The Association of Independent Retirees (A.I.R.) has backed the Federal Opposition’s plan to delay the increase to the superannuation guarantee (SG) for two years, on the basis it would impose another cost to businesses already suffering from low profitability.
Low productivity would lead to low share market prices and poor-performing super funds, according to A.I.R. president Max Barton.
“While A.I.R. supports the long-term objective of increasing the 9 per cent SG, any increase at this time will have a negative impact in the short term on productivity and the business climate,” he said.
“The negative impact of reduced share market prices on superannuation fund balances during the global financial crisis is well understood and is a stark reminder of the effect of a weak corporate sector in Australia.”
Barton said increasing super fund investment returns by half a percentage point as a consequence of reducing imposts on business would offset the deferral of the SG. Members could thereby gain substantial increases in their super savings through funds increasing returns over the long term and the reduction of super fund fees, he said.
Barton said reducing the forecast unemployment rate from 5.75 per cent to 5 per cent would have a greater impact on the economy than increasing the SG in July - which would have no positive immediate impact on super fund returns but would have a detrimental impact on small and medium-sized industries (SMEs).
He said growing SMEs to become public corporations would provide an avenue for local super fund investment, with potentially greater returns than those achieved offshore. The size of Australia’s super funds exceeds the market capitalisation of all of Australia’s public corporations, he said.
“Further increase in the size of superannuation funds only distorts the Australian economy, unless profitable investment opportunities are developed in Australia,” he said.
Barton said A.I.R. members considered increasing the SG a neutral approach to building an individual’s retirement fund - one which did nothing to improve the economy.
A number of industry bodies and financial services groups, including the Association of Superannuation Funds of Australia, the Australian Institute of Superannuation Trustees, The Actuaries Institute, Deloitte and BT, have spoken out in support of increasing the SG as planned on 1 July this year.