The coalition government has adopted the left wing, anti-accumulation views of a thinktank as there’s no relationship between wage growth and the superannuation guarantee (SG), according to former Prime Minister Paul Keating.
Speaking at the Association of Superannuation Funds of Australia (ASFA) conference, Keating said he did not see any change of real wages growth in the foreseeable future and it would not change if current legislation of enterprise bargaining was kept.
“Enterprise bargaining could work again but against it is a big deflationary force in the world coming from technology which is changing the nature of jobs,” he said.
“There’s been a 10% increase in labour productivity in the last eight years and not a cent has gone to wages and the point about the SG, which is legislated, is 2.5 percentage points of wages.
“Ten percentage points of labour productivity has gone to balance sheets. Really what the SG is saying is can we have 2.5% of 10% back and if that 2.5% is not paid then working Australians will have no real wage growth at all.
“If working people were to lose the legislated 2.5% they get none of the productivity.”
Keating noted that those that believed increasing the SG would impact wage growth were confusing an old argument and that economics was a science that changed over time.
Keating also said an SG increase would help the two needs in the economy – public rental housing and build to rent properties. This, he said, would help young people struggling to afford housing.
“Giving a deposit [through super] will push up prices of existing stock of house as we have a supply-side problem not demand. The answer is to use super to fund money to add supply,” Keating said.
“If money is invested in super, the super fund can create a whole new asset class in build to rent and can fund public rental housing. If you’re an earnest minister and you truly want to put a roof over a young person’s head the best thing to is let the super fund fund build to rent and public housing.”
He also said downsizing to help fund retirement was an option but people should not be driven to it. Super commentary by the Grattan Institute and the Retirement Income Review encouraged people to eat up their income and capital and if they became broke they would be encouraged to reverse mortgage their house and start eating up the family asset, he said.
“I’m surprised that the liberal party has locked onto the left wing views of John Daley and Brendan Coates of the Grattan institute. This is an unholy alliance where you’ve got a coalition government adopting the left-wing anti accumulation views of a left wing thinktank. It’s all about to put a spear through the 2.5% SG increase,” Keating said.
Keating noted there was a lot of pressure on the Age Pension given the ageing population. In 20 years, he said, there would be half the number of taxpayers supporting a much bigger retired population. He said in a few years there would be three taxpayers for every one person over 65 paying for the Age Pension.
“People will only have retirement adequacy through self-provision. They will never get it off the back of a budget when only three taxpayers are carrying the tax burden of the country. More than that they’re going to have to try the real rates of the pension and this is unlikely to happen. These younger taxpayers start life with a HECS debt, they pay a flat rate GST on everything they buy, and have to look after everyone over 65. This will break down,” he said.