Revealed: How middle-income Australians will be $30,000 worse off if the level of super contributions is increased to 12%
- Grattan Institute modelling showed middle-income workers lose from super rise
- Compulsory superannuation contributions rising to 12 per cent from July 2025
- Grattan researcher Brendan Coates said home ownership would fall with policy
- His modelling showed a super increase would deprive workers of take-home pay
Middle-income Australians stand to lose more than $30,000 over their working life if the level of superannuation contributions is increased to 12 per cent.
The Grattan Institute think tank has done economic modelling predicting how super changes planned for 2025 would affect those earning a median income of $55,400.
A 30-year-old worker would lose $30,000 during the next 37 years until they retired, or about $811 a year, it found.
The Grattan Institute’s program director of household finances Brendan Coates said boosting compulsory super beyond the current 9.5 per cent would reduce the wages of middle-income and make it harder for them to own a home in their old age.
Middle-income Australians stand to lose more than $30,000 over their working life if the level of superannuation contributions is increased to 12 per cent. The Grattan Institute think tank has done economic modelling predicting how super changes planned for 2025 would affect those earning a median income of $55,400 (pictured is a stock image of a barista)
‘It comes at the expense of lower wages for workers today when we know that financial stress is much higher amongst working-age Australians,’ he told Daily Mail Australia on Wednesday.
‘It makes it harder to buy a house. The biggest change in decades to come is that a smaller proportion of retirees will own their own homes.’
The federal government is planning to increase the level of superannuation from 9.5 per cent of income now to 12 per cent by July 2025.
It would rise to 10 per cent from July 2021 and increase in increments every year after that.
The Grattan Institute said lifting compulsory super to 12 per cent would ‘leave workers in middle Australia poorer over their entire lifetimes’.
Higher superannuation contributions would simply be paid for through lower wages, taking up to $20billion a year from workers’ pockets.
The Grattan Institute’s program director of household finances Brendan Coates said boosting compulsory super beyond the current 9.5 per cent would reduce the wages of middle-income and make it harder for them to own a home in their old age (stock image of Australian money)
Taxpayers would also be forking out more than $2billion a year in superannuation tax breaks ‘that won’t lead to lower pension spending’.
‘Half the tax breaks are going to the top 20 per cent of income earners that will never qualify for the pension,’ Mr Coates said.
Australian workers have been suffering from flat wages for the past five years, with salaries growing by an average annual pace of 2.2 per cent.
Employers were expected to withhold wages increases were super contributions raised.
‘It would be easy for employers to simply reduce those nominal wage rises to offset any increase in compulsory super – as they have in the past,’ the Grattan Institute said.
Paul Keating’s Labor government introduced compulsory superannuation in 1992 and in 1995 legislated to have it reach 15 per cent but John Howard’s Coalition government cancelled that and pegged the rate at nine per cent.
In 2010, Julia Gillard’s Labor government legislated to have super contributions rise to 12 per cent by July 2019.
However, subsequent Coalition governments since 2013 have delayed this increase.