Why is the Herald so nasty to Clarkson and Albanese?

[Bruce Tuncks]

My understanding of the superannuation changes is that they mainly effect the super-rich.

But Clarkson is one of them I would think, and I am puzzled by their hostility.

[old man emu]

Everyone knows that superannuation is a form of forced savings. The "Average Citizen" can only afford to put a small portion of their income into this form of saving for the distant future. Who the proposed changes are aimed at are the CEO's on multi-million dollar salary packages who tip their excess money into superannuation from which income is taxed at a very low level compared to the tax level their salary packages attract. 

 

The low tax rate on super is aimed as a kick-back to average level income earners. The problem with super for those people is that $1000 today won't buy the same number of loaves of bread in forty years' time due to inflation, which economists tell us is good if under control.

 

So, when the super-rich get a sting from a tax, they call up their media mates to raise a hue and cry, shouting, "Bloody murder" to frighten the peasants who think their heads will roll.

 

(Strewth! What a Rainbow cake of mixed together metaphors!)

[octave]

 

1 hour ago, old man emu said:

The problem with super for those people is that $1000 today won't buy the same number of loaves of bread in forty years' time due to inflation,

My super earned an average of 7.2% over the last 10 years this far exceeds inflation.      Having dropped out for many years my wife and I, about five years ago  thought we would have to work until we dropped. We thought we had left it too late.     My wife did a course on getting the most out of super.   We took advantage of every thing we could. For 4 years my wife did the maximum salary sacrifice,  I was self employed and was able to take advantage of a government yearly co payment.   Super is great if you use it wisely.  We were able to retire 10 years early (modestly but comfortably)

[facthunter]

Pollies who encouraged you to "spend" YOUR money have tricked you into compromising your future  financial security. Desperate people will work for LOWER rates of pay everywhere.   The long term benefit you lost makes it a bad deal. Expensive.  and inflationary and has helped to push up Interest rates which directly affect rental  costs.  Nev

[Jerry_Atrick]

Superannuation (Pensions in the UK) are a delicate topic. The idea of universal super is to alleviate the burden of the state from providing for people's pensions and transfer it to the private sector and workforce. This, IMHO, is a very good idea, especially in an ageing population; there will be enough strains on the public purse as a result. 

 

No system, however, is perfect, and there are financial and fiduciary risks associated with this approach - but none more-so than if the pensions were left to the public sector. 

 

Of course, any financial benefit usually benefits the rich more than the poor, and the idea that a state pension is still available is an important safety net. 

 

Although Australia is light years ahead in terms of mandating super/pension for the workforce as a whole (the UK only brought it in not too long before lock-down and the loopholes to avoid it are immense), I think the contributions side needs an overhaul. 

 

As I recall there is (or at least, was) a 15% input tax or thereabouts on Aussie super contributions. Obviously for most who will contribute, this will be a discount,  but if you're a high income earner, it is a much better benefit than lower income earners as the percentage difference between the rate of tax paid by high income earners and the 15% is higher than lower income earners. So, if we wanted to keep it absolutely equitable, the input tax would be better calculated as a single discount rate, rather than a fixed percentage. I left Aus not too long after all this started, so I am not sure my understanding is accurate.

 

However, putting a penny of tax on contributions, IMHO, is much more detrimental, especially to lower income earners, who will contribute less. While you can assume the yield curve to be constant and the proportional impact of future yields will be the same, in absolute terms, the higher contributor will be so much better off. And that is, in some ways fair. As Mr & Mrs Octave planed to retire early, they sacrificed more of their salary, so should be entitled to the better returns.

 

But, I would argue for super contributions, there should be a zero input tax because, the impact of a tax is much larger due to the compounding nature of super returns; and therefore the same rate applied to lower v. higher contributions becomes effectively exponential. But if you remove such a large chunk, it at least evens up the true yield curve as much as possible without going into a margin tax. Also, it acts as a great incentive for people to save for their retirement. 

 

Over here, there is 0% tax on pensions contributions. It used to be that to a limit of £250K contributions a year. This was grossly unfair as high income earners effectively got their first £250K of income tax free. So, the government a few years ago reduced it to £22,500... Any contributions above that in a year are made in after tax income.  I did get a bonus last year that paid more than a buying a pint... It all went to super tax free (well,  well under the limit, including the annual contributions I had made).

