The Minister responsible for superannuation is “ambivalent” about increases to the SG rate, while the PM has suggested such increases may need to be reconsidered due to COVID-19, and the Retirement Income Review is sitting on the Treasurer’s desk.
The debate over when, or if, to increase the Superannuation Guarantee rate has reignited. Currently the SG rate is set to increase from 9.5% to 10% starting in July next year, and then incrementally increase to 12%. However a number of Coalition backbenchers, among others, have been campaigning to stop or pause increases to the SG rate.
Now, Assistant Minister for Superannuation, Financial Services and Financial Technology, Jane Hume, has told ABC radio she is “reasonably ambivalent” on the issue of the super guarantee, saying it is a decision which should be based on the circumstances of the time.
The current timetable for SG rate increases was legislated under the Coalition in 2014. Under the previous timetable, which was legislated under Labor, the SG rate would already be 12%.
The renewed battle over the SG rate has likely been caused by the impending release of the Retirement Income Review. The Review stems from a recommendation of the Productivity Commission review of the super system, to which the Government has yet to respond. The Review was established not to provide provide recommendations, but instead provide a ‘fact base’. Shortly after releasing the terms of reference for the Review, the Government ruled out increasing the Age pension age, including the family home in the pension assets test, or further delays to the legislated increases to the SG rate. Nonetheless, Labor viewed the Review as a “stalking horse” for cuts to the Age Pension and superannuation. The Government has had the 650-page final report of the Review since late July, with Hume saying it will be released publicly in “due course” at the discretion of the Treasurer.
Hume noted the SG increases were legislated, and said “my understanding is it’s going ahead”. Last year Hume mused that 10% was a “nice round number” for the SG rate. After the last federal election Treasurer Josh Frydenberg had initially ruled out changes to the Super Guarantee timetable, before later returning to use of the phrase “no plans”. Prime Minister Scott Morrison was even less definitive at the time, only saying that there had no been a change in policy.
Asked last week about the SG rate, Morrison seemingly opened the door to changes, responding by pointing to his statements during the election campaign – about no change in policy – but also that “there’s been a rather significant event since then, but nevertheless, they are matters we are aware of, and they have to be considered in the balance of all the other things the government is doing in this space”.
Labor has said that if the Coalition flips on its SG rate election commitment than this would be “an attack on workers and their standard of living in retirement”.
Shadow Treasurer Jim Chalmers and Shadow Assistant Treasurer Stephen Jones called for the immediate release of the Retirement Income Review. They also argued that “now more than ever Australians need the legislated increase in the Super Guarantee to help rebuild their retirement balances”, balances reduced by the Government’s move to expand the ability for people to withdraw from their superannuation on hardship grounds.
During the election campaign, and since, Labor has committed to the currently legislated increases to the SG rate – a timetable which was legislated when Tony Abbott was Prime Minister.
Last week, RBA Governor Philip Lowe appeared before a House of Representatives committee. Committee Chair Tim Wilson – one of the backbenchers campaigning against increases to the SG rate – asked if “it’s a good idea or a bad idea to defer the increase in the compulsory super guarantee at this time?”. Lowe refused to offer an opinion on if such an idea was good or bad, but noted there was evidence that increases to the SG rate are offset by lower wages growth, over time.
Hume said it would be “irresponsible” for a Government to not take this trade-off into account given COVID-19. Though the point is disputed, with other research coming to a different conclusion on the impact on wages. Also, Labor argues the previous freeze to the SG rate – keeping it at 9.5% – didn’t result in higher wages but was followed by “record low wages growth instead”.
Lowe also told the Parliamentary committee he didn’t know if a higher SG rate would have a negative impact on employment: “If this increase goes ahead, I would expect wage growth to be even lower than it otherwise would be. So there will be an offset in terms of current income. Some people say that’s perfectly fine because people will have higher future income. There’s a trade-off: do we want people to have income now, or do we want them to have it later on?”.
MPs and Senators who were first elected at the 2004 election, or after, receive 15.4% superannuation.