Video: Industry experts respond to the Federal Budget 2020

Tracey Spicer

To talk about the federal budget, we’re joined by Steven Huppert, who’s an independent consultant and adviser specialising in superannuation, wealth management and retirement. But first of all, before we get to any of that, Stephen, how did your Budget Bingo go?

Stephen Huppert

Really good, thank you. Couple of people got bingo early on, and I got some great additional suggestions for words that I missed out on. So it generated quite a bit of activity on Twitter and LinkedIn. So I thank you for noticing.

Tracey Spicer

Yeah, it adds a bit of fun, doesn’t it. Look on a more serious note, we know that one in four older Australians lives in poverty. Is the pension boost of $250 in December and March enough for those who are living on the breadline?

Stephen Huppert

Yeah, look, it’s going to be a marginal impact. It’s better than nothing. But there’s still a lot more that needs to be done for older Australians, for people in retirement.

Tracey Spicer

Tonight, the Treasurer also announced an annual performance review of super funds and an online tool known as YourSuper. What kind of difference will that make to people planning for retirement?

Stephen Huppert

Like most things in the budget, the devil’s in the detail and what it actually means. So, for example, the annual performance test, how different is that going to be from the current member outcomes test that APRA just initiated from January this year? So is it going to be just that but on steroids? Is it going to be a broader measurement? How do you judge the performance of a superannuation fund? And that’s something that the industry has been grappling with for some time.

So with the annual performance test, a lot of it, and it explicitly says under guidance from the prudential regulator. So APRA’s got its work cut out for it now, still bedding down the member outcome test. And now it’s going to have to deal with whatever this annual performance test is. Regarding the YourSuper calculator is a really interesting one, because it’s very difficult for people to be able to compare superannuation funds.

There are a number of sort of commercial and semi-commercial entities out there that do it – some of the insurance comparators also include superannuation. There’s a couple of startups that are doing it as a service. But any sort of comparison, you have to really understand what you’re comparing. And the danger is you’re not comparing like with like.

And the other part of it is what sort of assumptions will be built into it. If the calculator is going to be trying to estimate what it will give you at retirement, then the whole question will come down to what assumptions. If it’s purely looking at what fees you’ll be paying for what you’ve currently got in the system, well, that will change as your balance grows and you needs grow over time.

One of the dangers with the calculators is that it may not take into account your particular needs, for example, around insurance and other matters.

Tracey Spicer

The devil’s in the detail. We’ll have to wait and see on that one. Self-funded retirees have been hit by not only low interest rates, but a volatile share market. Young people for generations to come will be hit by this enormous debt and budget deficit of $213 billion dollars this year alone. Surely there’s a valid argument that young people do need this money right now and self-funded retirees are just going to have to wait and sit back?

Stephen Huppert

There was a lot of speculation about would the contribution rates be talked about in the budget. They are scheduled to go up to 10% next year. And there’s been enormous debate in the industry and wider over the last six months about whether that should go up or not. It was completely silent on that. So, yeah, and for young people, whether they can use the super to buy houses, that’s been something that’s been in the media a lot over the last six months, especially. None of that was talked about in the budget.

There was some speculation there might be a third early release tranche, but that didn’t appear. So the measures in the budget related to superannuation are more systemic rather than sort of short tactical things, which I thought at least that’s a good thing.

Tracey Spicer

What’s the one thing you would have liked to have seen announced in the federal budget that wasn’t?

Stephen Huppert

Look, I’ve got a particular interest in what happens when people do retire. I think the focus on how much money you have when you retire is important. But in Australia, we don’t do enough for people when they retire in terms of the types of retirement products and the types of services that the superannuation and financial services industry can provide. And unfortunately, the budget, like a number of recent regulatory requirements and government announcements, has been completely silent on what happens when people retire.

So I would have loved to have seen comments about the proposed Retirement Income Covenant, which is going to come in eventually, but it’s been delayed and deferred a number of times. And also the requirement to have some sort of retirement income products to be able to offer to members, and those sorts of things I would have liked to say in the budget, but I really wasn’t very hopeful.

