Two Sides Of The Same Coin: Wages And Super Under Attack

12 February 2021

Address to The Association of Superannuation Funds of Australia (ASFA) Virtual Conference - Brisbane

Thanks for the kind introduction and for the invitation to speak with you all today from the traditional lands of the Yugumbir and Jagera people.

ASFA is an indispensable organisation when it comes to super and retirement incomes and this is a really important virtual gathering. I’m pleased to be part of it along with so many others including the architect of compulsory super, Paul Keating.

There couldn’t be a better time to have this conversation together.

Australia’s begun its climb out of the deepest recession in almost a century and it’s for us to decide what kind of recovery we want; whether we can make our economy and our society stronger and more secure post-COVID than it was before.

Key to this, of course, is financial security for workers, families, and retirees.

A combination of the pandemic, recession and recovery, changes to government policy, the Retirement Income Review – all of this has created a focus on super which we welcome.

Especially when it centres on super as part of a broader understanding of lifetime incomes, especially wages.

Stagnant Wages

This is the first main point I want to make: that you can’t understand contemporary issues in super without first acknowledging the impact of stagnant wages on balances.

When the Treasurer finally released his Retirement Income Review, the debate focused on the interaction of super and wages as if we had an opportunity to choose one or the other.

But that discussion obscured a more fundamental reality – that wages growth and retirement incomes have both been inadequate for too many Australians for too long.

It relied on a trade-off that may have existed in the past, and still exists in theory and in much of the commentary, but which has been called into question by recent experience.

Consider this fact:

In the six years before the Government froze the Super Guarantee in 2014, wages grew at about 3.3 per cent, but in the six years since, wages growth has averaged barely 2 per cent.

The last super freeze didn’t spur wages growth.

On the contrary.

Under this Government, now in its eight year, wages have hovered around record lows – the longest period of sustained low wages growth in Australia’s history.

Meanwhile, too many people are retiring without sufficient savings to live on.

Concern about super’s impact on wages not only ignores recent macroeconomic evidence, it ignores the arguably more important impact in the other direction: the fact that weak wages have reduced retirement incomes.

If wages had not been so weak since the 2014 super freeze then the average 30 year old could have an extra $40,000 in super when they retire.

Even before COVID-19, stagnant wages made it harder for Australians to save enough for retirement and there’s new evidence that this is likely to get worse.

Following the weakest wages growth on record before COVID-19, the RBA expects wages growth to hit a new low of 1 per cent, not returning to a still-historic low of 2 per cent by mid 2023.

Similarly, Deloitte expects average earnings to plummet to 1 per cent next year and not return to 2 per cent before 2024-25.

The damage done to wages is not accidental.

It is a “deliberate design feature” of the Government’s economic policies in the words of their longest-standing finance minister.

The proposed industrial relations changes are more proof of this, by allowing cuts to take home pay, as were their cuts to penalty rates.

So to pretend now that their motivation to cut super is higher wages growth stretches credibility to breaking point.

The Morrison Government should stop pretending another super freeze is about higher wages instead of higher super, when the truth is they want neither and they have form on both.

And the Government can’t argue the economy is too strong to support certain workers, industries and communities at the same time as it’s too weak for employers to afford modest increases in the Super Guarantee staggered over five years.

Instead of developing a plan to boost wages and retirement incomes at the same time, the Government wants to undermine both, by framing it as a simple but fundamentally false choice.

Super Under Attack

Those of you who follow the Minister or the Treasurer’s interventions in this debate might be tempted to conclude the damage they’re doing is your usual garden-variety incompetence, or a lack of understanding.

Don’t be fooled. Attacks on super are as deliberate and calculated as their attacks on wages.

We are dealing with a Liberal Party that is going down a spiral of dangerous ideology and extreme partisan envy, taking workers’ wages and super with it.

No governing party which genuinely believes in super would undermine it so frequently.

No party governing in the interests of ordinary Australian working families would do so much damage to retirement incomes.

No government on the side of people who work and struggle would see the answer to weak wages and inadequate retirement incomes as even weaker wages and even less super.

No well-intentioned guardian of the system would undermine industry funds by making it harder for them to advocate for members, and introduce performance benchmarking changes that encourage more administration fees and discourage investment in national infrastructure.

