It's the economy, stupid!

 
  DirtyBallast Chief Commissioner

Location: I was here first. You're only visiting.
Mate, YOU'RE the one who missed the boat.
Some people did very well out of the 'modernisation' of the economy and others didn't.

You're okay and that's all that matters.
don_dunstan
Actually, all my mates/colleagues/rellos are doing well too. YOU'RE the only loser that I converse with.

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  don_dunstan Minister for Railways

Location: Adelaide proud
Mate, YOU'RE the one who missed the boat.
Some people did very well out of the 'modernisation' of the economy and others didn't.

You're okay and that's all that matters.
Actually, all my mates/colleagues/rellos are doing well too. YOU'RE the only loser that I converse with.
DirtyBallast
And I love you too XXX.
  don_dunstan Minister for Railways

Location: Adelaide proud
Speaking of Josh Frydenburg (yet again), there was an interesting article in the Financial Review the other day regarding Treasury's economic advice to our esteemed Treasurer about what to do next:

Treasury warned Josh Frydenberg that bank profit margins will be "squeezed" by the Reserve Bank of Australia's ultra-low interest rates and raised the possibility of the RBA offering cheap funding to banks to stimulate the economy.

The internal government advice analysing "unconventional monetary policy" undermines Prime Minister Scott Morrison's argument that the big banks were unjustly "profiteering" by failing to fully pass on the recent three RBA cash rate cuts to 0.75 per cent. Instead, in a paradox, Treasury suggested the RBA could provide cheap debt finance to banks either by buying their bonds or via direct lending. This would compensate for the "intense pressure" on profit margins and ensure lower borrowing costs flowed through to the economy.

The advice had been "protected" but was released under Freedom of Information laws.

Treasury also said superannuation funds and life insurers faced pressure from ultra-low rates reducing returns on fixed income. "When interest rates are low or negative, pension funds and life insurers are likely to face increased difficulties in meeting ... the payout of pensions and life insurance claims as available returns decline," Treasury said.

Gosh, imagine that - things are going so well in the Aussie economy that the government is actually thinking about giving very cheap money directly to the banks to loan out to the real-estate market. I mean there's probably plenty of other schemes in Australia that are equally worthy of very cheap Commonwealth loans but propping up the bottom lines of the most profitable businesses on earth is probably not a bad way to use it too.
  RTT_Rules Oliver Bullied, CME

Location: Dubai UAE
Longer term, the OAP cost to the govt as % of revenue will by around mid 2030's when Gen X starts to retiree will become less of an issue as time moves on as SUPER and different savings attitudes will see a growing number of Australian's less dependent on the govt for their Golden Years. I believe we are seeing more self funded retirees and the attitude of "no need to save for your retirement the govt will pay" is dying.
We were told by Keating et al that this would have already happened by now - instead people plan their finances cleverly so that they can get the pension or at least a Health Care Card and still have their lump sum too. You're living in a dreamworld if you think reliance on the pension is going to decrease because of superannuation; people have learned to access both. It's become a worst-case scenario for taxpayers because superannuants are still getting support from the government and that situation is not set to change.

You have also failed to account for the fact that superannuation isn't a zero-sum thing, that money comes directly from employers and impedes our competitiveness as a nation in favour of other nations with lower wage bases and less taxation; we get overlooked as an investment and business destination because it's too expensive to employ people here (except in industries where the award wage is non-existent now). In addition all that money is distorting our financial system making returns on the ASX and with investments in general less and less. How do you think the search for dividends will go when domestic interest rates turn negative?

My theory is that the entire thing would have crashed by the time I get around to retiring anyway; the government of the day will probably compulsorily acquire the funds to keep the financial system going. Zero interest rates are just around the corner, the financial system is in diabolical trouble but you won't hear that from Morrison or Frydenburg.
don_dunstan
The average income earner retiring today has only had compulsory SUPER for about 25 years, so no their SUPER balances are the incomes from such schemes will not be enough to live off so accessing the OAP is likely required if they don't have other savings.

My Father Inlaw was a teacher who retired about 10 years ago (early) but in final few years was dumping the bulk of his pre-tax income into SUPER and still retired with about $550k in his fund.  Assuming a 5% return this is barely $500/wk or around $300/wk after funding inflation. Depending on other personal savings, this would need OAP to support.

However someone retiring after being on compulsory SUPER from Age 20 - 70 on average income ignoring inflation and using historical returns after fees (from my own SUPER as a reference) should have a sum of around $1.3M which is closer to $1000/wk after funding inflation and yes should not need access to OAP.

