Blind Labor robs workers with 12% superannuation

Despite Australian workers facing massive income declines, Labor continues to lobby hard for the superannuation guarantee (SG) to be lifted to 12%:

Senior Labor figures said compulsory super, which originated under the Hawke government’s accord process in the 1980s, should be protected as the Morrison government forged a new compact with unions and business to negotiate workplace reforms…

Labor leader Anthony Albanese, who has been excluded from negotiations, said the party held dear the 12 per cent guarantee.

“The accord and enterprise bargaining was successful because it incorporated a social wage including boosting retirement incomes through compulsory superannuation,” he said.

“Coalition governments have used every opportunity to undermine super, including the current process that has seen more than $13 billion taken from accounts.”

When will Labor admit that the SG is paid for via salary sacrifice from workers? This means that workers take home lower wages today in exchange for bigger superannuation balances at retirement. It also means that lifting the SG to 12% from 9.5% currently will necessarily lower workers’ disposable incomes (other things equal).

If you don’t believe me, here’s the Grattan Institute:

Even slower wage growth will be the result of increasing compulsory superannuation contributions from 9.5 per cent to 12 per cent…

If compulsory super contributions go up, wages will be lower than they otherwise. And the cut to wages from raising compulsory super is big. Really big. By the time it’s fully implemented in 2025-26, a 12 per cent Super Guarantee will strip up to $20 billion from workers’ wages each year, or nearly 1 per cent of GDP…

Here’s the Reserve Bank of Australia:

RBA assistant governor Luci Ellis said it had “shaved” its worker pay forecasts to reflect that higher compulsory super will dampen future wage growth for private sector workers…

“Historically about 80 percent of the increase in the non-cash benefit tends to show up as somewhat slower wages growth than what you would have otherwise seen.”

Here’s the Henry Tax Review:

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…

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.

Here’s former Labor leader, Bill Shorten:

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.

And here’s former Labor Prime Minister and Treasurer, Paul Keating:

The cost of superannuation was never borne by employers. It was absorbed into the overall wage cost… In other words, had employers not paid nine percentage points of wages as superannuation contributions to employee superannuation accounts, they would have paid it in cash as wages.

How much more evidence does Labor need before it admits that its 12% superannuation fetish will rob workers of much needed disposable income?

Perhaps even worse, 12% superannuation will also worsen inequality, since the lion’s share of concessions flow to high income earners, according to the Australian Treasury:

Moreover, because it gives higher income earners the lion’s share of concessions, compulsory superannuation costs the federal budget more than it saves in Aged Pension costs. The Grattan Institute, the Henry Tax Review, and actuarial firm Rice Warner are explicit on this point.

Indeed, the Grattan Institute estimates that lifting the SG to 12% would cost the federal budget an additional $2 billion a year in lost income:

In both the short and long term, though, superannuation costs the budget more than it saves, because the tax breaks cost the government more than the pension savings…

Any objective analysis would conclude that raising the SG to 12% is poor policy, given it would: 1) lower workers’ disposable income; 2) increase inequality; and 3) worsen the long-term sustainability of the federal budget.

The only real winners from this policy are Labor’s industry superannuation mates, which will get to ‘clip the ticket’ on bigger funds under management.

Leith van Onselen

Comments

  1. Fck me! How am I supposed to save for a fcking house deposit or any other necessary crap on my low wages if they take 12 fcking %, and then leave my money getting clipped by bl00dy blood sucking parasites in the finance industry, who get live life on the hog, and vulnerable to more fcking market downturns????
    That money is not going to mean jack sh1t by the time I retire anyway with the way the world is going. Saving for retirement is a cruel dream when you can’t even have a hope of owning a house that isn’t on the wrong side of the Great Dividing Range (climate change – yay), and with the way the global financial system is going. This is INFURIATING.
    I do not agree to this. JUST NO NO NO NO NO
    I am so fcking glad I stopped voting for Labor in the early 2000s (sorry Ermo)
    Just get rid of super. Full stop. End of story. It’s a fcking rort and I hate it.

    • Ukraine fnMEMBER

      Looks like Labour doing everything it can to make themselves unelectable.

