Thousands of Australians, close to retirement, were devastated last year when they looked at their prospective superannuation payouts.

They were shocked to find that they would be getting much less than they expected.

This was one of the hardest blows delivered by the stock market crash.

Australia’s superannuation funds also suffered, as these events badly damaged their credibility.

What, though, has happened since then?

And how does superannuation stack up now, as a medium to long term investment?

Jeff Bresnahan – and his research team at Superratings – have been taking a very close look at these issues.

The results are published on its website www.superratings.com.au.

It’s well worth taking a look.

The situation now is well illustrated in the title of this research agency’s latest report, called The hit and miss game of super performance.

As might be expected, in times like these, the short term performance of Australia’s major superannuation funds is not impressive.

In January, for example, they slipped backwards by 2.17 per cent.

In the 12 months to January31, though, they gained 12.66 per cent.

That gain, of course, was from a post-crash position that no-one likes to think about now.

The mid to longer term results though are more interesting.

On a rolling 5 year basis, to the end of January, the same funds were chalking up average advances of 4.3 per cent a year.

And on rolling 7 year calculations that result rises to 6.7 per cent a year.

As Mr Bresnahan, himself, says that last result, in particular, represents real gains in wealth, after allowing for inflation.

The essential message here, perhaps, is that superannuation is a mid to long term investment, for most people.

So, perhaps, that is the way it is best assessed – despite all the – mostly true – horror stories of the past year or so.

Australia’s economic recovery is deepening.

And the Federal government’s economic stimulus is playing its part.

Fresh evidence, on both fronts, showed up in  new capital spending figures, that the Bureau of Statistics has just released.

These showed that spending on industrial equipment, plant and machinery leapt by 12.4 per cent in the December quarter to $15.1 billion, on seasonally adjusted figures.

That was  7.2 per cent higher than the amount spent in the December quarter of 2008.

The bureau took the rare step of noting that
a large number of companies, which responded to its survey, said they had taken advantage of a tax break, that the government offered, to purchase new cars.

That break was part of the Federal government’s stimulus package.

The bureau’s figures strongly suggest that Australian car makers increased investment in their plants, to cope with this extra demand.

The bureau also reported that full time average weekly earnings, in the private sector, rose by 1.5 per cent in November and by 5.4 per cent over the year.

The comparable figures, for the public sector, were 1.3 per cent growth for the month and a 5.7 per cent rise over the year.

The Treasurer, Wayne Swan, told parliament that investment in private sector housing had fallen by more than 20 per cent last year, in the wake of the global economic crisis.

“But that has been offset by an increase of 42 per cent in public construction activity,” he added.

The Federal government has announced a $41.2 million program to help workers who were    retrenched after its home insulation was cancelled, as a result of safety issues.

The industry estimates that some 6,000 workers have already been put off.

The Prime Minister, Kevin Rudd, who made the announcement blamed a small proportion of unscrupulous firms in the industry for the trouble.

Four insulation workers have been killed – and more than 100 homes have become fire traps – as a result of shoddy insulation work, performed  under the government’s home insulation scheme.

Some of the sacked workers will be offered financial assistance.

Others will be eligible for retraining.

The issue has dominated question time in Federal parliament all week, with the Opposition demanding the sacking of the Environment Minister, Peter Garrett.

However Mr Rudd struck back at opposition members, who have questioned him aggressively on the matter.

He said the jobs these workers had held would never have existed under a Coalition government.

Mr Rudd said  his government had  initiated the home insulation scheme to create jobs, after the global economic crisis struck.

“There would have been no such program under the Coalition,” the Prime Minister said.

Mr Rudd said any insulation worker, who lost his job, would also be eligible for assistance under the Federal government’s Compact for Retrenched Workers.

This would mean immediate access to high level support.

People who can’t afford private health insurance are being forced to subsidise it for “millionaires,” according to a Federal minister.

The Federal Finance Minister, Lindsay Tanner made the charge in parliament.

He did so shortly before his colleague, Health Minister Nicola Roxon announced that private health fund premiums would rise by an average of 5.78 per cent from April 1.

