Superannuation fund members will soon start seeing better benefits as technical reforms – now under way – progress.

The industry and the government both believe the new systems – and clarifications – contained in the reforms will cut costs and boost benefits.

However the Senate could still block one key proposal.  That is to use Medicare’s powerful computing systems, as a financial services clearing house.

The Federal Superannuation Minister Chris Bowen said the Opposition has threatened to use its numbers in the upper house to do just that.

However the Parliament has now passed financial market supervision reforms, which the government proposed.

Mr Bowen said these would “enhance the integrity of Australia’s financial markets.”

The superannuation industry welcomed this news, praising the government, in particular, for extending consumer protection to superannuation borrowing arrangements.

This was done by declaring that these borrowings are financial products under the Corporations act.

Though technical in nature, the Australian Superannuation Funds Association, said this would help to curb the industry’s costs and the savings would be passed on to fund members.

Mr Bowen also welcomed an announcement by three of Australia’s largest superannuation fund managers, AAS, Pillar Administration and  Superpartners, that they would accept a common set of computer protocols, to cover the movement of data and money between funds.

“This agreement will make it easier and more efficient to transfer money between funds,”
Mr Bowen said.

That, too, would result in lower costs for fund members, he added.

The Prime Minister, Kevin Rudd, says his government will not increase tax, as proportion of national income.

Mr Rudd renewed this pledge – first made before the 2007 election – in the wake of speculation that the government will have to increase taxes, to meet rising health costs.

However the Prime Minister’s promise may not provide all that much comfort to taxpayers.

Mr Rudd said the costs of his planned hospital funding reforms would be met from the Federal budget.

He added, though, that, any politician who would not acknowledge that Australia’s health costs would increase, over the long term, “is not worth a pinch of salt.”

Despite that tax, measured as a proportion of the overall economy, would not rise.

“That’s what we said before the election.

“That’s what we’ve stuck to since the election.

“That’s what we’ll adhere to in the future,” Mr Rudd said.

He was speaking in a Sydney radio interview.

“We have said consistently that we will not increase tax as a proportion of Gross National Product,” Mr Rudd 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.

John Howard came to power, many years ago, promising that  red tape for small business would be cut in half..

At that time, though,  small business operators were generally filing just two tax returns a year. One for their business and a second for personal income.

By the time Mr Howard left office, though,  thousands were preparing no less than six tax returns a year, five for their businesses and one personal return.

While most could prepare their own quarterly Business Activity Statements themselves, many sought professional help with their annual returns – both business and private -  because of their perceived complexity.

The cost of getting their accountants to fill in those annual returns, though, was high.  Accountancy firms thought nothing of charging as much as $2,500, and sometimes more, for this small service.

Predictably, accountants protested loudly, in submissions to the Federal government’s tax review, at a proposal to make annual tax returns not only simpler, but also  voluntary in many cases.

The details are not yet clear, as the review’s report, which the Treasury Secretary Ken Henry handed to the government just before Christmas, has not yet been made public.

We can, however, expect the present arrangements for taxing superannuation to be comprehensively overhauled.

At present, superannuation money is taxed at a flat rate of 15 per cent, on its way into a fund.

So people, on very high incomes, can get much bigger tax breaks on super, than others on middle and low incomes.

The government, though, is not likely to agree to the superannuation industry’s request to increase compulsory super contributions from 9 to 12 per cent of salary, in this year’s Federal budget.

The Henry Review is understood to have concluded that the present rate of 9 per cent will provide an adequate retirement income, at least for younger Australians who are now coming up through the system.

It also favours a profit tax, of perhaps 40 per cent, for Australia’s big miners, in particular.

That would, eventually  replace State royalties and other charges.

Surprisingly, the miners themselves were not totally opposed to this idea.  Although high, that tax would not be imposed at all, when commodity prices were low, because the miners then would  be making little, if any, profit.

States like Western Australia, though, bitterly oppose this idea. That’s State’s Treasurer, Troy Buswell, is already fighting hard against it.

The Review has also come up with some novel ideas, such as taxing people who use the nation’s roads at peak periods.

That is based on the idea that if traffic flows could be spread more evenly – throughout the day – there would be less pressure from motorists for expensive new roads.

The Review concludes, too, that Australia’s rapidly ageing population will put heavy – and strongly rising  – pressure on Federal finances in the years ahead.

That’s why the Prime Minister, Kevin Rudd, has been touring the country, over the past week, telling Australians that the nation’s productivity must be increased, to meet these demands.

