Politics wins over policy

No wonder Joe Hockey is looking so happy with himself.

The creation of an annual budget is a tough job involving a struggle between policy and politics. Last year Mr Hockey went for policy – announcing a debt and deficit disaster that only the most swinging cuts to the most vulnerable could fix. Pensioners, students, the jobless would all need to take a hit to balance the nation’s books. What a difference a year makes.

Now Mr. Hockey is trumpeting the joys of a ‘glass half full’ economy – even though net debt is soaring. This year his approach is entirely political – priming the pump for small business, families with children and spending on infrastructure. He has also eased back on the cuts to those least well-off, scrapping the changes to pension indexation and removing the 6-month wait for Newstart allowances. So no deficit emergency any more, now an exhortation to the two million small business owners to ‘get out there and have a go’ and spend to receive an immediate $20,000 tax write off.

So what does this mean for retirees or those planning their retirement?

The changes to the asset free threshold in 2017 are intended to increase pension fairness. This will result in 170,000 pensioners receiving an increased pension income as they move from a part to a full pension or from a lower payment on a part pension to a higher one. Wealthier retirees will face a doubling of the pension taper rate, from $1.50 to $3.00 for every $1000 of assets over the asset free threshold.

At one level this makes sense, with higher payments to those least well off. But is the current pension cut-off threshold for homeowners, of $775,500 for singles and $1,151,500 for couples really such a lot of money? Say a couple is aged 63 and 65 – they will probably live for another 25-30 years. So what kind of income can $1.15 million fund over this period of time, particularly given the current record low interest rates? Not a lot!

The Treasurer was keen to point out that, at $44 billion, the Age Pension is the highest portion of government spending – about 10 per cent. But this is an entirely misleading approach to funding retirement in Australia.

Joe Hockey has a fixation on spending which misses the point about sound fiscal management.

When you can’t afford the costs of raising a family, a tried and true remedy is to get a better paying job or ask for a wage rise, or even take on an extra job. You tackle the revenue side of the equation.

And this is something the Treasurer simply refuses to countenance.

An easy win would be to increase GST. But this has been put into the too-hard basket as a ‘states-only’ problem. It is not – it is a national priority.

More importantly, however is what we are NOT considering in terms of revenue foregone – the overly generous taxation concessions on superannuation which, within four years, will cost the country MORE than the Age Pension. Yes, these concessions that favour the rich are not even a discussion for the current Treasurer.

The Department of Treasury itself has said:

“the wealthiest ten per cent of the population are expected to receive 31.8 per cent of the tax concessions on superannuation contributions in 2012-13. The same Treasury modelling shows that the poorest ten per cent will receive no benefit from those tax concessions and the bottom half of the population will receive 18.7 per cent of the concessions on contributions. (The Australia Institute, Super for Some).

So currently taxpayers are subsidising retirement for the wealthiest members of our society, while about 60 per cent of those on the full Age Pension live below the poverty line.

As well as a change to the tax concessions on super, the need for a Royal Commission into the financial services industry is critical. All of our major banks have now fostered a culture that has encouraged financial misdemeanors causing the loss of millions of dollars of retirement income for many thousands of Australians. The regulator was missing in action, and these companies now insist upon the right of investigating their own white-collar crime and compensating victims at their own discretion, and with draconian conditions attached. This is scandalous and only a Royal Commission will force the industry to comply with the need to put customers’ interests first or face fines or deregistration of planners who fail to comply. This alone will mean the first step back towards some form of trust in our retirement planning industry.

Budget 2015 is a wasted opportunity when it comes to retirement incomes. We have some fiddling at the edges, but the long term structural reforms so badly needed have been shirked. The rich retirees are growing ever richer – the poor are getting poorer and the government is in denial of the need for an urgent and radical review of how we properly fund retirement for ALL Australians.





