The minister for superannuation, financial services and the digital economy, Jane Hume, has revealed the government is still very much open to challenging the legislated superannuation guarantee (SG) increase before July 1 and backed its ability to make the right decision closer to the date.
Speaking on a digital session at the Conexus Financial Chair Forum this morning with her labor party counterpart, the shadow minister for financial services Stephen Jones, Hume said the prime minister has made it “very clear” a decision will be made closer to the scheduled increase to ten per cent mid-year.
“The reason for that is this government has demonstrated that it does have a skill in responding to the economic circumstances at the time,” she said.
The SG debate has been a cross-party bone of contention since the original plan to increase the amount to 10 per cent in 2015 was pushed back to 2021. In recent year stagnant wage growth and then the pandemic has fuelled doubt about whether the increases – set to peak at 12 per cent in 2025 – will do more harm than good.
Hume sidestepped “unsubstantiated” reports the government is mulling opt-in increases to superannuation contributions. The SG increase will either go ahead or the legislation will be challenged, she explained, with wage growth and the prevailing economic climate critical factors in that process.
“The rise to 12 per cent is already legislated, but the decision to pursue that legislation should be made in the economic circumstances at the time because we understand that the trade-off is a significant one.”
Likening those who dispute the link between a rise in the SG and a suppression of wages to “flat-earthers”, the minister said that while wage growth has been poor, it would have been worse if the SG increases had continued as per the original schedule.
In response, Jones took aim at the modelling used in the recent Retirement Income Review which found that increases to the SG would mostly come out of wages, mocking the “heroic” four per cent wage growth assumption used in the adequacy test.
“We have not hit four per cent in the last decade and we’re not likely to hit it in the next decade under current policy settings,” Jones continued. “So that’s just one example where the retirement income review got it absolutely wrong.”
Jones also referenced the current median superannuation balances at retirement for women ($118,000) and men ($180,000) and said “no one could argue” that 9.5 per cent was adequate. “Because it’s not,” he said. “Nine and a half per cent ain’t gonna get us there.”
Common and uncommon ground
The ministers also jousted on the merits of the recent Your Future, Your Super reforms, with Jones repeating a much-touted complaint – that the fund performance test doesn’t include administration fees.
“I’m on board with the objective 100 per cent,” he said. “My great disappointment is the detail falls short of promise to measure performance.”
Hume tempered hopes of legislating the purpose of superannuation, saying she “didn’t know” if it was needed. The idea has been bandied around parliament for years and was close to getting off the ground before Hume herself abandoned the proposal during the pandemic.
“Arguing over the purpose [of superannuation] did not add one cent to anyone’s account,” Hume said.
Both Hume and Stephens found partisan ground on the prevalence of mergers and the obligations on funds to either meet performance benchmarks, find a merger partner or transfer members to another fund.
“If fund mergers aren’t an option there needs to be a transfer of members into a better performing fund,” Stephens said.
“We’ve got to get disengaged members across to better funds,” Hume added.