by Alan Thornhill
Deeming accounts are not always what they are deemed to be.
That advice comes – very bluntly – from Australia’s corporate watchdog, the Australian Securities and Investments Commission.
The Commission has some tough observations to make about some Australian banks and other deposit taking institutions.
It said they are: “…using the term ‘deeming account’ to promote a basic savings account to pension recipients.
“These accounts have been marketed as having a connection with the Government’s ‘deeming rules’, which form part of the Government’s social security income test.”
However the Commission said the way these accounts are advertised “could mislead consumers.”
“These accounts have been marketed as having a connection with the Government’s ‘deeming rules’, which form part of the Government’s social security income test,” the Commission said.
But it warned: “In most cases, the savings accounts offer lower interest rates than the deeming rates, particularly for lower account balances.”
ASIC did not name either the banks or the other deposit taking institutions that it said are misleading their depositors in this way.
But it said ASIC is particularly concerned the name of the account could mislead consumers into believing the interest rates on offer would be the same as the deeming rates.
“ASIC was also concerned about consumers being unable to clearly identify the interest rates that apply to different account balances, known as ‘banded’ or ‘tiered’ interest rates,” the Commission said in a statement.
Its Deputy Chairman Peter Kell said that when offering financial products to consumers, it is important that they are true to label.
‘Special care should be taken when using terms which will have a particular connotation to consumers, to ensure that the product characteristics are consistent with the representations inherent in the product name,’ Mr Kell said.
The Commission said it has been working with the industry to address these concerns.
And progress had been made
Following discussions with the Australian Bankers’ Association (ABA) and the Customer Owned Banking Association (COBA), industry has agreed that members offering these products will work to ensure:
• the word ‘deeming’ is not used in a savings account name where that might mislead consumers about the interest rates being offered
• features of these accounts are not described as being ‘comparable to’, ‘compatible with’, ‘guided by’, ‘reflective of’ the Commonwealth Government deeming rates where this is not the case, and
• where ‘banded’ interest rates are offered, this is clearly disclosed, and information about different bands and applicable rate made easily accessible to consumers.
ASIC said it will continue to work with the ABA and COBA to ensure these measures are implemented.
by Alan Thornhill
The Federal government is suspending a plan designed to help the long-term unemployed because it proved too popular.
The Assistant Minister for Employment, Luke Hartsuyker, said the Wage Connect program, which subsidises employers who take on people who have been unemployed for a long time, will be put on hold to new applicants from Friday.
He said the program had been “oversubscribed” recently, for the second time, and blamed “Labor mismanagement.”
“Once again we have an example of the previous Government’s failure to responsibly roll out an important and essential service,” Mr Hartsuyker said.
“It let down job seekers, and employers who would have given them a chance,” he said.
by Alan Thornhill
Dave Roberts has firm views on the Productivity Commission’s suggestion that it may be necessary to push the pension age up to 70, to protect Federal finances.
In a letter published in The Canberra Times, Mr Roberts, says the Commission’s report, containing that recommendation: “…is a typical suggestion from a bunch of well-paid white collar public servants in their plush ivory tower.”
And that’s not all Mr Roberts, who lives in the Canberra suburb of Dickson, has to say on the matter.
He has a suggestion of his own.
“Why don’t they go out and ask brickies, farmers etc how their bodies are holding up at 65 and whether they can work another five years?”
True, the ACTU – and member unions – made much the same point, in their response to the commission’s report.
But Dave Robert’s eloquence put them all to shame.
He has supporters in surprising places, too.
The Nobel Prize winning economist, Paul Krugman, is one.
Mr Krugman wrote a blistering commentary on a US proposal to lift America’s retirement age, which is currently 66 to 67 – “because people are living longer.”
“This sounds plausible,” Krugman says, “until you look at exactly who is living longer.
“The rise in life expectancy, it turns out, is overwhelmingly a story about affluent, well educated Americans.
“Those with lower incomes and less education, at best, have hardly seen any rise in life expectancy at 65; in fact those with less education have seen their life expectancy decline.
“So this common argument amounts, in effect, to the notion that we can’t let janitors retire because lawyers are living longer.
“And low income Americans, in case you haven’t noticed, are the people who need social security most.”
The Productivity Commission didn’t have a lot to say about, precisely who, in Australia can now expect to live longer.
It relied, almost entirely, on broad population figures, produced by the Bureau of Statistics.
A reputable source, certainly.
But there is one big problem with stats, everywhere.
There is never enough detail.
And – as as both Mr Roberts and Mr Krugman have shown – that can be very important.
by Alan Thornhill
Does your family’s net wealth add up to more than $2.2 million?
If so, congratulations.
You – and yours – are in the nation’s top 20 per cent, wealth-wise.
And that’s a good place to be, because this group, on the latest count, holds almost two thirds of the nation’s net household wealth.
The Bureau of Statistics reported today that this – wealthy – minority – holds 61 per cent of Australia’s total net household wealth.
Although the latest available, these figures are for 2011-12.
And that’s a little while ago.
That’s because, even with the bureau’s powerful computers, calculations like these do take a little time.
As you might expect, things are quite different, in the homes of Australia’s poorest 20 per cent.
They hold just 1 per cent of the nation’s total household net worth.
Their wealth, on average, adds up to just $31,205.
So don’t look for any new Commodores in their driveways.
However there were some, perhaps surprising results, too in the bureau’s latest publication.
Australia’s battlers – and the middle class – have been making some significant gains, on income.
The bureau reports, for example, that – in real terms – the disposable incomes of low to mid income families rose by 5 per cent between 2009-10 and 2011-12.
While that might not sound all that much, that points to a real gain, after price rises.
The bureau also said that “there were no significant changes” over this time, for high income households.