Tracey Spicer

Stephen Huppert, thanks for your insights and your time.

Stephen Huppert

A pleasure, Tracey. Thank you.

Tracey Spicer

To discuss the federal budget, we’re joined tonight by Dante Di Gori, CEO of the Financial Planning Association of Australia. Dante, what’s your initial response to the federal budget, particularly around superannuation?

Dante Di Gori

This is obviously unprecedented times, very interesting type of budget, trying to rebuild the nation and get us back on track and overcome the drama that has been 2020.

I think one of the things that the FPA and our members really welcome, aside from aside from the stimulus options, of course, is that there is no real tinkering with the superannuation system, which we have seen in years gone by. And so this provides a real opportunity for some consistency and also some confidence to rebuild in the superannuation sector.

Tracey Spicer

While there’s no real tinkering, there are a few things. And one of them is that trustees who oversee funds will have to comply with a tighter requirement to act only in their members best financial interests. And some commentators are saying that could restrict some people who run superannuation funds from undertaking campaigns with regards to social justice, things like climate change. What are your thoughts on that?

Dante Di Gori

Well, I think we always have to consider what’s in the best interest of members collectively within a superannuation fund. A trustee has that obligation already. And I think it’s an opportunity time to review that. There is a lot of money. I think the budget talked about $30 billion worth of expenses coming out of superannuation, which is massive. And so I think it’s appropriate that we do consider ways in which we can reduce those costs because reducing those costs now mean more money for Australian citizens in retirement.

And I think it’s appropriate that we do consider that trustees are acting in the financial best interests of members and that detail should be really worked out. And things like, what is the place of trustees in terms of advocating or promoting and using funds of Australian citizens to do that? When is it appropriate to do that? Under what circumstances should that be done? I think that question should be asked and should be answered, and I think that’s appropriate at this time.

Tracey Spicer

Would you have liked to have seen a commitment to an increase in the super guarantee?

Dante Di Gori

Well, the FPA and our members have long supported the superannuation guarantee. And that measure is designed to continue to go to 12%. We think that’s an appropriate measure in terms of the adequacy of superannuation, in terms of, as I mentioned, in terms of any further tinkering to that. At this point, we welcome that there hasn’t been, and that we remain on track with the gradual increases to superannuation.

Tracey Spicer

In your submission, you called for various measures to reduce cost pressures on financial advisors, which are passed on to clients. Things like clients being able to claim on tax their first and perhaps subsequent meetings with a financial adviser. Although that didn’t come through in this budget, will you continue to lobby for that?

Dante Di Gori

Yes, we will. I think, you know, this is a real long term issue if you like or advocacy issue for us in terms of we think that more Australians deserve and need the services of a qualified professional and it needs to be affordable for them to do so. So we want to make sure that obviously they get access to quality financial planners and that those services are a very high standard, which it does come at a price. But we also want to make sure that most Australians can access that at some point.

And there’s got to be the right price points for many Australians. And deductions are one avenue in which that can be applied. And so, yes, we will continue to advocate and look at that as a long term benefit for for Australians to be able to gain access to advice.

Tracey Spicer

Dante what would you say to people who would contend that at this time of pandemic and economic crisis, that there are people who need tax breaks and money from taxpayers much more than wealthy financial planners?

Dante Di Gori

Absolutely, all Australians need access to support right now, people are suffering because of loss of jobs, because of businesses that may have gone under, and financial planners as business operators are no different to any other small business operator in this country and need support in order to ensure that they can continue to operate, employ Australians and also service their clients.

This is not just about financial planners. This is about all Australians gaining access to the financial services system, gaining access to professional financial advice. And what we’re looking for is something that is equitable, something that is sustainable and something that is in the long term interests of all Australians.

Tracey Spicer

Dante Di Gori, really appreciate your time tonight. Thanks so much.

Dante Di Gori

It’s a pleasure. Thanks for having me.