    COMMENTS

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    Patriot
    13th May 2015
    11:51am
    Can a BULLY be taught to have genuine COMPASSION in the span of ONE YEAR?
    I personally doubt very much that this is possible.
    As said, with a STILL "Soaring Debt Problem" everything is now ROSY and the "Lifters & Leaners" attitude seems to have "Faded" in the abundant Autumn Sunshine!

    Whilst, traditionally, I "used to be" a Conservative Voter, I will NEVER vote for them again (Now have not for years) as they are most "Self Centred, Intimidating & Insulting" crowd I have experienced!
    All they can think about is: "How do I keep my own head in the feeding trough. Stuff the Country & all Australians inclusive of my own kids".

    The Internationalists obviously "Ticked Off" Joe & Tony and reprimanded them for the use of the "wrong tactics" in order to "Lead Australians" into the "One World Slavery" condition.

    At least the Shadow Treasurer conducted himself with dignity & Credibility rather than "Throwing Off" at the NLP all the time.
    Grumpy
    13th May 2015
    11:55am
    Patriot...Amen.
    wally
    13th May 2015
    1:06pm
    Don't you like Tony and Joe? Tell us what you really think, pls.

    Anyway, what ever happens with the budget depends on Senate approval. Until that happens, all of the yelping about it is irrelevant and a waste of time.
    Patriot
    13th May 2015
    1:14pm
    wally
    Once it has passed and is LAW we will have HELL to reverse it.
    So, we MUST object before it is "Passed into LAW".
    Look at last year's budget, we BITCHED and they ABANDONED.
    Shows where the power is & WE should not FORGET IT !!!!
    Jen
    13th May 2015
    6:52pm
    Absolutely, Patriot. As long as we vote, we are not impotent.
    Patriot
    14th May 2015
    6:38am
    Jen,
    Only on Voting Day though - So the pollies think.
    My local pollie here seems to think that - when the party is elected - we (the Aust People) provide them with a Checkbook full of blank (SIGNED) cheques.

    Hence he believes that the SECRET negotiations going on currently with the Trans Pacific Partnership MUST remain secret and we - the people - should be OK to let our Pollies sign for whatever they see fit and then let US wear the consequences.

    The Mature Age Party seems to be the only option at the next election.
    http://themap.org.au/
    Grumpy
    13th May 2015
    11:52am
    Kaye, an almost balanced, sensible, well argued piece.
    You rightly raise the issue of current assets test limits. As a part pensioner (at the lower end of the asset scale) I see no reason to reduce the asset levels. We are frequently told that someone retiring today needs at least $1m to avoid penury. Reducing asset test limits will therefore simply create Commonwealth Age Pensioners sooner.
    Why change the taper rates? Current rates reduce a couple's pension by $78 pa for each $1k excess assets. The couple will need to receive the pension for approx 12.5 years to recoup $1k. Doubled the taper rate and the period becomes 25 years. Clearly the temptation for cash caches under the mattress will increase dramatically.
    Your piece is only unbalanced by not contemplating the massive amounts of revenue foregone in corporate patronage free of any means testing; Fuel Excise Rebate allowed to BHP Billiton and Rio Tinto, $15Bn pa as a donation to the Health Insurance industry, tax deductibility of interest on borrowings....................
    Tom Tank
    13th May 2015
    12:01pm
    It appears that the general concensus of this being a budget to claw back the damage to the LNP of the first budget is correct.
    Whatever happened to the momumetal financial crisis Australia was facing only 12 months ago? Either they were lying then or this budget is a shamefaced political act in the run up to the next election.
    Whichever way it is how can they ever be trusted.
    Patriot
    13th May 2015
    1:25pm
    Tom Tank.
    When the (politician's) head is feeding frantically and DEEPLY merged in the trough, their peripheral vision is blocked! UNADULTERATED GREED for POWER Prevails!
    However, when the head is NOT feeding frantically, the eyes are just lifted above the Rim-of-the-Trough and SOME peripheral vision is returned. GREED is now tempered somewhat!

