Every time the Reserve Bank of Australia meets to set the cash rate, millions of Australians brace for the impact on their mortgages, savings and household budgets. But some economists say there is another tool available to cool inflation — one that redirects money into workers' retirement savings rather than into bank profits. So far, almost nobody in public debate is talking about it.
With the RBA's next cash rate decision due this Tuesday, financial markets and most economists expect the board to hold rates steady as inflation in Australia continues to ease. The board has made clear its focus remains on returning inflation to its target band of 2 to 3 per cent. That process, however, has not come without cost — particularly for homeowners carrying large mortgages.
Why Interest Rates Hit Australian Homeowners Especially Hard
The standard mechanism for fighting inflation involves raising interest rates to make borrowing more expensive, squeezing household spending and reducing demand. Higher rates can also strengthen the Australian dollar, making imports cheaper and dampening export demand. Governments can also influence demand through fiscal levers such as taxes and public spending, but the primary responsibility for managing inflation through monetary policy sits with the RBA.
The problem, according to economist Chris Richardson, is that this approach lands disproportionately on Australian mortgage holders. "Because we haven't built enough homes, Australia has really high housing prices and a lot of debt around that," he says. "And our interest rates are tied to short-term interest rates. So when we fight inflation, it tends to fall more on the shoulders of mortgage holders than you see in most other nations."
This dynamic — high household debt concentrated in property — means the blunt instrument of rate rises carries an uneven social cost. Household debt and elevated house prices have already been reshaping Australia's political and economic landscape in significant ways.
The Superannuation Alternative — How It Would Work
Richardson proposes an alternative or complementary lever: the compulsory superannuation guarantee (SG). Rather than remaining fixed, the SG rate could be temporarily lifted during periods of high inflation to reduce disposable income across the workforce, cooling demand in a similar way to rate rises — but with a crucial difference. The money would flow into workers' own retirement savings, not to lenders.
The SG has risen steadily over more than a decade, climbing from 9 per cent in 2014 to its legislated final rate of 12 per cent, which takes effect on 1 July 2025. Under the proposed model, that rate would not be fixed permanently but would flex — rising when inflation runs hot and falling when spending weakens or unemployment rises.
In practical terms, the effect on an individual worker would depend on their income and the size of any temporary increase. For some, it could mean as little as an extra $20 a month being redirected into superannuation during high-inflation periods, with that money returning to take-home pay once the rate is wound back.
Economist Saul Eslake agrees the concept has merit. "If people's super contributions are raised temporarily as an alternative to increasing interest rates, they'll have less disposable income for as long as that applies," he says. The demand-cooling effect, supporters argue, would be broadly similar to that of rate rises — but the burden would be spread more evenly across the workforce rather than concentrated on borrowers.
Why It Hasn't Happened — and What Would Need to Change
A significant practical barrier is that any change to the superannuation guarantee requires legislation. Unlike cash rate decisions, which the RBA board makes independently, adjusting the SG would require a deliberate act of government and parliament — a slower, more politically complex process.
Critics of the idea also argue it would simply shift costs rather than eliminate them, with workers on lower incomes potentially feeling the pinch of reduced take-home pay without the same financial buffers available to higher earners.
Richardson's broader argument is that the most effective anti-inflation lever is the one that reaches the widest share of the population. Against the backdrop of the 2021–2023 inflation surge and its lasting effects on Australian households, the case for expanding the toolkit beyond interest rates alone is one that economists say deserves far more attention than it currently receives.