Tracey Spicer

We’re joined by Sandra Buckley, CEO of Women in Super, to talk about the Federal Budget. Hi, Sandra.

Sandra Buckley

Hello, Tracey. Lovely to see you again.

Tracey Spicer

And, you know, women bore the brunt of job losses in the pandemic. Now, $240 million has been announced in the budget for cadetships and job creation for women. What do you thoughts on that?

Sandra Buckley

I guess my first thought is at least we merited a mention and we would have taken up two sentences in the entire budget and $240 million. So we should be slightly pleased with that. But, you know, the $240 million is over two years and it’s part of the second women’s economic security statement. The first women’s economic security statement was in 2018. And not all of that has yet been implemented. So my first question would be, given that we haven’t spent what was originally put aside in the first statement, are we actually going to even get what’s been put in this statement?

And I think one of the things you picked out was it is directed at job creation and primarily targeted at younger people. And we know that younger women have been impacted, but older women have also been severely impacted. So we absolutely would have liked to have seen something in there about improving older women who have lost their jobs, who probably aren’t going to get another job.

Tracey Spicer

So you’re concerned that offering businesses and employers incentives to hire younger workers will mean actually more middle aged and older women out of work?

Sandra Buckley

Absolutely. It could do, provided you can actually afford to employ someone at the beginning because the subsidies that were announced were obviously $200-300. And I think it was over a fortnight wasn’t it Tracey. So we’re not talking very much money to start off with. But, you know, younger women have definitely lost jobs. And the government did make a statement that women are going back to the workforce in greater numbers than newer jobs that have been created.

But I think what we’ve got to recognise here is that they haven’t been going back to full time jobs or to jobs that they had before. They’ve been going back to part-time casual jobs that are not going to generate the sort of income that they need to get back on their feet. In fact, they’ve just been picking up roles wherever they could, for obvious reasons. But we’re certainly not going to be putting them in a position where they are going to be able to become financially independent further down the line.

Tracey Spicer

Was there anything at all, Sandra, in the budget announcement that will work towards narrowing that superannuation gender gap?

Sandra Buckley

No, nothing. I mean, every year we’re always disappointed that there’s no mention of super on paid parental leave, because that’s obviously something that we always advocate for. And there was obviously no mention of the legislated increase to the superannuation guarantee. And the reason we’d obviously like to see that go ahead is because it improves women’s adequacy in retirement. So neither of those two points were mentioned. I guess that means that’s something we’re going to have to keep fighting for.

The tax, even the tax cuts that were announced, the low income super tax offset is behind where it should be because it wasn’t included in the last tax re-evaluation, if you like, or redistribution, and it still hasn’t been included.

So we are changing the tax brackets, but we’re not taking into account the low income super tax offset and we’re not resetting that in line with the tax brackets, which means that anyone that’s getting the low income super tax offset is not actually going to get any more. They’ll just continue getting what they’re getting on a particular percentage of the income rather than having it increased up to 9.5% rather than 9%, which is where it is now, and increased in line with the tax brackets.

And we know that women predominantly get the low income super tax offset. So again, that’s another measure that predominantly because women are low income earners, and more than one in two earn less than $40,000, and the low income super tax offset goes up to $37,000.

So it’s women who predominantly benefit from those type of measures when it comes to superannuation. And we could talk about what else might have been done, given that women have decimated their superannuation balances. We know that one in four women in that 25-34 age bracket, but also the older group from 55 onwards, have taken out substantial amounts and have actually drawn down their superannuation. They had lower amounts to start off with anyhow.

So what are we doing for them? That older group is about to retire in the next 10 years and they won’t have any superannuation to retire on. So, you know, that’s extremely concerning for us. But we’re also concerned about those younger women because they’re about to hit those childbearing years where they start to enter that flexible work life balance of trying to do the caring with working. And maybe the silver lining of COVID is that they will do less than men will step up more and there will be more opportunities and flexible working. We’d like to certainly hope that that will be the case.