    The truth seems to be that - due to our pressure - they lifted they head somewhat out of the trough and thereby GAINED some (Insight) peripheral vision. They detected that, if they did NOT "Tow-the-Line", as demanded by the Australian TaxPayer, they would NOT be as well fed (at all) in the Future!!!
    It's amazing what Insecurity does to individuals !!! Especially GREEDY ones.
    Not Senile Yet!
    13th May 2015
    12:58pm
    They have no intention of attacking their wealthy Corporate Donaters to the Liberal party Fund......and never will!!!
    The Two Party System of Tag team type Politics needs a skyrocket right up the ********!!!
    It is the Tax Concessions given to the Middle to High end Earners....namely all high earners above $100,000 that is causing the budget blowouts....that and the combined tax subsidy's to Corporate Companies.....which amount to a legal way of paying LESS Tax.
    Even allowing any Australian Registered Companies to operate OFF SHORE as a way of avoiding their Society tax obligations!!!
    They know it!!! We Know it!!!
    A simple solution is to regulate the Issue of ALL ABN Numbers...without which a Company can not operate in Australia....by simply applying a Minimum Tax of 20% of all profits made within Australia to the Issuing of ALL ABN numbers!!!
    No 20% Paid....withdrawal of ABN Number by ATO!!!
    If this was done....their inability to Balance the Budget would disappear !!!
    As to the generous tax concessions to Super.....a more reasonable Limit needs to be set for ALL and Tax concessions either removed completely or all amounts put into to Super above Limit set does not attract a concession from taxation!
    Super has been destroyed by Both Parties wanting to tax it twice....once when it goes in.....and then again when it is drawn!
    This double dipping!!!! Tax it once before it goes in and then LEAVE IT ALONE!!!
    In my view Both Parties are buggering up the Super System by constantly fiddling with it!!! Leave it alone so people can plan for the long term!!!
    As for the statement about a " A little bit of pain for the most is the easiest way to balance the budget"...I disagree!!!
    The real Leaner's are those dodging tax by avoidance through loophole concessions or exclusions created by the Politicians of BOTH Parties over the past TWENTY YEARS for the privileged few!!!
    Time to vote against Both the BIG Parties & Their Puppet MP's so they no longer have control over Legislating privileged exemptions at their will!!!
    Time to vote as many Independants into both houses of Parliament and make the Parties negotiate everything...argue every point....debate every issue...because that is what they are supposed to do!!!
    TREBOR
    13th May 2015
    8:11pm
    You forgot to mention the double dipping involved in a pensioner having paid into social security via income tax levies for life then being taxed on that pension if he/she has the temerity to continue to work while on age pension..

    Same as your thoughts on super....
    Not Senile Yet!
    13th May 2015
    1:07pm
    By the way...the Independants in the Senate are constantly accused of Blackmailing the Parties.....simply because they block unfair legislation.....yet that is what they have to do to get a debate & or a modification of the proposed Legislation by the Lower House before a new proposal is presented!!!
    How convenient for the Party Puppets to label them Blackmailers within Parliament....outside they would be sued for libel!!
    Yet those who report statements by other inside Parliament are not held accountable for the repetition of libellous Slander!!!
    Time to remove Parliamentary Privelege or at very least ...introduce a Fine system for abusing Parliamentary Privelge by any MP and the Fines donated to a Homeless Shelter Fund!!!
    Maybe then they might stop ridiculing those that are simply doing their job without Party Bullying or Corruption!!!
    maelcolium
    13th May 2015
    2:11pm
    The writer of this article just lit my fuse.

