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Tag Archives: treasury

Corruption viewed within fine print of super reforms

Australia’s union movement has steadfastly rejected the Morrison government’s latest proposed reforms on superannuation on the grounds that workers would be worse off if choices about such accounts were left to the banks rather than to themselves or their employers.

And in addition to leaving Australia’s working classes potentially being worse off for retirement, the proposed reforms would leave the banks richer and grant the government’s superannuation minister – presently, Jane Hume – with a set of new powers that would go unchecked and with zero accountability.

In essence, the government seeks to use its Parliamentary and legislative powers to overhaul the superannuation system.

And doing so in a manner that leaves a trail of corruption in its wake, especially after the Australian Council of Trade Unions (ACTU) has recently called for an ending of a freeze on superannuation rates that have been an LNP government policy staple since 2014.

“The union movement stands ready to resist any attacks on workers’ retirement savings. Like with Medicare, we need to improve and strengthen our retirement system, which is already the envy of the world – not tear it down,” Michele O’Neil, the ACTU’s president, said last month when defending the status quo of the superannuation system.

Under the government’s reform proposals, whose exposure drafts and explanatory materials are being weighed up in the midst of a Federal Senate Inquiry on the Superannuation Sector, would take the rights of choice among superannuation funds away from workers, particularly those new to the workforce or to a new employer, and be steered towards any for-profit funds run by the banks.

The ACTU, by labelling these reforms as “predatory”, views the suggested reforms as being politically motivated and as an attack based on ideology, and have unsurprisingly called for their legislative defeat.

“The federal government’s superannuation reforms will shortchange workers and erode the hard-won retirement savings of millions of Australians,” Scott Connolly, the ACTU’s national assistant secretary, said on Monday.

“A worker could be locked into an underperforming for-profit fund that is funnelling money to shareholders through exorbitant administration fees – and be misled by the Government that they are in a good fund,” added Connolly.

The ACTU juxtaposes the Industry Super network of superannuation funds against the perils of the banking-based for-profit funds advocated by the LNP and the Morrison government, due to the fact that Industry Super-linked funds perform better via all profits going to each of its respective fund’s members.

However, under the government’s reforms, that would change, thereby leaving workers worse off in the long run towards planning their retirements.

“If these laws are passed, for-profit funds will have a systemic advantage over all-profit-to-member funds, leaving workers worse off,” said Connolly.

“The exposure draft legislation represents an attack on working people, their retirement savings, and the best performing and best-governed superannuation funds,” he added.

As the superannuation sector inquiry is scheduled to resume in the Senate next month when the federal Parliament returns from its summer break, and expected to wrap up in March, the Department of the Treasury highlights its reform package to include:

  • Members being given notification upon whenever a superannuation fund fails an annual transparency performance test administered by the Australian Prudential Review Authority (APRA), and if this occurs two years in a row, trustees for such superannuation products are prohibited from accepting new beneficiaries into the product
  • Providing certainty and transparency about the basis by which superannuation products will be ranked and published on a website maintained by the ATO
  • Invoking a new set of standards to ensure that superannuation trustees work in a manner upholding its members’ best interests

Employers will still be required to make contributions to an employee’s single nominated superannuation fund. However, wrinkles are being proposed to ensure that unnecessary fees and insurance premiums are not paid on unintended multiple superannuation accounts.

“It is no coincidence that administration fees are excluded from benchmark proposals, as for-profit funds performances will be overstated to members and potential members,” said Connolly.

The ACTU has also brought the recent memories of the Banking Royal Commission into recall, as the proposed superannuation reforms would grant extended powers to whomever its minister would be.

As Hume currently holds the portfolio for superannuation, as she has within the Morrison government since 2019, a bit of background about her history is required – especially since she is facing the prospect of having her powers expanded in a big way.

Although Hume served as a senior strategic policy advisor with Australian Super prior to her ascension to politics as a Senator for Victoria in 2016, she possesses a storied past in the banking sector.

Hume was a former Deutsche Bank Australia vice president in 2008-09 after previously working as a National Australia Bank sales and marketing research manager, investment manager and a private banker from 1995-99 before moving on to Rothschild Australia as a senior business development manager in the asset management division, and briefly as a key accounts manager from 2000-2002.

Any superannuation minister, present or future, would be given the power to possess the authority to deem as illegal any expense, investment, or activity, by any fund, at any time, as well as extending the preference for a single superannuation fund over any or all others while lacking the transparency is not required to give notice nor reason for those actions.

Moreover, the decisions of the minister nor any new regulations undertaking under the minister’s watch do not require to be challenged in court.

Given the context of what the Banking Royal Commission revealed, Connolly and the ACTU have called out the rogue nature of these reforms – as well as the extended, unchecked powers of any current or future superannuation minister for the government of the day.

“Despite the Banking Royal Commission finding for-profit funds blatantly rorting members, the government continues to favour them by making benchmarking based on net investment return,” said Connolly.



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Morrison’s Dilemma

Within a comparatively short space of time, we are starting to see our new Treasurer’s ‘modus operandi’ toward economic reform.

Scott Morrison’s recent claim that eight out of ten income tax payers fund our total welfare payments, is a poor attempt at shock therapy, not well thought through and in that horrible world of political comparisons, a dumb way to get the community onside.

It would seem Scott Morrison only knows one way to approach a difficult problem and that is to fire off a broadside, see what it achieves and then begin the tough work of negotiation and compromise. On this occasion, using the old Joe Hockey style of placing his foot in his mouth, Morrison’s comment was not a good way to start.

