Think tank gets super wrong – again

The Grattan Institute’s claims that an increase in super contributions from 9.5 per cent to 12 per cent will leave an average worker $30,000 worse off over their life have been debunked by new analysis.

And the think tank is not off by a slight margin either – it’s around $50,000 wide of the mark.

Industry Super Australia’s (ISA) modelling shows that an average worker would end up with nearly $20,000 more income over their lifetime if the super guarantee increases to 12 per cent – $50,000 more than the Grattan Institute’s flawed modelling and misleading analysis claims.

“The claims made by the Grattan Institute are based on a fantasy world that doesn’t exist.,” said ISA chief executive Bernie Dean.

“What’s not a fantasy is the impact cutting the super increase would have on people in retirement. They would end up with less to support themselves and their family, while everyone would pay to support more people on the pension.

“There is no Australian evidence to support claims there is an equivalent trade-off between wages and super. This clearly shows that if super increases, workers will end up with more money over their life – not less.”

ISA analysis also shows that a married couple on average full-time wages – not modelled by Grattan as it does not analyse women or couples – would have an extra $44,300 in income over their lifetime. For average earners, an increase in compulsory contributions could see a couple’s lifetime income boosted by over $100,000.

The potential effect on wages if super contributions were increased to 12 per cent could have on a lifetime income is less than one per cent. The same lift in contributions would see a lift of 10 per cent in a person’s annual retirement income.

“Any small potential impact on wages would be further offset by increases in the amount of personal tax paid – because super is taxed less than wages – and the impact it would have on family tax benefits, making very little difference to a person’s working life income. This means workers will end up benefitting from a bigger total remuneration package than they would without the increase,” stated the ISA.

“Further analysis of historical Fair Work Commission decisions has also found no evidence that there is a full trade-off between wages and super increases. There is also the fact that the super rate has increased by only half a per cent in the last 17 years while wages have gone through various stages of growth.

“The Grattan Institute’s modelling assumes everybody works continuously from age 30 until they retire, before dropping dead at 92. They ignore the three million workers who are currently working intermittently and those not receiving super, particularly in casual and part-time jobs, or taking maternity leave or other career breaks.”

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Written by Leon Della Bosca

Leon Della Bosca has worked in publishing and media in one form or another for around 25 years. He's a voracious reader, word spinner and art, writing, design, painting, drawing, travel and photography enthusiast. You'll often find him roaming through galleries or exploring the streets of his beloved Melbourne and surrounding suburbs, sketchpad or notebook in hand, smiling.


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