 

Under the MiFID II regulation brought in in 2018, under the Costs and Charges provisions, all asset/fund managers have to release comparisons of their projected returns to client free of costs and charges (fees), and with them applied. When you consider the impact over a 10 year period of what are usually quite small C&Cs of between about 1/2 percent to 1.5 percent, a 15% hit would be massive. 

[old man emu]

Superannuation is an Economics two-edged sword. The dull edge is that it is a means for those who are not likely to save for the future, as well as the thrifty, do build a nest egg for later in life. The sharp edge is its destructive, but unintentional,  effect on inflation. This is how I come up with that unintentional effect.

1. Each person puts aside a small portion of their income to save via superannuation.
2. The money is handed over to superannuation funds managers to take care off.
3. The superannuation funds managers find that they have huge sums of money to take handle.
4. Other organisations need money to progress their activities, so they approach the superannuation funds managers for loans.
5. The superannuation funds managers lend the money, often by purchasing shares with the expectation of those shares returning more than the amount equal to the loan.
6. The borrower knows that they have to use that money to maintain the principle, provide a return to satisfy the lender, and finally to generate a profit from the borrower's activities.
7. The borrower can only satisfy those requirements by its pricing for the products of its activities. Therefore, it increases its prices from their pre-borrowing levels. 
8. Increased prices create calls from each person for more dollars for their work.
9. Increased dollars mean increased money handed over in the form of savings in superannuation funds.

The cycle runs again on the basis of the increase in money that needs to be handled. This is called a Positive Feedback Loop. Positive feedback is a process that occurs in a feedback loop which exacerbates the effects of a small disturbance. That is, the effects of a small change on a system increases in the magnitude of the effects of the small change. That is, A produces more of B which in turn produces more of A.

 

Global warming is said to be a positive feedback loop. 

[octave]

3 minutes ago, old man emu said:

Superannuation is an Economics two-edged sword. The dull edge is that it is a means for those who are not likely to save for the future, as well as the thrifty, do build a nest egg for later in life. The sharp edge is its destructive, but unintentional,  effect on inflation. This is how I come up with that unintentional effect.

 

The money that is put into super is a form of investment as is the money we put in the bank.   If saving money in super is not a good thing then is saving money in the bank also not a good thing?  Is the alternative not to save? 

 

Large projects require large sums of money.  If you are going to build a new airport you need masses of money which would usually come from investors.    

 

I have always had ethical concerns about what my money is invested in.   If I think gambling is destructive then it would be hypercritical for me to invest in it.   We have always kept our super in an ethical investment fund so our money is invested in areas and projects that we want to further.     

 

My grandparents did not have the benefit of super, they worked until they were 65 and could receive the age pension. My grandfather only lasted only 3 years before succumbing to asbestosis from his work.   By contrast I mostly retired at 58. I know what I prefer.

 

In terms of super contributing to inflation I an not convinced but happy to consider the evidence.    Although inflation has been increasing since about 2020 the trend has been generally down whilst super savings have been increasing.

 

What would be a better system?

 

 

[Bruce Tuncks]

Personally, I found OME's explanation of inflation convincing, but then again I really don't understand the theories very well.

What I do believe is that it is a much more complex idea than a " balanced " budget will solve, and it does come down to companies being able to put up their prices without fear. This is in agreement with OME, I think.

 

 

[Bruce Tuncks]

Since moving to Victoria, I have been horrified at the amount of pro-gambling ads on prime-time telly here. It is the most destructive of all things...

A recently retired bookie once said on SA news that he would rather see his daughter marry an alcoholic than a gambler....   wow, thought I.

[octave]

I am definitely not an expert or even particularly knowledgeable about economic matters (other than my own).     The proposition that our system of super is a large contributor to inflation would surely mean that we should be able to see this correlation.  

This graph (sorry it is tiny) is the growth of the amount of money invested in super in Australia over time. The second graph is inflation over time.   I cant really see the correlation.

 

[Jerry_Atrick]

What OME describes is the credit multiplier. As I understand, only self-managed super funds can directly lend; managed super funds have to generally invest in securitised financial instruments such as shares, depository receipts, bonds, foreign exchange, and derivatives of them (derivatives are financial instruments that derive value from an underlying instrument - for example, a share option is a derivative that derives its value based on the share for which the option applies). 