Also note many women retiring now have very little Super in their own right and will need OAP unless married to someone cashed up. However in the future more women will be self funded in their own SUPER.

My dad mentioned a number of govt requirements to prevent claiming the OAP that have come in over the last few years, more will follow as more people retire with larger SUPER nest eggs.

My only issue with the SUPER is I don't trust the govt to leave it alone and changing rules including age of retirement meant we stopped contributing extra years ago, where as even at uni I was paying $10-20/week more from my part-time job.
  don_dunstan Minister for Railways

Location: Adelaide proud
Just Saying

https://tradingeconomics.com/australia/wage-growth

https://tradingeconomics.com/australia/inflation-cpi
RTT_Rules


A slight rise in the last 12 months does nothing to stimulate spending or turn the long-term decline around. The private sector is still lagging inflation.
  don_dunstan Minister for Railways

Location: Adelaide proud
The average income earner retiring today has only had compulsory SUPER for about 25 years, so no their SUPER balances are the incomes from such schemes will not be enough to live off so accessing the OAP is likely required if they don't have other savings
RTT_Rules
In fact it's 27 years since compulsory superannuation came in - and I knew many people (mostly in union-protected industries) who had superannuation right through the eighties.

How long do you need before reliance on the aged pension diminishes - another twenty years? Thirty?
My dad mentioned a number of govt requirements to prevent claiming the OAP that have come in over the last few years, more will follow as more people retire with larger SUPER nest eggs.
RTT_Rules
The Labor Party couldn't even remove the 'free money' in the form of that franking credit without being hounded. The problem is that once you've given people free money you can pretty much never take it away again.

If what your dad says is right then we should be seeing a large slump in the numbers of aged pension applicants in the coming years, yet nobody in authority seems to think that will happen. As I posted earlier, Treasury expects the overall cost of the aged pension to increase another $20 billion to $76 billion p/a by 2026. That doesn't sound like a moderation in the overall numbers to me; if anything the numbers on aged pension are going to get even higher.

Why didn't superannuation deliver a shrinking aged pension burden for taxpayers as promised nearly thirty years ago?
  RTT_Rules Oliver Bullied, CME

Location: Dubai UAE
Just Saying

https://tradingeconomics.com/australia/wage-growth

https://tradingeconomics.com/australia/inflation-cpi


A slight rise in the last 12 months does nothing to stimulate spending or turn the long-term decline around. The private sector is still lagging inflation.
don_dunstan
Now subtract inflation from wages growth since 2003 and were are we today?
  RTT_Rules Oliver Bullied, CME

Location: Dubai UAE
The average income earner retiring today has only had compulsory SUPER for about 25 years, so no their SUPER balances are the incomes from such schemes will not be enough to live off so accessing the OAP is likely required if they don't have other savings
In fact it's 27 years since compulsory superannuation came in - and I knew many people (mostly in union-protected industries) who had superannuation right through the eighties.

How long do you need before reliance on the aged pension diminishes - another twenty years? Thirty?
My dad mentioned a number of govt requirements to prevent claiming the OAP that have come in over the last few years, more will follow as more people retire with larger SUPER nest eggs.
The Labor Party couldn't even remove the 'free money' in the form of that franking credit without being hounded. The problem is that once you've given people free money you can pretty much never take it away again.

If what your dad says is right then we should be seeing a large slump in the numbers of aged pension applicants in the coming years, yet nobody in authority seems to think that will happen. As I posted earlier, Treasury expects the overall cost of the aged pension to increase another $20 billion to $76 billion p/a by 2026. That doesn't sound like a moderation in the overall numbers to me; if anything the numbers on aged pension are going to get even higher.

Why didn't superannuation deliver a shrinking aged pension burden for taxpayers as promised nearly thirty years ago?
don_dunstan
As I didn't have any of the SUPER schemes from before that has been enjoyed by PS and the like for decades, I have no idea of the rules, nor really care. I'm mostly focused on the Compulsory SUPER that everyone has been getting for as you say 27 years although it started off a messily 5% so hardly retirement planning. It also took about 10 years to tidy up the rules and prevent the rip-off's and stop the union or company mandated schemes.

Well I started work a few years before Compulsory SUPER and as I said it was just 5% initially so its another 20-25 years before the retirees in the 65-70 age mark will benefit from a full working career of SUPER and with progressive increases to 9.5% and soon higher, retirees going forward will have larger and larger nest eggs.

At a guess, by say 2035, the cost of the OAP should be in rapid decline.

