Opposition builds against lifting superannuation guarantee

Opposition to lifting the superannuation guarantee (SG) to 12% is growing according to the ABC:

Modelling by Super Consumers Australia provided to ABC News suggests funds will earn an extra $427 million in total over the period the superannuation guarantee rises to 12 per cent.

“With fees that high, you start to question where that money is going,” Mr Webster says.

The modelling is in sync with Grattan Institute figures that also show total fees pumped into super funds would rise by $500 million by 2025.

A recent review into superannuation by the Productivity Commission suggested having funds reduce fees would be one of the best ways to boost Australians’ retirement incomes.

“We need action to plug the leaks in the superannuation bucket before we consider tipping more money in,” Super Consumers Australia director Xavier O’Halloran says.

“A large slice of people’s retirement savings will end up lining the pockets of fund managers if an increase [in compulsory super] goes ahead without urgent reform to drive down high fees”…

They sit on one side of the debate, along with Reserve Bank governor Philip Lowe and researchers at the Grattan Institute think tank, who have raised concerns increasing the superannuation rate could stagnate wage growth and hurt Australia’s economic recovery…

Economist and UNSW professor Gigi Foster also wants the super rise to be abandoned.

She is among 29 of the 44 economists surveyed by the Economic Society of Australia who say the hikes in compulsory super contributions should be deferred or abandoned.

An even larger majority, including some economists who want the increases to proceed, believe if the legislated rise proceeds, it will hurt wage growth…

Grattan Institute researcher Brendan Coates is another player who wants to see the super rise abandoned.

He was making this call even before the COVID-19 crisis. He says raising super in the midst of a deep recession would only slow the pace of economic recovery.

“Firms have to simply choose between putting more money into the pockets of their workers or more money into their superannuation funds,” Mr Coates says.

“And if you increase compulsory super, then they [employers] will give lower wage rises than they otherwise would have”…

The increase would cost the federal budget more in extra super tax breaks than it saves in lower Age Pension spending for decades to come.

“It’s a $2 billion-a-year hit to the budget once super hits 12 per cent, and those extra super tax breaks skew heavily to the wealthiest 20 per cent of Australian workers,” Mr Coates says…

Senator Andrew Bragg is among a number of Liberal backbenchers pushing the Government to abandon the super increase…

“I don’t believe we should be tipping more money into a broken scheme,” Senator Bragg tells ABC News…

Senator Bragg says the real thieves are those who have been, and will continue to, profit from the system.

“The only people that have really had a say about super have been the rent-seekers, the vested interests — the banks, the financial institutions and the unions,” Senator Bragg argues.

“And guess what? They’ve all got their hands in your pocket.”

From the outset MB has argued against lifting the SG to 12% for the following primary reasons:

  • It would lower workers’ take-home pay, hitting lower-income earners especially hard.
  • It would increase inequality, given the lion’s share of concessions flow to high income earners.
  • It would worsen the long-term sustainability of the Budget, since the cost of superannuation concessions outweighs the benefits from lower pension outlays.

Because in reality, Australia’s superannuation system works more as a tax avoidance scheme for the rich rather than a genuine retirement pillar.

The only real beneficiaries from lifting the SG to 12% are superannuation funds, which would get to earn fatter management fees at the expense of both Australian workers and taxpayers.

Leith van Onselen
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Comments

  1. Senator Bragg has been pretty effective on this issue.

    Can MB please reach out and brief him on universities / immigration / etc?

    I’ve met him and he seems reasonable enough. Just needs to be armed with the facts and how it allies to his ideology (staying in power)