 

Even if direct lending is allowed, most managed super funds would avoid it due to the regulatory burden. Therefore, the credit multiplier from managed super funds would be indirect (and it would be interesting to see how many SMSFs actually directly lend, because they would also be subject to regulatory burdens, although not as much as managed super funds, and they would have to engage a loans administrator). 

 

The real issue with mandated super is that, as OME suggests, the super funds are awash with funds. As they invest largely in equities, it is thought that one of the reasons why equities has been a robust investment despite very ordinary returns is because the super funds (and pension funds here also contributing the the robustness of stocks here, and 401K plans in the US for their robust performance). The concern is that, eventually, the robustness of securitised investments will run out of steam, and if they do, it is going to be a wild ride.. that makes TLSA stocks seem profitable again.

[old man emu]

1 hour ago, octave said:

If saving money in super is not a good thing then is saving money in the bank also not a good thing?

Of course saving by an individual for use later on is a good thing. You example of the difference between your father and you proves it. However, the problem for the Economy, as I see it, is what to do with that massive pot of cash being filled be individual small contributions.

 

24 minutes ago, Jerry_Atrick said:

only self-managed super funds can directly lend;

I oversimplified the use of lend. By lend, I meant to give out in some form with the expectation of having the principle and added value returned to the giver. Buying shares, as the managed funds do, is really an "interest only" loan, as long as the borrower remains in a position to repay the principle on demand. The problem for the fund manager arises if the borrower's enterprise fails and can't pay back the principle.

 

It is said that money is made round to go round. Businessperson A sells shares to Fund Manager B and gets money to carry out a project, and uses some of that money to pay those working on the project. The businessperson and the worker C put a percentage of that money back into the managed fund as super contributions, thereby restoring the size of the pot a little. And round and round Piccadilly Circus.

[octave]

3 minutes ago, old man emu said:

However, the problem for the Economy, as I see it, is what to do with that massive pot of cash being filled be individual small contributions.

 Isn't this what a bank does with their customers deposits?   

 

I still cannot really see the downside.  I don't think there is really a strong link between the countries savings in super and inflation.  What system for saving for retirement would be better?

[old man emu]

2 hours ago, octave said:

Isn't this what a bank does with their customers deposits? 

Yes. But my opinion is that the introduction of compulsory superannuation in 1983 has put more of each worker's income into savings than ever went into them before. That is a good thing for the individual. Now, due to legislation, other financial entities, as well as the banks, are holding the money bags. As of 30 March 2022,As of 30 March 2022, Australians have AU$3.5 trillion invested as superannuation assets, making Australia the 4th largest holder of pension fund assets in the world. Savings held by banks never reached those giddy heights.

 

Prior to 1983, membership of superannuation funds was mainly something for government employees, but in the latter years of the 1970s, I was enrolling the average person in super funds managed by a Life Assurance company. As a result of the Prices and Incomes Accord, the trade unions agreed to forgo a national 3% pay increase which would be put into the new superannuation system for all employees in Australia. 

 

Banks used to attract depositors with catch phrases like, "Let your money work for you", and that is what super funds do with those trillions. But doing work in an economy means increasing the value of raw materials (money), and that pursuit of increased value is what I consider to be a major driver of inflation.

 

But we should not be awed by "trillions" or the other roman-numeral-illions.

A Book of Verses underneath the Bough,

A Jug of Wine, A Loaf of Bread—and Thou

are still Hebrews 13:8 in 2023 as they were in 1983.

[octave]

26 minutes ago, old man emu said:

But doing work in an economy means increasing the value of raw materials (money), and that pursuit of increased value is what I consider to be a major driver of inflation.

If it is a  major driver of inflation why generally (although not in the last year or so) has inflation decreased. If there is any correlation between super savings and inflation why does it appear to run in the opposite direction?    

 

There are 2 ways of looking at super. Firstly. is it good for the individual and secondly is it good for society?   The individual good I suppose may vary between individuals.  For me it has been unquestionably good.   As for the wider good speaking purely for my own super fund, my money is invested in alternative energy, low income housing projects etc. it is hard for me to see this as a bad thing.

