Lifting mandatory super contributions will strip wages $20 billion a year

Both the Liberal and Labor parties plan to lift super contributions but a new report says this will be costly for Australians.

Lifting mandatory superannuation contributions to 12 per cent will slow wage growth and strip $20 billion a year out of wages, a new report shows.

The Grattan Institute says both parties plan to lift the compulsory superannuation contribution from 9.5 per cent to 12 per cent by 2026.

But report author Brendan Coates warns the money will come out of workers’ wages, not employers’ profits.

“Both sides of politics are committed to wage cuts that workers’ can’t afford, in exchange for extra super that won’t help them much,” Mr Coates said on Friday.

“The overwhelming evidence is that higher super contributions are paid for by lower wages for workers.

“The Henry Tax Review and others have shown that this is exactly what happens. The Parliamentary Budget Office came to the same conclusion just weeks ago.”

Mr Coates said by the time it’s fully implemented in 2025-26, a 12 per cent super guarantee will strip up to $20 billion from workers’ wages each year — nearly 1 per cent of gross domestic product.

Mr Coates said super funds were pushing the major parties to lift the contribution threshold, but he warned against it.

“More super at retirement is only useful if it actually translates to higher incomes in retirement,” he said.

“For most low and middle-income earners, it won’t help much.”

Shadow treasurer Chris Bowen last month said Labor was committed to the 12 per cent guarantee.