But these women have taken a sufficient amount out of the superannuation for obvious reasons. And they did it knowing that what they were doing in the vast majority of cases so it wasn’t an easy decision for women to do. That’s been the benefit, all of the awareness we’ve created about the importance of women in particular having decent superannuation balances.

But these women now at the age of between 25 and 34, about to get married, have a family, they’re not going to be in a position to replenish that amount of money that they’ve taken out. They don’t get superannuation on paid parental leave. They were already behind. Suddenly they’re going to start falling even further behind. So that’s that’s definitely a big concern for us.

Tracey Spicer

We’re experiencing the worst economic crisis since the Great Depression. There’s a prediction of record net debt of $966 billion by 2024. What do you say to critics who say, well, projects like narrowing the gender pay gap in superannuation need to be put on the backburner for the benefit of the broader population?

Sandra Buckley

I think my first initial instinctive response to this is to say we’ve been told no for decades, basically. When times were good, we were also told, no, we couldn’t do it. And now the economic problem is obviously an issue and something that everyone’s concerned about. But before coming in here to this interview, I heard one of the economists talk about obviously the cost of servicing that debt. And the way he phrased it was, because interest rates are so low at this particular point in time, although we have borrowed that amount of money. In fact, the cost of servicing that debt, new and old, is less than it was in 2019.

So, of course, we want to be in a position where we can put the budget back in the black. But really, there is no better time now to actually borrow money, but to direct it towards where we might be able to generate economic recovery for women. And we know that when we get more women into the workforce, their contribution to GDP is phenomenal, and is directly related to the more women that we can put in, the more that we can actually generate that economic benefit.

So if we put money towards things like improving childcare, we learnt that very quickly in COVID-19 that that’s a big driver of women’s workforce participation. There are ways in which and levers we can pull to ensure that women can participate in the workforce in greater numbers and to a greater extent. And the economic activity will follow suit, if you like.

Tracey Spicer

Sandra Buckley, thanks so much for your time.

Sandra Buckley

Thank you, Tracy. Lovely to speak to you.

Tracey Spicer

To delve a little deeper into the detail of the Federal Budget, we’re joined by Noel Whittaker, who is executive in residence and adjunct professor at the QUT Business School and of course, a long-time and renowned columnist. Noel, first of all, is this budget enough to stimulate the economy and create jobs?

Noel Whittaker

How much money can you spend? I mean it’s spend, spend, spend, isn’t it. And at some stage you have to face the music. I’m just not sure it’s giving people in work tax cuts, because I think they’re more likely to save than spend. I thought they would have been better off to increase JobSeeker if they want the money spent, but the trouble with that is the people in restaurants tell me they can’t get staff because people are enjoying the JobSeeker. So it’s a bit of a catch 22.

Noel Whittaker

Are you also concerned that incentives for young people to encourage them back into the workforce, to give employers money to hire more young people, might leave some middle aged and older people high and dry in the workforce?

Noel Whittaker

Maybe. Also with all this COVID stuff, you can’t take on staff for the sake of taking on staff. I mean, most restaurant and licensed premises don’t have enough people to make a profit. So this is the major problem. Now, they say that the budget was framed around finding a vaccine. Maybe yes, maybe no. I’m also concerned about another housing stimulus. Interest rates are now, you can get a housing loan at 2%. That’s a huge advantage to people with jobs.

There are many people with jobs, but again, agents tell me that the real estate market is short of stock. I just think it will push housing prices up once more. Every time they try to boost the housing market, all they do send the prices, that’s the way it works.

Tracey Spicer

And Noel what about superannuation? They seem to be just a few tweaks around the edges announced in the budget. What should they have announced and what might potentially evolve over the coming months and years?

Noel Whittaker

Well, we are waiting on yet another retirement incomes policy review. I gather it’s 600 pages. It’s in the too hard basket. We had one in 2015. So these things keep on coming and nothing seems to happen. The main thing, this report from the 2015 one was that the people worst off were single women who didn’t have a house, over 65. And so we got then to affordable housing and I see all the howls today are well, they didn’t mention affordable housing.