 

I do think there are flaws in the system.   Most of us ordinary folks are unlikely to have saved enough to see us through to the end of our lives.  Most will eventually draw an old age pension, I know I will.    I am not sure by what amount compulsory super reduces the pension (if at all) but it sure does allow grey nomads to tour the country whilst they still have the health to do it. 

 

I would be interested in what alternatives there might be.

 

 

[spacesailor]

o m e,

'' This is how I come up with that unintentional effect. ''

 

 

Now mine ! ,

the big four banks are lacking in gold bullion , SO they have a quite word with the RBA , to discuss how they reaped huge windfalls from the 17.8% interest of yesterday .

A little latter those RBA interest starts to climb, for every one % interest , the big four increase the interest 1/4 % , to investor's . the worker's have to increase their prices to cover those rising mortgage cost's  .

The big four rub their hands with GLEE knowing the windfall , of getting half paid homes to sell at a later date , almost ! , & sometimes absolutely FREE . after BROKEN Mortgagee's give up .

SO Who is creating the '  inflation ' .

When ANY one, raises their price or interest , there IS a knock-on effect .

spacesailor

[onetrack]

It's interesting to note that the average "grey nomad" touring the countryside at their leisure, is usually driving a $120,000 Landcruiser, towing a $120,000 caravan - and is either the holder of a swag of bank shares that return anywhere between 10% and 15% on the investment - or they are retired property owners (usually farmers) who made millions in tax-free capital gains by selling their properties. In many cases, the farming properties were acquired for very little outlay.

 

In the 1960's and 1970's, the W.A. Govt gave away tens of millions of acres to applicants for "conditional purchase" farmland in the Wheatbelt of W.A. The land was sold to the applicants for around 25c to 50c an acre - with the conditions the undeveloped land be developed into farming properties over a long period of time - up to 20 years. The only real conditions were that a certain level of clearing and development such as fencing and buildings be done over a generous period of time.

The C.P. landowners could also apply to have the development time extended if they ran into financial difficulties such as drought and other hardships. Very few C.P. properties were ever "repossessed" and re-sold.

 

The galling part of this scheme is that farmers sons were the major beneficiaries of this property handout largesse. Very few people outside the farming community were ever able to acquire this C.P. land. The brother and I applied for dozens and dozens of these C.P. properties and we never succeeded in ever acquiring a single one of them. The reason being, we were earthmoving contractors and we were viewed as "opportunists" who would merely clear and develop the land and sell it for a fast profit. There was no justification for this view and if the Govt wanted to be even handed, they could have placed other conditions on the sale of the C.P. land - such as requiring purchasers to live on it for a number of years or not sell it for a number of years.

 

The bottom line is this C.P. handout was nothing more than a perpetuation of the local farmers privileged position, with their sons acquiring thousands of acres of virtually free land to add to their already substantial asset base.

The farmland in W.A. today now sells for multiple thousands of dollars per acre, and this section of our community has gained a major and unjust enrichment due purely to their privileged position and power base in the Govt. and political circles.

One farm here recently sold for $100M, a record for farmland prices in W.A. - but it's a record that is bound to fall. Interestingly, the big farms are increasingly being purchased by pension funds and overseas investors with billions to throw around.

And as to bank shares - if you were lucky enough to have good sums of money to invest in banks 25 or 30 years ago, you'd be rolling in it about now - and you'd easily be able to afford his and hers Landcruisers and multiple properties.

On of the wifes Uncles, a Commonwealth Bank manager, was sent packing from the CTB around 1997, when the major banks carried out their cunning coup of taking over and destroying the Commonwealth Banks original charter - to be a lender of last resort, and a handbrake on the private banks greed.

 

The wifes Uncle was shown the door as his major CTB branch in a highly-valuable leafy Western suburb was closed due to "duplication". Duplicity might be a better word.

The wifes Uncle got an "early retirement package" of $250,000 in cash, and 50,000 Commonwealth Bank shares - valued at $5 each at the time. As you probably know, Commonwealth Bank shares currently trade at over $100 a share today - valuing the wifes Uncles little "going away present" at $5M today. Naturally, he has also benefited greatly over the intervening 25 years or so, of the substantial dividend payout on those shares.

