Tony Abbott’s plan for the economy

Tax and spending cuts are at the heart of a plan the Federal Opposition presented today,  to strengthen the Australian economy

Tony Abbott, who leads the Opposition, said the Gillard government had failed to deliver “a credible plan for the economy.”

He was speaking in Sydney, after the last Shadow Cabinet meeting for this year.

Mr Abbott then invited his Shadow Treasurer, Joe Hockey, to explain the plan.

Mr Hockey said:”We have a four point plan on the economy.

“Number one is to live within our means.

“And how important that is.

“ Number two: get rid of the taxes.”

Mr Hockey said a Coalition government would start by dropping  the carbon tax and the mining tax.

Number three:  a six point plan to improve productivity, and

Number four: better engagement with Asia – real engagement with Asia as illustrated by Julie Bishop’s delegation of senior Coalition members to China last week.

An ugly year, but….

For many, the Parliamentary year ended on an ugly note.

Not least for the new Speaker, who urged MPs to reflect on the way they were treating “their Parliament.”

The scene before her might well have recalled the words of Winston Churchill, who once noted: “…it has been said that democracy is the worst form of government….”

Thankfully, Churchill added “except all those other forms that have been tried from time to time.”

This year’s sessions of Federal parliament ended with Tony Abbott saying that Julia Gillard had broken the law, while acting as a lawyer, some 20 years ago.

Good one Tony.

Make a note.

Sack all those expensive judges, when you become Prime Minister next year.

Think of the money you’ll save.

Ugly scenes, like these, do stick in the mind, though.

That’s a pity, because Federal Parliament did some important work, this year.

Not least, in introducing the carbon tax, on July 1.

Early signs are that this is  already causing Australian companies to look for less polluting ways of carrying on their businesses.

That can’t be a bad thing, especially as – at last report – Whyalla is still there.

There have been significant tax cuts, too.

Especially with the tax free threshold, for people earning less than $80,000 a year, being raised to $18,200

A note from the Parliament itself, reports that the House of Representatives passed 11 bills, in its final tumultuous week.

Altogether, it has passed 195 bills this year.

These have included:-

*….Budget and related bills

*….Dental Benefits legislation

* …Paid Parental Leave legislation

*….Fairer Health Insurance legislation.

*…A Schoolkids’ Bonus bill

*…A Murray Darling Basin plan and

*…Gambling Reforms.

Not a bad worksheet.

Pity about those appearances, though.

Protecting the forgetful

Money can disappear quickly, when it is unclaimed.

For example, Treasury estimates that under the current rules, a 20 year old with $1,000 in super can unknowingly have his super savings eroded to just $418 after five years.

A range of fees and deductions will see to that.

Similar estimates show that  a 30 year old with $2,000 can have his super savings eroded to just $1,250 after five years.

But the government is about to change the rules, to provide forgetful Australians with better protection.

The Parliamentary Secretary to the Treasurer, Bernie Ripoll, said reforms he would introduce into parliament would achieve that.

Mr Ripoll said that meant lost super and bank accounts would:-

*   stop being eroded by fees and inflation

*.. paid interest and

*..reunited with their owners sooner.

“The reforms will ensure this lost money is properly protected so people can get what is rightfully theirs,” he said.

The changes will help preserve those savings.

“As a result of the Government reforms, the same 20 year old will be able to claim $1,131 from the Australian Tax Office after five years, a boost to their superannuation savings of over $700 compared with current arrangements,” Mr Ripoll said.

“And the same 30 year old will be able to claim $2,263 after five years, a boost of over $1,000 to their superannuation savings.”

Small business still struggling

Small business is still struggling.

A new survey shows that trading conditions continued to get worse in the September quarter.

The Australian Chamber of Commerce and Industry said that left its indexes deep in contractionary territory.

There may be worse to come.

“Small business expects trading conditions to worsen further over the coming months amid rising input costs, subdued consumer demand and looming global economic uncertainties,” the chamber warned.

The Survey also found that:

*   the small business sector has become increasingly pessimistic about the strength of the Australian economy over the coming year, with the index of Expected Economic Performance edging lower from 40.6 to 38.8 during the September quarter, to be 2.3 points lower through the year

*   Profit Growth slid deeper into contractionary territory, while Selling Prices declined to its new historical low of 44.7, 1.3 points below the low reading of 46.0 previously recorded in June 2009.

*   Small businesses expect profits and selling prices to continue to fall in the December quarter

 and

*   Wage Growth and Non-Wage Labour Costs rose further in September, defying the declining trend reported in a broad range of indicators elsewhere in the Survey

However Business Taxes and Government Charges continued to constitute the top barrier to investment for small businesses for the seventh successive quarter in the quarter.

ACCI’s  Chief Economist, Greg Evans, said:“Small businesses have become increasingly concerned that labour costs have continued to rise and remain elevated, despite all other trading indicators trending lower in recent months.

Lack of pricing power as manifested by the historical low Selling Prices has dented small business profits and its ability to employ and investment.

“Against the current difficult trading condition facing Australian small businesses, further rate cuts are required to provide much needed support to the struggling sector, especially against the backdrop of international uncertainty and the high dollar and their implications for the domestic economy,” Mr Evans said.

