Australia Mulls Letting Workers Take Pay Rise Over Pension Boost
(Bloomberg) -- Australia’s government is considering letting employees opt for a pay rise over higher pension contributions, prompting the Labor opposition to accuse it of raiding workers’ savings to cover for a failed wages policy.
The government is seeking greater flexibility to allow workers to be able to choose increased take-home pay over a mandatory superannuation increase, the Financial Review reported. It’s also looking at the possibility of letting them tap their pension savings for expenses such as housing downpayments as part of efforts to better balance working and retirement incomes, the newspaper said.
The report drew a sharp rebuke from the opposition. The government is “blaming Australia’s world class superannuation system for its wages failure,” Labor spokesman Stephen Jones said in a statement Saturday. “Undermining workers savings for tomorrow to fix your political problems of today is not going to help wages grow.”
Firms currently pay 9.5% of a worker’s salary into a pension fund under a superannuation system that’s designed to ease the burden of an aging population on the government’s budget. From July this year, that’s legislated to climb in 0.5 percentage point annual increments to 12% by 2025.
Australian wages have stagnated in recent years as workers -- often carrying high debt loads -- worry more about job security than fatter pay packets. Prior to the pandemic, policy makers were trying to tighten the labor market sufficiently to drive salary gains.
Yet with the economy recovering from its first recession since just before superannuation was introduced in 1992, concerns are rising that firms will be unable to afford the extra burden and instead choose not to hire more staff.
Australia’s right-of-center government has been emboldened to try to tinker with the superannuation system after a positive public response to its Covid-19 measure that allowed people to withdraw up to A$20,000 ($15,400) from their pension savings.
Labor and the superannuation industry are opposing any pause or failure to proceed with the increase in contributions.
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