Controversial research from the Grattan Institute suggests higher super contributions will weigh on wages growth over the long term.
The research, which examined 80,000 federal workplace agreements made between 1991 and 2018, found 80 per cent of the cost of larger employer super contributions is borne by workers.
Those costs are not passed on immediately, but instead stifle wages growth over the life of the workplace agreement – meaning the effects on employees’ income wouldn’t be felt until years later.
The report’s authors – Brendan Coates, Will Mackey and Matt Cowgill – said government must stop the legislated increases to guaranteed contributions due to start from July 2021.
“Most Australians can already look forward to a comfortable retirement,” the report said.
“Raising compulsory super would force many Australians to save for a higher living standard in retirement than they enjoy when working, ultimately leaving them worse off over their whole lives.
“The new evidence in this paper reinforces our recommendation that the planned increase in compulsory super to 12 per cent of wages should be abandoned.”
The additional income could then be used to help buy a house or put children through school, helping to alleviate some of the financial stress many workers experience day to day.
Australians will ‘lose billions’
But Bernie Dean, chief executive of Industry Super Australia (ISA), said Grattan Institute’s research overlooked large sectors of the population and its findings were unreliable.
“This report is nothing new,” he said.
“Grattan came to this flawed conclusion last year, and have now come back with cherry-picked information to support a pre-conceived fantasy view of the world that ignores women, the self-employed and periods outside of the workforce.”
Scrapping the legislated plan to lift super guarantee contributions to 12 per cent could leave more than eight million Australians – particularly those who take time out of work – worse off based on ISA’s modelling.
For a couple currently aged 30 who are working full time, it would mean $200,000 less at retirement, and see Australians save $14.1 billion less each year compared with a 12 per cent contribution rate.
“Rather than take the advice of out-of-touch academics, the government needs to keep its promise to increase the super rate, or risk robbing millions of Australians of the dignified retirement they deserve,” Mr Dean said.
“Australians will lose billions in super and be left struggling to make ends meet on the pension or forced to work until they drop.
“Lifting the super rate will see workers end up with more money in their pockets over their lifetime.”
The New Daily is owned by Industry Super Holdings