the increase in the employee’s retirement income is achieved by reducing their standard of living before retirement.
Which is why the Henry Tax Review explicitly recommended the superannuation guarantee be retained at its current level, not raised to 12%, so that it didn’t adversely impact lower income earners:
The retirement income report recommended that the superannuation guarantee rate remain at 9 per cent. In coming to this recommendation the Review took into the account the effect that the superannuation guarantee has on the pre-retirement income of low-income earners.
Fair Work Australia has also acknowledged that workers pay for super, noting that wage increases were “lower than [they] otherwise would have been in the absence of the superannuation guarantee increase”.
And for anyone still with doubts about who pays for super, consider this 2010 interview with Bill Shorten when he was Minister for Financial Services & Superannuation in the former Labor Government:
Okay. When superannuation goes up from 9 per cent to 12 per cent, who pays?..
What happens with superannuation is that people’s pay goes up anyway. It goes up each year, by and large. What will happen is that superannuation, the increases to superannuation, will be absorbed as part of people’s pay rises… they get a pay rise, of which some will probably go in super, yes…
Okay. So you’re saying that the superannuation increases will be paid for by absorbing money out of the wage increases.
That’s the evidence…
Well, so, just to get it clear, business will not be paying an extra dollar, right?
No, I can’t see that business will be paying any more in the future than they otherwise would have been if the superannuation changes hadn’t gone through. But what I do recognise is that a portion of what would have been employees’ increases will go into compulsory savings, which is concessionary taxed.
Let’s also remember that raising the superannuation guarantee would cost the Federal Budget another $2 billion a year. Moreover, the budgetary costs of compulsory superannuation actually exceed savings to the federal budget – a point explicitly acknowledged by the Henry Tax Review:
“An increase in the superannuation guarantee would … have a net cost to government revenue even over the long term (that is, the loss of income tax revenue would not be replaced fully by an increase in superannuation tax collections or a reduction in Age Pension costs).”
The Grattan Institute’s latest report similarly concluded that “both the short and long term, superannuation tax breaks cost the budget more than they save in pension payments”:
While adequacy of retirement savings for lower income earners is indeed an important issue, this would be best addressed by the ACTU lobbying to make superannuation concessions progressive. This way, these low income workers could enjoy a boost in their retirement savings without also incurring a reduction in their take home pay.
But simply raising the superannuation guarantee without fixing the underlying problems will merely heighten the inequities already rife in the system, while lining the pockets of industry.
Given the ACTU has its fingers in the Industry Super pie, maybe this is its intention?