Yes, the OAP costs will rise until it declines, like gravity really. You have an aging population of baby boomers with little compulsory SUPER and for some an entrenched mentality carried on from pre-war baby's that "savings are for mugs, the govt will fund my retirement because I paid taxes all my life and was told the govt would look after me."

We all know people who have worked 40 years (and I'm not just talking the lowest paid jobs) and retired on not much more than their final pay cheque in the bank and live pension to pension there after, watching TV, pi$$ing off the wife, pottering around the yard, fortnightly outing to the RSL/sports club likely wondering where it all went (answer is often a pale yellow stream into the toilet/urinal or up in smoke).

Meanwhile many people have moved on, saved what they could and have something half decent, others like Valvegear/NSW trains choose to raise the middle finger at sitting on the couch and continue to contribute to others retirement via taxes.

SUPER didn't save the OAP 30 years ago because so few people actually had it, mostly PS and think about how those disastor state and fed funded schemes were actually run. Qld is the only PS SUPER scheme that is fully funded. Tas has almost nothing so guess how the SUPER pension's are funded? You guessed it, just like it was a OAP, straight from consuladated revenue and you wonder why the cost to the govt hasn't changed?

For the Fed's, we have to thank Little Johnny for bankrolling the Future Fund when times were good and not pi$$ing it against the wall on polularists social schemes. We also have to thank the ALP govt 2007 - 2013 for not trusting their Comrades to "manage" it (read raid it) and smartly left Peter Costello in the role for which his current term expires in 2024. BTW, the FF is now valued at $166B  + another $33B in other funds with an average ROR of 10% pa for last 10 years (and who was it that said you cannot get good investments anymore and need to rely on Term Despots to retire on?).

Oh, The FF employs just 160 people and generates over $15B a year in returns (that's $100Mpa each employee, that would probably be some of the most productive employees in the country). We need to clone these workers and sack the PS.
  mejhammers1 Chief Commissioner

@don_dunstan Yeah so we did not have a discussion abour Brexit.

If you do not like the repliies then dont bring up the subject and don't tell people how to suck eggs. Its that simple. You brought up the subject not me. YOU.

You would want to get that head out of your rear end Don.  It a wonder you can breathe.

Michael
  RTT_Rules Oliver Bullied, CME

Location: Dubai UAE
Don,
If you are asking me should we be forced to save towards our retirement rather than fund via a tax payer funded system such as OAP, yes I do.

Why,
Because longer term once the transition is complete, it will mean people are taking control and responsibility for the standard of their retirement. The OAP is chicken feed and designed to prevent you from starving. Increasing is nice, but we all have to pay for it. So rather than paying for the standard of living of you grand parents determined by others, you are paying towards your own retirement with a standard set by you and within your means of affordability and hopefully improve the standard of living for retirees moving away from day to day survival to living.

The OAP will never disappear and nor should it, it will always be a safety net for those who retiree with insufficient SUPER or outlive their SUPER.

SUPER also helps you set your own time frame of "retirement", not an arbitrary day in your life when your switch from being on the DOLE and being on OAP.

My view 20 years ago was that SUPER needed to increase to 12% employer + 3% employee contribution by 2010 and rise to 8% employee by 2020-2025, however the issue for this is the same taxpayers are also funding other OAP. ie paying twice, but the transition won't last for ever. Eventually combined contributions should rise to at least 25% (India is 12.5% + 12.5%, Singapore is 20% + 20%) and for lower income earners the govt providing some assistance to ensure a reasonable standard of retirement either by means of co-contribution or OAP supplement.

For married or people in defacto, I think the SUPER contributions should be split evenly during the time of the relationship. For example while the woman is doing the baby thing, the HB's SUPER is split to also her account as well. Courts effectively do something similar on separation, but from a few people I know it can be messy arrangement.
  don_dunstan Minister for Railways

Location: Adelaide proud
Now subtract inflation from wages growth since 2003 and were are we today?
RTT_Rules
Consumer Price I is rigged anyway, anyone living in this country and paying utilities for the last seven years knows that the cost has doubled. My price per k/wh doubled only a few years ago; my domestic gas price has almost doubled too. There's only so much you can do to ameliorate your use of those things - I put in a new instant Rinnai and that did cut down the gas bill by 25%. But I for one didn't see those extraordinary basic cost-of-living rises reflected in the official (very low) CPI - did anyone else?
  don_dunstan Minister for Railways

Location: Adelaide proud
@don_dunstan Yeah so we did not have a discussion abour Brexit.

If you do not like the repliies then dont bring up the subject and don't tell people how to suck eggs. Its that simple. You brought up the subject not me. YOU.

You would want to get that head out of your rear end Don.  It a wonder you can breathe.

