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Wage growth the issue not SG: panel
The lack of wage growth in Australia is not caused by superannuation and freezing the super guarantee (SG) will not necessarily lead to wage growth, a panel has argued.
Speaking on a Conference of Major Superannuation Funds panel, Per Capita executive director, Emma Dawson said the last super freeze was in 2014 when the then Prime Minister Tony Abbott wanted more money in workers’ pockets and did not increase the SG.
However, she said, there had not been any real wage growth over the last five to six years.
“The situation we’re in is one where workers are not getting their fair share of prosperity. They’re not getting wage growth but company profits have been quite healthy,” she said.
“Super is a legislated way for them to get a piece of the pie and it means they’re saving for retirement. Unless people are compelled to save, many won’t.”
Also, on the panel, HESTA head of impact, Mary Delahunty said freezing the SG ran the risk of delineation where “super becomes a wealth panning tool for those that have wealth”.
“Increasing the SG is not a trade-off from some magic wage increase that is going to pop out of some box somewhere. The legislated increase to super is necessary in terms of retirement adequacy,” she said.
However, Grattan Institute chief executive, John Daley argued that in a world where nominal wage growth continued to be 2% and the SG was increased to 10% next year, wages would instead increase by 1.6% instead of 2%.
“And that’s money that’s not in workers’ pockets that would be otherwise be and that’s a conclusion that bankers come to when they’re thinking about how much wages are going up,” he said.
“Increasing the SG means workers will have less increase in their wages.”
Dawson noted that the problem was wage growth not superannuation and there were many macro-economic policies that could be changed to lead to higher wages, and it was possible to enable workers to save more for an adequate retirement at the same time.
Daley responded the comment by saying “no matter what you do to the policies wages growth is going to be lower than it would be otherwise if the superannuation guarantee goes up”.
However, Mercer senior partner, David Knox said Daley’s argument would have meant that the SG would have never reached 9.5% in the first place as wages would have increased but this was not the case.
“We’re talking about dignity in retirement and what we’re saying is 9.5% is not going to get most Australians dignity in retirement,” he said.
“We need to get to 12% and this does not even mean 12% going into retirement. The government takes 15% of it, and half a percent goes into insurance so we’re really talking about 10% of salaries being set aside for the future.
“If we look at a 45-year period of work and 20 to 30 years of retirement, putting aside 10% net into retirement is probably still not enough.”
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