Mr Tanner said the “subsidy”  is the result of the opposition’s decision to block changes the government is trying to make to the private health insurance rebate in the Senate.

Mr Tanner said the Opposition is now facing a big test, on two fronts.

These were fairness and fiscal responsibility.

“Are you going to support the government or will you continue to subsidise private health insurance for millionaires?” Mr Tanner asked.

The Treasurer, Wayne Swan, announced in his budget speech last May, that the government would cut the private health insurance rebate for people on higher incomes.

Mr Swan also said that the Medicare Levy surcharge would also be increased for higher income earners.

However the Opposition, with the support of the Greens and other Senators, is blocking these moves in the Senate.

Mr Tanner said the Coalition’s obstinance would cost the government almost $10 billion over the next 10 years.

This would damage its efforts to get the Federal budget back into surplus.

He said the government had been forced to make tough decisions in its last budget.

One of these had been to apply a means test to the private health insurance rebate.

Mr Tanner said he would pay more, himself, under the government’s proposals.

“But I am afraid, Mr Speaker, that I don’t see the logic of why ordinary working people – on fifty grand – sixty grand a year – should have their taxes pay subsidies to my private health insurance, when many of those same working people can’t afford private health insurance for themselves,” he added.

“What the opposition is doing is protecting subsidies for higher income earners; doing great damage damage to the government’s budget settings; at the same time as claiming that they would be more fiscally responsible and that they would have lower deficits than the government.”

Mr Tanner said, too, that the Opposition’s Finance spokesman, Senator Barnaby Joyce, had initially supported the government’s position, but had later retreated.

“I am worried that he has been got at or something,” Mr Tanner said.

“I would like to see him step back up to the plate on this issue.”

More than 800,000 Australians have found themselves underemployed as the nation’s economic recovery gathers strength.

The Bureau of Statistics almost 900,000 Australians who want more work were not fully employed in September last year.

That included 811,600 people who were officially classed as underemployed.

The bureau’s study showed that both younger and older Australians have been hit hard by underemployment.

It said that while underemployment is more common among younger workers, older workers generally suffered longer bouts of underemployment.

The Bureau said part time workers, aged between 20 and 34, had the highest incidence of underemployment, with 29 per cent of those in this age group classed as underemployed.

The main reasons given, for this problem, were “no vacancies” in my line of work or “no vacancies at all.”

However older workers were suffering longer periods without enough work.

At the time of the survey, almost half of those aged 45-54, who wanted more work, had been underemployed for more than a year.

So had 45 per cent of those who were 55 or over.

The bureau said there were 452,100 female part time workers, among the underemployed, last September and 283,800 men.

However the incidence of underemployment among men in this group, at 30 per cent, was higher than that for women, at 20 per cent.

Malcolm Turnbull is warning that the Coalition’s climate change policy could well lead to higher taxes.

If it did not, there would have to be a cut in government services, the former Opposition Leader said.

Mr Turnbull also said the “command model” of carbon reduction, that the Coalition has adopted, might not reduce emissions, either.

He was speaking on the ABC television program Q & A.

Mr Turnbull narrowly lost his leadership of the Liberal Party, to the present leader, Tony Abbott, over this issue.

And he still supports the emissions trading model, which the Liberal party  abandoned, at that time.

The government, too, supports an emissions trading scheme.

“I believe we owe it to our children – and their children – to take care of the planet,” Mr Turnbull said.

However it was his comments on the tax implications of the Coalition’s policy that will strike hardest, in the political debate over climate change.

That’s because Mr Abbott’s main selling point, for the Coalition’s scheme is that the government’s plan is little more than “a great big tax on everything.”

Mr Turnbull warned, though, that the cost of the  Coalition’s plan – to offer payments to companies, to encourage them to  reduce their emmissions, would  have to be met by taxpayers, one way or another.

The cost could only be met in one of two ways.

These were  higher taxes, or cuts in government services, Mr Turnbull said.

Tough times are back for Australia’s homebuyers.

A new study shows that affordability plunged by 18.4 per cent in the final three months of last year.

That took it to a level 22.3 per cent lower than that seen 12 months earlier.

This means that affordability is now moving back to the levels last seen in 2008.

