That most prolific of Troppodillian bloggers, Nicholas Gruen, made an ‘appearance’ on ABC radio this morning in relation to an Open Letter to the PM which he and seven other economists have penned.
Now, anyone who reads these lines will know that I regard economists as little more than snake-oil salesmen. Practitioners of what the great unwashed public might regard as a mystical black art on the same lines as alchemy or oracle. Personally, when it comes to punting on what might be right, wrong or indifferent in regard to the nation’s current economic woes, or what direction the RBA Board of Governors might take in relation to interest rates, my own educated guesses are more often more in line with reality than any economic prestidigitator.
Right. Position set. I have to say, I find proposals 2 and 3 to be quite sound. Logical approaches to issues which can be addressed immediately, or at least in the relatively near future, with little or no adverse impact at the individual level. I think it’s well understood that in recessive economic times, it’s government’s responsibility to ensure that forward motion in growth is maintained, in order that job losses be minimised and consumer spending power be kept as high as possible. Infrastructure spending is the best way to achieve those aims, and if governmental borrowing is required, then so be it.
I have a problem with proposal 1. Reducing compulsory superannuation, for however short a period, I see as a retrograde step. Consider, for someone earning $50,000/annum, a cut in the 9% compulsory superannuation to 6% would add a grand total of $28.85 pre-tax to the wage earner’s gross weekly wage. The resultant taxation impost on the increased gross income over the 12 month period this reduction would be in place increases by $580, or in weekly terms, $11.27. So for the surrender of 3% in super, which is taxed at 15% ultimately, the wage earner receives a post-tax pocket of loose change worth $17.58. I’m a light smoker and roll my own. That’s a packet of tobacco for me. In fact I’d probably only buy a pack of tobacco once every two weeks, so maybe I could afford a trip to the movies & some popcorn. Whoop-de-doo! Don’t forget either that Government coffers benefit greatly from this idea, and at a compounded cost to the worker.
For mine, I’d be far more concerned about the loss of probable income from superannuation which in 2008 returned between 6.1% and 8.5% on a ten-year average than I would be about whether or not I can afford to go to the flicks this week. Don’t forget also, that superannuation is cumulative, and this reduction in compulsory super proposal promotes a one year reduction of 3%, with a slow return over three years to 9% then onwards over another three years to 12%. Still 3% short of where superannuation would have been by the early part of this decade, were it not for Howard & his mob. Certainly, over the longer term, and let’s be honest and agree that superannuation is a long term investment, earnings may be recouped, but over what period of time? Has the modelling been done? I suspect not, but if so, where is it? All well and good to put out these open letter ideas, but where’s the supporting data for the curious to survey?
I’m 51 years of age and while my super may not be gargantuan right now – it’s well over the $100k mark – I’d like to think that given an economic recovery in the next couple of years, I’ll still be able to retire around 63. Earlier would be wonderful, but I’m trying to be realistic. I’m not in the least bit interested in, nor supportive of any scheme which will be deliberately detrimental to my, and my family’s future financial security, so that the greater good – being business, industry and those in the workforce a lot younger than I am – can be served. Social Democrat I may be, but when it comes down to me or the mob…..I’ll back me every time. Is there any wonder I have a disdain for snake-oil salesmen?