Also that the superannuation concessions always favour the wealthy. Well, I guess they always have. That’s the way it goes I guess. But the major thing from the Jeremy Cooper superannuation inquiry was that 80% of Aussies are disengaged. And I’ve written over and over. The most important factor, which determines how much you get when you retire, is the rate you earn on your money. If you are disengaged, you might not be getting the best return possible.

So what they’ve done, which I think is great, is going to make people engage. When you start a new job now you take your old fund with you. They’ve got a new term, ‘stapled’. So when I start my first job, I’m stapled to my first fund and then when I change jobs. I stay with that fund unless I opt out. So it should make people very engaged, Also, if you’re a good boss and you get new staff, you could encourage them to unstaple from their existing fund, and staple to a better fund. Plus, the tax office is going to have a portal about best performing funds.

Because if you accept the premise that the net rate of return is the major factor. Major part of that is fees. So by chopping 1% off the fees, you’re  adding an awful lot to the end in 30 or 40 years time.

Tracey Spicer

You make a lot of sense. Thanks so much for your time Noel Whittaker.

Noel Whittaker

Thanks. Tracey.

Tracey Spicer

We’re joined now by Xavier O’Halloran, director at Super Consumers Australia. Xavier, this move to name and shame underperforming super funds through YourSuper. How much will that help consumers?

Xavier O’Halloran

Yeah, I think it’s going to help a lot. Unfortunately, consumers are completely left in the dark at the moment around their fund’s performance. We’ve heard of people getting complicated yearly documents from their funds, updating them on performance and having no real idea whether that stacks up well against the rest of the market. So this will be a real game changer in driving competition, letting people know that there may be better options out there for them.

And will it also simplify and streamline processes for people when they change jobs?

Xavier O’Halloran

Yeah, it really will. At the moment. People get a new account every time they change jobs unless they take active steps to stop that from happening. And that’s led to millions and millions of duplicate accounts being created out there. People are paying multiple fees, multiple insurance, in some cases insurance they can’t even claim on. And that has been a huge drain on the system. They estimate something like $50,000 on average for a person out of their retirement savings.

So this new process of people taking their account with them as they change jobs is going to streamline all of that. We won’t see creation of any new accounts. It will be important, though, that consumers do continue to check if they have any existing duplicate accounts out there. But again, the process has been made easier through the ATO to consolidate those which will really help consumers take control of their superannuation.

Tracey Spicer

Should the government have gone further, though, for example, to make a firm commitment to increasing the superannuation guarantee?

Xavier O’Halloran

Look, I think the jury’s still out on the superannuation guarantee. The Retirement Income Review will be really important in guiding decision making there. The starting point always has to be how do we get to adequacy for people in retirement? The measures announced in the budget will really assist with that. Some of the Productivity Commission estimates for people say in a really poor performing fund currently, across a lifetime. we’re talking about half a million dollars worth of lost savings due to underperformance.

So those sorts of things will actually really drive up people’s retirement balances without the need for a superannuation guarantee. So I think it’s important that these kind of measures get passed first and then we reassess, well are we reaching adequacy. Do we still need to go ahead with superannuation guarantee? And if that’s the case, then that’s the right time for the government to consider it.

Tracey Spicer

What about things like changes to the system for caps on contributions? I know there’s been discussion about making it a lifetime cap for extra contributions rather than yearly.

Xavier O’Halloran

Yeah, again, the Retirement Income Review’s got a lot of work to do here. We really are keen to see what’s in that report because there are serious fairness issues in the system where wealthier people essentially have been able to save far more and have benefitted far more from the system and benefitted in terms of tax cuts far more than others. And so there really needs to be a realignment about what this system is set up to do. And I think, like I said before, it should be about making sure people have adequate retirements, not that they can accumulate vast sums of wealth to then pass on to future generations.

Tracey Spicer

OK, Xavier, thanks very much for your time.

Xavier O’Halloran

No worries. Thank you.

