Scheduled increases in the superannuation guarantee (SG) would help deliver workers returns denied them in the current low wage growth environment, according to Industry Super Australia (ISA) chief economist Stephen Anthony.
“Currently with wages growing very slowly, workers are not being paid their productivity increases,” Dr Anthony said.
“An increase in the SG would mean those productivity increases would be paid to workers.”
Dr Anthony’s comments came after reports in Nine newspapers said employer groups, including the Australian Industry Group (AIG), were considering calling for a slowing of planned increases in the superannuation guarantee.
Those rises are scheduled to see the SG move from its current 9.5 per cent of gross salary, to 10 per cent by 2021, and to 12 per cent by mid-2025.
SG rises queried
AIG CEO and AustralianSuper board member Innes Willox said the scheduled increase in the SG from 9.5 per cent of gross wages to 12 per cent should remain the ultimate goal, but the question was “how we get there and when we get there”.
However, when approached by The New Daily Mr Willox deferred to the upcoming retirement incomes review called after the May election by Treasurer Josh Frydenberg, saying it would “provide insights into the expected impacts of the already legislated increase in the superannuation guarantee from 9.5 per cent to 12 per cent over coming years”.
No money for bosses
Some employer groups have opposed rises in the SG in the current environment, with Peter Strong, the CEO of small business lobby group COSBOA, saying in a low wage growth environment “everyone wants a pay increase”.
“But if there is an increase in the SG, there is no extra money in pay packets for employees. The employer has to find the money to pay and there is no corresponding extra money flowing through the community [that would increase business turnover],” Mr Strong said.
However, independent economist Stephen Koukoulas said there was no evidence that increases in the SG would hold down wages.
“In recent times wage growth has been weak, but we have only had one increase in the SG. At other times there have been lots of SG increases and wage growth has been high,” Mr Koukoulas said.
Dr Anthony said holding back planned SG increases would reduce retirement incomes for workers.
“We want workers to be able to invest for the long term, like Warren Buffett. That’s the only way for them to build up super balances that prevent them having to live on cat food in retirement.
“Any delay in the scheduled rise to 12 per cent SG would cost Australians superannuation savings that could markedly improve their retirement outcomes. For all income earners, even those very close to retirement, moving to 12 per cent SG will mean a more comfortable standard of living in retirement,” said Glen McCrea, deputy CEO of the Association of Superannuation Funds of Australia.
Independent economist Saul Eslake said a rise in the SG would increase national savings, especially at a time when people were saving less due to low wage increases.
“People said the introduction of compulsory super would decrease voluntary savings, but they were wrong,” Mr Eslake said.
“Households still saved, and low-income people who couldn’t save voluntarily got a chance to build some super savings,” Mr Eslake said.
Give bosses the choice
Travis Schindler, a certified financial planner with Hewison Private Wealth, said increasing the SG from its current 9.5 per cent was desirable, but said employers could be given flexibility about the size of increases.
“A range of between 10 and 12 per cent would give employers the ability to pay increases according to their financial situations.”
Mr Eslake said slow wage growth was an almost universal phenomenon through the western world.
Causes included increased globalisation where “wages growth is no longer related only to the labour market in a particular country”.
As western economies move from manufacturing to services, “companies are carrying far less inventory, which means industrial action causes far less financial pain”.
That in turn reduces the power of unions.
The New Daily is owned by Industry Super Holdings
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