Following speculation that the government will go ahead with the promised increase to the SG rate in the coming budget, an ex-Liberal leader has said any freeze in the rate would hand Labor a dangerous political weapon at the coming election.
Former opposition leader and current director of Crescent Wealth, John Hewson, told InvestorDaily that reports the government would drop its plans to freeze the SG were likely correct, as such plans would give the opposition more firepower heading into an election where the Coalition’s chances were already looking dire.
“The argument is that the government should back off [the SG increase] in the interests of employers that can’t afford to do it, but I think they will do it on the basis that the argument against it is really weak,” Mr Hewson said.
“There was a firm commitment that we will keep going to 10 per cent and I think in the end they will, mostly because they know if they don’t the ALP will run hard in the election against them.”
Mr Hewson said the government’s retirement policy lacked long-term vision and it had allowed the political conversation over super to become knee-jerk and reactive.
“There’s an employer lobby that says any increase in compulsory super is too much, we have enough trouble paying what we’ve got and we don’t want anymore. But when you go back to the original focus on super, it was as an alternative to a wage increase and they accepted it at the time,” he said.
“They are not thinking about in a long term strategic sense whether it’s an adequate retirement income strategy, just some immediate cost impacts. It’s become a very emotive issue and it’s never a good time to increase because they will always argue it’s a cost impact at a time they’re trying to transition their business, or coming out of COVID or whatever.
“That’s an easy argument for them to make, but this is something of national significance – it’s way more important than any group of employers. If this is what we’ve embraced as a nation for compulsory super as a reliable basis for retirement income strategy, we’ve got to stick with it.”
Commenting on the Your Future, Your Super reforms, Mr Hewson said while efforts to reduce inefficiency in the super system by stapling employees to their accounts were admirable, the amount of power handed to government in terms of performance benchmarking and veto power over fund investment strategies set a dangerous precedent.
“I get nervous when governments and bureaucrats start setting ratios and rules, because on what basis are you setting them,” he said.
“The theoretical models on which they’ve taken these ratios, it’s like the LVR ratio in banking – you know the banks have lent far more money on the basis of the value of the house than they should have, but if you look at it as it should be 60 per cent or 70 per cent, you can’t generalise.
“A lot of that comes from some sort of theoretical thinking, not a practical reality. That is a real danger in finance regulation generally.”