But interest rates were much higher then than they are now.

The Housing Industry Association, which conducted the study, blames rising house prices, three interest rate rises and rapid population growth and the winding down of the Federal government’s assistance to first home buyers.

It said home buyers in Sydney, Brisbane, Hobart and Canberra had been hit hardest.

The HIA’s senior economist, Ben Phillips, said the brief opportunity that first home buyers recently had, to get into the market, is now closing.

“Australia’s fast growing population is pushing dwelling requirements to record high levels,” Mr Phillips said.

The association expects that there will be 151,000 new home starts Australia this year.

However Mr Phillips said that would be well short of the 190,000 needed to meet expected population growth.

A little more shopping around might be worthwhile right now, if you are in the market for a new home loan.

You might do better than you originally expected with an unconventional lender, like the AMP, or a small State-based bank.

The AMP’s chief executive, Craig Dunn is sounding very upbeat about his organisation’s prospects, right now.

Indeed, he has just announced that his organisation is slashing 10 basis points from its basic variable home loan rate.

Not a lot, perhaps, but a worthwhile saving, nevertheless, especially in the early years of a new loan.

That, of course, is when repayments are usually at their most painful levels.

Mr Dunn has also written to the Federal Treasurer, Wayne Swan, saying:”We are also hopeful that we will be able to further reduce our interest rates in the coming  months.”

He said this could happen  “as we gear up our operations in the light of ongoing improvements in the securitisation market.”

That’s where organisations, like the AMP, get much of the money that they subsequently lend to homebuyers, like you.

The Federal government is helping, too.

It has just ordered the Australian Office of Financial Management to invest up to $16 billion in Australian residential mortgage backed securities.

Mr Swan says it has done this to bolster competition among the nation’s home lenders.

The government, of course, has its own motives, too.

This move will help to keep activity levels high, in Australia’s home building industry, as temporary measures, associated with its stimulus packages are gradually withdrawn, over the year ahead.

The Reserve Bank Governor Glenn Stevens says the bank expects Australia’s underlying inflation rate to be about 2.5 per cent over 2010.

That’s important because the bank looks primarily at that rate when it sets official interest rates.

The bank aims to keep Australia’s underlying inflation within a 2-3 per cent range over the course of the business cycle.

Mr Stevens made the prediction in his opening address to the House of Representatives Economic Committee in Canberra.

However, he also suggested that further interest rate rises are still likely this year.

“If economic conditions evolve roughly as we expect, further adjustments to monetary policy will probably be needed over time,” Mr Stevens said.

He said the bank would again seek to ensure that inflation remains consistent with its target over the medium term.

“This is a normal experience in an economic expansion,” he added.

Mr Stevens also said that Australia had chalked up 2 per cent economic growth last year, despite the global economic crisis.

“We expect that it will grow by a bit over 3 per cent for 2010 and about 3.5 per cent in 2011 and 2012,” he added.

Economists estimate that Australia needs about 4 per cent economic growth to absorb each year’s school-leavers into the nation’s workforce.

Mr Stevens said government spending, from the Prime Minister’s stimulus package, is still “having an impact on demand.”

However he added:”This effect will gradually diminish over the coming year.”

“At the same time, a large build up in energy and resource sector investment is under way,” Mr Stevens added.

Australians are rapidly moving past  full reliance on the Age pension in retirement.

The compulsory superannuation regime, introduced by Paul Keating, is providing better results, on several fronts.

A senior Federal Minister, Chris Bowen, spelt that out in a speech he delivered in Melbourne.

He said the introduction of compulsory superannuation “…has meant we are all, collectively, saving more.

“The resultant national pool of wealth – which is available for investment in Australian companies, property and infrastructure – has been a crucial source of funds for our economy,” he added.

That had helped Australian industry, in the wake of the global financial crisis.

Mr Bowen, who is minister for Financial Services, Superannuation and Corporate Law, also said “The Age pension will inevitably continue to supplement retirement incomes in future.

“But a far lower proportion of retired Australians will be full pensioners,” he said .

“And a far higher proportion will be part pensioners,” Mr Bowen added.

