A potential cut to the legislated SG increase is still up in the air. It would have been easy to push one through in this month’s budget when the government enjoyed unprecedented support and had tacit permission from the people of Australia to boost economic growth by any means necessary. They opted not to go down that road – raising the possibility of a showdown with Australia’s largest funds before 1 July 2020, when the increase is meant to go ahead.
That’s a battle the Morrison government may not want to fight. The industry funds can bring substantial resources to bear on media campaigns – something that admittedly may become harder under the Your Future, Your Super reforms – and are unlikely to take a cut lightly. Of course, given that there will be no election in 2021, Mr Morrison does have more time to let potential backlash roll through the electorate before riding a strong economic recovery to victory in 2022.
A missing piece of the puzzle is the Retirement Income Review (RIR), which is meant to probe the efficacy of Australia’s retirement system but which – somewhat controversially – has not yet been released. Assistant minister for superannuation Jane Hume says that she read the 650-page RIR “cover to cover” and “loved it” but that Treasurer Josh Frydenberg had been too focused on the budget to have a look.
“It doesn’t have any recommendations. It’s a fact base, ” Ms Hume told the Association of Financial Advisers Vision Conference.
“It’s a fact base. And because of that we can release it out there and it can create so much headline chatter without any depth to it. I think we want to make sure that the government is ready to respond to it if not react to it.”
But how the government will react to it is unknown. The rationale for cutting the SG increase is that it will hit wage growth by forcing employers to pay more into workers’ super rather than increasing their take-home pay. But moving on a cut after announcing a host of hiring and investment incentives is as good – in Australia’s cutthroat political world – as admitting those incentives aren’t working. The potential success of those incentives would also leave the Morrison government little room to justify a cut.
It may also be that the appetite in Canberra to perform the difficult work of cutting super has waned since the announcement of the Your Future, Your Super reforms. Backbench rising stars like Andrew Bragg have welcomed the reforms and it is possible that the government is satisfied with the changes that will soon be sweeping superannuation. But if they aren’t, they’ll be facing heavy resistance from funds that see the increase as their lifeblood.
