Super:how it stacks up now

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 recovery deepens

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.

Sacked insulation workers to be helped

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.

Rich “subsidised” on private health insurance:Labor

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.”

Thousands left behind as recovery gathers strength

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.

Turnbull warns taxpayers could be hit by Coaltion’s climate change plan

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.

Home affordability slumps

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.

Shop around for your new home loan

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.