Amid all its pontificating over Australia’s anaemic wages growth, Labor has committed to increasing the superannuation guarantee to 12% if it is elected at the upcoming federal election. From The New Daily:
Federal shadow treasurer Chris Bowen told a banking and wealth summit in Melbourne on Tuesday that Labor was committed to the legislated super increases from 9.5 per cent to 12 per cent by 2025.
“Let me make it clear that the Labor Party does not regard a 9.5 per cent super guarantee as providing adequacy,” Mr Bowen told attendees.
Mr Bowen’s emphatic guarantee came after modelling by Treasury this week reportedly showed the age pension is on track to cost the nation less than predicted…
Industry Super Australia’s (ISA) deputy chief economist Matt Linden said lifting the super guarantee will be “more impactful” for lower and middle- income earners…
“It’s particularly important for lower and middle-income workers, because that’s a group who are often not making additional savings,” he said.
Doesn’t Labor realise that compulsory superannuation is paid for by workers (not employers) via lower take-home pay (less disposable income)?
It should, because nine years ago leader Bill Shorten gave a speech when he was Minister for Financial Services & Superannuation in the Gillard Labor Government which acknowledged this precise fact:
Because it’s wages, not profits, that will fund super increases in the next few years. Wages are the seedbed of the whole operation. An increase in super is not, absolutely not, a tax on business. Essentially, both employers and employees would consider the Superannuation Guarantee increases to be a different way of receiving a wage increase.
Let’s also remember that the Henry Tax Review explicitly noted that compulsory superannuation is paid for by workers:
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.
Accordingly, 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.
The Henry Tax Review also acknowledged that the budgetary costs of compulsory superannuation actually exceed the pension savings to the federal budget:
“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”:
Labor needs to face up to the facts. Tax concessions on superannuation already cost the Budget an inordinate sum, and are growing rapidly. Raising the superannuation guarantee to 12% would mean they become an even bigger ($2 billion a year) Budget drain over time.
Meanwhile, it would do little to boost superannuation savings for lower income workers – those most likely to become reliant on the Aged Pension – given the lion’s share of superannuation concessions would flow to higher income earners. Thus, raising the superannuation guarantee would merely worsen the inequities and inefficiencies already rife in the system.
The only winners from raising the superannuation guarantee would be the industry, which would get to ‘clip the ticket’ on more funds under management and earn fatter profits.
Clearly, Labor cares far more for the industry rent-seekers than ordinary Australian workers and taxpayers, who would have to foot the bill for its 12% compulsory super obsession.