The lobby group representing industry superannuation funds, Industry Super Australia (ISA), has admitted in its submission to the Retirement Income Review that lifting the superannuation guarantee (SG) from the current 9.5% to 12% will primarily benefit high income earners:
According to ISA modelling, the benefit of a higher SG rate will be weighted heavily to the top end of town, with the top 10 per cent of earners expected to have a 22 per cent higher disposable income in retirement, offset by a 0.8 per cent reduction in income during their working life. The poorest 10 per cent of workers will see a modest 1.3 per cent boost to retirement incomes, paid for by a 0.3 per cent reduction in income over their working life…
According to the modelling, the poorest Australian workers will have an income boost across their “whole adult life” of 0.6 per cent if the SG rate increases to 12 per cent. The wealthiest will see a 3.6 per cent boost.
“These are significant results because it has been claimed by some that increasing the SG rate will negatively impact levels of consumption. But our modelling shows that disposable incomes over an adult life will increase for all income deciles,” he said.
ISA’s claim that wages would only be modestly impacted by lifting the SG is based on its own flawed modelling, released late last year, which is contradicted by research from the Grattan Institute and the Reserve Bank of Australia, which both show a significant impact on wage growth.
Which should we believe: modelling from an industry lobbyist that benefits financially from the policy in question, or independent analysis from independent parties that do not stand to benefit financially? The answer is obvious.
What the ISA’s research does highlight is just how inequitable the superannuation tax concessions are, which are heavily skewed to high income earners.
The Australian Treasury recently illustrated that the top 1% of income earners will receive over $700,000 in taxpayer contributions to their personal superannuation account over their working lives, whereas those in the bottom 10% of income earners will receive less than $50,000:
Surely, such as gross inequity undermines ISA’s incessant lobbying for the SG to be raised to 12%?
Superannuation concessions already cost the federal government an obscene $43 billion a year, most of which flows to high income earners, while also lowering workers’ take-home pay and worsening inequality (as illustrated clearly above).
Thus, lifting the SG from its current level will unambiguously worsen these inequities, blow an even bigger budget black hole, and reduce workers’ disposable income even further.
The only winner from lifting the SG to 12% will be fund managers like ISA, which will ‘clip-the-ticket’ on more funds under management and earn fatter fees. This explains why the superannuation industry is gunning so hard for the SG to be lifted. It’s pure financial self-interest.