He has stressed, each time, that this means working smarter, not harder or longer.

But that forced  his Treasurer, Wayne Swan, to remind Australians of the Rudd government’s promise that its total tax take would be no higher – as a percentage of national income -than that of its predecessor, under John Howard.

Few issues, though, are as politically sensitive as tax reform, however well intentioned.

And things don’t always work out, in real life, exactly as intended.

Mr Howard, himself, discovered that.  Mr Rudd will, too.

The Federal Treasurer, Wayne Swan, says the Labor government’s future tax take won’t be bigger than that of its predecessor, the Howard government.

“We remain committed to keeping taxation as a share of GDP below the level the Government inherited,” Mr Swan said.

“And that’s 23.6 per cent of GDP in 2007-2008,” he told an ABC radio interviewer.

The commitment is important, because the Treasury Chief, Ken Henry, said last night that the government’s need for money would rise over the years ahead, as Australia’s population aged.

That was taken as a sign that the government might be planning to raise taxes.

Especially as Mr Henry headed a committee which has just completed a major review of Australia’s entire, ramshackle, taxation system.

The committee’s report, which runs to more than 1,000 pages, was handed to the government just before Christmas.

But it has not yet been released to the public.

Mr Swan admitted, though, that the rapid ageing of the Australian population would put pressure on the nation’s finances.

“Well, I think it’s very clear – and you’ll see this in the Inter-Generational Report which I will release in a short period of time – that the ageing of the population will put pressure on the Budget, and on the economy over the next 40 years.,” the Treasurer said.

“There are currently something like five people of working age for every person aged 65 and over,” he added.

“And in 2050 that will be 2.7.”

“That’s why the Prime Minister has been talking about increasing productivity,” Mr Swan said.

He said that’s what Australians must do to offset the ageing of the nation’s population.

” That’s the way to solve the problem of the ageing population, along with increasing participation,” Mr Swan said.

” It’s making sure that we pay attention to that critical issue of productivity, so we increase our wealth and increase our capacity to support an ageing population, and also make sure we have the right policy settings in place in health and retirement income policy which will support an ageing population,”

Mr Swan said, though, that increasing productivity meant working smarter, not harder.

Older Australians might be encouraged to work longer. But those who wanted to retire would still be able to do so.

Young mothers, wanting to set up their family benefit payments, are increasingly doing that over the internet.

Indeed,  the government says, around 80 per cent of first time mothers now lodge their claims online instead of using paper forms.

”More and more people are telling Centrelink they prefer to use the Internet to do their business,” the Federal Minister for Human Services, Chris Bowen, says.

His comments illustrate a revolution, now under way, in the methods used to pay benefits of all kinds.

Age pensions, Austudy payments, youth allowances and even disaster relief payments can all  be accessed over the internet now.

Old style visits to local social security offices are rapidly becoming a relic of  past practices.

And that’s understandable.  A brief visit, to a computer in your back room, is much more convenient.

So how do you find out just what your entitlements might be?

A visit to  www.centrelink.gov.au or www.familyassist.gov.au. will probably help.

If you still need to be certain, though, after that, a telephone call to your local Centrelink office will usually confirm your calculations.

In short,  this task has never been easier.

And Mr Bowen is proud of that.

“More families are choosing to claim family payments over the Internet, with around half of all family assistance claims now being made using convenient and improved online services.” he says.

Mr Bowen said Centrelink has worked hard  to improve these services.

The information that clients provide through an online claims is sent straight into Cenrtrelink’s records.

And that which still comes on  paper forms is also scanned into its computer system.

Mr Bowen said the service also allows busy parents to save the information they have completed and finish the claim  later.

.“The 6,000 families claiming Family Tax Benefit online and 3,400 families lodging a paper form every week are benefiting from these changes by receiving their payments more quickly, with more than 80 per cent of claims processed within 14 days,” Mr Bowen adds.

People can claim a number of family payments online including Family Tax Benefit, Baby Bonus, Child Care Benefit and Maternity Immunisation Allowance, Mr Bowen said.

And 3.9 million customers are already registered to use self-service options.

And more than 24 million online transactions were completed last  financial year.

Others wishing to register need only to go to www.centrelink.gov.au or www.familyassist.gov.au.

Where do you stand, at the start of a bright new decade?

An old song puts it well.

“You load 16 tons – and what do you get?

