Tuesday, 23 April 2013

The Super conundrum

There has been debate raging for some time about Australia's compulsory private retirement pension system (or superannuation).  Following in the footsteps of European deficit countries perhaps, government is discussing ending the favourable tax breaks some have enjoyed when contributing to pensions and in general with high risk and low yields in many asset classes, the sector is looking weaker, just when many more people are looking to their pensions to cover them for difficult futures.

And tied up in this is a government short of funds which has found its windfall mining tax is coming up short on delivering promised funds

Asked about speculation the government is poised to raid superannuation contributions and earnings in the May budget, the PM would only promise an increase in the super guarantee from 9 to 12 per cent....Funding to pay for tax concessions to allow the increase are supposed to come from the minerals resource rent tax (MRRT) - an impost the Coalition would scrap in government. (here)
One of the other key fiscal reforms of recent times, the carbon tax has also struck trouble given the failure of the EU ETS scheme which has caused the price of carbon to drop to far below Australian levels (meaning Australian authorities are charging excess levies inflicting pain on the economy).  As set out in the Economist magazine:


...For the time being, therefore, carbon permits seem set to remain, in the phrase of the secretary-general of EURELECTRIC, an electricity providers’ association, “junk bonds”.   
That will have profound consequences. Over the past few years more than a dozen countries and regions have followed the EU in establishing or proposing cap-and-trade schemes. They include Australia, South Korea, California and several Chinese provinces. The travails of the ETS will not stop this process: China’s new leaders are committed to reining in their country’s vast carbon emissions and think a cap-and-trade scheme is essential.(here).
Looks like the government could be getting squeezed soon.




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