Undermining super would betray workers
An opinion piece by Greg Combet, as published in the Herald Sun, 29 July 2019
When Australia’s superannuation system was first established more than 25 years ago, its purpose was to provide working Australians with some savings at retirement. Most people had no nest egg at all, other than their home. Like Medicare, compulsory superannuation quickly became entrenched in our social fabric. People’s super account has helped to ensure a better standard of living in retirement, which is especially important as we live longer.
Now, as the first generation of Australians benefitting from compulsory super reach retirement age, we are seeing the transformative impact superannuation is having on people’s lives.
Gone are the days of our parents and grandparents, where unless your family came from money, retirement meant living day to day, relying on the meagre pension and other government supports to get by.
Compulsory superannuation is a genuinely life changing reform. For those Australians retiring now, with more than two decades of compulsory super payments, the money they have accrued in super makes all the difference. It means being able to take a holiday to visit the grandkids. It means being able to have the heater on in winter and not worry about whether or not the bill will get paid. It means being able to go out to dinner every now and then. Ordinary things that Australians should be able to take for granted.
Yet all this could be at risk if opponents of Australia’s superannuation system get their way. Despite an increase in super contributions from 9.5 per cent to 12 per cent being legislated by the Parliament and Coalition, there are some commentators out there – both inside and outside the Parliament – that want to deny Australians a dignified life in retirement.
Sadly, we have seen this before. In the 1990s, and again in 2014, Liberal Governments have seen fit to delay promised increases to the rate of super contributions. Industry Super Australia analysis estimates that these continued setbacks have already cost an average worker, now on the cusp of retirement, close to $100,000 in retirement savings.
If history repeats itself, and the current Morrison Government gives in to pressure from its backbench to again deny Australian workers the increase in super contributions that have been promised, a 30 year old male earning $85,000 a year would stand to lose a further $147,000 from their super by the time they reach retirement. That’s the equivalent of nearly $5,500 extra a year in retirement. If he and his wife have children, she will likely take time out of the workforce, and on a typical pattern could lose $93,000. Together they could lose $240,000. Australians will either need to work longer to make up that shortfall, or increase their reliance on the pension – at a cost to every taxpayer.
It’s no surprise then that research released by Industry Super Australia shows Australians are overwhelmingly opposed to freezing the super guarantee at its current level, with 87 per cent of people polled in favour of increasing contributions above 9.5 per cent.
Those arguing against an increase in super claim workers would be better off having that money now as wages, rather than putting it aside for their life in retirement.
This relies on a misguided, and idealistic assumption, that employers would readily switch the contributions they make in super to a pay rise. In the real world that will not happen. Low paid workers and particularly women will simply lose their super.
We have seen these same claims before when penalty rates have been cut, yet the promised wage increase never materialises, with employers citing increased costs to keep the money inside the business. And when one in three workers are currently not even paid their legal super entitlement by their employer, it’s easy to understand what nonsense these claims are.
In fact, in a period of slow wage growth, increasing workers’ super contributions – as promised – is one of the most effective ways to increase a workers’ overall remuneration. It would simply ensure that Australian workers at least receive a share of Australia’s productivity growth and prosperity - a share they are not receiving in wage rises. And investment returns on superannuation have over the past 20 years grown twice as fast as wages growth.
The Government must resist the temptation to undermine more than two decades of work to build the super nest eggs of working Australians for a short-term political and economic hit that will cost workers in the long run.
With new research showing that only 19 per cent of Australians expect to be able to live comfortably off their super in retirement, the case for the promised increase to 12 per cent is clear.
And with nearly 70 per cent of Australians backing compulsory superannuation as a safety net like Medicare, the Government should think very carefully about any attempt to wind back or undermine compulsory super. Like Medicare, Australia’s superannuation system should be off limits.
Industry Super Australia
*The above material, whilst correct at the time of publication may include references or statements which are no longer current.