Terry McCrann: Superannuation surplus is too much

Will an increased “superannuation guarantee” cost jobs? Or would a failure to increase it cost jobs and wages, asks Terry McCrann.

The blandly-named but politically explosive “Retirement Income Review” plonked into public view Friday, all very heavy — if very worthy — 648 pages of it, and immediately laid out a political and economic battleground into 2021.

Simply put, should, and will, the compulsory payment into superannuation — tagged SG or “superannuation guarantee” — stay at its current 9.5 per cent of every wage or salary, or should it keep going up in increments to 12 per cent, with the next move mid-next year?

Also, if it does keep going up, will “you” — the individual you and the collective you, as in all workers — pay for it with smaller wage and salary rises?

Indeed, will an increased SG cost jobs? Or — and this is where it gets really complex, and ultimately unknowable — would a failure to increase the SG cost jobs and wages, in the context of what the Reserve Bank is doing with interest rates and money?

The review’s conclusions on all this were clear, unambiguous and unqualified.

The three-person panel concluded that increasing the SG to 12 per cent would be at least partially “paid for” by lower wage and salary rises.

The trio also argued that the increase was not only not needed but would be poor policy.

This was based on two critical assessments sitting under the panel’s overall conclusion that, “the Australian retirement income system (the mix of compulsory super, the old age pension and private savings) is effective, sound and its costs are broadly sustainable”.

These were that the 9.5 per cent would produce sufficient savings to fund retirement — crucially, in that broader context — and that there had to be more efficient use of those savings in retirement.

A way of characterising what the review concluded is that lifting the SG to 12 per cent would be a soft-option cop-out. The “benefit” to workers would be obvious — any costs in lower wages or lost jobs would be opaque.

This is why the comments that the review provided cover for the government to stop the — to be clear, already legislated — SG rises going ahead, totally missed reality.

Whether or not the increase goes ahead has got zero to do with evidence or substance. There is no way — no way — that Labor or Green senators will vote to stop it. It all comes down to the two One Nation Senators.

The government has to get at least Pauline Hanson to agree to stop it and find another vote among what’s left of the so-called Centre Alliance of former senator Nick Xenophon. Or the one senator of the “Jacqui Lambie Network”, surprisingly named, drum roll please, Jacqui Lambie.

Now, I suggest the best argument against lifting the SG — and one that should appeal to Labor and the Greens, but it won’t — is why should the government be mandating that more billions have to be paid each year into the fat bank accounts of people working in managing super and investments if, very simply, it’s not really needed?

There is already $3 trillion in super. One way or another $100bn or so of new money is already getting pumped in each year — of which easily the biggest component is the compulsory super added to wages and salaries.

The “costs” — otherwise known as the easy pickings — of managing all this runs at somewhere between $30bn and $50bn a year. Isn’t that enough loot already?

Now, there was a lot — and I mean, a lot — more in the report than just this issue of will they or won’t they, should they or shouldn’t they, lift the SG?

To me, it was one of the most substantive and actually practical that I’ve seen in 50 years or so of looking at them.

Even if it seemed slightly contradictory: the system works well but here’s the long list of things needed to make it work better.

It was realistically built on the basis that a “reasonable” retirement would maintain income in the 65-75 per cent range of what you were earning pre-retirement. Not as much — none? — analysis is built on what you need to “survive”.

This makes realism the basis of the whole report. The idea that people turn 65, retire and willingly move into a lifestyle of near poverty is the usual crap we get from so many “experts”.

But, critically, also the report approaches how best we get that reality both from how much savings should be accumulated and how people in retirement draw on those savings.

Simply, in retirement don’t seek to live on income alone, but a mix of income and capital.

Interestingly, the government got the report in July and has sat on it for four months.

That’s perhaps excusable in the broader context of what’s been happening, if also somewhat surprising as it validates one of its big political arguments and did not contain any obvious political hot potatoes.

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Originally published as Terry McCrann: Superannuation surplus is too much