Michael
mejhammers1
Michael, you know that I love talking trash with you but there are certain topics that send you on a very long diatribe and it gets really personal at times. I'm happy to talk with you like I do with RTT_Rules (among others) but not on certain topics any more, I think we should have a civil discourse on this board... (cue canned laughter)...
  don_dunstan Minister for Railways

Location: Adelaide proud
RTT_Rules, you've posed quite a lot of issues - have you read this ABC synopsis of the things the Superannuation and Retirement System Inquiry is investigating?

As I didn't have any of the SUPER schemes from before that has been enjoyed by PS and the like for decades, I have no idea of the rules, nor really care. I'm mostly focused on the Compulsory SUPER that everyone has been getting for as you say 27 years although it started off a messily 5% so hardly retirement planning. It also took about 10 years to tidy up the rules and prevent the rip-off's and stop the union or company mandated schemes. Well I started work a few years before Compulsory SUPER and as I said it was just 5% initially so its another 20-25 years before the retirees in the 65-70 age mark will benefit from a full working career of SUPER and with progressive increases to 9.5% and soon higher, retirees going forward will have larger and larger nest eggs. At a guess, by say 2035, the cost of the OAP should be in rapid decline. Yes, the OAP costs will rise until it declines, like gravity really. You have an aging population of baby boomers with little compulsory SUPER and for some an entrenched mentality carried on from pre-war baby's that "savings are for mugs, the govt will fund my retirement because I paid taxes all my life and was told the govt would look after me." We all know people who have worked 40 years (and I'm not just talking the lowest paid jobs) and retired on not much more than their final pay cheque in the bank and live pension to pension there after, watching TV, pi$$ing off the wife, pottering around the yard, fortnightly outing to the RSL/sports club likely wondering where it all went (answer is often a pale yellow stream into the toilet/urinal or up in smoke).
RTT_Rules
The tax concessions on superannuation funds @ 15% is costing the federal budget $21 billion this year (from memory), it's projected to grow quite a bit in the next five years too.

There's several things that the Commonwealth could do to curtail the cost of the aged pension; Joe Hockey nibbled around the edges with raising the age (later stages cancelled by Turnbull anyway) but if you really wanted to hack into the actual expense before it rises to $70-something billion p/a you've got to -
  • Include the Primary Place of Residence in the assets test. No ifs or buts, if you live in a house worth a certain value then the Commonwealth says "move somewhere cheaper, it's a massive country, take your pick".
  • No Commonwealth aged pension for overseas retirees - that money will need to be spent here to ensure it supports the system that supports it.
  • Tax the lump-sum takers like nswtrains much harder - sorry but withdrawing the whole lot at retirement age should remove all your tax concessions. See my post below about the need to tax capital rather than labour.
It's not a law of gravity that access to aged pension/concession entitlements will fall by 2030 - what are you basing that on? And its only a forecast anyway, given that we were supposed to have weaned the majority of retirees off Commonwealth entitlements here in 2019 I'd say that the current superannuation setup is a massive failure destined to get even worse.

For the Fed's, we have to thank Little Johnny for bankrolling the Future Fund when times were good and not pi$$ing it against the wall on polularists social schemes. We also have to thank the ALP govt 2007 - 2013 for not trusting their Comrades to "manage" it (read raid it) and smartly left Peter Costello in the role for which his current term expires in 2024. BTW, the FF is now valued at $166B + another $33B in other funds with an average ROR of 10% pa for last 10 years (and who was it that said you cannot get good investments anymore and need to rely on Term Despots to retire on?). Oh, The FF employs just 160 people and generates over $15B a year in returns (that's $100Mpa each employee, that would probably be some of the most productive employees in the country). We need to clone these workers and sack the PS.
RTT_Rules

Now you're holding up Johnny Howard as an example of prudence and austerity? The man threw money away like there was no tomorrow - remember $5,000 cash grants just for having a baby? And why on earth is Peter Costello allowed anywhere near the board (let alone leadership position as he currently is) - if ever there was a conflict of interest that's it.

And yeah that's right Shane, we can just sack everyone and have twenty Future Funds and they'll all earn trillions from their stunning global investments and nobody will ever have to work again. Sounds a lot like Multi-level marketing or even a Ponzi scheme.

