Superannuation
Flaws in Grattan SG research: Report

Research published this morning by Jim Stanford from the Australia Institute says increasing the superannuation guarantee to 12% will not stifle future wage growth, and calls out assumptions used in Grattan's research on the subject.

Stanford reviewed economic statistics from the introduction of superannuation to the present, in the paper titled The relationship between superannuation contributions and wages in Australia, which was commissioned by industry superannuation funds.

He found there is no statistical evidence that higher SG contributions would automatically lead to lower wages and hence be self-defeating.

"The research refutes claims made by some commentators and lobbyists that higher superannuation contributions would automatically lead to lower wages, and hence would be self-defeating. The new research finds no statistical evidence for that claim in Australian empirical data," Stanford said in the introduction.

If anything, the research found a slight positive correlation between wage growth and SG.

"On average, wages were more likely to accelerate and grow at a faster rate when the superannuation guarantee (SG) rate was increased, than to decelerate or grow more slowly. This indicates a slight positive correlation between wages growth and changes in employers' minimum SG rate," the report said.

The research concludes that winding back SG increases is not a fix to Australia's languishing wage growth.

Grattan made "arguments by echo chamber"

Earlier this year, Melbourne-based Grattan Institute garnered attention when it argued that an SG increase would leave Australians worse off.

Stanford's paper says that Grattan's model incorrectly assumes that wages adjust fully and immediately to offset superannuation contributions.

It also says that many major reports that have refuted an increase to SG tend to use the same citations without looking deeper, reinforcing a "groupthink" and circular arguments.

As an example, the paper says Grattan cited a 2016 report by Michael Potter and also three other sources (Henry Tax Review, speeches by Bill Shorten and Paul Keating) used in the Potter report, without testing their assertions.

"Those who have argued that increases in the SG rate will be automatically and fully reflected in a decline in wages have not advanced concrete empirical evidence in support of that claim in Australia; instead, they have simply repeated assertions to that effect in a circular and repetitive exercise in "groupthink," the research reads.

"Economic theory (in contrast to the assertive claims of some analysts and newspaper columnists) does not expect a full and complete offset between wages and superannuation contributions."

Read more: Australia InstituteJim StanfordBill ShortenGrattan InstituteGrattan SGMichael Potter
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