Tracey Spicer

We’re joined today by Peter Burgess, deputy CEO at the SMSF Association. Peter, what does the budget mean for self managed super fund trustees?

Peter Burgess

Well, I think for self managed super fund trustees, it was a quiet night. We didn’t see any charges specifically related to self managed super funds, and I wouldn’t change it. I think we’ve had a few budgets now where there have been at least some tweaking of the rules for SMSF trustees, but nothing specific in last night’s budget. So so a quiet night overall for self managed super funds, which, as I said, I think it’s a welcome change.

Tracey Spicer

What’s your response to some of these so-called simplification measures of superannuation that have been brought in. For example, increasing the focus on YourSuper and as some commentators have suggested, naming and shaming super funds who don’t comply with the rules, or charge too many fees.

Peter Burgess

So these changes are aimed at the larger funds. We think it’s good, strong structural change to the superannuation system. So we support the measures that were announced in last night’s budget. To reduce the number of duplicate accounts, for example. So when employees change jobs, that will no longer be necessary for them to set up a new superannuation account with that new employer, which we think is a good thing, it will reduce obviously the number of duplicated accounts. And that’s a big issue for the industry. Over 6 million duplicated accounts in this country. So we certainly support that measure.

And I think the other measure, which, as you mentioned, is the naming and shaming. We think that’s also something <intelligible> that perhaps hadn’t been performing as well as they should be, that the MySuper products that is. So APRA, the Australian Prudential Regulation Authority will start to benchmark the performance of these MySuper products. And if you have been underperforming for two consecutive years, then the fund won’t be able to accept any new members. So, again, it’s about transparency. It’s about making it easier for members to identify funds, which perhaps have been underperforming. So, again, it’s something we support,

Tracey Spicer

Given the level of government spending, which is and here’s that word again, unprecedented. Are you concerned that any additional future taxes might be skewed towards those who have wealth already, often self managed super funds and their members?

Peter Burgess

Well, not in particular. We think the government’s plan here is to grow out of this recession and we support that. We don’t support new taxes, but we  think the government’s plan to create jobs is the right way to go. And we are confident that the economy will be able to grow and we won’t need new taxes, particularly in relation to superannuation.

Tracey Spicer

Peter Burgess, thanks very much for your time.

Peter Burgess

My pleasure.

Tracey Spicer

Bina Brown is director of Third Age Matters, and she’s here to talk about the Federal Budget. Bina, of course, this budget was famously all about jobs, but we did see 23,000 more home care packages. Is this what you’d hoped for?

Bina Brown

Not really, Tracy, but probably no surprises, there was a real focus on jobs. Aged care was definitely second fiddle, but we do have a Royal Commission underway and the Treasurer did make note of the fact that they will address that when the time comes in February. So big things expected then, I guess.

Not surprisingly, too, the focus was on home care. That’s where the real pressure is. Nobody really wants to go into residential aged care in the best of times, but not in these times either. So 23,000 home care packages, well short of what anyone would have liked, but loads more than they normally give out. So that’s good.

Tracey Spicer

Yeah, I noticed that on the 2,000 of the new packages are at level 4, the highest level of care which is needed to keep people out of residential aged care. Should it have been structured differently?

Bina Brown

Probably, yes, it’s part of the aged care sector that does need a real overhaul as well. Level 4 packages are in higher demand because it’s what you need to stay at home. It’s not a lot of money to begin with. So, yeah, loads more in that area would have been good. There’s still 100,000 people on the waitlist, so waiting for a home care package of the right level. So, you know, anything is better than nothing, but it’s certainly not the answer to keeping people at home.

Tracey Spicer

The Royal Commission heard that 30,000 people died either waiting for a package or going into aged care unnecessarily. I know you say that there will be more announcements early next year, but is that too long to wait when people’s lives are at risk?