“Another day older – and deeper in debt.”

This coal miner’s lament, which was once a huge hit, still  has lessons for  all Australians.

At the end of the noughties, for example, their nation is more  dependent on coal than ever.

That’s not a good look, in a world – rightly – worrried about climate change.

And debt levels have risen so sharply, in Australia, over recent years, that they now present a real risk to the nation’s financial stability.

At the turn of the Century, the average Australian owed a little more than $22,000.

According to the Reserve Bank,  that’s now $74,000.

So debts have more than trebled over the decade, while prices rose by just 35 per cent.

Repayment capacity hasn’t matched debt growth, either.

While average weekly earnings now stand at a truly impressive $1,249 a week – wages – from which debt repayments are made – rose by just 50 per cent over the noughties.

Don’t despair if you don’t earn quite that amount, though.  Most people don’t.  It’s the relatively small number, right at the top, who push that figure into the stratosphere.

The crash still dominates Australia’s prospects, even though its influence is now waning.

At the start of the last decade, Australia had chalked up 3.75 per cent growth – while  expecting something a little better in the year ahead.

On the latest figures, Australia’s annual economic growth rate was just 0.5 per cent and – once again – we are looking for something a little better in future.

The crash, though, hit Australia’s national finances very hard.

At the turn of the Century, for example. the Federal government took a 23.4 per cent revenue bite from Australia’s output.

That tax take is now up to 24.9 per cent.

The Federal government’s spending has also risen  sharply.

It was just 22.8 per cent of the nation’s gross domestic product, back then.

It is now about 27 per cent.

Stimulus packages might be necessary,  after stock market crashes.

Bu they are not cheap.

So what else hits the pockets and purses of ordinary Australians, today – and how has all that changed, over the past decade?

At 5.7 per cent, Australia’s unemployment rate is still low, by current standards.  The US rate, for example, is 10 per cent.

Most will have forgotten, though, ours stood at 7.5 per cent at the turn of the Century.

And Australia’s inflation rate – which was approaching 6 per cent then – is now down to 1.3 per cent.

Share prices had been rising strongly, as the turn of the Century approached.  But the tech-wreck  rock was just ahead.

That, sadly, became a model for a later disaster, too.

Technical advances were certainly impressive, at the turn of the Century .

But they were also over-hyped, on world share markets.

Sadly we  forgot that lesson, all-too-quickly.

If we had remembered it, we might well have asked some salutory questions, when complex financial products were also hyped, some years later.

So what lies ahead now?

We will make just one prediction, but we offer it with absolute certainty.

Expect the unexpected

It’s a safe bet.

The Federal government has served notice that it will bring back its carbon pollution reduction scheme after parliament resumes in February.

This inevitably raises the spectre of a double dissolution election, in the first half of 2010, as these bills, which have already been defeated in parliament, still have no clear path through the Senate.

The government took this – carefully calculated  – step when it released fresh data, which responds directly to Tony Abbott’s claim that the proposed scheme is just “a great big tax.”

The Acting Environment Minister Peter Garrett said, big polluters would have to pay, under the plan.

But everyone, who cut energy use or harmful emissions would be rewarded.

Mr Garrett’s main point, though, was that low income families would be more than fully compensated for the extra costs.

And half of Australia’s middle income earners would also be fully compensated.

He said Mr Abbott’s scare campaign was simply wrong.

In fact,  Mr Gattett said, Treasury modelling shows that  2.9 million Australians, who are on low incomes, would be better off under the government’s proposed plan.

On average, these families would be $190 a year in front.

But the Federal Finance Minister, Lindsay Tanner, also  said that people who are on  very high incomes,  like cabinet ministers, would not be compensated.

But the government left the main attack to Mr Garrett,.

“There are two simple facts nobody can avoid,” the former rock star said.

“The first is that there is no free way to tackle climate change.

“The second is that Mr Howard, Mr Costello, Mr Turnbull and the Rudd government all chose a carbon pollution reduction scheme to act on climate change.”

They had done so because this was the cheapest and most effective way to tackle climate change, as it puts a hard limit on emissions and funds compensation for families.

But the Opposition Leader persisted with his claim that the scheme is simply a tax.

“If the best the government can say is that 50 per cent of  of middle income earners will be no worse off, obviously a lot of people are going to be worse off under Mr Rudd’s great big tax,” Mr Abbott said.

So what have we  learnt, economically, from the year that is now passing?

