The long-awaited retirement income policy review report from former IMF Director and Treasury deputy secretary Mike Callaghan is looking good based on reporting by the Financial Review:
Increasing the compulsory superannuation rate could disadvantage low-income earners and cut workers’ lifetime income by 2 per cent, the much-anticipated retirement income review has concluded, opening the door for the Morrison government to delay or even scrap legislated rises.
This is great news because continuing with the scheduled increases in the super guarantee rate, progressively increasing it to 12% by mid-2025, would be really bad policy. Among other reasons, Grattan Institute modelling suggests it won’t actually provide much of a benefit to many workers, as they’ll just end up with lower age pensions (due to means testing), and it would also be very bad macroeconomic policy to increase savings while the economy remains well below its potential, which could be the case for the next few years at least.
I’ve previously supported scrapping the super hike, on QEW (Imperative to avoid bad policy measures like super increase which would set back recovery) and in an article co-authored with Adept Economics Research Officer Ben Scott (Super Guarantee hike should be scrapped or delayed).
It will be interesting to see what specifically the review says about how “Accessing home equity is an under-utilised opportunity.” It sure is, given all the asset-rich, cash-poor retirees living in Australia’s capital cities, but changing policy settings (e.g. pension assets/means test) would be politically toxic. Look at all the trouble the Opposition’s franking credits and negative gearing policies caused it in the 2019 election, for example. Perhaps the Government will provide some type of incentive to encourage reverse mortgages, although ASIC has previously cautioned against reverse mortgages according to this ABC report because they’re not well understood by people. It’s going to be interesting to see how the government responds to what is sure to be a very important report, one that could justify big changes to our retirement income policies.