Broad assertions that the further scheduled increases in the superannuation guarantee (SG) will add to cost of living pressures don’t really stack up, according to principal consultant with specialist superannuation consultancy, QMV, Jonathan Steffanoni.
In an analysis released this week, Steffanoni is arguing that while the scheduled SG increases could result in some workers taking home less pay, the incremental increase is likely to benefit lower and middle-income Australians.
According to Mr Steffanoni, the planned increase is sound economic policy and beneficial to the retirement savings of Australian’s, however caution is warranted to ensure broader economic conditions and the labour market remain adequately elastic to absorb the associated cost.
“Broad assertions that the planned increase in the SG will add to the cost of living pressures faced by many Australians don’t really stack up to closer scrutiny,” he said. “This may simply be due to misunderstanding of the complexity and nuance in the way the SG and labour markets function.”
Steffanoni said that rather than adding to cost of living pressures by reducing take home salary, an increase in SG for the 23 per cent of Australian workers on lower salaries set by Modern Awards would increase the retirement savings of those who are set to benefit most, as wages aren’t set by the market and provide for SG in addition to salary.
He said that young Australians early in their careers and workers in lower paid industries often faced the most pressing cost of living challenges, and it would be this demographic that benefited most from an increase in the SG.
“As casual employees on monthly incomes of less than $450 are not covered by the current SG system, they would also benefit from an increase in the SG and the removal of the $450 rule,” Steffanoni said.
He said that while there would be some of the 37 per cent of workers on individual employment agreements which relied on a “total remuneration package, inclusive of SG” who could see a direct reduction in their take home pay with an SG increase, a vast majority of the 40 per cent of workers covered by a collective agreement would be unlikely to see a direct reduction.
“The salary of employees on individual or collective agreements often falls below market value, particularly where employees remain in the same role or with the same employer for a longer period. There may be pay increases, but these typically don’t keep pace with the market,” Steffanoni said.
“An increase in the superannuation guarantee is a blunt but effective mechanism to force improvements in labour market efficiency in times of low unemployment and wage growth - times such as those we are currently experiencing.”