And you do realise that the Future Fund has also failed miserably - unfunded Commonwealth super liabilities exceed the assets by some $50 billion. Yet another total failure for the taxpayers of Australia, on the hook for more and more money all the time. Thanks Paul Keating, thanks hopelessly broken superannuation system.
  don_dunstan Minister for Railways

Location: Adelaide proud
Don, If you are asking me should we be forced to save towards our retirement rather than fund via a tax payer funded system such as OAP, yes I do. Why, Because longer term once the transition is complete, it will mean people are taking control and responsibility for the standard of their retirement. The OAP is chicken feed and designed to prevent you from starving. Increasing is nice, but we all have to pay for it. So rather than paying for the standard of living of you grand parents determined by others, you are paying towards your own retirement with a standard set by you and within your means of affordability and hopefully improve the standard of living for retirees moving away from day to day survival to living. The OAP will never disappear and nor should it, it will always be a safety net for those who retiree with insufficient SUPER or outlive their SUPER.
RTT_Rules

RTT_Rules, as we've discussed at length on this board in recent months interest rates are crashing towards zero and the search for dividends from straight out savings is almost nil as it is. It's red-alert time, we haven't seen interest rates this low pretty much since the Commonwealth started setting monetary policy by that arm (originally the "old" Commonwealth Bank) in the early 20th century; 0.75% official policy is unheard of in modern history.

This in itself will upend everything everyone knows about how the monetary system operates, it's going to be a brave new world where the money paid into the banking system will be effectively bailed-in and for a minor cost the banks will look after your money for you - thanks for bailing into the Aussie banking system. The Japanese banking system has been doing this for a while actually - it's a mystery why the Japanese people don't pull their money out of their banks with that arrangement but they don't. Our government is trying to head off any possible run on our banks as we speak with the new cash transaction ban trying to get through parliament presently; as it stands there's already some pretty steep laws around brazen cash laundering, why is the new law necessary?

Are you starting to get a sense that there's a new paradigm on the way? That perhaps capital will end up being taxed while labour will be taxed more lightly - maybe that's why they're trying to remove cash from the system to stop a run on the banks before the proletariat actually get wind of it? Either way it bodes really badly for our economy; the returns for these massive sums of money on-shore and off-shore simply won't be there any longer to sustain them. It's even worse in the United States where city, state and federal public pension funds have unfunded liabilities in the region of US $6 trillion which means they probably won't ever be able to pay out on all of them in the coming decade or so.

Again - where are the dividends and/or earnings going to come to sustain those huge sums of money? It just doesn't stack up, something will have to give.
  RTT_Rules Oliver Bullied, CME

Location: Dubai UAE
Now subtract inflation from wages growth since 2003 and were are we today?
Consumer Price I is rigged anyway, anyone living in this country and paying utilities for the last seven years knows that the cost has doubled. My price per k/wh doubled only a few years ago; my domestic gas price has almost doubled too. There's only so much you can do to ameliorate your use of those things - I put in a new instant Rinnai and that did cut down the gas bill by 25%. But I for one didn't see those extraordinary basic cost-of-living rises reflected in the official (very low) CPI - did anyone else?
don_dunstan
CPi inputs have mostly remained consistent for years now. everyone is very quite to pick up whats going up but ask them to tl you about whats going down. Answer is usually silence.

Doubling of the wholesale price should not equal doubling of the domestic tariff as most of the cost of supplying power is the poles and wires. For the last 10 years the average SA power bill has resin from around ~2.4-2.6% of house hold spending to around ~3.5%. Basically its gone up 50% after inflation over 10 years (yes I can prove it and yes 50% is 50% too much).

Things like petrol prices etc and other have off-set the power price and other rises in CPI which is why its where it is at a few percent.
  RTT_Rules Oliver Bullied, CME

Location: Dubai UAE
Don, If you are asking me should we be forced to save towards our retirement rather than fund via a tax payer funded system such as OAP, yes I do. Why, Because longer term once the transition is complete, it will mean people are taking control and responsibility for the standard of their retirement. The OAP is chicken feed and designed to prevent you from starving. Increasing is nice, but we all have to pay for it. So rather than paying for the standard of living of you grand parents determined by others, you are paying towards your own retirement with a standard set by you and within your means of affordability and hopefully improve the standard of living for retirees moving away from day to day survival to living. The OAP will never disappear and nor should it, it will always be a safety net for those who retiree with insufficient SUPER or outlive their SUPER.

RTT_Rules, as we've discussed at length on this board in recent months interest rates are crashing towards zero and the search for dividends from straight out savings is almost nil as it is. It's red-alert time, we haven't seen interest rates this low pretty much since the Commonwealth started setting monetary policy by that arm (originally the "old" Commonwealth Bank) in the early 20th century; 0.75% official policy is unheard of in modern history.