      • they are trying to secure another big bribe for their union mates that sit all these industry superfund boards …

    • ErmingtonPlumbingMEMBER

      No reason to apologize Sister I fking hate the Super rort too and often annoy party comrades when I go on about the disgrace it is.
      That my kids will be robbed by this system for over 50 years disgusts me.
      Even more so that it was all brought in by the ALP.

      Thing is when it was brought in it was partly to combat high wage inflation.
      Not really a problem today.

      “For many years until 1976, what superannuation arrangements were in place were set up under industrial awards negotiated by the union movement or individual unions.

      A change to superannuation arrangements came about in 1983 through an agreement between the government and the trade unions. In the Prices and Incomes Accord, the trade unions agreed to forgo a national 3% pay increase which would be put into the new superannuation system for all employees in Australia”
      https://en.wikipedia.org/wiki/Superannuation_in_Australia

    • DominicMEMBER

      With any luck, Pop, you won’t need to save a cent – Scummo will tip 50,000 freshly minted taxpayer dollars in your pocket and you’ll be the one high on the hog 😉

      Fingers crossed, the magic money tree is about to deliver quite a bounty.

      • ErmingtonPlumbingMEMBER

        If this tree is good enough for Asset prices then its good enough for the plebs.

        Better those leaves come from Australian trees too.
        The Chinese leaves can be dangerously addictive and cause unforseen consequences.

        • DominicMEMBER

          As I already own a place I just have to figure out a way to get in on this handout. Fair’s fair, everyone should get a crack at it.

          Maybe I should take up a career as a developer … ahhh … the answer was staring me in the face all along!

          Anyway, will be good if the likes of Pop get a leg up.

          • Jumping jack flash

            Yes!

            If tiny homes take off, and I believe they must because there is no alternative, then the lucky ones who own the standard 600sq block can subdivide it into 4, 6 or even 10 tiny home blocks and they all become developers!

            by 2050, the median house price, for today’s standard sized house, will be around 10 million. A 60sq block for a tiny home will probably be 400 or 500K.
            Totally affordable!

    • This effect however keeps house prices lower than otherwise. Putting the super money in your hands (assuming everyone else gets the same perk) would be stimulatory to price growth of houses. In the end you would still pay all your money in house prices as sellers know with the new money you can bid more; but have no super savings either.

      • Jumping jack flash

        Yes but the houses are a much better investment for retirement than super. Vehemently protected from falls, and all but guaranteed to double every 7 to 10 years. Super has none of that.

        My super took a 10% hit which took it back about 5 years. Say it recovers all of that over the next 5 years… how long before the next hit? Another 10 years’ time? Every 10 years it goes backwards by 5 years?

        These hits seem to be getting more frequent, not less frequent, as the global economy’s debt pile foundation gets constantly shakier and weirder.

    • Jumping jack flash

      “How am I supposed to save for a fcking house deposit or any other necessary crap on my low wages”
      “Just get rid of super. Full stop. End of story. It’s a fcking rort…”

      Exactly. Even 12% out of an average wage wouldn’t be enough to fund 30 years of retirement at the average wage, and that’s not even considering that fact that super growth can’t compete with debt inflation and the gouging of costs of living which is required for those essential services workers to obtain the necessary amounts of debt.

      The alternative is to salary sacrifice into super, but then that means you get even *less* take home pay to spend and save up for a house.

      What should be allowed is to use super as a house deposit. Then the house prices will grow as a result of the debt, much faster than super, and be protected from falls by government policy – such as a 50K FHOG and the “MortgageKeeper” wage subsidy.

      You don’t get that kind of support for super.

  2. Mark Hardwood

    Before you guys whinge about Super, look at the payroll taxes in Europe – 25%+ – that are swallowed up by the State and don’t even go into ‘your’ account!

    The problem here is that we are ‘forced’ to live to 85. What if I never want to get Super or a Pension, and will just voluntarily euthanise myself at 70 or whenever I can no longer work, can I pay less tax and no Super then?

    • Jumping jack flash

      With coronavirus floating around now it may actually work out well with regards to retirement savings.
      Perhaps 9.5% is all that will be required moving forward… perhaps it can even be lowered to 5%?