Paul Keating spins more superannuation lies

Former Treasurer and Prime Minister Paul Keating continues to lobby for his super industry mates over working Australians.

Yesterday, Keating gave a speech to the Association of Superannuation Funds of Australia (ASFA) – the peak policy, research and advocacy group for superannuation funds – where he lashed out at the Reserve Bank of Australia for stating that wage growth would fall if the superannuation guarantee (SG) is lifted to 12%:

Keating said [the RBA]… were “confusing an old argument.”

…“Since 2012 there has been no real wages growth,” he said.

“Therefore if the employees don’t pick up the 2.5 per cent increase (in super) then ordinary working people get nothing.”

The only one that is confused here is Paul Keating. While real inflation-adjusted wage growth has stagnated, nominal wages in Australia have grown by 18% since 2012, averaging 2.2% annual growth:

Even in 2020, amid the sharpest economic downturn since the Great Depression, Australian wages grew by 1.4%.

Thus, there is plenty of scope for wage growth to slow should the SG be increased.

Keating is right that “there had been a 10 per cent increase in labour productivity since 2012”, and this is reflected by the collapse in wages share of national income (see next chart). But workers’ income share has been falling for decades. It is not some new phenomenon that has magically appeared since 2012.

Moreover, why would bosses absorb the cost of increasing the SG when workers’ bargaining power and share of national income is at all-time lows?

If employers are not currently under pressure to give decent pay rises, why would they suddenly feel pressed to absorb the cost of lifting the SG?

Let’s get real for a moment. Employers are only concerned with their total employee cost. They don’t about what share of wages is paid directly to employees, what share is paid to the ATO in tax, and what share is paid into a superannuation account. The overall cost to the employer is the same regardless.

Therefore if the SG is raised, employers will simply transfer more of workers’ total remuneration into superannuation (other things equal). Paul Keating said so in 2007:

“The cost of superannuation was never borne by employers. It was absorbed into the overall wage cost.”

Finally, the large fall in the labour income share over the period when the SG was increasing is inconsistent with Paul Keating’s new found argument that employers absorbed the cost of compulsory superannuation.

Stop lying Paul.

Unconventional Economist

Comments

  1. The rationale of using pooled funds to save for retirement income is practically dead now. Those who put their retirement savings in private rentals are going to do better now because of rental income holding up much better than financial interest income. A lot of commercial real estate won’t do well if it survives either which just leaves a decent share fund which is capable of taking profits as a second string needed to the bow.

  2. Display NameMEMBER

    A lot of people disingenuously make the claim that super is separate from wages and that an increase in super doesn’t affect wages when the vast majority of companies do and have been for some time working on a total remuneration basis which means if you increase super, part of remuneration, then take home wage goes down.

    Bit like Phil Lowe pondering, on more than one occasion, in the SMH why wages are low. Just BS on every front.

    • happy valleyMEMBER

      Captain Phil, the guy who has annihilated interest income rates (de facto wages) for retirees, savers and depositors, prognosticating on wage levels, which he is probably not too uncomfortable with other than them being a bit high in terms of the cost of cafe lattes?

    • I wonder what the counterfactual might be.

      If we don’t increase the SG, where will the money go…to take home pay?

      I find that a rather contestable claim.

      To my other diatribe the other day – choose your poison.

      SG and less take home pay now, or no SG and likely no increase in take home pay (as capital elects to deploy it to capital investment, retained earnings, opex, bonuses, shareholder divs, debt repayment etc etc etc)

      • “nominal wages in Australia have grown by 18% since 2012, averaging 2.2% annual growth:”
        plenty of scope to reduce wage increases there…

        • Who is this nominal wage earner? Doesn’t sound like it’s related to the median let alone low wage earner. Gotta call bs on this ‘nominal’ and this average pumped high by fat wage growth at the high end. Gotta call it disingenuous MB self interested spin.

  3. Forrest GumpMEMBER

    Despite all the Hoobla over Super and how it purportedly keeps wages low….I much prefer to have an increase in my super…coz im never getting an INCREASE in my wage.

    Even if super was scrapped. Wages will never grow. There are other factors at play that prevent wages rising.

  4. His government saw the largest fall in labour’s share of income to capital in Australia’s history. It fell about 10% from 83 until the early 90s.

    • His government repealed the National Welfare Fund Act but not the 7.5% levy for the NWF collected since 1946 that we still pay with our income tax. (Fraser and Lynch already had swiped the funds invested in treasury bills and buried any account keeping. The same will be done again to super.)