He also quoted lines from Tony Abbott’s book, Battlelines, which Mr Bowen said  suggest that a Coalition government might slash the present tax concessions on superannuation, to fund abolition of the means test on Age pensions.

“That “would be a very retrograde step.”

“We rule it out,” Mr Bowen said.

“Mr Abbott should  as well,” he added.

So far there has been no response from the Opposition Leader.

Australia’s economic prospects look good, as the country moves towards the Federal election due later this year.

Voters, though, should be wary of big electoral promises, offered by any of the major parties.

They might well be particularly hard to fund, this time.

The extra spending, in the Rudd government’s stimulus package, is now putting considerable pressure on the Federal budget.

The Treasurer, Wayne Swan, conceded yesterday that Australia had been helped by China’s economic strength, after the global economic crisis struck.

However he told  ABC television that the stimulus had been mainly responsible for Australia’s relatively strong performance over the past year.

“I think it’s very important to understand that – first and foremost – our domestic surplus – delivered in a timely way – is the principal reason why the Australian economy is so strong, compared to just about ever other advanced economy,” Mr Swan said.

New evidence now suggests that Australia’s relatively strong performance is likely to continue.

A leading index, produced jointly by the Westpac Bank and the Melbourne Institute, continues to surge.

A senior Westpac economist, Matthew Hassan, said that “continues to point to a dramatic improvement in (Australia’s} growth prospects.”

Mr Hassan said the index also suggests that the Australian economy now has a growth outlook that is on a par with that seen in 2007  “at the height of Australia’s resources boom.”

However if that produces fresh inflationary pressures  the Reserve Bank is sure to respond with further interest rate rises.

So the  election, later this year, will be held in good, though necessarily restrained times.

Certainly not at a propiti0us time for politicians, from any party, to be making  expensive promises, to win votes.

Reject those who do.

Watch the North Atlantic.

According to one expert, that’s where the lingering risks from the global economic crisis are likely to appear.

Guy Debelle, an Assistant Governor of the Reserve Bank, who specialises in financial markets, delivered this warning in a speech he gave in Sydney.

Addressing a Women in Finance lunch, Mr Debelle said:”We are now into the phase where weakness in the global macroeconomy is feeding back into the financial sector.

“In that regard, a significant risk, in my assessment, is that we are still to see the full impact of the weakness in the North Atlantic economies on the loans on the books of financial institutions.”

“…this was a big recession which, combined with large falls in both commercial and housing property prices, should result in large loan losses,” Mr Debelle said.

(A copy of his speech can be found on the Reserve Bank’s website, at www.rba.gov.au).

Mr Debelle stressed, though, that this warning should not be taken as his central message .

“The central case is that financial markets have improved considerably over the past year,” Mr Debelle said.

In a separate development, the Reserve Bank warned that more interest rate rises can be expected this year, but that they will probably not be on a monthly basis in future, as they were late last year.

This message was contained in the minutes of the Reserve Bank board meeting, held earlier this month.

The board, then, surprised many economists, by keeping interest rates on hold.

The minutes have just been released.

They noted that board members had been briefed on Australia’s economic prospects.

Then the printed  minutes  then offered a ray of hope to struggling home buyers.

They said board members:”…did not regard that outlook as requiring an increase at every meeting.”

The board, generally, meets on the first Tuesday of each month, except January, to review rates.

It’s main aim, at those meetings, is to keep Australia’s underlying inflation rate within a 2 to 3 per cent range, over the course of a business cycle.

The minutes described the case for keeping rates on hold earlier this month as “stronger” than that for another rise.

The minutes also said that  although Australia’s underlying inflation rate is still  3.25 per cent, it is expected fall to around 2.5 per cent this year.

Australians are now using their credit cards very carefully.

The Bureau of Statistic reports that Australians had just $3.8 billion outstanding on their credit cards – and other kinds of revolving credit – at the end of December.

Although that figure might seem high, it represented no growth at all, in this kind of credit, over 2009.

Business borrowers have been even more careful.

They cut their borrowing – on revolving credit facilities – from $11.6 billion in Dcember 2008 to just $7.3 billion in Dcemberr 2009.

