The union-backed industry superannuation industry is launching a $3.5 million advertising campaign to promote the phased increase in the mandated “superannuation guarantee” from the current 9.5 per cent of wages to 12 per cent between 2021 and 2025, amid fears the Coalition government could pause the legislated rise.
The ad campaign, which launches across free-to-air television on Sunday night, says a 30-year-old woman earning an average wage would stand to gain more than $85,000 in extra super under the changes.
But the RBA’s new economic forecasts suggest that wage growth will flatline at about 2.2 per cent from next year when the super rise kicks in, even with a predicted fall in the jobless rate to below 5 per cent.
The RBA has been desperately trying to lift sluggish wage growth to help boost soft consumer spending and weak inflation.
“The real challenge we have is to make wages grow at a faster rate than they have been,” RBA governor Philip Lowe told a parliamentary committee hearing in Canberra on Friday.
The RBA said international and local experience suggested about 80 per cent of the scheduled increase in the super guarantee would be paid for by lower pay rises.
RBA assistant governor Luci Ellis said it had “shaved” its worker pay forecasts to reflect that higher compulsory super will dampen future wage growth for private sector workers, offsetting wage increase pressures from a tightening labour market.
Wage growth would have got “a little bit of a pick-up from here” if not for the legislated requirement for business to boost their superannuation contributions, Dr Ellis said.
“Historically about 80 percent of the increase in the non-cash benefit tends to show up as somewhat slower wages growth than what you would have otherwise seen.”
“It’s not a full trade-off but it’s most of it.”
The Morrison government’s wide-ranging retirement income review led by former Treasury official Mike Callaghan is considering the merits of higher compulsory super, among a host of issues.
Grattan, ACOSS, Treasury backing
The RBA’s analysis confirming that higher super is traded off for lower wage rises backs up findings by the Grattan Institute think tank, Australian Council of Social Service, Treasury and Henry tax review commissioned by the Rudd Labor government.
Liberal backbenchers have agitated for the government to reverse the Labor-legislated super rise, with some floating a 10 per cent super guarantee as a potential compromise.
Liberal MP Tim Wilson, who chairs the House of Representatives economics committee that the RBA officials appeared before on Friday, said it was telling that “almost everyone who is economically literate” acknowledges increasing the higher superannuation impost will cost workers wage growth.
“The only ones who are denying it are those who would get their hands on the extra cash if it went up and denied workers choice,” Mr Wilson said.
Treasurer Josh Frydenberg said the government had no plans to change the legislated superannuation increase.
The government fears a backlash from the powerful $3 trillion super industry. The superannuation guarantee is due to incrementally rise from 9.5 per cent, by 0.5 per cent each year between 2021 and 2025.
Dr Lowe said the increase in compulsory savings through super would lead to less voluntary savings.