Superannuation: The Coalition helps the workers

[nero_bolt]

We've dodged a bullet.

Had compulsory super contributions climbed as legislated, Australian workers would have lost 0.5 per cent of wages from their next pay increase, 0.5 per cent from the following one then 0.5 per cent from each of the following three. By 2019 they would be earning 2.5 per cent less than if the government had left compulsory super alone.

Labor legislated to increase compulsory super recklessly. After being stalled at 9 per cent of pay since 2002, Labor wanted to lift it to 12 per cent, lifting it at first by 0.25 per cent of pay in June 2013 and 2014 then by 0.5 per cent in each of the next five years.

Labor knew the money would come out of wage rises. Its superannuation minister Bill Shorten said so.

But he said we would get healthy wages increases nonetheless. He told Fairfax Radio in 2012 the impost was just "a quarter of a per cent"

"So I'm assuming without, you know, and again this is a forecast, I'm assuming that wages in 2013-14 will probably move somewhere between 3 and 4 per cent. I am assuming that a quarter of per cent of that 3 to 4 per cent may well go into your compulsory savings, which is concessionary taxed, so that's a plus."

It didn't sound that bad. But he was wrong.

In 2013-14 wages climbed by just 2.6 per cent. Prices climbed 3 per cent, meaning real wages went backwards.

One of the reasons they went backwards was that employers were asked to fork out an extra 0.25 per cent for super on July 2013 and knew they would be again on July 2014.

From next year they were to be asked to fork out twice as much extra each year, an extra 0.5 per cent for each of the next five years.

Had it happened, the regular imposts would have depressed wage increases and quite possibly depressed real wages for half a decade.

The Henry Tax Review found against any further increase in the super contributions beyond 9 per cent. It said, although 12 per cent would increase employees retirement incomes in retirement, it would do so "by reducing their standard of living before retirement".

The Coalition has pushed the whole thing out into the never never. Super contributions won't begin climbing again until 2021.

After that they are legislated to climb by 0.5 per cent a year until they reach 12 per cent, but it's a fair chance they never will. Anyone who wants to save extra is welcome to. The Coalition and Clive Palmer has made it more likely they'll have the wage increases to afford it.

And those wage increases will be taxed at standard rates, rather than lightly taxed as would have been extra super, strengthening the government's finances.

Maintaining the low income super rebate, the income support bonus and the schoolkids bonus until after the next election also makes sense. People can vote on whether they want them to stay.

The compromise leaves the government $7 billion worse off than if it had got what it wanted but $10 billion better off than if it had got nothing at all. Those figures cover the next four years. The government says, a decade on, its projections look pretty much as at budget time.

Peter Martin is economics editor of The Age (a good left leaning Fairfax news paper)

Twitter: @1petermartin

Read more: http://www.smh.com.au/federal-politics/political-opinion/superannuation-the-coalition-helps-the-work...

Read more: http://www.smh.com.au/federal-politics/political-opinion/superannuation-the-coalition-helps-the-work...

[fourandsixpants]

.....so let me get this right pls - before the GFC Howard (Lib) and his cronies pummelled us day after day about how **bleepING** FANTASTIC 'superannuation' was.....and didn't it become compulsory during Hawkies or Keatings reign (both ALP of course) for employers to contribute on behalf of their workers....to these super funds?

.....now we have LNP with Abbott and Hockit AND Palmer PUP (who is a mining Billionaire) telling us, in an indirect manner that workers get better value from their wages being put directly into the pocket/hand than bothering with money going into a super fund??

WT...?!!

Have I got the gist?.......or err.....have I missed something over the years?

Actually what I believe this is all about is this: we are heading for a catastrophic economic recession-soon. There will be massive job shortages and unemployment  etc etc etc. This is the Govts way of keeping money in the system so that the workers are encouraged to spend as so keep the economy as buoyant as possible thereby keeping the possibility of a  major economic crash at bay.This move is only intended to be for the short 'term'......e.g.rest of LNPs reign in Leadership mode....for the next 2.5 years that'll be.

.....then when the ALP get voted back in the superannuation rate will be readjusted back up to the planned increased rate of 15%.....it's all an Agenda....a Bipartisan Agenda. As it always is........................*yawn

I am sure the ALP would have done something similar and called it something else.....but would have sold it much, much better and not have given all those other  concessions to the top end of town along the way like LNP have done.

Just irks me that Palmer Drama got his cake and ate it too in this fiasco.

[fourandsixpants]

This plan had better stave off a major depression boyz......if it doesn't they'll blame the ALP

[nero_bolt]

Adam Creighton says super tomorrow is lost wages today:

Until this is changed ... compulsory superannuation will remain a costly, unfair burden and lucrative subsidy to fund managers…

Myth ... : business pays for increases in the SG. “Although employers are required to make superannuation guarantee contributions, employees bear the cost of these contributions through lower wage growth,” [Ken Henry’s tax] review says, flatly contradicting Labor Senate Leader Penny Wong this week, who denied on ABC TV a link with take-home pay.

“The effect of this reduction in a person’s standard of living falls most heavily on low to middle-income earners who are unlikely to be in a position to offset the increase in the superannuation guarantee by reducing their other savings,” it goes on....

The Rudd government ignored the Henry review, announcing without justification in May 2010 the share of workers’ wages to be siphoned into remote, untouchable accounts destined to be ravaged by fees would rise to 12 per cent, come hell or high water.

http://www.theaustralian.com.au/business/opinion/superannuation-debate-ignores-failures/story-fnc2ji...

[tall_bearded01]

Sorry Nero but you can’t have it both ways.

You can’t on the one hand support the notion that the “age of entitlement over, part of which includes the premise that persons on the aged pension are an economic drain on the community as a whole, and the,n in the next breath, support an action by this government which effectively reduces the average workers ability to self-fund their own retirement.

[***super_nova***]

What happened to the "unsustainable pensions" emergency?  As usual, LNP takes the easiest and short term solution, and Palmer showed his true colours; it is all about him.   He'll spouts his populist rhetoric, but in the end of the day he will vote for what is good for him.

[boris1gary]

sick and tired of the "age of entitlement" song, if we as a nation can't look after our own, just what exactly is the point? plenty of money for war, plenty of money to set up an embassy to support the fascists in the Ukraine but no money for our own seniors or anyone else who isn't above a certain annual income. Thankfully this will be a one term circus because Aussies won't be supporting a government that shows only contempt for the majority of us. 

[cherry*135]

Plenty of money for Royal Commissions ($20m for insulation one that didn't come out with anything new).

Super:

"Following the Prime Minister's logic, one might be tempted to cut the superannuation guarantee to zero - after all, that would put even more "money in workers' pockets".

But the purpose of compulsory superannuation is to help provide for adequate incomes in retirement and to preserve the pension for those who need it. And most of us should be saving more for retirement. With the postponement, many of us will retire with less."

Jim Minifie is the Productivity Growth Program Director at the Grattan Institute

[cherry*135]

"For those on lower incomes, the impacts will be magnified if the Low Income Super Contribution (LISC) scheme is shelved, as planned, in 2017. LISC ensures that people earning relatively low incomes do not end up paying a higher tax rate on their super contributions than they pay on their ordinary income."