Selecting individual elements of revenue raising to match a particular expense item is a lazy way to signal target areas where spending cuts might be on the agenda and is, in the overall analysis, quite useless. In this case Morrison uses the 2015-16 budget to compare spending estimates on welfare of $154 billion with personal income tax revenue estimates of $194 billion to fuel his broadside.

One would think any secondary school student could do something similar; cherry picking and coming up with what are totally useless comparisons. One could use the company and resource rent revenue estimates of $71.2 billion and compare that with the estimated spending of $69.4 billion on health. But what relevance does that have?

It seems pretty clear from Morrison’s statement that he wants to find savings in welfare expenditure. Depicting the poor, long suffering taxpayer from Middle-Income Street, in Plain Town, as the one shouldering the welfare burden, might appeal to the lowest common denominator, but it ignores the reality.

All government revenues go into the Consolidated Revenue Fund. In some cases, specific revenues are raised for specific purposes such as the fuel excise being used for only for roads. But this is rare. Income tax revenues have no such specific purpose and to relate them directly to welfare payments, as if to say this is where your money is going, is wrong.

But what is Morrison really up to? He has earlier told us that we don’t have a revenue problem, only a spending problem. He bases this on the increasing ratio of spending to GDP compared with a lower ratio of revenue to GDP. In doing so he is ignoring 50% of the problem. A higher revenue ratio would also reduce the spending ratio.

henryIf we accept former Treasury Secretary Ken Henry’s assessment that both revenue and spending should, over a given cycle, be 25% of GDP then it is clear both areas need to be addressed. Attacking spending in isolation will lead to a contraction in the cycle which, by a strange coincidence, is exactly what we are experiencing now.

But Liberal ideology limits Morrison’s choices. Raising taxes is anathema to their sense of justice and fair play. They would rather lower taxes, particularly for their corporate friends. They would rather strangle Union power, limit wage growth and cut back on welfare. It is the opposite of what they should be doing.

Higher wages means higher tax revenue, greater demand for goods and services, higher GDP which translates to a higher living standard for all. The one exception is that company margins are lower. So what? Additional demand compensates for that. The present Liberal ideology is framed with blinkers on, unable to see the bigger picture.

jobsThis is Scott Morrison’s dilemma. For as long as he maintains this blinkered approach to growing our economy, he will fail to capitalise on the power of demand side economics. And he will continue to preside over a seriously under-utilised workforce and lower than could be realised revenues.

Under Morrison’s management, deficit spending is destined to become the norm, not that there is anything wrong with that, provided it translates to higher employment. At the moment it is not.


Playing Political Football with the Economy

Usually in an election campaign the leader of the party makes individual policy announcements and is supported by the relative minister. In the 2010 campaign Tony Abbott (as if to confirm Costello’s opinion of him as an economics illiterate) shirked the presentation of his party’s economic policy and hand balled it to Joe Hockey. Now Joe wasn’t up to the task making a complete balls-up of presentation so he in turn hand balled to Andrew Robb. He decided to give the assembled press an economics lesson and in doing so confused both himself and the press. Watching it on television was excruciating and that cringe factor came over me. You know the feeling one gets when you watch someone making a fool of themselves without knowing it. Andrew did such an appalling job that he had party advisers giving him wind up signals from the back of the room.

As if to make matters worse they then neatly side stepped treasury and had their policies costed by some fifth tier accountancy firm in WA. It in turn was a balls up of monumental proportions and a black hole of even greater proportions was picked up. They were later fined for their incompetency.

All this brings me to Joe Hockey’s latest announcement that he intends to again side step the Treasury Department because in his words ‘he cannot trust them.’ Instead he says he will use a variety of outside sources (all assuredly sympathetic to his parties world view of economics) to cost his parties policies. This is of course totality unprecedented and raises questions of ‘’what is he trying to hide?’’ And if he cannot trust them now, how would he do so in government.

As we say in Australia. It all sounds a bit sus. I mean it was their own economics champion who founded this “Charter of Budget Honesty” so why won’t he play by the rules?

Is he seriously saying that the Coalition will not recognise the Treasury Finance statement, PEFO?

In other words, he is preparing to reject the statement from the only authorities that have possession of the facts. It is a rejection of the umpire’s call. He seems to be running away from the rules the Coalition instigated itself. That being the disclosure of honest national policy costings and budgeting.

One cannot help but think that this is a deliberate attempt to muddy the policy waters. He is seeking to reject the department’s figures so as to allow him the flexibility to make things up as he goes without scrutiny. In other words he is asking the public to trust the people he anoints to cost his policies and reject the official body that has all the facts at its disposal and is giving the same advice to both parties.

Two months ago, Hockey said: “We have always said that the only numbers we can actually rely on are the numbers released by the secretary of the Department of the Treasury and Finance, 10 days into the election campaign. Because they belong to the public servants rather than these numbers which belong to the government.”

Sorry but Joe is simply not credible. We should be demanding that Mr Abbott deliver his party’s economic policy and that Mr Hockey stand beside him with properly documented and costed policies according to the charter of honesty that his party introduced. And I might add in plenty of time for the electorate to digest it.

There is really no excuse. The Government is expected to release an economic statement late this week and it will be backed up by the PEFO report 10 days into the campaign. Common Joe give us the truth. It does matter.

Otherwise it’s all a bit sus.

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