The great Australian dream – of one day owning a home – is still very much alive  though.

The bureau also reports that Australians borrowed $15.5 billion, to buy homes in December 2009.

That was up from $14.1 billion, in December 2008.

These figures are all seasonally adjusted.

Borrowing, through fixed personal loans, though, was more subdued.

Australians took out fixed loans with a total value of $3.3 billion in December 2009.

That compares with a figure of $3.1 billion in December 2008.

The weekly expenses that older Australians face rose much faster than those of other people over the past year.

This is confirmed in research that the Australian Bureau of Statistics has just published.

The main reason for this is that rapidly rising food and health care bills take bigger slices of the incomes of older people than from those of the general public.

Age pensioners were  hit hardest.

The bureau reports that their costs rose by no less than 3.2 per cent, over the 12 months to the end of December.

The Consumer Price Index, which measures the costs faced by the general public, rose by just 2.1 per cent over the same time.

Self funded retirees, whose incomes are mostly higher than the age pension, did a little better than age pensioners.

The bureau reported that the cost of living, for this group as a whole, rose by 2.8 per cent over 2009.

The Bureau also reported that the living costs of both age pensioners and self funded retirees rose by 0.6 per cent in the December quarter of last year.

In this area, they did slightly better than Australia’s employees households, which saw their cost of living rise by 0.7 per cent in the final three months of last year.

The CPI rise, for the quarter, was 0.5 per cent.

Remarkably, the bureau’s “employee households” saw their living costs rise by just 0.4 per cent last year.

The bureau noted that their electricity prices, rents, insurance charges, hospital and medical fees and beer prices had all risen in this time.

However, those rises had been offset by reduced interest charges, cheaper petrol, lower audio and television prices and lower insurance costs.

The Bureau’s report strongly suggests that all Australians would be wise to review their retirement plans, to provide for the bigger health bills Australians, generally, are facing in their later years.

Alles wird schon gut sein.

That – effectively – is the message that the German Chancellor, Angela Merkel, gave the Greek Prime Minister, Georges Papandreou, when European leaders met in Brussels last Friday (Australian time) to discuss Greece’s debt crisis.

This is as close as it is possible to get, in German, to “She’ll be right, mate.”

More literally, that German phrase translates as “All will become handsomely good.”

Mr Papandreou wasn’t happy with this result, even though he had never actually asked his EU partners for help. In fact, he was  angry.

Investors weren’t altogether happy either.  Share prices plunged in the opening minutes of trade in New York on Friday, US time, pushing the Dow Jones index, briefly, below 10,000 points, before traders recovered their nerve.  That saw the market close at 10,099.14.  That was just 45.05 points down on the day’s trade.

Japanese and European markets were also relatively steady over the Australian weekend, with the Nikkei rising 112 points and the the STOXX index easing by 5.79 points.

The Euro, of course, was rattled in early trade on  currency markets, shortly after the EU leaders’ decision was announced.

What, exactly, was that decision, though?

And how is it likely to be assessed, in the week ahead?

The “deal”, put bluntly, is that Germany and France might offer Greece some help, possibly as loans or guarantees, if that proves to be necessary.

One analyst, Howard Gold, of Dow Jones, says that is no more than  “a quick fix.”

He also points out that since hitting a post crash high of 10,725.43 points on January 19, the Dow Jones index has shed more than 6 per cent of its value.

However, Gold adds, this is probably no more than the correction which was to be expected.

But will it become a “correction of truly catastrophic proportions” a phrase that a celebrated US economist coined, at a National Press Club lecture in Canberra, several years ago?

That is not being widely predicted. We can all be grateful for that.

It would be reasonable, though, to assume that some worries over the EU decision will still play out on world markets, over the coming week.  The early impact, though, could be masked by public holidays for the Chinese New Year and George Washington’s birthday.

The Federal Treasurer, Wayne Swan, noted at the weekend that European stock markets had already fallen by “around 10 per cent in the past month.

“Government net debt in Greece is 86 per cent of (that country’s) GDP,” he said.

That is “more than 20 times higher than Australia’s level of net debt,” Mr Swan added.

Barnaby Joyce, please note.