‘Can’t be crying poor’: Business profits support calls for higher super

Company profits have surged on the back of massive government support payments in what some economists have described as vindication of calls for higher superannuation.

Figures released by the Australian Bureau of Statistics on Monday show company profits increased by 3.2 per cent over the September quarter and by 18.6 per cent over the 12 months to September 30.

The strong quarterly result came after a massive 15.8 per cent profit jump in the June quarter.

Economists said the profit surge was largely the result of massive government support payments. The federal government paid almost $70 billion in wage subsidies to roughly one million businesses during the first phase of JobKeeper.

Wages also rose, but at a much slower rate than profits.

Businesses paid out 2.4 per cent more in wages in the September quarter as restrictions eased and Australians got back to work.

But, unlike with business profits, the welcome increase in wages came after a sizeable fall in the June quarter (down 3.3 per cent), which meant they were up just 0.4 per cent over the year.

Market Economics managing director Stephen Koukoulas said the strong company profits were the continuation of a decade-long trend.

He told The New Daily the figures showed companies could easily afford the legislated increases in the superannuation guarantee, even after the economy suffered the largest contraction on record in the June quarter.

“It’s not just the last quarter or two. It’s that trend over the last decade. Company profits have been pretty good,” Mr Koukoulas said.

“Given the profit numbers, businesses could – clearly – easily afford a half percentage point increase in the super contribution payments.”

The data sheds light on another issue that has animated public debate in recent months: The potential misuse of the JobKeeper wage subsidies.

The government scheme was intended to cover the cost of retaining staff at firms that otherwise may have let them go, due to large falls in turnover.

But Mr Koukoulas said the ABS data showed much of the money “was given to companies that didn’t need it”.

It comes after Labor MP Andrew Leigh attacked several ASX-listed companies in August for paying executive bonuses despite receiving JobKeeper.

Centre for Future Work senior economist Alison Pennington said the ABS figures showed the recession was hitting hit some members of the community harder than others.

“While company profits are up 18.6 per cent on this time last year, total wages and salaries rose by only 2.4 per cent on the quarter and 0.4 per cent on this time last year,” Ms Pennington said.

“So what I think will be confirmed (when the national accounts are released) on Wednesday, is that labour’s share of GDP will remain at, or even plunge lower, than the post-war record lows that we [saw] last quarter.

So what that means is the overall share of the economic pie going to people in their jobs will be at a post-war record low.”

Ms Pennington added that although business profits were surging, the purchasing power of workers had gone backwards, as wages (+0.4 per cent) had risen slower than inflation (+0.7 per cent).

She said the data showed there was “more than ample space for Australian employers to pass on the riches they are accumulating [during] the worst recession in 90 years”.

“If wages and salaries are not going anywhere, then the least they can do is forward on this 2.5 per cent increase in the superannuation guarantee rate,” Ms Pennington said.

“Not just because they are rolling in higher profits, but because workers have increased their labour productivity rates by 10 per cent in the last eight years.

“So it really is the least they could do. They definitely can’t be crying poor.”

A table showing when the super guarantee will lift, and by how much.

Independent economist Saul Eslake, however, said although many firms could afford to increase the superannuation guarantee, the weight of evidence suggested it would come at the expense of lower wages growth.

Not because companies couldn’t afford to raise both, but because labour productivity over the long run had been weak and workers had less bargaining power.

“And given the existing contribution rate, of 9.5 per cent, is enough to give people who work for their working lives an income in retirement equal to 70 per cent of their working incomes … and given that’s adequate, why then would you want to incur a budgetary cost [through a lower tax take], in order to provide people a retirement income that’s more than adequate?” he said.

“I mean, if you really want to do that, why not just raise the age pension or allow more people to get it? It would be simpler.”

The New Daily is owned by Industry Super Holdings

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