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Sunday, 19 May 2013

Will the coalition really be costing worker's $20,000 by delaying the SGL increase 2 years?

Aside from accepting in principle all of the savings measures announced in Labor's budget, in Tony Abbott's budget reply he also flagged saving an additional billion or so by deferring the introduction of Labor's SGL increase to 12% by two years.

Labor claims this will cost young workers up to $20,000 in final retirement payout, but at the same time claims that there's no need to defer to SGL increase as it isn't really going to be paid for by business (and would therefore be a drag on economic growth), but will be essentially a diversion of part of the normal wage rises that would otherwise by paid for by business. This is essentially a case of Labor tying to have their cake and eat it too.

Either the SGL increase would be paid as an additional cost on business, and therefore should be deferred at a time when the economy isn't growing very strongly, or it is actually going to be paid via foregone wage increases - in which cases the workers could simply salary sacrifice the extra 2% (which would mean they'd be in exactly the same situation as if the 12% SGL was implemented according to Labor's schedule), or choose to contribute as an undeducted contribution, or else choose to spend the extra income on something else now, rather than lock it away until their retirement.

It's also a bit ridiculous for Labor to claim that delaying the move to 12% SGL by a couple of years will 'cost' a young worker $20,000 in final retirement benefit. Using that logic, then Labor has cost the same worker's more than $100,000 by choosing to phase in the increase from 9% to 12% over several years, rather than in one year! Let alone the 'cost' of not introducing this increase when they were first elected, or the 'cost' of not increasing the SGL to 15% as superannuation pundits have said is the amount required to ensure workers on minimum wage end up with enough superannuation to support themselves in retirement...

The fact that Labor has been unable to make any more sensible criticism of Abbott's budget reply suggests it was politically effective.

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