Hockey “campaigning” for higher GST:Government

The Assistant Treasurer, David Bradbury, says the Coalition is campaigning for a higher GST.

He cites the following extract,  from an interview the Shadow Treasurer, Joe Hockey, gave on the Sunday edition of the Sky news program, Agenda, today.

The host asks Mr Hockey if the states should be campaigning for a hike in GST.

The transcript says:-

HOST: You want them to campaign for it?

HOCKEY:  Well they’ve got to campaign for it and they’ve got to win the Australian people over. I tell you why…

So what’s this “fiscal cliff?”

Share traders have been rattled today by fears that the United States economy is about to go over a fiscal cliff.

These fears followed the re-election of Barack Obama to the US presidency, while he is facing a still hostile Congress.

But what is this so-called fiscal cliff, anyway?

The Federal Treasurer, Wayne Swan, should know.

And he attempted an explanation, in a radio interview earlier today.

“……the fiscal cliff is a combination of tax increases and spending cuts,” he said.

Mr Swan was talking, primarily, about the US economy there.

But global woes got a mention, too.

“ As you know there’s great uncertainty in the global economy,” Mr Swan added.

These two worries added to each other.

“ We’ve got weak global growth at the moment and of course that’s beginning to weigh on growth in our region,” Mr Swan said.

So what’s ahead?

A rough ride, possibly,

Mr Swan certainly thinks so.

“So if you put together the recession in Europe and the challenges in the United States, the global economy does face challenges in the weeks and months ahead,” he says.

“ It’s really important therefore that these matters are dealt with in a sustainable way in the United States,” he adds.

The New York Times also has an explicit explanation, of the fiscal cliff.

“…this simultaneous combination of sweeping reductions in government spending and tax increases could push the economy into recession in 2013, economists fear,” the paper says.

Those tax increases, in large part, would be due to the expiry of Bush era tax breaks.

New tax cap a problem? Talk to Wayne

High income and big medical bills?

Then you may be interested in a notice that has just been placed on the Federal Treasury’s website.

As you might recall, the Federal government announced in its Budget, back in May,  that it would introduce a new means test, for people like you.

That’s now open for public comment, in case some people would be hurt, unreasonably,  by the new arrangements.

You can address written submissions to General Manager
Personal and Retirement Income Division
The Treasury
Langton Crescent
PARKES ACT 2600

Or email your contribution to  personaltaxconsultation@treasury.gov.au

But what’s it all about, again?

The Treasury explains:-

“The Government announced in the 2012-13 Budget that it will introduce a means test for the net medical expenses tax offset (NMETO) from 1 July 2012.

“Under the new means test, people with adjusted taxable income above the Medicare levy surcharge thresholds ($84,000 for singles and $168,000 for couples or families in 2012?13), the amount above which a taxpayer may claim the NMETO will be increased to $5,000 (indexed annually thereafter).

“The rate of offset will be reduced to 10 per cent of eligible out?of pocket expenses incurred above the $5,000 claim amount.

“ People with income below the income thresholds will be unaffected by this change.”

Got that?

Polishing the superannuation system

Super is gradually getting back a little of the lustre it lost when the stock market crashed  in 2008.

Although the value of the shares held by Australia’s superannuation funds have risen robustly from post crash lows, they have not yet returned to pre-crash levels.

But further gains can be expected on that front.

Meanwhile, the Federal government is giving Australia’ superannuation system a fresh polish, in several departments.

It has placed three separate bills, affecting super on the notice paper for the Spring Sittings of the House of Representatives this week.

They are:-

• The Superannuation Laws (Capital Gains tax relief and other Efficiency Measures) bill
• A Further My Super and Transparency Measures bill and
• A bill covering arrangements with New Zealand.

These – and other – measures will add up to a small overhaul of the system.

There will be big changes, for example, to the way “lost super” is treated.

Amounts of up to $2,000 in lost, inactive accounts, whose owners can’t be contacted, will be transferred to the Australian Tax Office.

The Federal Superannuation Minister, Bill Shorten, says this will prevent the value of money in these accounts being eroded by fees and charges.

Interest will also be paid on these accounts, to protect them from inflation.

Mr Shorten explains, too, that Australia’s superannuation funds struck a difficulty with capital gains tax, when they came to distributing money to the beneficiaries  of fund members who have died.

Investment earnings that superannuation funds get, on assets that support pensions, are exempt from tax.

However a draft ruling, issued by the Tax Office last year, led to some uncertainty on this point.

“To address these concerns, the Government will amend the law to allow the pension earnings tax exemption to continue following the death of a pension recipient until the deceased member’s benefits have been paid out of the fund,” Mr Shorten said.

The government is also planning to curb superannuation fund fees by pushing the superannuation industry even further along the path to full digital processing.

Processing superannuation transactions manually costs between $5 and $10 each.

Digital transactions, though, cost between 5 and 15 cents each.

Naturally, it is you, the individual fund member who eventually picks up the cost of these transactions, either way.

The really big movement in Australia’s superannuation system, though, will start on July 1 next year,.

That’s when the superannuation guarantee levy will gradually begin moving from its present level of 9 per cent, to 12 per cent of pay.