A planned rise to compulsory superannuation will result in years of lower wages for working Australians, a confidential report has warned.A secret Tre
A planned rise to compulsory superannuation will result in years of lower wages for working Australians, a confidential report has warned.
A secret Treasury report raises concerns over the ‘trade off’ between higher superannuation and lower wages as businesses struggle during the COVID-19 pandemic.
Prime Minister Scott Morrison could opt to freeze a planned super guarantee increase, which is set to rise to ten per cent in July 2021 and 12 per cent in 2025.
The 650-page report, which offers no formal recommendations, is now in the hands of federal treasurer Josh Frydenberg for consideration.
Grattan Institute economist Brendan Coates said workers will end up losing out if employers have to fork out for more super.
Australians will face lower wages if a legislated superannuation guarantee rise planned for mid- 2021 doesn’t go ahead (pictured, Melbourne commuters heading to work on Monday)
‘Our work shows that 80 per cent of the cost of super comes via lower wages within two to three years. And the long-term impact could be as high as 100 per cent. That’s what international studies of similar schemes typically find,’ he told news.com.au.
He believes a compulsory super rise would force Australians to save for a higher living standard in retirement.
‘Raising compulsory super would also cost the budget $2billion a year in foregone tax, which would vastly exceed any savings from less spending on pensions for decades to come,’ Mr Coates added.
Liberal Senator Andrew Bragg expects the Treasury report to spark debate within the party when it’s released.
He believes Australians should be able to access their super when they need a first home deposit.
A Treasury report raises concerns over the ‘trade off’ between higher superannuation and lower wages (pictured, Melburnians going about their daily lives amid a citywide lockdown)
‘I’ve had constituents write to me saying this is the only chance they have of getting into the housing market. We all know the best way to avoid poverty in retirement is to own your own home,’ Mr Bragg said.
But there are also fears workers will lose the legislated pay rise if the federal government axes the increase.
An average 30-year-old couple working full-time could lose up to $200,000 by the time they retire if the superannuation guarantee rise is cut, according to Industry Super Australia.
‘More than 2.5million Australians have accessed the government’s early release of super scheme and at least 560,000 Australian have emptied their super accounts forcing them to start saving for retirement again,’ the ISA wrote.
One economist believes a compulsory super rise would force Australians to save for a higher living standard in retirement (pictured, a barista working in a Sydney cafe)
‘The only way to deliver a dignified retirement is to stick to the legislated increase to the super rate to 12 per cent.
While the prime minister has said he has ‘no plans’ to dump the super guarantee, Mr Morrison has just appointed former union boss turned KPMG partner Paul Howes as the super reform champion on the COVID-19 commission.
Mr Howes has previously called for a superannuation rethink.
‘Even the most ardent superannuation proponent should appreciate what a big deal it is to compulsorily quarantine someone wages,’ he wrote.
‘There’s still the question of whether that supplement is more useful in retirement than the money would have been over the course of a cash-strapped working life.’
Workers will face the the price if employers have to fork out for more super (pictured, a Sydney cafe worker working during the ongoing pandemic)