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Retirement

Freezing the SG guarantee is no magic wand to wage rises

  • October 29 2020
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Retirement

Freezing the SG guarantee is no magic wand to wage rises

By Cameron Micallef
October 29 2020

As the debate about the superannuation guarantee continues, Industry Super Australia has explained why holding superannuation rates does not lead to promised wage increases.

Freezing the SG guarantee is no magic wand to wage rises

Freezing the SG guarantee is no magic wand to wage rises

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  • October 29 2020
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As the debate about the superannuation guarantee continues, Industry Super Australia has explained why holding superannuation rates does not lead to promised wage increases.

Freezing the SG guarantee is no magic wand to wage rises

While Liberal backbenchers argue that raising superannuation during a pandemic might be the wrong time, Industry Super points to 2014 when the Coalition stopped the rate increasing by 0.5 per cent a year to 12 per cent in 2019 in return for higher wages.

“But an Industry Super Australia analysis of 8,370 Enterprise Bargaining Agreements (EBAs) struck before and after the super rate was frozen shows the promised wages boost never materialised and workers were not compensated for their lost super,” Industry Super said.

“Its delay could cost the average full-time worker in their 30s $45,000 at retirement.”

Industry Super pointed out that workers who did not see an increase in superannuation were punished as contracts that were negotiated to include increasing super were not renegotiated after the government did not raise the SG.

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The pay cut persisted for years – once those agreements expired, the new deals did not include catch-up wage increases to compensate for the lost super.   

“When the super rate was last delayed in 2014, there was no wage rise, and millions of workers’ pay packets were cut. Politicians could wave a magic wand to increase wages then, and they don’t have a wand now,” Industry Super CEO Bernie Dean said.

“Working families have already taken the biggest hit in the fight against this virus, and they shouldn’t be asked to once again sacrifice their future.”

The superannuation body said politicians are trying to use the same failed argument that they used in 2014.

“Yet despite evidence that freezing the SG at short notices leaves workers worse off, politicians are once again claiming cutting next year’s legislated 0.5 per cent super rate rise – only its second increase in 18 years – will lead to higher wages,” Mr Dean said.

“The economic downturn makes wage rises far less likely now, and most economists now concede that Australian workers are not going to receive any real wage growth over the coming years – making the super rate increase the only pay rise on offer for most workers.”

The industry body noted that a worker on the cusp of retirement has already lost about $100,000 from previous super guarantee delays, further pauses will compound the losses. 

“It is unfair that some politicians – who receive more than 15 per cent super contributions – are once again cruelly asking workers to sacrifice their chance for security and dignity in retirement for nothing in return. 

“These small staged increases are affordable for employers and the key to giving people more choice about when they can stop work and control over their life in retirement. The community won’t take kindly to a broken promise that will make millions more Australians dependent on the pension and hike taxes for those still working,” Mr Dean concluded.

Freezing the SG guarantee is no magic wand to wage rises
Freezing the SG guarantee is no magic wand to wage rises
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About the author

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Cameron is a journalist for Momentum Media's nestegg and Smart Property Investment. He enjoys giving Aussies practical financial tips and tricks to help grow their wealth and achieve financial independence. As a self-confessed finance nerd, Cameron enjoys chatting with industry experts and commentators to leverage their insights to grow your portfolio.

About the author

Cameron is a journalist for Momentum Media's nestegg and Smart Property Investment. He enjoys giving Aussies practical financial tips and tricks to help grow their wealth and achieve financial independence. As a self-confessed finance nerd, Cameron enjoys chatting with industry experts and commentators to leverage their insights to grow your portfolio.

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