Prime Minister Scott Morrison stated prior to the 2019 election he would honour proposed legislated increases to the superannuation guarantee (SG), due to take effect as from July 2021.
However, he noted on 14 August he might consider abandoning that commitment, given the impact of the COVID-19 pandemic.
His comments came after Reserve Bank governor Philip Lowe confirmed to a parliamentary committee it was the RBA’s view that increasing the SG could reduce wages and curtail consumption, and could impact employment:
Reserve Bank of Australia governor Philip Lowe said on Friday that lifting the super guarantee from the current 9.5 per cent would reduce wages, cut consumer spending and could ultimately cost jobs…
‘‘The evidence is that increases of this form do get offset by lower wage growth over time,’’ Dr Lowe told a parliamentary hearing on Friday…
‘‘If this increase goes ahead, I would expect wage growth to be even lower than it otherwise would be.
‘‘There will be less current income and if there is less income, there may be less spending, and if there is less spending, there may be less jobs’’…
Asked by AFR Weekend about Dr Lowe’s assessment and the government’s response to the retirement income review, Mr Morrison said there had been a ‘‘rather significant event’’ since the 2019 election – when the Coalition pledged not to alter the legislated super rise.
‘‘They are matters we are aware of and they have to be considered in the balance of all the other things that the government has been doing in this space,’’ he said.
The Prime Minister is aware that if the government seeks to abandon or defer the super rise, it would face an uphill battle in the Senate and a revolt from the powerful $3 trillion super industry at the next election.
From the beginning, MB has lobbied against raising the SG to 12% because:
- It would lower workers’ disposable income, impacting lower-income earners particularly hard.
- It would worsen inequality, since the bulk of concessions flow to higher income earners.
- It would worsen the long-term sustainability of the federal budget, given the cost of superannuation concessions outweighs the benefits from lower pension outlays.
In reality, Australia’s compulsory superannuation policy works more as a tax avoidance scheme for the rich than a genuine retirement pillar.
The main beneficiaries from raising the SG to 12% are funds, which gain from earning fatter management fees at the expense of both workers and taxpayers.