Yahoo Finance Paul Keating thinks the government is ‘damaging’ superannuation
Former leader of the Labor Party, Paul Keating, has used an opinion piece for The Guardian to slam the Morrison Government’s ‘recklessness’ when it comes to superannuation.
Keating, who made employer super contributions mandatory in 1992, said the Coalition Government was ‘jamming’ superannuation contributions at 9.5 per cent, while those in parliament pocket 15.4 per cent into their own accounts.
“Ordinary working men and women have been jammed by the Liberal party at 9.5 per cent of wages going to super, while parliamentarians, without a hint of reflection or embarrassment, pocket 15.4 per cent into their own super accounts,” Keating wrote.
“And even though the parliament, and I emphasise the parliament, has legislated to compulsorily provide 12 per cent of wages to the super accounts of the great body of the Australian workforce, the Liberal party wants to take it away. They want to kill the last two-and-a-half percentage points.”
Keating said the government “repeatedly relied” on the “discredited analysis of the Grattan Institute,” which claimed that by boosting the employer contributions, Aussies will lose out.
The argument against increasing the superannuation guarantee
The Grattan Institute report, published in July, claimed that increases in compulsory super payments would cost wage increases - particularly for low-to-middle-income earners.
“The reality is that most Australians can already look forward to a better living standard in retirement than they had while working – even if they interrupt their careers to care for children,” Grattan fellow Brendan Coates and Owain Emslie stated.
“Workers with interrupted employment histories lose super in retirement, but get larger part-pensions.
“The poorest Australians get a clear pay rise when they retire: the age pension is worth more than their after-tax income while working.”
The Grattan report estimated that a 30-year-old worker on $58,000 would lose 2.5 per cent of their wages each year under the 12.5 per cent super guarantee, but would get less than 1 per cent in retirement - in turn, costing them $30,000.
“The big winners from higher compulsory super would be the wealthiest 20 per cent of Australian earners, who would benefit from extra super tax breaks and would be unlikely to receive the age pension anyway,” they said.
‘It’s a demonstrable lie’
Keating said that for the Grattan analysis to have been correct, both the super guarantee and wages would have had to have risen in the last five years.
“This [the report’s claims], of course, is a demonstrable lie,” Keating said.
“There has been absolutely no addition to compulsory superannuation contributions over the last five years, yet there has not been a jot of increase in real wages over the same period.
“For the Grattan analysis to have been correct, we would have seen real wages rise by at least 2.5 per cent, where, in fact, they have not risen at all. And what’s more, given the current international division of labour, the likelihood is, will not be rising.”
Financial services consulting agency Rice Warner also labelled the Grattan Institute’s report ‘misleading’.
“Its analysis has less to do with the SG level, but is more about the issues of means-testing of the Age Pension,” Rice Warner stated.
“Far from supporting Grattan’s long-standing hypothesis, our Paper concluded that a level of 10 per cent to 15 per cent was necessary to achieve the system objectives, including the reasonable one of making more people self-sufficient in retirement.
“In twisting our argument, Grattan also erroneously claimed that the Paper shows that we (at Rice Warner) believe increasing the SG would have huge fiscal costs not only in the short term but also in the long term.”
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