Can’t raise JobSeeker, can pork barrel retirees

Treasurer Josh Frydenberg is said to be looking at measures in the May budget to assist self-funded retirees hurt by record low interest rates. In particular, lowering the deeming rate for aged pensioners, and making permanent what was a temporary reduction in the drawdown rate that the government introduced in March at the height of the pandemic:

“Low interest rates are here for a long while. The government doesn’t have a strategy. In fact they’ve made it worse: always slow to adjust deeming rates and the pension loan scheme [Shadow assistant treasurer Stephen Jones said]…

The plight of self-funded retirees, which is a key voting demographic for the Coalition, is one of many the government must juggle as the economy emerges from the pandemic-induced recession.

The federal government has already racked-up hundreds of billions of dollars of debt to steer the economy through COVID-19, which will need to be repaid by younger generations.

Now retiree groups want to throw billions more onto the debt burden of younger generations so that they can enjoy their retirements in undiminished comfort.

the argument that the deeming rate is unfair does not pass scrutiny. Deeming rates apply to all financial assets, including equities like shares and unit trusts. And equities typically rise as the cash rate falls (as has happened recently) – a point conveniently ignored by the Seniors lobby.

Deeming rates have to provide a simple benchmark that takes account of cash returns, dividends and other equity returns. That’s why there are two deeming rates – a lower one biased to cash (0.25% on the first $53,000 of investment assets for a single), and a higher one biased to equities (2.25% on investment assets over the amount of $53,000 for a single):

If anything, the upper deeming rate is far too generous, since actual earnings on equities (dividends) are typically much higher than 2.25%.

My argument was explicitly supported by Council on the Ageing Australia CEO, Ian Yates, who previously noted that most pensioners earn significantly more than the deeming rate on their investment earnings:

“Those calling for the full cut in the cash rate to be applied to deeming need to be honest about how many pensioners are affected, and about the fact that if the Government replaced the deeming rate with actual earnings the majority of part pensioners would be worse off”.

Moreover, the government’s first priority should be to permanently lift JobSeeker, which at just $40 a day has fallen well below the poverty line and the Aged Pension ($61.50 a day):

The unemployed are among Australia’s poorest and most vulnerable. They are the cohort that needs help, not home-owning retirees.

Unconventional Economist
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Comments

    • Totes BeWokeMEMBER

      I have taken a bet on Labor for over $10k at $2.80 to $2.88 They have come in to under $2.70, meaning I’m in the red a bit. After Australia works out how politically poisonous Plibersek is nationally, I expect them to blow out to at least 3/1, where I’ll bet on them, or might even let it play out with some.

      In other words, short of workchoices, LNP can do whatever the fk they want and get away with it. Labor are never winning another federal election.

      • Dunno. I think if shorten can look just half as smug as SFM and Labor focus their attention on landed Australians.

        Sell it as just a pause then open the gates.

        Shorten is the only hope they have. As above just needs to not look smug but look reformed and learned from wrong policies.

        • Totes BeWokeMEMBER

          “Labor focus their attention on landed Australians”

          Labor would win in a landslide if they adopted nationalist polices.

          Though Plibersek etal would lose ground to the globalist Greens in their seats. Therefore, it’s not going to happen IMO.

          We are witnessing the most selfish MP’s in Australian political history.

          • Agreed. It’s Labor’s leadership dominated in the inner city rings of Sydney and Melbourne that keeps them out of touch with society. A family on the outskirts of Sydney for example has little in common with many in the inner west/inner Sydney communities who vote Albo and Tanya. As an example issue with many people on the outer rings home owners (and many in the inner rings renters) Labor’s housing policy was all lose, no gain for most outer ring families. Job losses, loss of value in their homes, etc.

            All Labor needed to say was we will raise super, look into raising wages, and limit migration and everyone would of voted for them.

      • So this the democracy in Australia I hear all about? Only two parties even gain power and one of them has been in government for 80% of the nations history. Heh, least we’re not China.

    • Strange Economics

      Lets see – the (non Jobkeeper aspirationals) unemployed will never vote Liberal. Pesionioners are a large swinging group of voters, who also tell their families what they had better vote –
      which one would you spend money on if you were the govt?

      And What happened to last week’s ” we will not make structural changes” – well, except for pensioners.
      Mind you only for home owning part pensioners, not those renter types.

