Workers will receive a boost to retirement contributions as a long-awaited lift to the superannuation guarantee kicks in, but further increases are unlikely any time soon.
The rate of super employers are required to pay employees increased from 11.5 per cent of their wages to 12 per cent on Tuesday, along with a raft of other changes to payments and prices to mark the dawn of the new financial year.
It’s the culmination of a decades-long process to increase the super guarantee from three per cent when it was introduced in 1992 and follows a six-year delay in the rollout to 12 per cent under the previous coalition government.
Former prime minister Paul Keating – who conceived compulsory superannuation alongside union boss Bill Kelty – said the system had finally matured.
“Superannuation, like Medicare, is now an Australian community standard, binding the whole population as a national economic family, with each person having a place,” Mr Keating said.
The Labor Party’s national platform still lists an aspiration for the party to “set out a pathway” to increase the guarantee to 15 per cent, but voices in the Labor movement have recently cooled on the idea.
Sally McManus, secretary of peak union body the ACTU, said getting to 12 per cent was an “amazing achievement”, but the union movement was not pushing for more.
“There’s a question about whether or not we’ve actually reached the point of a dignified retirement at 12 per cent,” she told AAP.
“Obviously, we’ll keep assessing that.”
Former Labor treasurer Wayne Swan, who legislated the increase of the super guarantee from nine to 12 per cent and now chairs industry super fund Cbus, doesn’t want further rises.
The scheme provides “adequate retirement savings for most workers” at 12 per cent, Mr Swan argued in an op-ed in the Australian Financial Review at the weekend.
Labor figures are concerned that the scheme no longer functions as intended – to provide a dignified income in retirement and reduce reliance on the old age pension.
The increasing use of super as a tax minimisation vehicle rather than a retirement nest egg by Australians prompted the government to introduce legislation, increasing the tax rate on earnings from super balances above $3 million from 15 per cent to 30 per cent.
The change is yet to pass parliament but will be backdated to July 1 once legislated, assuming Labor wins the support of the Greens in the Senate.
The government will also pay super on paid parental leave from Tuesday, in a “major win” for women who take time out of the workforce to raise children, said Mary Delahunty, chief executive of peak superannuation body ASFA.
Workers on minimum and award wages will receive a 3.5 per cent pay bump on Tuesday – a significant boost to real wages above inflation.
As well as helping address a decline in living standards in recent years, Ms McManus said it would help the economy because consumer spending was essential for businesses and workers on award wages spend rather than save a higher proportion of their income.
“People are still behind where they were prior to inflation going up. So there is more catch-up to do,” she said.
While wages and government assistance payments were going up, so too were price hikes for business registration and energy bills, which could be up to 9.7 per cent higher for some households.
Increased costs for businesses and households would hit living standards and hamper productivity, said shadow treasurer Ted O’Brien.
“This new financial year was Labor’s chance to reset, instead Labor have doubled down on higher costs, more red tape, and policies that make life harder for working Australians.”
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