Assistant Superannuation Minister Jane Hume says the government has no plans to backflip on increasing the super guarantee, but concedes the decision will be “controversial” amid opposition from a group of government backbenchers.
Compulsory superannuation contributions are legislated to increase incrementally from 9.5 per cent to 12 per cent starting from next year, which would add up to $20 billion a year to superannuation funds to assist workers in retirement.
Ms Hume said “unwinding something that is already legislated is a very difficult thing to do but, particularly in this environment, there will be much pressure to do so”.
A group of Liberal backbenchers, including first-term MPs Katie Allen and Dave Sharma, Jason Falinski and former ministers Eric Abetz and Barnaby Joyce, have all voiced opposition to lifting the rate in the current economic climate. Others, including Andrew Bragg and John Alexander, have pushed for significant changes to the existing super system, including allowing more early access to allow home buyers to use retirement funds to pay for property deposits.
Ms Hume said there were currently “no plans” to change the legislation, but pointed to pressure also coming from external sources.
“It’s not on the government’s agenda, we’ve no plans to change the superannuation guarantee,” she said.
“We’ve had a very diverse range of advocates speaking up against the super rise, everybody from the [Reserve Bank] through to [the Australian Council of Social Services],” she said.
“So it may be law, it may be legislated, but of course it’s going to be a controversial decision to maintain the rises.”
ACOSS warned increasing the super guarantee could reduce take home pay, potentially offsetting any benefit in retirement for lower income earners, while the RBA has also said a rise in the super guarantee could affect wages growth depending on labour market conditions at the time.
The increase has also been opposed by Grattan Institute academics, in a submission to the retirement income review, who argue increasing the guarantee is a trade-off with wage growth. The review panel handed a report to Treasury on July 24, but it has not been made public.
Super funds, the unions and Labor have criticised this position, saying the increase is needed to ensure workers have an adequate retirement.
At an Industry Super Australia video conference on Tuesday, former Prime Minister Paul Keating said if the retirement review opposed the increase in the super guarantee it would “reek of illegitimacy”.
Mr Keating also criticised the federal government’s super early-access scheme, allowing struggling workers access to up to $20,000 of their super fund in two tranches, as a “breach of the preservation rules”.
Ms Hume said the early-release super program, used by 2.6 million people, had proven to be the “right program for the time”.
In response to Mr Keating’s criticism, Ms Hume said she lost her first graduate job offer during “Keating’s recession we had to have” in the 1990s and a job was the most important part of ensuring a secure retirement.
“This demonstrates how extraordinarily out of touch Paul Keating and Labor are,” she said. “This is not theft from the taxpayer … this is people accessing their own money.”
“The largest industry super funds have given themselves a 14 per cent pay rise over the next three years. It is galling they can lecture and shame ordinary Australians who are in quite precarious circumstances about the decisions they are making,” she said.
“I think millions of people are now looking to superannuation for the first time and including it as part of their personal balance sheet. They’re asking the question, where has that nearly $1 in $10 of everything I have earned gone?”
Bill Kelty, a former secretary of the Australian Council of Trade Unions and an architect of Australia’s superannuation system defended the 12 per cent rate, saying the government’s early access scheme showed how super could replace workers’ incomes in a crisis.
Mr Kelty supported the withdrawal scheme for those suffering financially during the pandemic, but said access should be tightened to make sure people weren’t accessing money they did not need.
“I think superannuation is for retirement, but if you need it right now, that’s the right thing to do,” he said. “If it’s for simple stimulation it’s very short sighted.”
He warned the move to a higher super guarantee should not be “jeopardised” as a higher rate would help deal with bigger problems in the future by giving poorer Australians a financial buffer.
“With a future society we probably need superannuation to go to 12 per cent,” he said.
Jennifer Duke is an economics correspondent for The Sydney Morning Herald and The Age, based at Parliament House in Canberra.
Nick Bonyhady is industrial relations reporter for The Sydney Morning Herald and The Age, based between Sydney and Parliament House in Canberra.