During what he calls the GFC (global financial crisis) Prime Minister Kevin Rudd has issued many compassionate statements. He has even outlined some compassionate policy initiatives. But there is one group in Australia about whose plight government comment has been conspicuous by its absence. It is, of course, the nation’s previously-growing band of self-funded retirees.
Curiously, it is also this group that has demonstrably been the hardest hit so far by the world financial collapse. These people have seen their superannuation capital reduced in the stock market downturn by as much as 50 per cent - some even more. The other superannuation staple, property, has suffered a significant decline in value. Income from cash deposits has been severely depleted by plummeting interest rates as the Reserve Bank seeks to stimulate a flagging economy by rate cutting; and companies are reducing dividends as they, in turn, grapple with changed financial circumstances.
The bad news just keeps on coming for these people.
No doubt there will be some who will be keen to point out that there was, a few months ago a “good news” announcement that the minimum draw-down rules on superannuation pensions had been relaxed until the end of June. For many people this simply means being allowed to give yourself less than you need to live on from a sorely depleted fund ... “Good news”?
But what is even more curious is that it is this group that the government seems to be targeting for cost cutting as it stitches together a budget which it has signalled will be a “horror” one, with, among other measures, tightened eligibility for seniors’ healthcare cards and the aged pension. What else is in store for us? The present financial crisis provides, as does the spectre of global warming, dangerous opportunity for governments of all political persuasions to implement policies which would normally be electorally quite unacceptable.
And if retirees living solely off super funds in pension mode or living off dividends from their other investments which have been offset by franking credits are looking forward to a spot of government largesse by way of the much touted stimulus package, then there is more bad news - they are not eligible for the $900.
But this is not all. It seems certain that one of the recommendations of the current taxation review will be a reduction of company tax from its present 30 per cent to 20 per cent to be funded by abolition of dividend franking credits, which will be another blow to self-funded retirees receiving a pension from their super funds.
Former Labor Treasurer and Prime Minister Paul Keating (who actually introduced dividend franking) said in a recent interview that one of his biggest regrets was that he had not achieved a national superannuation scheme of 15 per cent. It was apparent to him during his time in office, as it was to Peter Costello also, that Australia would reach a point where it simply could not afford to fund its retirees by way of government pensions. The Hawke, Keating and Howard governments all saw the value of encouraging and facilitating a system of self-funded retirement.
It defies logic that the present government would seek to dismantle this highly commendable structure, built up over successive Labor and Liberal governments. With a budget deficit growing alarmingly how will future governments deal with those people who will have, as it were, dropped off the self-funding shelf? On a more personal level, the nation’s self-funded retirees must wonder what they have done to deserve such cavalier treatment. They could hardly be seen as a manifestation of Kevin Rudd’s “extreme capitalism”.
Has his carefully burnished halo of economic conservatism slipped fetchingly to the left? Or is his government simply thrashing around in search of a group that can be squeezed without fear of electoral retribution? It is difficult to get a handle on the exact number of self-funded retirees in Australia, compounded by the fact that some of these people receive a part pension, but data from the 2007 Survey of Employment, Arrangements, Retirement and Superannuation indicates that the figure is well in excess of one million (3.1 million retired, with 2.1 receiving a pension or part pension). Their distribution electorally would be similarly hard to ascertain but it is safe to say that the tree- changers and sea-changers would be concentrated on the coast and coast hinterland and come the next election they might well unite in a chorus of “Come back Peter” (or even “Come back Paul”!).
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