When society’s biggest rent-seekers and parasites are in rare and furious agreement, ordinary working men and women should be profoundly sceptical. The plan to lift the Superannuation Guarantee from 9 to 12 per cent is vigorously endorsed by government, financial institutions and trade unions alike, yet sadly is receiving little scrutiny.
Nothing is stopping workers from putting an extra 3 per cent of their wages in super right now.
Indeed, workers’ mistaken belief that the burden of compulsory super falls on their employers, or even government, rather than themselves through a 9 per cent cut in take-home pay is allowing an extremely unfair, inefficient and ultimately ineffective policy become reality. The argument Australia ‘needs’ to increase superannuation to plug a ‘savings gap’ and ‘take the pressure’ off the Age Pension is a bogus platitude.
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Super nest eggs have emerged as the first major policy battle ground of the election and neither side of politics is covering itself in glory. The Opposition, while promising no “unexpected and detrimental” changes to super, has confirmed plans to axe a tax concession on the super balances of 3.6 million low income earners.
Meanwhile, in its search for budget savings, Labor is running the ruler over the super balances of high income earners.
After hinting it may tax withdrawals from million dollar super accounts, the government last week backed down and guaranteed the tax free status of all super withdrawals after age 60. That’s only fair. It’s one thing to tax new contributions to super at a higher level, but quite another to retrospectively tax someone who has been saving for years.
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Assume for a moment that superannuation, compulsory private saving, is a good idea. How should it be taxed? If something is compulsory, it doesn’t need to be encouraged; yet almost all countries have concessional taxation arrangements for personal contributions to retirement nest eggs, whether they are mandatory or not.
In theory, saving – consumption in the future – should not be taxed more heavily than spending – or consumption today. Yet by taxing the income savings generate, income tax does precisely that.
The argument for concessional taxation of retirement saving is even stronger: the tax wedge between current and future consumption grows the longer the savings period (especially if inflation is high), and concessions might even prompt people to save more, which could defray the cost of any taxpayer-funded retirement pensions.
Retirement savings which were starved during the global recession four years ago are plumping up as the stock market comes storming back.
The bad news, for some, is that this coincides with rising speculation the fattened superannuation industry is being eyed by federal politicians hungry for cash to counter shrinking revenue prospects elsewhere.
Specifically, the generous tax treatment of superannuation money is likely to be reduced for the wealthy in a move which could revive the annual accusations of “class warfare” from the Opposition.
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Are you sick of being stuck in Sydney traffic for hours? Are you annoyed about the near constant traffic chaos around Sydney airport? And do you ever wonder why there are so many cars driving through Sydney’s CBD?
Well, what you are seeing is a general failure of transport planning by successive governments over many decades. Not since Dr JJC Bradfield have we had a true transport visionary in Sydney. What we get is an endless procession of so-called transport experts who are increasingly just free market fundamentalists having this delusional view that the market will fix all transport and infrastructure problems.
The so-called market in this case are those big private sector companies that just want toll roads so they can simply milk motorists for decades with ever increasing tolls. It’s so easy for a private sector company to build a toll road that barely meets the existing transport needs to just rake in lots of easy money until the toll road can’t cope anymore. Then there’s inevitable call for a new toll road with a new income stream to milk motorists.
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Who is looking after your retirement savings?
Twenty years after the introduction of compulsory superannuation, an alarmingly high proportion of Australians are unable to answer this seemingly simple question.
This week News Limited published rankings of the nations best and worst performing super funds over the past decade, based on their investment return after fees and taxes on their default product.
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It’s a question that will affect everyone at some point in their lives, but very few people know how to answer.
The most recent estimation comes from the Association of Superannuation Funds in Australia.
According to their researchers every Australian will need at least $55, 000 per person, for every year of retirement to ensure they will be enjoying the last years of their lives in comfort.
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Retirees. They’re living it up nowadays, blowing any pitiful inheritance their kids could expect on all their tree-changes, sea-changes, and various kinds of me-changes.
But a number of Gen Ys - my generation - reckon they’re still going to get a fair bit from their parents when they die.
According the ING Direct Financial Wellbeing Index, one in seven Gen Ys are expecting to rely on their parents’ inheritance to support them in retirement.
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Why should we expect others to cover our needs when we could and should do it ourselves?
We want a consumer lifestyle and for the Government to pay, provide and in short, take from someone else to cover those things we insist are basic needs.
Basic needs that are apparently not so important that we set aside our own money before discretionary spending to cover them.
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Bill Kelty made a memorable speech last week. Addressing the ACTU Congress Dinner in Sydney, the legendary ACTU Secretary who helped shape the Accord in the 1980s and 1990s, explained why he became a unionist.
“It was the underdog you always sided with in our family,” he told a hushed audience that included former Prime Ministers Bob Hawke and Paul Keating.
“The Aboriginal on death row, the Gurindji people, women not getting equal pay. It was Australia of whom you were proud, but not the Australia who sang God Save the Queen.
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I sometimes think there are two kinds of politics in Australia. The stuff that gets reported, and the stuff that actually affects people’s lives.
The 24-hour news cycle has created constant demand for new content, no matter how trivial. Much of the demand has been fuelled by punditry, pontificating and poll-analysis, rather than actual news.
While the political journos are obsessed with the state of Craig Thomson’s stomach, Peter Costello’s Future Fund dummy spit, and Wayne Swan’s Three Stooges jokes, you could be forgiven for thinking that is all Parliament ever does. Conflict, not matter how confected, is the fuel that drives media coverage.
