Super to rise after MPs’ push falls over

The May federal budget will set workers on a path to having 12 per cent of their annual salary put toward retirement despite a push to stop the rise.

The superannuation guarantee is scheduled to rise from 9.5 per cent to 10 per cent in July, and rise a further 0.5 per cent each year until 2025.

The May federal budget will set workers on a path to having 12 per cent of their annual salary put toward retirement savings — waving through an initial increase in the superannuation guarantee to 10 per cent — despite a push by backbenchers to stop the rise.

Senior government sources say an improving economy has weakened the argument to pause the staged increase of the superannuationpayment, with employers to begin contributing more to their workers’ retirement savings from July.

Government sources also say the budget will not include reforms to allow early access of superannuation for first-home buyers, as called for by some Coalition MPs including Tim Wilson, Jason Falinksi, Gerard Rennick and Matt Canavan.

The push to pause the superannuation increase was being considered by Scott Morrison and was backed by business groups, economists and the Australian Council of Social Service.

“The polling, the policy and the politics are all on the side of doing something here,” one Liberal MP, who spoke on condition of anonymity, said.

“What is missing? A little bit of courage.”

The superannuation guarantee is scheduled to rise from 9.5 per cent to 10 per cent in July, and rise a further 0.5 per cent each year until 2025.

The budget is expected to include superannuation changes that will build on the government’s reforms to improve performance in the sector in the past three years which have included cracking down on duplicate ­accounts and underperforming funds. Sources said the “most important” superannuation priority for the government was passing the “Your Future, Your Super” legislation announced in last year’s budget, which includes an annual test on underperformance and requirements for employers to pay contributions into a new employee’s existing fund to avoid the creation of multiple accounts.

The legislation is being examined by the Senate economics legislation committee.

In August last year, the Prime Minister said he would consider pausing the increase of the superannuation guarantee because of concerns it could impact the economic recovery following the COVID-19 pandemic.

“It is the circumstances that has occurred since the election which has made that the case … prior to the election, it was certainly my view … those were legislated changes and increases, and we had no plans to change any of those and that was certainly our view,” he said. “COVID-19 has occurred. People’s jobs are at risk.

“But I also note this doesn’t come into effect until July of next year. So I don’t think there’s any undue haste that is needed here to consider these issues.”

Since Mr Morrison said he would consider pausing the superannuation guarantee, the economy has outperformed expectations. Australian Bureau of Statistics figures released last month showed that employment lifted by 88,700 last month — ­triple the expected result — pushing the number of Australians in work past 13 million.

The unemployment rate in March was 5.8 per cent, down from 6.8 per cent in January.

While super contributions are paid by employers on top of wages, some economists say increasing compulsory contributions would suppress wage growth. Reserve Bank of Australia governor Philip Lowe has warned that a rise in compulsory superannuation payments would impact the take-home pay of workers.