Pressure on the federal government to legislate the proposed increase of the superannuation guarantee (SG) from 9 to 12 per cent is mounting as preparations for the 2011/12 budget are running at full steam.
Industry associations have stressed the importance of the SG increase in their budget submissions to Treasury, while according to media reports unions have thrown their weight behind the cause as well.
Although Financial Services and Superannuation Minister Bill Shorten confirmed the government's commitment to the increase in December last year when it published its response to the Super System Review, there seems to be a growing uneasiness about the fact that it has not been set in stone yet.
The Association of Superannuation Funds of Australia (ASFA) explicitly voiced its concerns in its budget submission released yesterday.
"In ASFA's view, any winding-back of the proposed increase in the SG . would be very short sighted," the association said.
ASFA is worried that the changes to the proposed mining taxation will be used as an argument against the SG increase, because the mining tax was originally intended to 'pay' for the increase.
"In particular, ASFA does not consider the superannuation measures should be linked to the Minerals Resource Rent Tax (MRRT) that the government intends to apply. The cost to tax revenue from increasing the rate of the SG is relatively small in terms of the overall Commonwealth budget," the association said in its submission.
ASFA said the phased increase of the SG increase has a projected budgetary cost of $240 million in the financial year 2013/14. At this cost, it seems the long-term benefits of an increase far outweigh the short-term pressure on the government's balance sheet and the long-term problem of a shortfall in retirement savings.
The Australian Institute of Superannuation Trustees (AIST) said in its budget submission of 2 February that it also supported the measure and that the phased introduction should mitigate any negative impacts of the increase.
An AIST-commissioned CoreData poll also suggested the majority of workers are supportive of the increase, with 61 per cent of respondents indicating they would be willing to pay for the additional 3 per cent from their wages.
This seems to indicate that there is enough support for the proposed increase of the SG to 12 per cent by 2019.
Perhaps some of the uneasiness is related to the precarious position of a minority government, which might be restricted in its ability to push through a change in legislation that has proven to be unpopular with the opposition.
The 2011/12 budget will be announced on 10 May, and hopefully the industry will then receive clarity on the proposed measure.
