Yahoo Finance ‘Right thing to do’: Super chief weighs in on ‘cruel’ debate
Australian Super chief investment officer Mark Delaney will be speaking about investing during a recession at the Yahoo Finance All Markets Summit on 17 September. Register here for your tickets.
The legislated increase to the superannuation guarantee has been the centre of contention of late, with prime ministers past and present weighing in on the debate, but Australian Super’s chief investment officer, Mark Delaney, isn’t mincing his words.
“It’s the right thing to do,” Delaney told Yahoo Finance.
“People are going to live a very long time in retirement as they keep on ageing, and they’re going to need retirement savings well in excess of what 9 per cent will contribute.
“And if we don’t increase the guarantee, those people are going to run out of super savings, and then go back onto the aged pension.”
The superannuation guarantee, or the amount your employer pays into your superannuation, is slated to begin gradually increasing from 9.5 per cent to 12.5 per cent from 2021.
However, Treasurer Josh Frydenberg said he was still considering whether to go ahead with the legislated increase, as the nation enters its first recession in nearly 30 years.
"An increase in the super guarantee will mean lower wages, lower wages means lower income, lower incomes means less spending, less spending means less jobs," Frydenberg told Sky News.
"Ultimately, what we have to consider is the timing of that particular issue."
Former prime minister Kevin Rudd and founding father of superannuation Paul Keating slammed the suggestion, saying the Coalition’s argument is a tale as old as time.
“All this was said to me in 1992, ‘Oh if you put the superannuation guarantee on, you know you’ll just lift the cost of wages’,” Keating told ABC.
“You know, you could hear all the small business organisations out with a handkerchief out crying.”
Rudd said this was a “cruel assault” by the Morrison government on the retirement income of working Australians, using the guise of Covid-19 to “get away with it”.
Delaney isn’t convinced by the wage growth argument, either.
“Modelling of wages is extremely difficult,” he said.
“There are lots of factors that determine wage growth - how strong the labour market is and how high unemployment is are the greatest factors.
“Other structural factors like technology and globalisation have also been very large influences, and then, in order, there may come the super guarantee levy after that.”’
The key to increasing wage growth is therefore lowering unemployment, Delaney said. Of course, given we’re in a recession, this is a little tougher than it sounds, and it could remain like that for some time, the CIO said.
“It takes three, four, five years to get back to levels we were operating on prior to a recession, and the Covid-19 recession is no different.”
The main differentiating factor between the Covid-19 recession and a regular recession is, of course, the health element.
“It’s a health-generated recession,” he said. “So you need a better health outcome than what we’re experiencing.”
Australian Super chief investment officer Mark Delaney will be speaking about investing during a recession at the Yahoo Finance All Markets Summit on 17 September. Register here for your tickets.
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