The overwhelming majority of top economists say the federal government should abandon or defer the legislated increase in compulsory superannuation contributions, to help boost wages growth and spending during a sharp economic downturn.
As the government ponders a landmark review of the retirement income system — likely to be released ahead of the October budget — two thirds of 44 economists surveyed by the Economic Society of Australia advised against lifting the compulsory contribution rate to 12 per cent.
Ian Harper, a professor at the Melbourne Business School and RBA board member, said raising the costs of hiring workers was “ill-advised at a time when measured unemployment is set to hit 10 per cent”.
“Saving is already rising as people brace for the possibility of losing their jobs and possibly even their homes,” Professor Harper said.
The superannuation sector fears the Coalition will use the findings of the review, a recommendation of the Productivity Commission, to defer a gradual increase in the superannuation guarantee to 12 per cent, which is legislated to occur by 2025, rising to 10 per cent on July 1 next year.
Paul Frijters, an Australian economist at the London School of Economics, said raising the superannuation guarantee was “a straightforward grab by corrupted groups for an even bigger slice of the wages of the population”.
“Their running excuse is bogus, which is that people cannot look after themselves or that the scheme could not be run much cheaper. Both are simply untrue,” he said.
Superannuation Minister Jane Hume came under fire from the super sector earlier this month after suggesting she was “ambivalent” about the increase.
Employer-aligned directors of large industry funds AustralianSuper and Cbus have started speaking out against the increase, which is strongly backed by the Labor Party, the union movement, and the funds management industry.
Josh Frydenberg said no decision had been made on axing the superannuation guarantee, but he noted Reserve Bank governor Philip Lowe’s opposition to the scheduled rise.
“We’ve heard from a range of figures including the head of the Reserve Bank … when he said that ultimately, an increase in the superannuation guarantee will mean lower wages,” the Treasurer told Sky News.
“Lower wages means lower income. Lower income means less spending. Less spending means fewer jobs.
“You’ve heard — whether it’s from ACOSS, whether it’s from the Grattan Institute, whether it’s from the RBA, whether it’s from the Small Business Association — you’ve heard their concerns about the superannuation guarantee issue.”
Independent economist Saul Eslake said he had “changed his mind” on superannuation. “The current super guarantee contribution rate is enough to provide an adequate income in retirement, and further increases would likely be at the expense of wage increases,” he said.
UNSW economist Gigi Forster said: “We should be far more worried about workers’ spending power today than in their golden years.”
Thirteen of the 44 economists said the increase should proceed, including former federal Liberal leader John Hewson, a professor at the ANU Crawford School.
“Compulsory super has become a fundamental element in an effective national retirement incomes strategy and we need to finish the job,” he said.
Former Labor minister and economist Craig Emerson also backed the planned increase.