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The massive sums and the wealthy characters in the bitter debate over the mining profits tax have swamped discussion of a plan to help the lowest paid Australians. This measure would address the painful worry of hundreds of thousands of working women that they will not be able to save money for retirement.
It is a move designed to avoid the unhappy destiny of many unskilled women - there are just over two million in the workforce - who at the end of their working lives face a struggle to survive.
It has bipartisan support to the extent that if the Government proceeds with it the Coalition, should it win government, would not wind it back. But it is rarely mentioned because the debate is anchored in the fate of billions of dollars, not in the futures of millions of the low paid.
The Deputy Prime Minister, Wayne Swan, spoke at the National Press Club, Canberra, on Monday – the topic, The Rising Influence of Vested Interests in Australia.
In a supporting essay Mr Swan wrote: “We’ve always prided ourselves on being a nation that’s more equal than most – a place where, if you work hard, you can create a better life for yourself and your family.”
Members and retirees of the Australian Defence Force champion this principle. The trouble is the veterans have had with successive governments is that they’ve not been fair regarding the indexation of their superannuation.
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The reader response to The Punch article, 12 January 2012, “Why have we abandoned our troops?” highlighted a deep misunderstanding of the central tenet of the article, and, more worryingly, a flawed knowledge of the actual conditions of service applicable in the Australian Defence Force (ADF).
Some of the more ill-informed myths about what entitlements our military men and women received were:
• Tax free salaries – No (but there are some concessions when deployed to war zones).
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Global financial markets are going completely bananas. Again. Financial experts worldwide are calling on leaders for some direct action to bring certainty to the struggling Greek and southern European economies. So what does all this mean for us? Australian treasurer Wayne Swan has described it as a dangerous new phase, while other economists have urged the RBA to take immediate action to avoid being caught up in the recessionary sweep. Eager to find out what all that actually means, The Punch asked Saul Eslake, senior economist at the Grattan Institute to give us the low down.
1. How much could the current crisis affect Australia? How worried should we be?
The current ‘crisis’ reflects (first) the increasing likelihood (as markets see it) that Greece will default on its debts, resulting in losses that may render some banks who hold large amounts of Greek government debt insolvent, and that in the aftermath of a Greek default other countries (Portugal, perhaps Spain or even Italy, the latter two being much larger than Greece) will be more likely to default; and (second) the increasing likelihood that Europe and/or the US may slip into a second recession, in which case governments and central banks would have very little capacity to respond in the normal way (by cutting interest rates or doing fiscal stimulus).
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Not since Paul Keating introduced compulsory superannuation contributions in the early 1990s has there been such an important opportunity to change the way Australians think about saving for their retirement.
This urgent need for change is magnified when Australians are asked how much they actually know about their superannuation. A recent survey by Suncorp Life found 49 per cent of us don’t understand our super, and 30 per cent of us don’t believe our super is even our own money. Annual changes to the superannuation system are also a constant and frustrating occurrence. That’s why it’s vital for the Government to get it right this time.
The results of the much-anticipated Cooper Review announced last week urge a range of sweeping reforms to superannuation, and herald an exciting new era for the industry. The question is whether the Government is prepared to do what’s needed to simplify the system, and restore Australian’s confidence in superannuation.
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Forty billion dollars gone; four million Australians out of pocket; fees charged for services that are never delivered. It’s the biggest scam you’ve never heard of, and there’s a very real chance you’re a victim.
Indeed, according to the results of a groundbreaking research project last month, a series of questionable practices in Australia’s superannuation industry are gouging close to $80,000 from the retirement savings of many average income earners.
Most worryingly, the same report warned that without immediate, decisive action to fix these serious problems $120 billion more could be siphoned off in the next decade alone.
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In 1992 Paul Keating’s leadership motivated me to join the Labor Party. Keating provided the labour movement with the leadership, vision and fighting spirit needed to combat the regressive Fightback package.
Keating won the election, and Labor celebrated a great win against neo- liberalism. What followed was a period of government where Keating’s great intellect and vision was pitted against his arrogance, exhaustion and electoral indifference.
This was a difficult and frustrating period for many Labor supporters and I remember periods of despair at our performance. After 1996 the whole labour movement shied away from defending Keating, his Government and his politics due to the collective scars caused by his defeat.
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What the hell was that? As a parent with a child in school for the first time I have just withstood a round of what I suspect will become the regular school holiday juggle.
After taking one week’s leave the battle-plans were laid out: a day with said child in the office, play dates lined up, grandparents locked in – and then she gets sick meaning the fragile house of cards came tumbling down.
It’s a simple rule of math really, schoolkids have around 12 weeks of holidays each year while their parents average four - that’s a lot of time when households are juggling care.
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Financial planners will no doubt tell you the world has just ended. The government’s corporate regulator, the Australian Securities and Investment Commission (ASIC), this week revealed proposals to ban all commissions, volume bonuses, kickbacks and percentage-based fees paid to financial advisers.
But while the industry launches into a noisy whinge, consumers are likely to see things differently.
For years consumers have been struggling to figure out if financial advisers are really working for us or whether advisers are simply pushing financial products to serve their own financial interests.
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As of yesterday about one-million hard-working Australians discovered that Kevin Rudd’s campaign promise to stand up for “working families” came with an invisible asterisk.
The asterisk denotes - “promise does not include all working families”.
Especially those families who work a little bit too hard, who pay a higher rate of tax because they hold more senior jobs, work longer hours, have taken risks starting businesses, employing other people, and have got themselves into a position where with their super, their private health care, their choice of hospitals and schools, they are constantly taking pressure off the public system.
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