For three decades compulsory superannuation has afforded Australians the best chance of simultaneously providing a decent retirement for us all while building a fighting fund of capital for our nation to invest in its own future.
Already the $2.8 trillion pool of savings is bigger than our gross domestic product, and bigger than the GDP of all but seven countries, just behind India but bigger than Italy and growing fast.
Much of that wouldn’t exist without compulsion, but remarkably it’s still not enough.
A just-released analysis from the Association of Superannuation Funds of Australia shows there continues to be a significant gap between the $640,000 it considers necessary for a comfortable retirement for couples and what people are actually accumulating.
That’s why it’s so critically important that the superannuation guarantee is lifted from 9.5 per cent to 12 per cent on the currently legislated timetable.
Analysis by actuarial firm Rice Warner shows that without that further lift in super, most working Australians will be forced to rely on the Age Pension for most of their retirement income. But a gradual rise to 12 per cent would provide most with adequate income after they finish working.
Industry Super Australia has shown that the substantial difference between 9.5 per cent and 12 per cent for today’s 30-year-old worker on about average full-time earnings would be $90,000 by retirement. In this environment it beggars belief that Liberals in the Morrison government want to freeze the superannuation guarantee at 9.5 per cent. When the additional 2.5 per cent could go into super or wages, they want it to go to neither but instead to further pad the extraordinarily high company profits that have fuelled a record stockmarket.
The superannuation guarantee has been frozen since 2014 and since then wages have barely moved either. When savings are inadequate and wages growth is sluggish, Liberals want to rob almost 13 million Australians of the super increases they need, deserve and were promised. The party of wage stagnation and rampant wage theft is now coming after workers’ super as well.
The same party opposed universal compulsory super; froze it multiple times; tried to abolish the low-income super contribution scheme; and even tried to weaken penalties for employers who don’t pay the right amount. Now some want to freeze super and, worse, others want to make it voluntary for some workers. They want to take the compulsory out of compulsory super.
Australians never heard a peep about these plans during the election. Coalition members and candidates wandered around the country crying crocodile tears for retirees at the same time as they harboured extreme plans to cut super and attack pensions. Then, after the election, when the Prime Minister told his party room to stop commenting publicly on these plans, the campaigning only intensified — a direct and deliberate challenge to his authority.
These Liberals’ latest attack is built on one heavily contested and disputed think tank report that claims an increase in super would lower living standards for some Australians. This conclusion is partly driven by the tougher pension assets test which penalises retirees for saving, and which the government introduced with the Greens to cut the pension for 370,000 pensioners and kick 88,000 pensioners off the pension altogether.
Australians will see through these faux concerns for low-income earners and weak wages growth, and the Coalition’s crocodile tears for retirees. They know these are just excuses to undermine and diminish a super system that the Liberals and Nationals never believed in from the beginning.
Super was conceived as a trade-off between wages and savings but most Australians will not be convinced that much or any of the 2.5 per cent of forgone super in today’s climate will find its way into the pockets of low-income earners as wages.
Nor will Australians be comforted by the weasel words of Scott Morrison and Josh Frydenberg who, in one week, refused to guarantee the legislated super increases, then committed to them, and now say they will be subject to a retirement incomes review. A review that could become a stalking horse for these proposals and worse, such as including the family home in the pension assets test.
On behalf of the government, the Treasurer needs to give a far more definitive statement in support of the legislated increases to the superannuation guarantee on the current timeframe. Anything less risks a repeat of the national energy guarantee debacle, when extremists on his own backbench forced him into a humiliating retreat and proved that in the Liberal Party the tail wags the Treasurer.
Australia’s retirement savings system is the envy of the world. It has its imperfections, but lifting the guarantee rate to 12 per cent by 2025 is not one of them. When the adequacy of retirement incomes is a pressing challenge, and when our ageing population puts pressure on pensions, Australians need more super, not less.
Jim Chalmers is the opposition Treasury spokesman.
This opinion piece was original published in The Australian, on Monday, 29 July 2019.