Sunday, September 07, 2014

Not so super: Labor's dumb idea

Lifting compulsory super contributions to 12 per cent was perhaps the dumbest idea Labor had.

The Henry tax review saw this clearly and had its findings ignored. Keen to jump on its support of a resource super profits tax Labor turned its back on the review'sequally serious finding that compulsory super "remain at 9 per cent". It chose the day it released the review – May 2, 2010 – to announce that it would do the opposite: lift compulsory super contributions swiftly to 12 per cent over the next nine years.

The superannuation cheer squad loved it. Many of them work in an industry that would manage nothing like as much as the present $1.85 trillion were it not for compulsion. Where else can you perform badly (most funds fail to match the sharemarket after deducting fees) and still be rewarded with an extra 9 per cent (now 9.5 per cent) of wage earners' income flowing your way each year.

An increase to 12 per cent would have been even better.

Curiously, Labor's mates in the union movement occupy almost half the seats on industry fund boards. Bill Shorten himself sat on one. Where else can you get the finance industry and the union movement to agree that taking money out of your wages is good for you?

I mentioned wages. Strictly speaking, compulsory super contributions are paid by employers in addition to wages rather than being taken from wages. But it's easy to see where employers get the funds. When they are forced to pay more into super they don't increase the amount they are prepared to secure the services of each employee. Instead they change the way it is broken up. They pay a higher proportion in super (because they are forced to) and a lower proportion in wages.

When compulsory super contributions climb, the next wage increase is lower than it would have been. Employers fork out what they would have anyway. Their workers get less cash in their hands, more saved up for them in super.

Among people who know super it isn't in dispute. Bill Shorten put it this way: "The increases to superannuation will be absorbed as part of people's pay rises."

I have been besieged in recent days by emails and tweets from people who don't believe it.

One woman said in her case the extra super contributions couldn't come from her pay rises because she received the minimum wage set by Fair Work Australia. I pointed her to the latest Fair Work minimum wage decision, which explicitly said her wage increase was "lower than it otherwise would have been in the absence of the superannuation guarantee increase". 

Another man said his employer wasn't intending to give him a pay rise any time soon so he wouldn't be harmed. I told him he would have to wait even longer for the next pay rise because of the lift in compulsory super to 9.5 per cent.

Workers who have exceptional bargaining power may be able to get both – a full pay rise plus the increase in super contributions, but they would have been able to get over the odds pay rises in any event.

For most of us super comes out of our wages. And Labor never modelled what would happen when 9 per cent out of wages became 12 per cent.

But the Henry Review did. Here's what it found:

High-income earners make the biggest compulsory super contributions (they are a proportion of wages). Henry's calculations show they don't need more than 9 per cent of their large wages to retire on because 9 per cent of a large number is a large number. If they felt they did they were more than capable of saving extra themselves, voluntarily, inside or out of the superannuation system.  There's ample evidence that they do. High-income earners do not need greater compulsory contributions.

Low-income earners on the other hand may well find that 9 per cent isn't enough, because 9 per cent of a small number is a small number. But they have to face the reality that if more of their employers funds are put into super there will be less in their wages, and many are financially stressed.

"The effect of this reduction in a person's standard of living before retirement is likely to fall most heavily on low- to middle-income earners, who are unlikely to be in a position to offset the increase in the superannuation guarantee by reducing their other savings," it found.

Faced with a choice between further impoverishing stressed people now in order to give them a better retirement or assisting them now at the cost of a worse retirement, the review felt the choice wasn't its to make. It was up wage earners themselves to decide what was important to them. Low earners who wanted to save more could be encouraged but not forced to.

And it recommended a complete overhaul of the super taxation arrangements that would have boosted their savings independently without boosting their contributions.

The Coalition has killed Labor's dumb idea. Compulsory super now won't climb further until 2021 if at all. The people Labor normally claims to be concerned about should be thankful.


Prime Minister Tony Abbott rules out abolishing penalty rates

Prime Minister Tony Abbott has ruled out lowering or abolishing weekend penalty rates in an interview marking his first year in office.

Mr Abbott has also played down the prospect of tax cuts being offered at the next election.

Mr Abbott told AFR Weekend it was up to businesses, not government, to seek to change weekend penalty rates.

His comments come amid pressure from businesses and some of his own backbenchers to take action.

