Static wage growth should be a major concern for Australia’s superannuation industry, which has a common cause with unions to reverse the trend, visiting economist at the University of Melbourne Stephen Kinsella says.
According to the Irish-born academic, the $2.6 trillion sector needs to jointly lobby, have a policy program and put cash behind an effort to encourage wage growth.
Average wage growth was 2.75 per cent last financial year, the second lowest ebb since the Australian Bureau of Statistics began the wage price index in 1997. This comes at a time of growing underemployment, rising household debt and falling union membership.
“Australia’s economy, and potentially the problem with wage growth, is [where] the super industry and the unions have a common cause and, in many respects, they should be supporting each other,’’ Kinsella says. “If people don’t have wages, they don’t pay super and that’s that. If you look at the fall in Australian union coverage, it’s far more marked than anywhere else in the OECD.”
More than 5 million Australian workers are members of 16 industry super funds, including the nation’s largest, AustralianSuper, health worker-based HESTA and construction industry fund Cbus Super. The 16 funds have a combined $400 billion in funds under management.
Kinsella says the super industry has money, while unions do not and, although he is not advocating that Australia become a “socialist paradise”, workers have experienced hidden austerity, such as increased housing inaffordability. This is reflected in the labour share of the economy shrinking from 62 per cent to 49 per cent of the since 1960.
“For a business that has generated surplus, and not given some to wage rises, those workers supplement their income with debt and that leaves them fragile to interest rate changes,’’ Kinsella says.
Added to this is a rise in people working in the gig economy – that is, contract workers who do not come under the superannuation guarantee.
“The Oxford Internet Institute says Australia has the second highest gig economy workforce (behind Britain and the United States) which is an interesting problem, because in the gig economy, workers tend to only pay taxes and not have a pension associated with that work,’’ Kinsella says.
He says part of the solution rests with the superannuation industry.
“The super industry has the funds and the resources to be able to prosecute a long-term research agenda,’’ he explains.
Industry Super Australia chief economist Stephen Anthony says a new accord between employers, workers and government is what’s required to clear blockages in the economy, with a productivity trade-off to come with wages growth.
But the approach would be different, as the system has decentralised since the industrial relations reforms of the 1980s.
“Probably there’s another grand bargain to be struck that requires a collegial approach…We’ve all had enough of driving sideways,’’ Anthony says.
Dr Stephen Kinsella, a visiting research fellow at the University of Melbourne School of Government, will give his view of Australia’s economy at the Australian Institute of Superannuation Trustees Super Investment Conference, to be held in Cairns, September 5-7.