 

We are a greatly divided society today, into the "haves" and the "have-nots" - and the latter, unfortunately, are in great numbers, and they support the former, with virtually every purchase they make, just to stay alive and fed.

 

 

[Old Koreelah]

OT your analysis rings true.

As a refugee from a farm too small to survive changing markets, I have some experience of following the careers of wealthier neighbours. 
 

My brother has many times shown me examples of the old wisdom, that the first generation works their guts out to get started, the second generation consolidate the farm/business/empire, then the third generation pisses it up the wall.

I’m always suspicious of the very wealthy; it aint easy to get that rich by legitimate means!

 

[spacesailor]

'' with the conditions the undeveloped land be developed into farming properties over a long period of time - up to 20 years. The only real conditions were that a certain level of clearing and development such as fencing and buildings be done over a generous period of time. ''

 

Guess WHAT

Today you can still get FREE virgin land, were you '' improve that land & live on it , for a number of years , with helping ' handouts ' from the government of .

::::CHILE

in case you need a LITTLE MORE !.

: https://www.cascada.travel/blog/30-things-you-didn-t-know-about-chile :

( had a friend who went there to make a ' better life ', yes he was an Aussie.)

spacesailor

[octave]

Whilst I agree that the wealthy are able to take greater advantage of super and investing generally in the past poorer folks had no option but to work until they dropped or hopefully spend some years on the age pension.   My grand parents worked for a wage until retirement age and then lived on the pension and my parents pretty much did the same thing.  My wife and I pretty much neglected financial planning until the last minute but realized that the benefits of utilizing the system to the max for about 5 years turned our situation around.  I feel like we had our cake (prioritized family time over work) and got to eat it too (early retirement).  Who wants to pay more tax than they need to?    To be clear we are not financial high flyers by any means and in fact when the money runs out and we go on the pension we will be living on the amount we are currently living on.  Through good planning we are able to live well.

 

In terms of the economy I can not see that having a large pool of money for investments here and overseas can be a bad thing.  Norway has a huge sovereign fund (which I believe is 1.3 trillion) that it invests, this is surely not a bad thing is it?

 

I can see an argument as to whether super should be compulsory.  I can see the frustration of young people struggling to buy a house and save for a retirement which seems like an eternity away.   We could I suppose get rid of the stick but keep the carrot, in other words remove the compulsion to put money in super but keep the benefits for those who wish to be in control of their financial future.

 

The question I have put a couple of times but no one has really addressed what should we do if not what we do now i.e. a combination of invested savings in super or other investment and a tax payer funded pension scheme?   

 

 

 

[Marty_d]

When I first saw this thread I thought the title was "Why is the Herald so nasty to Clarkson", and I thought it was Jeremy Clarkson - so the answer was easy:  Because he's a c***!

 

But obviously it wasn't that Clarkson.  So the answer's not that easy.

[old man emu]

 

  That spike in the 70s was a definite anomaly, and being such a large one, took a long time to come down. That graph suggests that if you left out the 70s and 80s, inflation would average out at around 4.5%. 

 

That graph, however is deceptive. It shows the inflation rate for each year and is drawn from spot values. However, inflation is cumulative. 

 

If in Year One I have $1 and inflation in that year is 4.5%, at the start of Year Two that dollar is only worth 95.5 cents. So I start Year Two with that amount and inflation remains at 4.5%. At the start of Year Three, my original dollar is now worth 94.3725 cents. However an item that cost $1 (100 cents) in Year One would cost 104.5 cents at the start of Year Two, and 109.2025 cents at the beginning or Year Three.

[octave]

7 minutes ago, old man emu said:

That spike in the 70s was a definite anomaly, and being such a large one, took a long time to come down.

I would suggest that the recent spike in inflation is also an anomaly caused by the pandemic.   I am pretty open minded about ideas but I have done quite a bit searching the net and I can't really find anything about superannuation being a significant driver of inflation.  Perhaps you could steer me towards information supporting this idea.  

 

I would still like to know what you think we should do regarding financial security of older citizens? 

[Old Koreelah]

51 minutes ago, octave said:

I would still like to know what you think we should do regarding financial security of older citizens? 