This in itself will upend everything everyone knows about how the monetary system operates, it's going to be a brave new world where the money paid into the banking system will be effectively bailed-in and for a minor cost the banks will look after your money for you - thanks for bailing into the Aussie banking system. The Japanese banking system has been doing this for a while actually - it's a mystery why the Japanese people don't pull their money out of their banks with that arrangement but they don't. Our government is trying to head off any possible run on our banks as we speak with the new cash transaction ban trying to get through parliament presently; as it stands there's already some pretty steep laws around brazen cash laundering, why is the new law necessary?

Are you starting to get a sense that there's a new paradigm on the way? That perhaps capital will end up being taxed while labour will be taxed more lightly - maybe that's why they're trying to remove cash from the system to stop a run on the banks before the proletariat actually get wind of it? Either way it bodes really badly for our economy; the returns for these massive sums of money on-shore and off-shore simply won't be there any longer to sustain them. It's even worse in the United States where city, state and federal public pension funds have unfunded liabilities in the region of US $6 trillion which means they probably won't ever be able to pay out on all of them in the coming decade or so.

Again - where are the dividends and/or earnings going to come to sustain those huge sums of money? It just doesn't stack up, something will have to give.
don_dunstan
The low inflationary era is in part due to different and more controlled approach to managing economies. We have been heading this way for around 20 years, nothing new. To be honest I don't see why we need inflation and if anything its a sign or lack of control. We are also in an era where IT is moving ahead faster than ever and with it lower costs on an increasing part of our economy as businesses become more responsive and doing more with less.

In the bad old days, govts used to use high inflation to dilute debt.  Didn't pay it off, just made it get smaller in real terms.

Think about, prices went up, so we argued for more wages which drove up prices and we asked for more wages which drive up prices ........ So basically, everything stayed the same, just this magic knock one effect. The biggest justification the union had for its existence was to push for higher wages, which drove inflation, but after 50 years, did they ever actually achieve it after inflation? No, I think today with less unionization and less a controlled pre-programmed economy such as automatic wage rises, we are just moving towards a state of flat inflation. People don't expect wages rises like they used to, they by and large don't get them either and as such production costs don't rise as a result.  



https://www.youtube.com/watch?v=OsSevAihAIE

The old, oh we need inflation to show demand. Well we have demand now, the economy is still growing, why do we need inflation if the supply chain can keep up? Aluminium is growing at around % YOY, prices are not going up, rather down because there is more being made than demand.

The gap between inflation and TD rates, well does that change a great deal between years ago and today? The answer is actually yes because I checked, but that was because interest rates were driven up by the govt to make borrowing expensive and  encourage saving. Again all artificial.

I've been told, but I don't know that some of the communist countries at one time or another had zero inflation because the govt controlled everything. Don't need wage rises if there are not rises in prices and if the stores run out/low, govt controlled prices prevented peak pricing kicking in. Black market may kick off, but if the country is run well and everything in balance then no issues and stores don't run out.

Just a few thoughts
  RTT_Rules Oliver Bullied, CME

Location: Dubai UAE
RTT_Rules, you've posed quite a lot of issues - have you read this ABC synopsis of the things the Superannuation and Retirement System Inquiry is investigating?

The tax concessions on superannuation funds @ 15% is costing the federal budget $21 billion this year (from memory), it's projected to grow quite a bit in the next five years too.

There's several things that the Commonwealth could do to curtail the cost of the aged pension; Joe Hockey nibbled around the edges with raising the age (later stages cancelled by Turnbull anyway) but if you really wanted to hack into the actual expense before it rises to $70-something billion p/a you've got to -
  • Include the Primary Place of Residence in the assets test. No ifs or buts, if you live in a house worth a certain value then the Commonwealth says "move somewhere cheaper, it's a massive country, take your pick".
  • No Commonwealth aged pension for overseas retirees - that money will need to be spent here to ensure it supports the system that supports it.
  • Tax the lump-sum takers like nswtrains much harder - sorry but withdrawing the whole lot at retirement age should remove all your tax concessions. See my post below about the need to tax capital rather than labour.
It's not a law of gravity that access to aged pension/concession entitlements will fall by 2030 - what are you basing that on? And its only a forecast anyway, given that we were supposed to have weaned the majority of retirees off Commonwealth entitlements here in 2019 I'd say that the current superannuation setup is a massive failure destined to get even worse.


Now you're holding up Johnny Howard as an example of prudence and austerity? The man threw money away like there was no tomorrow - remember $5,000 cash grants just for having a baby? And why on earth is Peter Costello allowed anywhere near the board (let alone leadership position as he currently is) - if ever there was a conflict of interest that's it.

