InFocus: Why the Budget will reset the super guarantee timetable
The superannuation industry should brace itself for the reality that the next rise in the superannuation guarantee (SG) to 10%, if it occurs, will be the last under a Coalition Government.
Every signal emanating from the Morrison Federal Government in the lead-up to the May Budget is pointing to the fact that the superannuation guarantee will not move beyond the scheduled rise to 10% and that it may very likely remain fixed at the current 9.5%.
And the Government’s rationale? That the economy and employers need time to recover from the impact of the COVID-19 pandemic and that to lift the SG any higher would adversely impact wages growth.
The claim about economic recovery is, up to a point, legitimate. The claim with respect to wages growth is dubious, at best.
And if anyone doubted the Government’s intentions, they need only be following the social media offerings of the Minister for Superannuation, Financial Services and the Digital Economy, Senator Jane Hume, who has enthusiastically adopted the mantra of any increases in the SG being at the expense of wages growth.
In a recent series of tweets, Hume offered the following on the issue of increasing the SG:
“Tipping ever increasing amounts of your hard earned money into super is not and cannot be the answer to every social ill. Deferring more of your wages today comes at a trade off to your standard of living in your working life.
“Importantly, the balances of women retiring today reflect a majority of a working life without compulsory super at 9.5% and a system created by Labor that was never built to recognise women’s work patterns or the gender pay gap.
“We have made substantial progress on the pay gap and participation gap – and that work continues. On super, our immediate focus is on making your super work harder for you – improving performance and lowering fees. It’s your money.”
So, there you have it. At a time when the latest Australian Bureau of Statistics (ABS) data shows that annual wage growth in Australia is below 1.5% and has been in decline for most of the past seven years, a serving Government minister is claiming that increasing the SG is a factor that workers should be worried about.
What is more, the Reserve Bank of Australia (RBA) has suggested that wages are likely to move back into growth in 2023 – well after the next Federal Election.
What is more, successive Governments of both political stripes have delivered few positive policy initiatives which would help women and other low-income earners play catch-up with respect to the disadvantage they are already experiencing with respect to their ability to build retirement income nest eggs.
While Hume and other members of the Government have been significant critics of superannuation and superannuation industry organisations, they need to recognise that notwithstanding the underlying ideologies and political points-scoring that most superannuation funds have been continuing to deliver for their members.
According to the latest data from SuperRatings, over the 2021 financial year to date, the median balanced option returned 9.7%, reflecting the strength and speed of the post-pandemic recovery, which has been extended through the start of 2021.
With wages growth below 1.5%, Governments would do well not to be too dismissive of average superannuation fund returns in solid positive territory. Members can’t spend it today but they’ve certainly got it in the bank.
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