The Federal Government is continuing to send messages throwing the future of scheduled superannuation guarantee (SG) increases into doubt with the Treasurer, Josh Frydenberg, arguing that a higher SG will come at the cost of lower wages growth.
Drawing upon the findings of the Retirement Income Review (RIR), Frydenberg has argued to a business forum that the trade-off in terms of lower wages is undeniable and said that it was something that both he and the Prime Minister, Scott Morrison, were considering in the context of the May Budget.
“As I have said previously, this is not rocket science, anybody who denies that there is a trade-off is effectively a “flat-earther”,” the Treasurer said.
Pointing to the findings of the RIR, Frydenberg said that for a median earner, increasing the superannuation guarantee could increase their retirement income by $33,000, but lower their working-life income by around $32,000.
“Given the compulsory nature of superannuation, this is a trade-off that the system imposes, not one which individuals can choose for themselves. Were it not for compulsion, it would be a matter for each individual to decide how much of today’s income they are prepared to save for their retirement.”
He said it was simply not true, “as some would have us believe, that there is virtually no limit to how high the superannuation guarantee can be increased in the name of delivering ever higher retirement incomes”.
“Indeed, for some, there isn’t a problem that cannot be solved through a higher rate of compulsory superannuation,” Frydenberg said. “These myths do nothing to help Australians plan for retirement, to feel more confident or to be more secure in their retirement.”:
“Indeed, as the Review noted, the people most affected by high default settings are not the most-well off: ‘People with lower incomes are particularly vulnerable when compulsory savings rates are set too high’, noting that it ‘could increase pressure on lower‑income earners during working life through lower incomes’.”
“This important observation sits alongside a key finding of the Review with respect to superannuation, which is that “If people efficiently use their assets, then with the SG rate remaining at 9.5%, most could achieve adequate retirement incomes when combined with the Age Pension. They could achieve a better balance between their working life and retirement incomes.
“This is why, as the Prime Minister and I have said, we must rightly carefully consider the implications of the legislated increase to the superannuation guarantee before 1 July this year – even more so at a time when our economy is recovering from the largest economic shock since the Great Depression.”