RBA forecasts have 80% of Super Guarantee increases coming out of wages growth

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The RBA, when preparing its forecasts, is working on the basis that 80% of the cost of increased Super Guarantee for private sector workers is passed on as slower wages growth.

Appearing before a House of Representatives Committee, Dr Luci Ellis, Assistant Governor (Economic) with the RBA, said the forecasts “assumed a partial passthrough” of increased Super Guarantee as slower wages growth.

Drawing on Australian and overseas examples, the RBA found there was “not quite a full pass through” when there was a “non-cash increase in benefits” – such as superannuation.

“Historically, about 80 per cent of the increase in the non-cash benefit tends to show up as somewhat slower wages growth than you would otherwise have seen…”

While the Super Guarantee is legislated to increase in 0.5% increments, the RBA forecasts the slower wages to take some time to come through.

“We think that trickles through over several years because of wage bargains.”

“We’re embedding an assumption that the Fair Work Commission does engage in some trade-off of the fact that the superannuation guarantee has been increased when they think about what the increase in the minimum wage and award wages should be.”

“So there is an embedded assumption there, and then we’re allowing for enterprise agreements to follow suit over time as they’re renewed.”

Though this “mainly” applies to the private sector, with the public sector mostly unaffected.

“In building up our forecasts and allowing for this, we’ve made the assumption that most public sector workers are unaffected by the increase in the superannuation guarantee. This is because they’re already getting more super than that to begin with, because many public sector workers already get 12 per cent.”

Work by the Grattan Institute recently also found an 80% of the cost of higher Super Guarantee contributions was passed on to workers as lower wages, over time. While this analysis was done on workplace agreements, covering around a third of workers, the Institute assumed it would apply to other workers.

Though other economic modelling did not find a correlation between increases in the Super Guarantee rate and lower wages.

Documents released under FOI last year show that Treasury is of the view that “employees bear the cost of higher SG in the form of lower take home pay”, though it is unclear if this means a 100% offset between super and wages.

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