Abandoning mandatory superannuation the “best possible stimulus”

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The Australian Adam Creighton has tweeted suggesting that freezing compulsory superannuation contributions would provide the economy with the “best possible stimulus”:

Adam Creighton’s suggestion has merit. The superannuation guarantee comes directly out of workers’ take-home pay, thus reducing their disposable income and consumption. Moreover, cash-strapped lower income earners are most adversely impacted by this policy.

Making superannuation contributions voluntary would boost pre-tax disposable incomes by 9.5% for those that opt to take home extra pay. And since lower income earners, who have a high propensity to spend, are most likely to take up the option, it would provide much-needed stimulus to the economy.

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About the author
Leith van Onselen is Chief Economist at the MB Fund and MB Super. He is also a co-founder of MacroBusiness. Leith has previously worked at the Australian Treasury, Victorian Treasury and Goldman Sachs.