    This idea that the fiscal balance (budget) is like the budget of a household or a business is not factual. Using words like revenue, balancing the budget or funding welfare payments represent the national accounts in a fallacious way and should be dismissed. The fiscal choices of governments are political, they contain very little economic rationale, so the share of national wealth is an ideological choice. Australia is a sovereign entity, with a fiat currency and floating exchange rate. All debts in the national accounts, which means that all income and expense are entirely in the currency of Australia. Australia cannot be bankrupt.
    Federal deficits are not carried forward and surpluses are not banked. The only intergenerational theft of public debt (in Australian dollars) is the theft of the right of unemployment to our youth of whom 18% are unemployed. This youth cohort will need to support future generations, so we need to equip them to be productive members of society.

    Welfare is an expectation of a modern society to ensure it's vulnerable citizens are able to continue to line their lives with an element of security and share in the national wealth. There is no real constraint to the provision of welfare it is entirely a policy choice.

    In summary, bearing the foregoing, pensioners should not accept the neoliberal dogma that Australia cannot somehow afford welfare or must trim it's costs in favour of one group to the detriment of another group. This division only advances the purpose of those with an agenda to move national wealth from productive processes that benefit society to profits that benefit the top 1% of the nation. I implore the writer of the article to heed this advice and seek to be more informed when presenting information so that facts are reported and not unsupported group think ideas.

    On the issue of GST I'm surprised the author would view this as an easy win - for whom? It is a regressive form of tax in the sense that the impact is felt more by those on low incomes (pensioners) or fixed incomes (mostly pensioners) because they pay proportionally more than higher incomes. It is a tax on the poor. It is expensive to administer, is collected and with held by a federal agency and disbursed by a political process. It does not fund the States in the way it was originally proposed. To propose that it should be increased is a disgrace and lacks sensitivity to the members of Your Life Choices who will be the ones that bear it disproportionally to the rest of the population.

    The assets test is one element of pension entitlement. There is also the taper rates and income tests that will determine the pension quantum. I would like to see some numbers within various asset/income ranges so that readers can start to understand the impact.
    Grumpy
    13th May 2015
    3:02pm
    maelcolium thank you for picking up on a point I omitted in my earlier truncated comments on these issues i.e. the penal and regressive nature of GST. Notably, by and large the Coalition's strongest supporters and donors do not, guess what, pay GST.
    Thank you also for adopting the approach to which I now restrict myself ...clearly thought out and cogent argument in lieu of repetition of idealogical mantras and personal attacks.
    The Coalition forgets that the economy is the handmaiden of society, not vice versa. Your comments on likening Australian society to a credit cardholder or business is equally germane. From the Coalition's point of view the credit card analogy is perfect in that it focusses only on spending, excluding any need to consider increasing revenue to cover outlays.
    Mar
    13th May 2015
    2:41pm
    My sentiments exactly Tom Tank.
    Grumpy
    13th May 2015
    3:13pm
    To date non one seems to have picked up on the politically tactical and devious element of the proposed changes.
    Nothing proposed applies until passed into law, and then not until 2017, after the next election. For this year the changes can be used as bargaining chips for passage of previously rejected, unfair savings from the previous budget. They also serve to wedge the Opposition and independents before the events i.e. moral blackmail, denying pensiomners future benefits.
    For the future they can be used as a fear factor during the next election. Re-elect us or risk losing these pension gains.
    All this is achieved without spending a dime. (I've used the US currency since that is exactly where the Coalition wishes to place us; the next star on the US flag.)
    This is corporate gamesmanship at its worst. Scoring political points and winning the game is more important the prize for winning. The real problem is that destruction of ordinary people's lives are simply collateral damage during the game.
    Patriot
    13th May 2015
    6:45pm
    Grumpy
    Excellent - and in my opinion - correct logic.
    And yes, America sneezes and we have the box of tissues ready at the time the face prepares for the sneeze.
    SLAVES - THAT'S WHAT WE ARE !!!
    Patriot
    13th May 2015
    6:46pm
    The Bast**ds have "Sold-Us-Out".
    Young
    13th May 2015
    6:04pm
    Does this website ever stop whinging about what they want.We are holidaying in VietnamPeople are not nearly as well off and are happy.
    You whinged about the first budget and now are complaining again.
    We could not be better off.Get out and live.
    TREBOR
    14th May 2015
    12:37am
    Yes - last time I holidayed in St Moritz the place was full of these lower class workers serving drinks and such... and a whole lot of bloody foreigners!
    Young
    13th May 2015
    6:06pm
    Why don't you all run for parliament.You know so much.
    TREBOR
    14th May 2015
    12:38am
    No current party would have us since we want genuine change..... so we have to get the Grey Panther Party up and running....
    Patriot
    14th May 2015
    6:29am
    TREBOR