  1. master of toilet paper

    how many newstart recipients are even actually ‘unemployed’

    afaik a significant number of dole recipients are not unemployed at all, theyre out of the labor force entirely

    the dole is basically a payment for ppl who are too lazy/defeated/incompetent to actually get a job but not incapacitated enough to qualify for the disability pension

    a large number of dole recipients are over 50s+ or so cruising on the payment until they qualify the pension, theyre in the best possible position to bludge too usually bc they often own their own home (no rent) and dont have to do the garbage jobactive provider obligations that young people are required to which are intended to cause recipients to drop off the payment; the idea that therre’s no dole bludgers is an economist myth, speaking as somebody who is unequviocally one

    i think a lot of ppl dont understand the dole bc theyve never been on it

    that being said it should be increased significantly

    • I'll have anotherMEMBER

      The dole is also for women fleeing abusive partners with their kids, returned vets, those who have been recently made redundant with bills to pay, people with an IQ under 80 who have no support structure but are not mentally retarded, widows with no skills, those too old to get a job labouring anymore with no other skills, those with serious mental health conditions who don’t qualify for disability.

      Besides, if someone doesn’t want to work, who gives a toss. Gov just spent trillions and then walls aren’t closing in. We are spending $500bil on dud submarines that won’t be here for 30 years. The economic arguments for withholding a livable dole rate no longer stack up to me after seeing the amount of debt we are in. What’s a few billion difference going to make? None! Not to mention this money would actually be spent, unlike the tax breaks afforded to rich retirees speculative investments.

      Gov wastes money all over the place. Ultimately, if people hate work that much and want a barely livable wage, good for them. It doesn’t worry me; and believe me, I’ve paid more than my fair share of tax and will continue to do so, whilst employing others who do the same. Why force a bunch of unwilling, disinterested people onto the jobs market. There will always be those willing and keen and able to work, give the jobs to them.

        • LibLab won’t be getting rid of the jobactive system. The backhander donations LibLab receives from jobactive contractors is too tasty for that to ever happen.

        • Even StevenMEMBER

          Triple the Newstart (Jobseeker) payment with no obligations and I’d give up working. Even though I earn a very decent income. Why wouldn’t I?

          I’d shift almost all my assets into my wife’s name (she can keep working) so I can claim full Jobseeker, and together with our house (fully owned) and assets in equities (now in my wife’s name) we’d have a very comfortable existence indeed.

          That is a very bad idea.

          I am highly employable, well paid, and you’ve just set up a structure which incentives me to stop working. A 30% increase in Jobseeker is probably ok. But a tripling? No way.

    • You’re trolling, surely. When I was on Newstart I was also working in a casual position. So were half the other people in my “job club” group. Yet we STILL had to comply with the time wasting obligations.

      • master of toilet paper

        how old are u? the obligation load is lower for people over a certain age than younger, its one of the big reasons theres a disproportionate number of newstart recipients in older age ranges

  2. SoMPLSBoyMEMBER

    Josh is the latest of many who have been tasked with the vitally important role of protecting Straya’s debt-fuelled ‘equity’.
    This carefully nurtured ‘wealth’ will be required to support the inexorable and future debt expansion of the next gen.

    This strategy is all that we have left and every chip remaining has been pushed across the felt with trembling hands. It may not work they know but there can be no other way now.

    • Even StevenMEMBER

      Yes, I don’t understand why the Pension Loan Scheme is so expensive. Surely the government can provide it at extremely competitive rates. It should almost be a community service.

  3. Rich mansion-owning Boomers most certainly ought to get a boost in their fortnightly welfare payments from the government! they’ve earned it and they’re entitled to it! #Entitlement #We’ve worked hard #Boomer’s World #EatTheYoung

  4. “And equities typically rise as the cash rate falls (as has happened recently) – a point conveniently ignored by the Seniors lobby.”

    The article misses the point that the aged don’t have all the time in the world for equities to recover after a fall, and that given the increasing risk of significant medical costs, and looming humungous costs of entering a satisfactory aged care facility at any time, cash may not only be king it may be the most sensible place to park funds.

    • Even StevenMEMBER

      Cash is rarely the best place to allocate a substantial portion of funds. A balanced allocation will achieve a far higher return for only a modest increase in risk. I’m going to say what you’re proposing would be wrong for about 95% of circumstances (background: investments, financial planning).

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