Firstly, perhaps, that the economics of John Maynard Keynes are not dead, after all.

The new neo-classicists, who held that markets, alone, could be trusted to keep economies strong, were proved wrong, yet again.

Just as their predeecesors were back in the 1930s, when Keynes argued that monetary authorities and governments must intervene directly, at times, to support economic growth.

Ideologically, at least, Australia’s Liberals are still close to the neo-classicists, at heart.

That’s why the Opposition’s Treasury spokesman, Joe Hockey, was signalling shortly after the crisis struck, late in 2008, that the opposition’s response would be based, primarily, on tax cuts for those in the middle to high tax brackets.

That is, precisely, those who are most likely to save, not spend, any extra money they might receive.

That is not, necessarily, a hot way to tackle an all too imminent recession.

The Rudd government’s response, through stimulus packages, was much more full blooded – and effective

But Joe Hockey does have a point, when he says budget deficits can’t go on forever.

So has the Rudd government overshot the mark?

Two Treasury economists, Dr David Gruen and Colin Clark, made some pertinent remarks about that, in an article published earlier this month.

“…Federal governments of both political persuasions have demonstrated the resolve needed to bring deficit budgets back into surplus after the economy has recovered from recession,” they say.

The economists add, too, that governments, of both persuasions, have also “committed themselves to increasingly well articulated medium term policy frameworks for fiscal policies.”

Comforting thoughts, eh?

Don’t ring Wayne Swan.

The Treasurer will  be busy reading a “comprehensive report”  over Christmas on ways to make Australia’s ramshackle tax system “fairer, simpler and more competitive.”

If it actually achieves all that, of course, it might well qualify as Mary MacKillop’s third miracle.

The Treasury Secretary, Ken Henry, risked spoiling his boss’s Christmas, by handing the heavy report to him on December 23.

At  this stage, Mr Swan is giving no hints about what might be in the  report.

He said, only, that the government would consider  the document and release it “in early 2010.”

“I won’t be responding to any of the recommendations in the report,” Mr Swan told journalists.

“There will be enough time for that in the New Year,  when we will release the report and the government’s initial response.”

Mr Swan refused to say exactly when that would be.

“This is a comprehensive report,” he said.

“The government will take some time to study it in great detail

“And we will release it in the New Year.”

He thanked Ken Henry and the four other members of the Review Panel, which produced the report, after 18 months’ work.

The panel received some 1,500 formal submissions, zs well as more than 4,700 letter, during the course of its study.

It also held discussion panels right around the country.

Mr Swan said the government “will not be engaging in speculation” about the report, before it is publicly released.

It will leave that to the media.

Australia’s $1.1 trillion compulsory superannuation industry is impressive, but there are still big gaps in its coverage.

These are revealed in figures just released by the Australian Bureau of Statistics.

These show that almost two thirds (65 per cent) of retired Australians strill rely on the age pension, or some other kind of welfare, as their main source of income, in retirement.

Yet the Age pension – and similar benefits – were designed to help people in their retirement years.

They were – and still are – not meant to provide a comfortable standard of living.

The architect of compulsory super, Paul Keating, originally meant contributions to rise gradually to 15 per cent of salary.

But they have did not go beyond 9 per cent, either in the 12 years of the Howard government, which was decidedly cool – if not openly hostile to compulsory super – or under the subsequent Rudd Labor government.

The current superanuation minister, Chris Bowen, talks enthusiastically of seeking more than mere adequacy in retirement incomes, through super.

But he becomes distinctly nervous when asked if the present government is contemplating lifting compulsory superannuation contributions, even to 12 per cent.

Characteristically, though, Mr Keating, himself, remains bold.

He told an interviewer recently that he would push those contributions right up to the 15 per cent level, if he were to return to power.

That’s not likely to happen.

And the upshot is that Australians, who are now living longer than ever, are still quite likely to find themselves strapped for cash, in their retirement years.

The global financial crisis has dealt Australia a sharp, double blow.

The average price of the commodities the nation sells  has plunged by 42.6 per cent over the past year.

As a result, business profits fell by 19.6 per cent, over that time.

In his weekend “economic note,’ the Treasurer Wayne Swan, this is the biggest fall seen in the nation’s company profits since the Australian Bureau of Statistics started keeping these figures, back in the 1990s.

This has huge consequences.

The Federal government’s tax collections will  fall, as a result.

A large slice of the nation’s business sector has gone into survival mode.

