We’ve all been conned on superannuation

Matthew Franklin and Annabel Hepworth
The Australian
March 23, 2012

BUSINESS has accused Labor of misleading Australians about the cost of increasing the superannuation guarantee so it could slip the change through parliament without political inconvenience.

The Australian Chamber of Commerce and Industry has also accused the government of compounding its “deception” by claiming workers would fund the $20 billion-a-year increase when its legislation clearly saddled employers with the burden.

The ACCI’s attack came yesterday as the head of the nation’s biggest union – the Shop Distributive and Allied Employees Association – said Labor had not properly explained its decision to lift the superannuation guarantee from 9 per cent to 12 per cent.

As the SDA national secretary Joe de Bruyn also vowed his members would not pay for the super increase, Reserve Bank broad member Roger Corbett questioned its timing, warning that the cumulative effect of higher superannuation payments and the carbon tax could have a “very, very adverse effect” on the economy.

Small business also entered the fray, with Council of Small Business of Australia president Peter Strong saying the small-businessperson would pay for the increase. “They will have less money to take home,” he said.

However,Workplace Relations Minister Bill Shorten defended the government’s position, assuring businesses they would not be left to foot the bill and insisting the government had been upfront about its intentions.

On Monday night, the Senate approved Labor’s $10.6bn mineral resources rent tax, with the legislation also including an increase in the super guarantee to be introduced from July next year and to rise in increments over seven years.

On Wednesday, Mr Shorten hosed down business sector claims that employers would pay the tax by saying the money would come from “deferred wage rises” that would be extracted as part of routine negotiations between employers and employees for annual pay increases.

Labor MP Gai Brodtmann conceded to The Australian yesterday that she had struggled to clearly explain the super increase when speaking to reporters in Canberra on Wednesday. During a long and rambling interview, which she admitted was not her finest moment, Ms Brodtmann said the government’s mining tax would boost the retirement savings of 8.4 million Australians. She was forced to admit that the cost of the 3 percentage point boost to compulsory superannuation would not, in fact, be borne by the government. “The superannuation will be, in terms of how it is paid for . . . discussed in enterprise agreements over coming years,” she said.

ACCI chief executive Peter Anderson accused Wayne Swan and other ministers of spending more than a year giving people the impression that the new mining tax would fund the increase.

Mr Anderson said that while part of the MRRT proceeds would fund government revenue losses caused by changes in concessional tax thresholds to assist low-income earners to lift their superannuation contributions, it was clear employers would pay the cost of lifting the guarantee.

“It has been politically convenient to the government to give the impression that the mining tax is funding higher superannuation and it has helped them to justify the imposition of the tax,” Mr Anderson told The Australian.
“At the core of that claim was the reality that businesses would be funding it. The misleading nature of that claim. . . is simply compounded by the assertion now that it is not the mining tax but the workers who will pay for it when the legislation makes very clear that employers will pay.”

Mr Anderson said Mr Shorten’s shift to claim workers would pay was an attempt to “try and get the government out of a tight corner” and would provide no comfort to businesses because the government had created no framework for wage trade-offs.
Mr Shorten said last night employers would pay the increase but that this did not mean they would bear the full cost.
“It confuses their legal incidence (who the legal obligation is imposed upon) and the economic incidence (who ultimately pays),” he said.

“It is the government’s view – a view supported by statistics from when the super guarantee was increased to 9 per cent – that employers do not ultimately pay for the increase, and rather that it is factored into wage negotiations.”

Mr de Bruyn, whose union represents retail workers, said employers should absorb the increases because they would be small given the long phase-in period. “We won’t be (moderating pay claims),” he said.

Despite Mr Shorten’s confidence, Mr de Bruyn said unions did not moderate wage claims when the guarantee rose from 3 per cent to 9 per cent during the 1990s.

Mr Corbett, a Reserve Bank board member and former Woolworths chief executive, said he agreed with increasing the super guarantee but worried about the timing.

He said the levy would represent an “immense” impost on many small businesses, while unions could also have considerable leverage to push against deferred pay rises.

“There are many businesses in Australia really in struggleland, big time,” Mr Corbett told The Australian.

“Whilst the macro economy is all right, the finance sector, the retail sector and indeed the property sector, and other sectors, but those mainly, are under very, very severe pressure.”

He said unless there were clear guidelines on the need for tradeoffs against wage rises, “then we are going to have to be very careful that this doesn’t have a very, very adverse effect”.

Garry Weaven, the chairman of Industry Funds Management and a former assistant secretary of the ACTU, said the higher super levy would lift retirement incomes.

“It’s sensible to spread the costs out over a period,” he said.

“The hysteria now is largely built up by political pressure.”

Additional reporting: Joe Kelly