Treasury to analyse if taking compulsory super guarantee to 12pc will hurt wages

The Australian

5 March 2020

Michael Roddan

The Morrison government has commissioned the Australian National University to analyse whether wages will be harmed if the scheduled increase in the superannuation guarantee to 12 per cent is allowed to go ahead.

Appearing before a Senate Estimates committee on Thursday, Robb Preston, the manager of Treasury’s retirement income policy division, revealed the government’s key economic department had contracted a number of independent economic researchers to provide analysis of the superannuation system for Scott Morrison’s retirement income review.

Mr Preston said the ANU’s tax and transfer policy institute, a well-respected policy research unit headed by Professor Robert Breunig, would be providing Treasury with modelling of the relationship between wages and the superannuation guarantee (SG).

The SG is legislated to rise from 9.5 to 12 per cent by 2024, but critics have warned that forcing workers to carve off more savings into nest eggs will cull wages growth, cost the federal budget billions in foregone revenue thanks to generous super tax concessions, and mainly benefit wealthy retirees.

Mr Preston said modelling of how changes in the superannuation guarantee affected rates of voluntary saving would be provided by Monash University, while Curtin University would be examining how the superannuation system affected pre-retirement behaviour.

Actuarial firm Rice Warner will also be providing Treasury with “long-run” modelling estimates of the retirement income system.READ MORE:Workers ‘pay for increases in super’|Stay calm: super giants|Higher super to ‘benefit the wealthiest retirees’

“The panel is very interested in understanding the trends ­affecting the retirement income system going forward,” Mr Preston said.

“We’re endeavouring to take a very comprehensive approach to our work,” he said.

“We’re planning to release a report to government by 30 June,” he said. Australian Taxation Office deputy commissioner James O’Halloran on Thursday said the government revenue agency disqualified some 300 self-managed superannuation fund trustees every year, noting there were a small number of funds engaged in “tax mischief”.

“In terms of criminality, there are instances perhaps where a SMSF might be carrying out the avoidance or minimisation of tax,” Mr O’Halloran told Estimates.

Labor, the ACTU and the $700bn industry fund sector have argued for the higher rate.

The independent Grattan Institute has come under criticism from the super sector after it argued raising the super guarantee to 12 per cent would cost the budget $2bn a year in tax concessions, hurt low-income workers and fail to drive a meaningful increase in retirement income or result in a lower age pension bill.

Confidential Treasury modelling of the super system, obtained under Freedom of Information laws and reported by The Australian last year, is “broadly consistent” with the Grattan Institute ’s findings.

According to the documents, Treasury also warned increasing the super guarantee rate would cost workers wage rises and would exacerbate the gender income gap, a position also recently argued by the Australian Council of Social Service.

The Age Pension is the biggest government expenditure at nearly $50bn a year . In 2002 it cost 2.9 per cent of GDP and is tipped to hit 4.6 per cent by 2042.