The combination of higher social security payments and the lingering effects of the global financial crisis produced these odd results.
But, perhaps most surprisingly of all, the bureau reports that: “the share of household income received by low and middle income households increased between 2007-08 and 2011-12, while the share received by high income households decreased.”
That flies in the face of the common belief that the rich get richer and the poor get poorer.
There are no prizes, though, for guessing where Australia’s highest family incomes are to be found.
The so-called “fat cats” in Canberra, topped the list, back then, with household incomes of $1,144 a week.
But families in the resource rich State of Western Australia weren‘t far behind, dragging in an average of $1,017 a week.
The national average, back then, was $918 a week.
by Alan Thornhill
Many veterans and service pensioners can look forward to receiving a little extra money, because the Federal government is cutting its deeming rate.
The Minister for Veterans Affairs, Senator Michael Ronaldson announced today that the rate would be cut from 2.5 per cent to 2 per cent for total financial investments up to $46,600 for single pensioners or $77,400 for a couple.
He said the upper deeming rate would also decrease, from 4.0 per cent to 3.5 per cent for balances over these amounts.
The first full pension payment calculated using the new deeming rates will be on payday 28 November 2013, Senator Ronaldson added.
He said the payment on 14 November will be calculated partly using the previous deeming rates and partly using the new deeming rates.
“The reduced deeming rates will benefit service pensioners and income support supplement recipients who receive less than the maximum rate of pension due to their income.
The average increase is around $8.00 per fortnight,” Senator Ronaldson said.
by Alan Thornhill
Self funded retirees have faced some of Australia’s steepest increases in living costs, over recent months.
The Bureau of Statistics reports that their living costs rose by 1.5 per cent in the three months to the end of September.
This rise was almost twice that – of 0.8 per cent – seen in the living costs of employed Australians over the same time.
But age pensioners also saw a substantial rise – of 1.3 per cent – in their cost of living in this time.
The overall cost of living, for all Australians, rose by 1.2 per cent in this period, on the consumer price index scale.
by Alan Thornhill
Talk of privatising Centrelink services has alarmed Australia’s unions and the opposition.
The Treasurer, Joe Hockey, has spoken of consolidating the delivery of pension and other social security payments.
And he has asked the Government’s newly formed Commission of Audit to look for ways in which this might be done.
The Financial Review is reporting that this might mean closing Centrelink’s service centres.
The Shadow Minister for Human Services, Senator Doug Cameron, said the government is thinking of selling off Centrelink’s frontline services to Australia Post – which he said is also slated for privatisation.
He said millions of Australians rely on those services, which the government had now “put on the chopping block.”
However Mr Hockey’s office called for a calm debate.
His spokesman said there are no recommendations before Government yet.
And nothing would be considered from the Commission of Audit before the budget process begins.
But Senator Cameron said the government needs to stop hiding behind its “Commission of Cuts.”
“It should be upfront with Australians about where the axe will fall,” he added.
“How many jobs will go?
“What payments and services will they cut?”
Meanwhile the President of the Australian Council of Trade Unions, Ged Kearney, described the change, now being considered, as “enormous.”
“…there are services here that will impact on many, many Australians.
“Australians have a right to be consulted about this process,” Mr Kearney said.
He said the processes the government is pursuing lack transparency and accountability.
The Commission of Audit is due to deliver an initial report by the end of January and give its final recommendations by the end of March.
by Alan Thornhill
All Australians will, ultimately, contribute to the cost of the devastating fires that have swept through New South Wales.
The Prime Minister, Tony Abbott, says the Commonwealth will be picking up “about half of the tab” for the joint funded Commonwealth-State Natural Disaster Relief and Recovery Arrangements.
These will provides assistance to individuals and families, including emergency food, clothing and accommodation.
However Mr Abbott says it is still too early to say what that cost is likely to be.
The fires have been so severe, though, that Australia’s insurance companies will be forced to review their premiums, in the months ahead.
The fires, themselves, which have already left hundreds of Australians will little more than the clothes they were wearing, at the time, will also be a stark reminder of why no-one, in this sunburnt country, can afford to be without insurance.
Large parts of the country, like the Blue Mountains, where the fires were, perhaps, at their worst, are tinder dry, at present.
And summer hasn’t yet started.
Mr Abbott has extended his sympathy – and that of his government – to those whose homes have been devastated by these fires.
Meanwhile, he is offering a little help.
He said the Federal Government will provide much needed assistance to those affected by the devastating bushfires still raging in New South Wales.
Mr Abbott said it would do that by making available the Australian Government Disaster Recovery Payment (AGDRP).
“While the full extent of damage caused by the bushfires is still unfolding, the payment of $1,000 per eligible adult and $400 per eligible child will assist those already affected, particularly those who have lost their homes or suffered damage, are seriously injured or have lost an immediate family member,” Mr Abbott said.
Need to know more?
Go to www.disasterassist.gov.au or ring 180 2266
Alan Thornhill is a parliamentary press gallery journalist.
Private Briefing is updated daily with Australian personal finance news, analysis, and commentary.
Saturday December 7
The Dow Jones index rose 198.69 points to 16,020.20
Nelson Mandela dies
Australia’s first same sex marriages have taken place in Canberra, the first just after midnight
ACCC puts a cap on the fuel shopper dockets offered by Coles and Woolworths.
Qantas shares placed in trading halt
|Aud To Usd||0.9102||N/A||N/A|
|Bhp Blt Fpo||36.750||-0.030||-0.08%|
|Qbe Insur. Fpo||15.450||0.000||+0.00%|
|Cwlth Bank Fpo||75.170||-0.330||-0.44%|
|Origin Ene Fpo||13.630||0.000||+0.00%|
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