And yeah that's right Shane, we can just sack everyone and have twenty Future Funds and they'll all earn trillions from their stunning global investments and nobody will ever have to work again. Sounds a lot like Multi-level marketing or even a Ponzi scheme.

And you do realise that the Future Fund has also failed miserably - unfunded Commonwealth super liabilities exceed the assets by some $50 billion. Yet another total failure for the taxpayers of Australia, on the hook for more and more money all the time. Thanks Paul Keating, thanks hopelessly broken superannuation system.
don_dunstan
I tend to agree in those recommendations, mostly.

We are more mobile today, some reports average Aussie moves every 7 years (If I heard correctly last week). The era of "paid house off over last 25 years, I'll die here" are dying with those still doing that. People move and upgrade, down grade to suit lifestyles, try new things, careers etc. Come to think of it, my house in Dubai we have been in it 7 years this Dec, longest I've stayed in one place since I left home.

Primary place of residence I think median house price and above is fair call, not below.

I would tend to think most people on OAP will live in Aust and likely to have the mindset or finances to live OS cheaper, maybe NZ married to someone?

Yes, lumpsum takers need protection from themselves to a LIMIT. If I have $5M SUPER, then me taking $1M isn't going to see me on the pension. Lets say you need $1M to retire on OAP levels, then lump sums down to there are probably ok. Beyond that no. I wouldn't tax it, I'd ban it.

The 15% tax should be set and linked to the cost of the OAP costs. ie one funds the other, with time as it goes down the SUPER tax also goes down. Everyone can see the link. (Yes I'm a believer of direct taxation).

You cannot ween people off the OAP onto a SUPER system that didn't exist for much or part of their careers and you are being unrealistic to think otherwise. However as SUPER came in around 1995, so 40 year career means 2035 most retirees will have near the full benefit of a working career of SUPER payments, SO YES OAP COSTS will go down by mid 2030's, if not before as the rising SUPER nest eggs start impacting on OAP entitlements.


Peter C was the driver behind the FF, he banked around $40B or so by the time they left govt. Had PC not started the FF, do you think it would have been started by now, indeed under ALP?

He balanced the budget with money left over so yes they had some entitlement to throw some money around.  Baby Bonus was to try and solve the OAP issue we are discussing, breed, raise more taxpayers in a declining birthrate. It was successful, birthrate hit 1.9, its now 1.5, so without breeders, we need to import taxpayers and we are.

Hardly conflict of interest and considering he's getting on average 10% pa YOY, leave him there and maybe anyone bitching about poor returns from banks should ask him for investing advise. As I said before at $100M income per employee, the Future Fund team are likely the most productive in the entire economy.

How is the FF a failure, within 15 years with of starting its earning $16 Bpa???? Where would be be today without it, what would be the gap and what is your magical answer to fill it.....?

How is the SUPER system broken ?????
  don_dunstan Minister for Railways

Location: Adelaide proud
How is the FF a failure, within 15 years with of starting its earning $16 Bpa???? Where would be be today without it, what would be the gap and what is your magical answer to fill it.....?
RTT_Rules
Abolish defined benefits.
How is the SUPER system broken ?????
RTT_Rules
I've explained it in some detail over the last page or so, read it again.
  don_dunstan Minister for Railways

Location: Adelaide proud
You cannot ween people off the OAP onto a SUPER system that didn't exist for much or part of their careers and you are being unrealistic to think otherwise. However as SUPER came in around 1995, so 40 year career means 2035 most retirees will have near the full benefit of a working career of SUPER payments, SO YES OAP COSTS will go down by mid 2030's, if not before as the rising SUPER nest eggs start impacting on OAP entitlements.
RTT_Rules

All the evidence that I've found points to the opposite outcome - increasing spending on the aged pension will continue for decades to come REGARDLESS of how much money is poured into superannuation. In fact economic consultants Rice Warner warned earlier this year that even if the 12% superannuation contribution goes ahead it will be sometime after 2050 before any savings are made to age pension receipts and even then the savings will be tiny (about 0.1% less per year). Even if superannuation was increased to 20% this would barely change the level of dependence on aged pension at all because most superannuants will manage to claim some benefit from the government.

The compulsory superannuation system has failed: It does nothing to ameliorate the cost of the aged pension to taxpayers despite what we were told when it was rolled out in 1992. Your suggestion to give it another fifteen years to see if it works is not projected to yield any results either.
  michaelgm Chief Commissioner

So Woolies, one Australia's largest employers have been underpaying staff.

https://www.afr.com/companies/retail/woolworths-underpayments-could-cost-executives-20191030-p535p7

Why is it, I cannot recall of people being overpaid in similar circumstances?
  Valvegear Dr Beeching

Location: Norda Fittazroy
So Woolies, one Australia's largest employers have been underpaying staff.
"michaelgm"
i'll bet the CEO wasn't underpaid.