All right Octave I’ll give it a go, but I’m sure to ruffle a few feathers. The challenges facing Australia require a change in mindset. If we expect the government to support us in our old age, it will have to impose ever increasing taxes on the diminishing working sector of the population. (The Seniors’ discounts we currently enjoy cannot last.) 

 

Surely everyone should have a secure, comfortable retirement and old age, but how do we pay for it?

Governments have to control the cost of supporting and caring for an increasing proportion of our population.

 

Nobody should get “sit-down money”. As part of the Social Contract, everyone should contribute to the common good.

It’s only lack of imagination preventing all but the most frail and disabled from doing something useful.

Visit a retirement homes and see how much is done by the staff and how little is expected of the residents, many of whom are still mobile and compus mentus. I would happily do some washing up, cleaning, gardening etc. to help keep down costs and maintain what’s left of my bodily and mental health.

 

It amazes me how many people will stand idly stand by while some job needs to be done. 

When our grandies were Nippers my wife and I went along to watch them being introduced to surf races, etc.

Our son-in-law (city boy) commented later that we were the only parents/grandies who pitched in to help the organisers, even though we country-bred oldies had little experience of the beach. We just saw volunteers struggling to carry stuff, set up posts, etc. so stepped forward to help, while hundreds stood watching.

 

Since we live in a society (a word Maggie Thatcher despised) we are all in this together. The last thing Australia needs is communal distrust and hatred, of the sort endemic in many countries (and being actively stirred up by Rupert Murdoch’s thugs in America). Throughout this nation we find communities coming together in times of crisis. Ethnic differences evaporate and the best in human nature comes forward. Let’s celebrate that and not the negatives beloved of the tabloid media. A stronger Press Council to rein in divisive media is needed.

I’m quite happy to pay more tax to maintain and enhance what social cohesion we still enjoy.

 

New cars, TVs and household goodies are not happiness.

For too long the boffins have measured our nation’s health in monetary terms: Gross National Product per Capita, etc.

Bhutan has led the world towards a more sensible statistic: Gross National Happiness.

By several internationally-recognised measures, Australia is near the top in Liveability, Community Safety, etc.

Recognising and defending that is a good step.

 

[octave]

17 minutes ago, Old Koreelah said:

The challenges facing Australia require a change in mindset. If we expect the government to support us in our old age, it will have to impose ever increasing taxes on the diminishing working sector of the population.

That is is why super or some other form of savings is so important.  

 

 

I think the older generations are contributing a lot in unpaid work.  Measuring the value of unpaid household, caring and voluntary work of older Australians

 

My 90 year old mother who is still in her own home but getting pretty frail gets by with our help (she is interstate so many flights over there regularly.) She has been assessed as being eligible to go into a home.  She manages OK at the moment with our help and the help of friends and neighbors who are also elderly. The meals on wheels guy is a volunteer who himself must be in his late 70s.     A lot of contributions by older folks are not necessarily seen and appreciated by society.

 

I am all for people working to an older age if that is what they want to do and we as a society should facilitate this.  Our choice was to retire early so we did what needed to be done to achieve that.  We believe our ethically invested money is doing good.   There is a desperate need for our society to transform to sustainable energy (I guess some will disagree with that)  but the reality is that this requires investment.

 

When I left my job it did not disappear but was taken by younger person at the start of their working life.

 

One of the issues is that we are living so much longer into the poor health and dementure years.    We often have elderly people looking after their even more elderly parents. This is where I am at.   OldK I agree with much of what you say but getting back to the topic. I am free to travel interstate to help out my mother and hopefully keep her out of a home as long as possible (as with did with my father) because superannuation has allowed me not to have to hold down a job. I can and often do hop on a plane over to Adelaide where my mother lives to help out.  

 

52 minutes ago, Old Koreelah said:

New cars, TVs and household goodies are not happiness.

For too long the boffins have measured our nation’s health in monetary terms: Gross National Product per Capita, etc.

Bhutan has led the world towards a more sensible statistic: Gross National Happiness.

By several internationally-recognised measures, Australia is near the top in Liveability, Community Safety, etc.

Recognising and defending that is a good step.

Yep I agree with this I am aware of Bhutan but other countries are also starting to adopt measures of happiness.   New Zealand changes GDP index for Happiness and Wellbeing