Retirement
Super increase will hurt wages: governor Lowe
Reserve Bank of Australia governor Philip Lowe has warned that the legislated increase to the superannuation guarantee to 12 per cent will hit wage growth.
Super increase will hurt wages: governor Lowe
Reserve Bank of Australia governor Philip Lowe has warned that the legislated increase to the superannuation guarantee to 12 per cent will hit wage growth.
The RBA governor has placed industrial relations at the top of the list of areas where the economy can generate growth but pointed out that changing the legislation would hurt wage growth.
“There is a process going on at the moment to make the enterprise bargaining system more flexible where businesses and employees can get together more effectively instead of being weighed down by process, which is what is happening at the moment,” Dr Lowe said.
In response to a line of questioning from Liberal MP Tim Wilson, who has been a proponent of freezing the legislated increase of the super guarantee to 12 per cent, governor Lowe warned that “increases of this form do get offset by lower wage growth over time”.
“It will certainly have a negative effect on wages growth,” governor Lowe said. “If this increase goes ahead, I would expect wage growth to be even lower than it otherwise would be. There will be an offset in terms of current income. Some people say that’s perfectly fine because people will have a higher future income.
“So, there’s a trade-off here. Do we want people to have the income now or do we want them to have it later on?"
Governor Lowe said that he would not enter into a debate on that trade-off because it was “potentially politically controversial”, but noted that both parties currently supported the legislated super increase.
Former prime minister and super advocate Paul Keating previously stated that the country can afford to increase the rate of superannuation.
He pointed out that since 2013 there has been no real wage growth, while productivity growth has increased by 9.6 per cent.
“None of this has been distributed to wages. It all went to the balance sheet of companies. So, the proponents of the SG going to 12 per cent are saying there’s 10 per cent labour productivity banked, and we are asking for a quarter of it back,” Mr Keating said.
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