This is a Liberal Party which will not rest until super is voluntary, and exclusive, and looks more like the pre-Keating version system of the 1980s than the post-Keating one.

Costs and Consequences

The consequences are already apparent.

At the systemic level – our retirement income system has just fallen out of the top three of Mercer CFA Institute’s respected global rankings.

And at the personal level, where the costs of the government’s ideological obsessions are most obvious.

Because of the Government’s decision to freeze the Superannuation Guarantee in 2014, and the early access scheme, more Australians will retire poor.

Instead of ensuring there was sufficient government support for Australians hard-hit by restrictions, the Government forced people to drain their super, through a program that was rorted and had no checks and balances.

The early access scheme meant that hundreds of thousands of superannuation accounts have been completely emptied and will cost an average 30-year-old over $80,000 when they finish working.

Worse to Come

This damage will be compounded if the government freezes the Superannuation Guarantee at 9.5 per cent.
Not only would it break a promise to working Australians – another announcement made with no intention of following through.
It would cost the same 30-year-old worker another $85,000 by the time they retire.

Now we are told the Government is considering an ‘opt-in’ model for the already legislated increase in the Superannuation Guarantee from 9.5 per cent to 12 per cent.

It seems almost every day brings a new way to come after super.

This latest model is not about giving people choices.

People can already top up their super if they want.

It’s about undermining universal superannuation.

It is about cutting super and dismantling the very system designed to give people security and dignity in retirement.

It will leave older Australians with lower retirement incomes and fewer options.

Allowing workers to opt out of higher super won’t see 2.5 per cent of their income returned as higher wages.

It’s more likely to increase the profit share of companies, which is already sitting around all-time highs.

It would also be a tax hike by stealth, since wages are taxed at a higher rate than super contributions, and drawdowns in retirement are not taxed at all.

Not even that appears to be enough.

Now we hear unhinged proposals by Liberal backbenchers to make superannuation voluntary – for Australians earning under $50,000.

One LNP senator even likened super to cancer.

This cannot be laughed off in a government where the tail wags the treasurer.

A Recovery Built on Super

When it comes to superannuation, Australia is at a crossroads.

We have two choices.

The low road, where we allow the pandemic to be used as an excuse to undermine workers’ wages and superannuation at the same time, hurting people and weakening our economy.

A downward spiral of lower living standards and lost opportunities.

Or the high road.

The high road would see us rebuild retirement incomes, and harness super to help unlock a stronger, broader and more sustainable economic recovery.

Instead of having to defend the very foundations of superannuation, we should make the system work better for Australians and our economy.

This means lifting fund performance, improving adequacy for low income workers, closing the gender super gap and addressing unpaid super– which are all Labor priorities.

We also know that improving living standards in retirement is about boosting wages today.

To do this, we need to chart a more ambitious path back to full employment, critical to generating healthy wages growth, faster. This must be done in a way that starts to tackle insecure work and chronic underemployment.

This week, Anthony Albanese announced policies to do just that – policies that will make work more secure, better paid and with fairer conditions.

Compulsory super has been a source of economic strength since it was introduced by Paul Keating, a key point made by the Treasurer’s own review.

It can be a key ingredient in a stronger, broader and enduring recovery from the recession as well, drawing on a pool of capital worth $3 trillion to invest in our nation and its future.

Your industry is already playing a leading role– by financing critical job-creating projects that deliver value for your members, taxpayers and future generations of Australians.

But we can make so much more progress with federal government leadership – on the financing and ownership of infrastructure assets, climate and energy policy certainty, and on many of the issues discussed at this conference.


I said at the start that we welcome a big national conversation about all this – about jobs and wages; about super and retirement incomes; about the right kind of recovery.

We’d prefer some kind of bipartisan consensus but if what’s needed here is a clash of political armies, then so be it.

Because we are on the side of the vast majority of working Australians who are struggling with stagnant wages and worry if they can afford a decent retirement.

The other side thinks people are paid too much, and have too much to retire on.

One which takes every opportunity to vandalise what was and can be a key economic strength for our nation and its people.

If this Prime Minister, this Treasurer and their government was prepared to use a once in a generation pandemic to come after wages and super – just imagine how emboldened they’d be in a fourth term, to go even further?

So if it turns out that these are the central issues in an election late this year or early next, we welcome that fight as well.