15 August 2020
Olivia Caisley – Reporter
Patrick Commins – Economics Reporter
Additional Reporting: Joe Kelly
Scott Morrison has given a strong signal he is no longer wedded to increasing the super guarantee to 12 per cent, acknowledging it could suppress wages and potentially cost jobs, as the government weighs up the findings of an independent review into retirement incomes
The Prime Minister on Friday noted the coronavirus pandemic was a “rather significant event” which had occurred since he pledged at the last election to continue with the scheduled increase in the super guarantee, due to reach 12 per cent by 2025.
On Friday, Reserve Bank governor Philip Lowe warned that increasing the super guarantee would “certainly have a negative effect on wages growth” and that, if it went ahead, he would “expect wages growth to be even lower than it otherwise would be”.
Dr Lowe argued there could be flow-on effects if the guarantee was increased, telling the standing committee on economics it might reduce take-home pay, cut spending and potentially cost jobs.
Mr Morrison later said he was “very aware” of the issues raised by Dr Lowe and argued they should be “considered in the balance of all the other things the government is doing”.
The warning from Dr Lowe came as an inquiry heard that nearly three million Australians had applied for early access to their superannuation, with $33.3bn already approved. Labor has accused the government of undermining the superannuation system through the early access program, with Anthony Albanese warning that too many young Australians had exhausted their super balances.
Dr Lowe also criticised the states for not carrying their “fair share” of the fiscal burden, saying they were preoccupied with their credit ratings rather than job creation. He repeated the RBA’s baseline forecasts for the unemployment rate to reach 10 per cent by the end of the year and expected the jobless gauge to “still be around 7 per cent in a few years’ time”.
“The challenge we face is to create jobs, and the state governments do control many of the levers here,” he said.
Mr Morrison seized on the call to say the federal government had done the “seriously heavy lifting” to navigate the pandemic and urged state and territory leaders to “provide further fiscal support”. He said the states had provided “about $45bn in both balance sheet and direct fiscal support” but the federal government had provided “about $316bn”.
Dr Lowe said that, with the cash rate at a record low of 0.25 per cent, further monetary policy easing was unlikely to gain any traction in stimulating demand. Instead, fiscal policy and structural reform would be the primary tools to carry the country through the crisis and lay the foundations for recovery.
He identified measures such as removing stamp duties — which he called a “tax on mobility” — and industrial relations reform, echoing calls from the Productivity Commission this week.
“There’s a process going on at the moment to try and make the enterprise bargaining system more flexible, so we can get back to a world where businesses and employees can get together and make their businesses work effectively, rather than be weighed down by process,” he said.
Dr Lowe warned Australians to be prepared for a “bumpy and uneven” recovery, and argued the second wave of coronavirus infections and new restrictions meant the bank was “not expecting a lift in economic growth until the December quarter”.