Call to scrap super increase ‘or risk economic recovery’

An increase in compulsory super contributions would come at the expense of economic recovery, the Grattan Institute says.

Greg Combet says it’s a ‘complete furphy’ to argue workers will miss out on pay rises if super is hiked. Picture: Britta Campion

An increase in compulsory superannuation contributions would come at the expense of an early economic recovery, it has been claimed.

A pandemic report issued by the Grattan Institute says the legislated hike of the superannuation guarantee to 12 per cent by mid-2025 would “exacerbate” problems sparked by the virus.

The stance taken by the Melbourne think tank is vehemently opposed by Industry Super Australia, which claims a move to scrap the increase is being pushed by a group of “noisy” backbench Coalition MPs.

Grattan noted the higher cost to business of an increase in super would come at the cost of lower wage growth and would dampen consumer spending.

“The policy justification for increasing the superannuation guarantee is weak anyway,” the institute’s report says.

“The vast bulk of retired Australians have an adequate income and feel financially comfortable, and the vast bulk of working-age Australians can already look ­forward to a standard of living in retirement at least the equal of their standard of living while working.”

ISA on Wednesday said nearly half a million Australians had wiped their retirement balances clean through the early release of super scheme implemented by the Morrison government.

It claims without a legislated rise in the super rate, more people will have to rely on the aged pension, placing greater strain on the tax system.

ISA chairman and former Labor minister Greg Combet ­attacked critics of the legislated increase in the superannuation guarantee, saying it was a “complete furphy” to argue workers would miss out on any pay rise as a result.

Mr Combet this week told an industry super roundtable event, which also launched the sector’s bid to create 200,000 jobs from a $19.5bn investment program, that freezing the charge would have no upside for workers.

“No one will be gifted a wage increase in return,” he said.

“So there shouldn’t be any further delays to the super guarantee rises. They’ve been delayed for years, they’ve been promised repeatedly, they’ve been legislated by the parliament and they are law.”

The super guarantee had reached 9 per cent in 2002, and had only increased by half a percentage point in 18 years since.

Mr Combet said if critics of the hike to 12 per cent succeeded, the impact on people’s retirement savings would be “significant”, and much worse for those who had withdrawn $20,000 from their nest eggs under the government’s early release scheme. He said the impact of both measures on a 30-year-old man on average earnings would be $180,000 less at the retirement age of 67, or working for an extra 6½ years.

For a 30-year-old woman on average earnings, it would mean $150,000 less at retirement, or an extra eight years of work.

REST chief executive Vicky Doyle said an increase in contributions needed to occur so funds could recoup losses caused by the economic downturn and also the early release of super.