"It's not for us to have a go at penalty rates," he told the AFR.   "There's nothing to stop a business organisation taking an application... to the Fair Work Commission and the FWC will adjudicate on that."

Mr Abbott was also non-committal about tax cuts at the next election, despite he and Treasurer Joe Hockey keeping the prospect open after the coalition took office last year.

"What we go to the next election with will depend very much on the circumstances of the time," Mr Abbott said.  "We're going to be economically responsible.  "We've been uber responsible up to now."

The prime minister also urged people to focus on the benefits of falling wages growth, particularly on unemployment figures.

"If there's less upward pressure on wages, over time, that should mean more employment, which is a good thing," he said.


Energy monopoly backtracks on family's $3000 gas bill -- under media spotlight

ActewAGL has been pulled into another billing drama after it turned a family's gas off and billed them $3000 over a mistake the power company made.

The company has now backflipped, but not until after an injured woman was forced to couch surf for a week because there was no heating in her family's apartment.

Deanna Emms, 20, was supposed to be resting her injured leg at home last week, while her parents were overseas.

Instead, ActewAGL disconnected the gas, which ran all the heating in the Mawson apartment, because of an almost year-long dispute over $3000.

It started in October 2013, when the family said it received three letters on the same day from ActewAGL: one said they had a gas supply without an account, the second welcomed them as a new customer and the final letter was a $3308 bill.

It turned out there had beena "crossed meter", meaning the family had been receiving cheaper power bills since as early as 2009, because the company was matching a meter to the wrong home.

The family refused to pay and complained of bill shock, but last week ActewAGL disconnected the gas, which forced Miss Emms to stay with friends.

ActewAGL reversed its decision after being contacted by The Canberra Times.

"After reviewing this matter, ActewAGL has agreed to remove the disputed amount and all associated fees," ActewAGL general manager retail Ayesha Razzaq said on Tuesday.

"We have been in contact with the customer and have apologised for the inconvenience this issue has caused and the time it has taken to resolve this matter.

"ActewAGL prides itself on delivering quality customer service. "On this occasion, an error was made.

"This issue was as a result of associating meters to the wrong residence due to incorrect information being provided when the meter was installed."

After hearing the news on Tuesday, Miss Emms said she was looking forward to returning home.

"I'm extremely happy," she said. "It's not good we had to go to the media to make something happen.  "It's quite terrible for a monopoly company in Canberra."

It is not the first time ActewAGL has drawn the ire of customers and prompted questions about accurate billing.

A Canberra man disputing a $17,000 bill for six months' electricity at his O'Malley home says not even a heart attack can stop him lobbying for more competition in the ACT energy market.

And he has brought together friends and family members critical of ActewAGL in an attempt to strengthen his argument.

Territory GP Yarub Jamiel made headlines last year when he revealed he had received the $17,000 power bill covering six months and had accumulated $25,000 worth of electricity costs in a year.

Hearing his case, the ACT Civil and Administrative Tribunal raised concerns there was no independent body testing the accuracy of meters in the ACT, but it ordered Dr Jamiel to pay some of the money.

A sum of $17,000 is still in dispute.


An Australian senator with his head in the clouds

But he's a Greenie so what do you expect?

GREENS senator Peter Whish-Wilson has been condemned for suggesting Islamic State fighters should not be described as “terrorists” because Australian forces could also be viewed by some as terrorists.

The Tasmanian senator, in a speech to parliament, claimed that describing the militants as terrorists “demonises people” and “implies a very one-sided view of the world”.

“I think we need to find better words than ‘terrorist’ and ‘terrorism’ because, to me, this implies a very one-sided view of the world,” Senator Whish-Wilson told the upper house on Monday night.

“Often our forces could be seen by Iraqi civilians as being terrorists.

“Anything that creates terror is, by definition, terrorism. We use that word because it is a very simple word to use and it demonises people.”

The Greens have opposed military intervention against Islamic State fighters in northern Iraq, calling on the government to seek parliamentary consent for any deployment.

Liberal MP Andrew Nikolic, a former commander of Australian forces in southern Iraq, accused Senator Whish-Wilson of “playing ideological, peripheral word games” while civilians face danger.

“While Peter Whish-Wilson is playing word games, thousands of people are dying in Syria at the hands of what should properly be described as a barbaric and evil organisation,” Mr Nikolic told The Australian.


No comments: