Hockey rules-out super reform

By Leith van Onselen

You cannot make this stuff up. Despite declaring a “Budget emergency” and waging a “war on entitlements”, Treasurer Joe Hockey has this morning ruled-out following The Greens proposed reforms to Australia’s inequitable and costly system of superannuation concessions, which was estimated by the Parliamentary Budget Office to save the Budget $10.3 billion over three years. From The AFR:

Mr Hockey reaffirmed the government’s commitment not to change superannuation policy in this term of government…

Mr Hockey said it was very hard to take the Greens seriously when they refused to back indexation of the fuel excise.

“So how can you take the Greens seriously on any economic policy?” he told ABC radio on Thursday.

Mr Hockey has used the ‘we promised no change in this term of government’ excuse with regards to superannuation, however he had no trouble breaking pre-election promises regarding funding to the ABC or SBS, implementing no new taxes, and promising no cuts to health or education.

The fact of the matter is that superannuation is one of the biggest and fastest growing burdens on the Budget, costing an estimated $29.7 billion in revenue foregone in 2014-15, with the cost forecast to rise by a whopping 10.8% per annum between 2014-15 and 2017-18 – far quicker than the growth of the broader economy.

Until Mr Hockey addresses the giant elephant that are superannuation concessions, then his blustering over the Budget deficit and entitlements will fall on deaf ears.

The sensible thing for him to do is to acknowledge that the Government is examining superannuation reform, but that no change would be implemented until next term, in keeping with the Government’s pre-election commitment.

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Leith van Onselen

Leith van Onselen is Chief Economist at the MB Fund and MB Super. Leith has previously worked at the Australian Treasury, Victorian Treasury and Goldman Sachs.

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Comments

  1. he is not stupid he is just plain evil – a psychopath

    he would never pass PCL-R


    Facet 1: Interpersonal

    Glibness/superficial charm
    Grandiose sense of self-worth
    Pathological lying
    Cunning/manipulative

    Facet 2: Affective

    Lack of remorse or guilt
    Emotionally shallow
    Callous/lack of empathy
    Failure to accept responsibility for own actions

    Facet 3: Lifestyle

    Need for stimulation/proneness to boredom
    Parasitic lifestyle
    Lack of realistic, long-term goals
    Impulsivity
    Irresponsibility

    Facet 4: Antisocial

    Poor behavioral controls
    Early behavioral problems
    Juvenile delinquency
    Revocation of conditional release
    Criminal versatility
    Other:

    Many short-term marital relationships
    Promiscuous sexual behavior

    • Maybe, but he strikes me as a true narcissist. Did you see how aggressive he got when criticised in the interview this morning? A real psychopath would charm the interviewer to her doom, a narcissist just blows up at any criticism.

    • Apologies to Dennis Leary

      I’m just a regular Joe, with a regular job, I’m your average white, conservative slob.

      I like merlot, and porno, and books about war. I’ve got at least 10 houses, all with nice hardwood floors.

      Your wife, my job, my kids and my car, my feet on your table, and a Cuban cigar.

      But sometimes that just ain’t enough to keep a man like me interested, oh no, no way, … you know the rest.

    • Could apply that list to nearly every politician here and overseas. They are a waste of space.

  2. But they DID make changes to super by deferring the planned rises from the current contribution guarantee 9.5% to 12%.

    Smoking Joe must have conveniently forgotten about that.

    • They also reversed Labor’s plan to tax income earned from superannuation above $100K p.a. at 15% IIRC.

      I mean, if you’re earning $100K in income from super you’d have to have a super balance around $2M, and if you can’t live on $100K tax free (with every dollar over $100K taxed at 15%) then you have some serious spending issues. These people are not on struggle street, and yet Affable Joe is there to defend their right to pay zero tax.

      • “I mean, if you’re earning $100K in income from super you’d have to have a super balance around $2M, and if you can’t live on $100K tax free (with every dollar over $100K taxed at 15%) then you have some serious spending issues. These people are not on struggle street, and yet Affable Joe is there to defend their right to pay zero tax.”

        This statement is so full of holes that I wonder did it come out of where the sun don’t shine?

        With a SMSF Super Fund you have an obligation to withdraw a % of the balance in your Fund every year depending on age. As you get older the % grows. At age 70 your taking out 5% minimum. Its 5% of the BALANCE of the Fund during the previous year.

        This is NOT “if you’re EARNING $100K in INCOME from super” — Its F%$&ing regardless of whether you lost 50% in a market crash or EARNED 5% ! You still have to take out the 5% of the previous years BALANCE.

        When you take out the $100,000 or whatever it is then subject to tax IF you make a profit by investing any of it. It would be good if those commenting with envy got their facts straight before hitting the keyboard.

        It would be nice to hear acknowledgement that those with a healthy Super balance do NOT get one centavo in Pension saving the Taxpayer many $$$$$$.

    • Would’ve been better if the Greens had kept quite and let more Lib/Labor/Business people call for it. Now it will be marginalised as a “crazy Greens idea” rather than being debated on it’s merits.

      • If I had any faith left in the Liblabs Stormy I would agree with you.

        The future is not with the neo liberals of the last thirty years but with parties like The Greens expanding their economic view beyond preservation.

    • Where were these Green super savings ideas when they were in Government with Gillard? Yeah, like they really care.

      • Even assuming that the Greens don’t care about whatever it is you don’t think they care about, why should that prevent a discussion on the merits of the actual policy?

      • @AB

        “… why should that prevent a discussion on the merits of actual policy

        In the brave new world we inhabit we no longer do discussion of policy.

        The Lib/Nats do Captains Calls and Labor does nothing.

      • I expect discussion following the Tax White Paper, which may include similar proposals.

        The Government has initiated a tax review and the process is in train. At least we can expect the Greens to support improvements to the system. Finally.

      • 3d1k,

        “..The Government has initiated a tax review and the process is in train….”

        That is a very slow train.

        I recall you and I suggesting early last year that the government better put that tax review on a fast train if they wanted to get ahead of the economic debate.

        I hope the expenditure review committee can stump up the cash for a few tickets on a Maglev.

        They are going to need it.

      • “I expect discussion following the Tax White Paper, which may include similar proposals.”

        If I was Treasurer and I truly believed that my country faced a BUDGET EMERGENCY then I would have commissioned the tax review at the same time as set up the Commission of Audit.

        Unless of course I was too stupid or too ideological to realise that a budget consists of both revenue and expenditures.

        I wonder what combination of stupid and ideological Hockey might be…

      • Unfortunately we have recently witnessed a complete refusal to accept even minor reform from the Senate and hysterical elements in the media. Does not auger well for future reform – even the Council of Social Service quickly came out yesterday bagging the McClure Report!

        Reforms will inevitably appear ‘unfair’ to some section or other of the electorate. This needs to be understood and accepted, minimised where possible and ran with where not.

      • 3dik the Greens were never in government or in coalition with Labor. It was a confidence and supply agreement allowing a minority Labor government.
        And the Greens did have ideas in their policies freely viewable to anyone who bothered to look unlike Lib or Lab who play small target games.
        I don’t recall if this was Greens policy at the time but they did have ideas even back then.

      • @3d1k “Unfortunately we have recently witnessed a complete refusal to accept even minor reform from the Senate and hysterical elements in the media.”

        The trouble is you and the LNP ideologues actually believe this! It always will be and always has been about the policies!

        Put in sensible reforms and they will get passed. Put in policies that will lose more money than they make ($5 medicare co-payment), will not actually work in practice (number of job applications per month), or break key election promises, or a just plain mean and unfair, and they rightfully will get rejected by the Senate – as that is their job!

      • “The trouble is you and the LNP ideologues actually believe this! It always will be and always has been about the policies! ”

        That’s what does crack me up – I think they’ve been spouting the bullsh1t for so long that they’ve completely internalised it.

        Yes, it’s a real surprise the people complained when the government decided to look at spending in isolation while completely ignoring revenue.

        And tax expenditures. John Hewson summed it up perfectly.

        http://parlinfo.aph.gov.au/parlInfo/search/display/display.w3p;query=Id%3A%22committees%2Fcommsen%2F21d58c08-0ac6-492d-b752-15c9a3ed3ea1%2F0007%22

        The main point I wanted to make today is obviously to focus in on the need to look at tax expenditures pretty much as you look at normal government expenditure. To the extent that you do not do that, it is a pretty half baked exercise. You have to look at the lot. If you look at the numbers, assistance that is enshrined in the tax system is worth about $120 billion this year, on the budget estimates, rising to about $150 billion in 2016-17. That is approaching a third of aggregate government expenditure. It is a very large number. I see the recent IMF numbers have ranked us as having a greater amount of tax expenditure to GDP than any other advanced economy in the world.

    • The revenue foregone estimates don’t appear to take in to account the savings from reduced pension outlays. Where is the estimate of what pension expenditures would be without superannuation?

      • “Where is the estimate of what pension expenditures would be without superannuation?”

        I don’t have one but I do know that superannuation concessions cost the budget almost as much as the the old age pension does.

        And that the cost of the concessions is projected to rise by 12% per year. And that they money largely flows to high income earners (of which I am one so I’m not arguing for my own benefit).

        Even some of that money could pay for a whole lot more pensions.

        http://www.smh.com.au/federal-politics/political-news/its-super-tax-concessions-not-pensions-that-are-killing-the-budget-20140421-zqx7p.html

        The study, to be formally released on Tuesday, found the rate of growth of super tax concessions is greater than that of the pension despite the ageing population, meaning the cost of the tax concession will soon overtake the pension to become ”the single largest area of government expenditure,” by 2016-17.

        ”’The age pension currently costs $39 billion and superannuation tax concessions will cost the budget around $35 billion in 2013-14,” the study found.

        It notes that the Commonwealth bill for these concessions is projected to rise at a staggering 12 per cent annually to be $50.7 billion in 2016-17.

        ”The overwhelming majority of this assistance flows to high-income earners,” the report finds.

        ”Low-income earners receive virtually no benefit. The combined cost of these two policies will be $74 billion in 2014 alone.’

    • Where is 3d1k to polish this turd?

      Above. Defending the government and getting stuck into the Greens.

      No shame.

  3. This budget problem has nothing to do with funding the deficit now or even 30 yrs in the future. It is a fake crisis to allow the LNP to achieve their reorganisation of society.
    I was shocked to see the new Treasury head saying unless something is done we will wake up to massive increases in interest rates one day. Really ?
    Please show me one first world sovereign country that issues debt in it’s own currency where that has happened?
    Its BS. Net debt @ 15% or even 40% will make no difference.

    The LNP are adopting the Tea Party play book a fake crisis to attack widows and orphans. And the media just let them get away with this. Where is a comparison of world bond yields to aggregate debt outstanding, or credit ratings and bond yields on the news to rebut these lies.
    Or even better just show Rwanda Bond yields that blood thirsty country as I have pointed out before has issued $US Debt at prices that would make your average RE speculator jealous.

    • In that case are you saying you agree with Hockey that Superannuation changes are not necessary? There is actually a clear link between government bond spreads and the financial position of a country. For a country like Australia with 80% of it’s debt held by foreigners it is definitely a risk issue that, if not controlled, could result in higher taxation if interest rates (or more correctly, spreads) increase, as well as inflation and currency devaluation. Perhaps not quite as dramatic as suggested by Treasury, but still a major risk issue. Also, management of government debt is not a partisan issue, witnessed by the USA which has reduced it’s budget deficits 5 years in a row and is aiming at stabilising overall debt. Also NZ which is in surplus with declining Govt debt. The massive rate of growth in our debt is the issue, not the overall debt to GDP ratio.

      • “There is actually a clear link between government bond spreads and the financial position of a country”

        Please provide evidence of this clear link. The U.S and UK had deficits of 10% of GDP and bond yields around 2.5% post crisis as well as debt to GDP ratios over 100%. Germany has debt around 80% of GDP and has lower bind yields then Japan although moving to a surplus now they have not had one for some time hence the 80% debt to GDP. I could go on pointing out the amazingly low bond yields of country’s with sky high debts and big annual deficits. But you probably don’t want facts to get in the way of plans to dismantle the Australian settlement’ and create a new plutocracy
        How do you feel about country’s like Spain or Italy and their spreads compared to Japan and U.S ?
        Have you looked at Japan ? Or do you just get your Macro from midday show bank economists.

      • You are missing my point & I think some broader reading might help you. For a start, Japan’s debt is almost 100% owned by it’s own citizens, basically the polar opposite of Australia. The Japanese Government is currently concerned that this historical dynamic has started to change and they now need to tap foreign debt markets which will expose them to higher interest rates and higher domestic taxes. It is simple logic that an international investor looking to place $100M will place it in the country with the lowest perecived risk for the highest return. There are numerous, balanced articles on the web that deal with government debt spreads and risk and relate them to a country’s financial position. You can quote any outlier that you like, but it doesn’t disprove reality because some countries (eg USA and Germany) will attract lower risk spreads because of their “powerhouse” economy status. Having said that, their spreads would be even lower if they had less government debt relative to alternate investment markets. Your conspiratorial view of the class motivations (?) for managing Govt debt just doen’t make sense unless you believe that Obama and our ALP are part of the same conspiracy.

  4. “Mr Hockey said it was very hard to take the Greens seriously when they refused to back indexation of the fuel excise.

    “So how can you take the Greens seriously on any economic policy?” he told ABC radio on Thursday.”

    So by Hockey’s “logic” it’s very hard to take the Liberals seriously when they refuse to back superannuation reform.

    “How can you take the Liberals seriously on any economic policy?”

  5. heh, Chris Becker may be the gif king, but when he alone may post gifs, it seems a bit like a very exclusive club awarding yet another trophy to their best mate.

  6. personally I think they should keep these concessions. Why? i’m sick of benefits getting taken away just as I get to the point of being able to utilise them. If we remove these, it wont impact boomers who have already rorted the system and are now retired. It will affect theyounger ones coming through who PAID for eductation, got ridiculously expensive housing and who wont have a pension when it comes time to retire. Dont we want to keep at least one rort for Gen X / Y????We could finance it by including the family home in pension testing.

    • My circumstances are similar and I understand your frustration. However, why should others be screwed over like we have been? Especially when we understand that while it appears to benefit us at an individual level, the community we reside in suffers.
      I’d argue that if the community suffers, then as a member of that community I lose out as well. So how can perpetuating something destructive be good for me even if I get a benefit from it?

    • Remember they way these rorts work. They provide a huge benifit to the rich and a small benifit to the ‘middle class’ so the middle class fights to keep them.

      Far better to close up all the rorts and have the much healthier economy.
      Personally I’d increase the pension with some of the money saved by fixing super. So you’d still get something for your effort.

      • That would be really fair. Here’s how to explain it to a bright-eyed 20 year old entering the workforce “You’ll be forced to put 10% of your wage in to super and have it taxed at your full marginal tax rate, then have the fund’s earnings taxed at your marginal rate, but the clincher is, you cant touch it for at least 40 years!” “Why is that?” “Oh, years ago we pretty much stuffed our tax system up and then decided to pay more to people who didn’t have super or had spent their super”. “Oh….but my parents made sacrifices and put more money in to super when they were working and now get about $600 pw so don’t get the pension – how much is the pension?” “$600 pw”

        Also for clarification on the rorting point, for someone on over $300K, the applicable tax benefit in super is LESS than someone on a middle income (contributions are taxed at 30%, not 15%). You can only contribute $25K pa with this tax break, hardly enough to make you super wealthy. Any further contribution has to come from post tax income, meaning for a high income earner it has already been taxed at 49%.

      • I personally hate compulsory super, it’s a scam that only enriches banks and super funds and allows politicians to be lazy.
        Ideally I’d scrap it entirely. Have a universal pension thats not means tested and is enough to actually live on. And if people save they get to keep their savings.
        Any benefit we might get from means testing could be done just as easily through the tax system and wouldn’t require as much beurocracy.
        Keep your tax system and your payments/expenditure seperate. Stop pretending that some money can only be used for one purpose, budgets don’t work like that.

  7. It’s very telling what the coalitions sacred vows are.

    The budget crisis is so severe we need to leave unemployed and disabled to starve in the gutter and dismantle universal health care but promises to protect the politico housing complex can’t be broken.

    Really shows who they work for.

    • They really are lowlifes.

      That grinning psychopath Morrison on the one hand laying out his plans to bend over the disabled of the country, while on the other, Hockey is assuring the country’s wealthiest that the teat shall not be withdrawn.

      Not to say that a lot of policy couldn’t do with review, but with issues like:

      – negative gearing,

      – discount CGT,

      – super and trust rorts,

      – cash economy,

      – multinational tax shifting,

      – salary packaged vehicles,

      – and mansion owning pensioners all left unaddressed, the disabled hardly look like the lowest hanging fruit.

      I lack the words to adequately express my disgust for many of the corrupted souls that inhabit politics at present. Holding on to a rigid ideology at any cost, and the consequent failure to make themselves informed and do what is right, even if it comes at a personal cost, is just another form of evil.

      Like Uncle Ben said, “With great power comes great responsibility”. If you don’t like that fact, the get the fuck out of where you should never have been in the first place and let someone with courage do the job.

  8. Everything he does and says now shows that the whole “budget crisis” thing was a steaming pile of b*s*.

    You can’t trust the Liberals.

    They have terrible internal governance, their accounting is suspect, they lied to the electorate in spades before the election, many of them have had corruption findings against them or proven to be incompetent.

    Labor had its problems and got turfed out and rightly so.

    Now we need to turf out the Liberals and show them we won’t tolerate this crap from either party.

    To vote for the most important issue of all, (honesty and integrity in politics) vte against sitting members everywhere.

  9. Prime Minister in waiting Turnbull may have other ideas about super reforms, and *he* didn’t make any promises before the election.

  10. MB is a great source of insight into how the powers that shouldn’t be are going to frame the upcoming theft of super funds.