Why is it, I cannot recall of people being overpaid in similar circumstances?
"michaelgm"
It's hushed up - the government doesn't want others copying it.
  michaelgm Chief Commissioner

VG! Heard this morning the executives bonuses are likely to be slashed, should be removed all together.
The audit will review as far back as 2010. Systemic?

Issues are around middle management, not higher up or Smeg kickers either.
As a direct shareholder, am appalled by this behaviour and afraid to look at current share price.
CEO Banducci should go.
  RTT_Rules Oliver Bullied, CME

Location: Dubai UAE
You cannot ween people off the OAP onto a SUPER system that didn't exist for much or part of their careers and you are being unrealistic to think otherwise. However as SUPER came in around 1995, so 40 year career means 2035 most retirees will have near the full benefit of a working career of SUPER payments, SO YES OAP COSTS will go down by mid 2030's, if not before as the rising SUPER nest eggs start impacting on OAP entitlements.

All the evidence that I've found points to the opposite outcome - increasing spending on the aged pension will continue for decades to come REGARDLESS of how much money is poured into superannuation. In fact economic consultants Rice Warner warned earlier this year that even if the 12% superannuation contribution goes ahead it will be sometime after 2050 before any savings are made to age pension receipts and even then the savings will be tiny (about 0.1% less per year). Even if superannuation was increased to 20% this would barely change the level of dependence on aged pension at all because most superannuants will manage to claim some benefit from the government.

The compulsory superannuation system has failed: It does nothing to ameliorate the cost of the aged pension to taxpayers despite what we were told when it was rolled out in 1992. Your suggestion to give it another fifteen years to see if it works is not projected to yield any results either.
don_dunstan
Decades, yep I said two decades.

It will reduce the dependence on the OAP as provides an alternative source of income for which the govt will take into account.

The failure is why it too so long to implement.

The biggest failure is the OAP. Govt set up a social welfare scheme that was not funded correctly and even changed the funding rules over time. Which is typical of the systems where taxpayers just hand over money to the govt and expect them to do the right thing. Sooner or later you get a series of govts with social or other agendas that see this revenue stream as a means to fund other agends quietly leaving the longterm issue for another day. Hence why I favor direct taxation. You pay here to get this.
  RTT_Rules Oliver Bullied, CME

Location: Dubai UAE
How is the FF a failure, within 15 years with of starting its earning $16 Bpa???? Where would be be today without it, what would be the gap and what is your magical answer to fill it.....?
Abolish defined benefits.
How is the SUPER system broken ?????
I've explained it in some detail over the last page or so, read it again.
don_dunstan
Lump sum's that drop below the deemed minimum distributed monthly living allowance, should be banned.
  don_dunstan Minister for Railways

Location: Adelaide proud
VG! Heard this morning the executives bonuses are likely to be slashed, should be removed all together.
The audit will review as far back as 2010. Systemic?

Issues are around middle management, not higher up or Smeg kickers either.
As a direct shareholder, am appalled by this behaviour and afraid to look at current share price.
CEO Banducci should go.
michaelgm
Former Senator David Leyonhjelm penned an article today in the Financial Review arguing that all awards should be abolished:

This is not about paying workers starvation wages, or even paying them below the national minimum wage (at $18.93 per hour for adult workers, almost the highest in the world). There is a minimum rate for every job covered by an award, as well as for things like additional skills, overtime, penalties, superannuation, allowances and holidays.

An employer can be labelled a wage thief for getting any of them wrong. It makes no difference if the affected employees are quite happy with what they are paid, don’t feel at all exploited and believe nothing has been stolen from them. They and their employer are not allowed to agree on anything less than the prescribed minimums. It also makes no difference if it was totally unintentional, not unusual given that navigating awards and agreements can require at least two degrees, very strong coffee and an executive assistant.

I think he's right but for a different reason: Awards in some industries have become completely unenforceable and the problem is that the minority of employers trying to do the right thing are at a distinct economic disadvantage - therefore why bother having a law at all. Complete deregulation with minimum standards like sick leave; and no compulsory superannuation because when you're that poor you have a completely hand-to-mouth existence anyway and need every cent. Compulsory super costs the government $21 billion p/a in tax concessions but only saves $9 billion in pensions paid so why bother penalising employers and employees with the burden of compulsory super any longer.

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