That is, business executives start looking for ways to survive, rather than opportunities for expansion.

That squeezes job opportunities for this year’s school leavers.

Even so, Australia has been touched lightly by the crisis.

Almost alone, among advanced western countries, it has avoided outright recession.

Australians will find out more this week, though, about how the nation is faring in these very difficult times.

The bureau is to release its November labour force figures on Thursday.

The nation’s balance of payments figures for September will be out tomorrow.

And international trade results, for October, are due for release on Wednesday.

All of these figures will be watched very closely.

A Federal minister signalled today that Australians can expect shocks, when a new report on tax reform is finalised next month.

However, the Minister for Financial Services, Superannuation and Corporate Law, Chris Bowen, promised that the  public would be given adequate opportunity to consult the government, on proposed changes.

He said he expects some of the changes, proposed by the Henry committee, would be controversial.

And there would be winners and losers.

The Rudd government has asked a committee, headed by the Treasury Secretary, Ken Henry, to recommend ways in which Australia’s tax system should be reformed.

Mr Bowen was speaking at a conference, organised by the Australian Superannuation Funds Association, in Melbourne.

He promised, though, that the government would not make major changes to Australia’s tax system, until adequate time had been given for public consultation on the Henry committee’s recommendations.

Mr Bowen had previously revealed that he may well cut the current, very generous, tax concessions, on superannuation contributions, that are presently available to very high income earners.

He said these tax breaks are not fair, when low to middle income families get little, if anything, by the way of comparable tax breaks.

The Henry committee’s report, though, is likely to lead to the deepest tax reforms made to Australia’s tax system, for more than two decades.

Early indications suggest that traditional State charges, like annual motor vehicle licence fees, might well be swept aside, in the reform processs.

However Mr Bowen’s remarks today suggest that the reform process, itself, will take months, if not years, to complete.

The Federal government challenged Australia’s superannuation industry today to develop more attractive retirement income stream products.

The Minister for Financial Services, Superannuation and Corporate Law, Chris Bowen, had been asked, at a superannuation industry conference, if the government would consider introducing compulsory annuities.

Mr Bowen said would not.  He said people, everywhere, preferred instant gratification.

And superannuation had to be kept attractive.

So it was the task of the superannuation industry itself to develop income stream products, or annuities, that people would find attractive.

Private Briefing asked Mr Bowen, after he had spoken, if he had any suggestions on how that might be done.

He said he did not, repeating that this is an area for the industry, itself, to develop.

Mr Bowen was also asked to elaborate on his previous assertion that Australia should be aiming for something better than bare “adequacy” in its retirement income policies.

“I see it as a theoretical approach,” Mr Bowen said.

“We look for something better,”  he added.

Mr Bowen said he would like to see a national debate on the adequacy of  the retirement incomes, that are available in Australia.

Australians have already put more than $1.1 trillion into their superannuation accounts, to help them provide for themselves in retirement.

Mr Bowen also said, again, today that he would like to see middle to low income earners given more incentive, through the tax system, to save more for their retirements.

High income earners are  likely to face a bigger tax slug on their  superannuation contributions.

The Treasurer, Wayne Swan, hinted strongly at  this yesterday, saying people with incomes in the top 2 per cent, are getting much better “value ” from the present 15 per cent flat tax rate on those contributions than ordinary families.

He said, though, that any such change would be part of broader reforms.

Mr Swan also  revealed that the the government expects the  reforms, which will follow the Henry report, which is due next month, will take up to ten years to implement.

And he said the government might seek the approval of the public, for particular changes, at  general elections.

He was addressing the Economic and Social Outlook conference in Melbourne.

Mr Swan told his audience that some people had asked whether aspects of the present system of taxing superannuation contributions “work against our progressive personal  tax scale.”

At present, superannuation contributions are taxed at a 15 per cent flat rate, across all income levels.

Mr Swan said this meant that the value of the concessions rose with income.

“Less than 2 per cent of taxpayers earn more than  $180,000 each year,” Mr Swan said.

“But they receive a concession worth 31.5 per cent of their contributions.”

“Compare this to an average family with kids and a total income of $115,00.

“The primary earner, on $80,000 or $90,000 would receive a concession worth 24.5 per cent of his or her contributions.

“And the secondary earner would receive a concession of as little as 1.5 per cent, if he or she earned under $35,000.”

“Overall fairness, though, requires us to think about a wide range of retirement income related policies,” Mr Swan added.