    Look at the following link - Mature Age party
    http://themap.org.au/
    Jen
    13th May 2015
    6:46pm
    It'd be hilarious if it wasn't so sickening. We've gone from an emergency deficit that the vulnerable had to fix, to double the deficit and no emergency in twelve months. Notice the new slogan to hit our govelling media?

    Well Joe and Tony, you can say it a million times but it doesn't make it so! Not all of us are idiots.
    Fready
    13th May 2015
    7:00pm
    The question that has to be asked is why did all those grizzling about the pension not save towards your retirement.?? To be constantly wailing about the wealthy everyone has a different perception of wealthy is futile. A few months ago people who had saved $1 million were said in this column to be wealthy and now their income (if they are prudent) is less than a full pensioner couple. !!
    The more serious issue is this childcare rort. A low paid couple with 3 children can get $65,000 in childcare support; nearly twice the full pension for a couple. The other rort is you mind my 5 kids as a carer or nanny and I mind your 5 kids as a nanny and we both get paid to mind our own kids.
    This is a vote buyer as even if successful in getting more women prepared to return to work there are no jobs and no childcare places.
    TREBOR
    14th May 2015
    12:52am
    Some of us - perhaps many of us - were ambushed by a combination of life, dismal industrial relations, economic downturns, social engineering such as to 'equalise' women, age, illness ,injury, divorce... and any number of other social and economic issues.

    Maybe a lot of those areas are what really needs to be looked at in The Age of The End Of The Age Of Entitlement ™ .... no more freebies anywhere, any time.....

    Fortunate are those who managed to not hit any of those mines in that field...
    TREBOR
    13th May 2015
    7:45pm
    I am struck by the lack of any real difference between giving the Kev Oh-Sev cash to pensioners etc - and priming the economy via tax concessions for small business.

    I've long said that small business is the engine room, and not the big boys... those mega organisations dealing with billions of dollars do not, as a rule actually employ very many people - small business as a group does.

    Ergo - any attempt at generating jobs must come significantly from supporting small business.
    TREBOR
    14th May 2015
    12:41am
    This is an economy stimulus package by another name, with the fervent hope that enough cash thrown around in one way or another will stimulate buying and thus taxes....

    It's a hard call and a gamble.. and I really doubt it will generate many jobs. Where I work they don't really need much new equipment etc, so I expect the result to be negligible. If they were smart, they'd lay me of and then re-employ me to get the $10k....
    Adrianus
    18th May 2015
    8:20am
    Bill Shorten and his team are in the political fight 24/7.
    When the government claws back on spending we hear them cry STOP THE CUTS!
    When the government gives pensioners an extra $30 per fortnight we hear cries of Abbott and Hockey are too soft!
    Just more political posturing from Labor.
    By the way, when did Superannuation become a burden on the taxpayers????
    travelman
    19th May 2015
    12:15pm
    I find this budget is a farce, much better that Shakespeare could produce and if this is the best he can do it is time for him to 'fall on his cigar'. Better still the Prime Minister to hang his head in shame and forthwith get himself to the Governor General to resign and have a 'caretaker' government to take over until elections can take place. This nation can no longer accept the incompetence, financial and security risk that this government is driving this nation toward. Travelman
    JosephBurkey
    15th Aug 2018
    8:06pm
    https://trabalhosprontos.net/gestao-grupo-x-equipe-3357/