Bina Brown

Definitely, yes. Definitely too late. They’ve been calling for more home care packages, more work to be done to the whole aged care sector for so long now. Maybe we weren’t expecting great things from this budget, but it would have been really helpful to have some some reforms in place. Things like bringing forward the time period, even for the assessment, would have helped get some detail around that. Also, just higher levels really is where we need it.

Tracey Spicer

OK, thanks so much for your time, Bina

Bina Brown

Thanks Tracey.

Tracey Spicer

We’re joined now by Ian Henschke, chief advocate at National Seniors, to talk about the federal budget. Ian your submission outlines 11 recommendations. How many of them manifested within the budget?

Ian Henschke

Well, we didn’t get a lot of what we asked for, Tracey. And also it was good in parts, if you would like to use that phrase. One of the things that we’ve been asking for was addressing the home care waitlist because as you would realise, COVID is a health and a wealth crisis. So we put our health first. And of course, that was one of the things we were asking for. And you might remember the Royal Commission last year handed down an interim report called Neglect, and it said the number one priority was to fix the home care waitlist.

Now, these are people that are waiting for a home care package so they can stay in their own home, not move into an aged care home. We knew from the Royal Commission that the amount of money required to fix that was $2-2.5 billion. And that’s what the chief of that department told the Royal Commission. Ms Buffington told the Royal Commission last year that to address the issue, it would be $2-2.5 billion. So stick with me on the numbers on this one.

Last night, they announced one point six dollars billion would be given to create extra home care packages. And I thought this is great news. And then I realised it’s over four years. So when you four years into $1.6 billion, you get $400 million. So a problem that we were told by the department needed $2 billion to fix. We got $400 million. So 80% of the problem is still there.

Now, this morning, Mathias Cormann was saying, we framed this budget on the available evidence. Well the available evidence was provided by the Royal Commission that you needed $2 billion. They’ve given a fraction of that. So what we are hoping for is that the Treasurer has said that he will address this issue when they have the final report of the Coyal commission, which is in February. So, in fact, he’s put it on hold.

So he’s listened to us, but he’s not listened to us. We’re waiting and we’re hoping. Remember the old song? I’m waiting and hoping. Well, we’re waiting and hoping. But the thing is that the people that are at home now who are wanting that package now, they’re the ones that are going to miss out. 100,000 people waiting.

And they’ve also broken down.I’ve had this morning to look at packages. They’re a mixture of level one, two, three and four. Level four is for the most frail. Now, there’s only 2,000 of those available. So there is going to be somebody out there at the moment waiting for a package who may well die or go into aged care unnecessarily between now and when the government does give its response. It’s always that balance between acting now or putting it on hold. They’ve put it on hold.

But I’ll remind everyone watching this that Scott Morrison, two years ago, almost to the day, announced the Royal Commission. And he said, I’m doing it to restore faith in the system. So this is not just an aged care issue, it’s become a political issue and an issue of which he has hung his hat on as prime minister. So I think of these things not as numbers, but as people’s stories. And this is actually about individuals.

I had a man text me this morning saying, ‘I hope this is not going to be an example of calling the Royal Commission. So it looks as if you’re doing something’. And and that is the political, I suppose, message that’s been sent. You know, you put this on hold. Are you appearing to do something or are you going to be doing something? So my judgements left open on that.

In terms of the other areas, we did ask for a lowering of the deeming rate. Now, we were reminded in the budget that the deeming rate had been lowered, but that was back in December. And of course, no one can get the sort of interest rate from a bank account that is being deemed to be got at the moment. The deeming rate for the upper figure, which is above $50,000, is 2.25%. No one’s getting that. And you might remember when we pushed for this last year, Josh Frydenberg said there’s a whole suite of investments that people can go into where they can get this better rate than what we’re deeming.

Guess what? That suite of investments doesn’t look so sweet today because that the bank shares, for example, have almost halved some of the stock dividends. So the self-funded retirees in particular and the part-funded retirees, I think, would be fairly disappointed about what came down in the budget.

And look, the $250 payment is is something that goes to help some of the pain there. But once again, we have another issue going, and that is the Retirement Income Review.

Now, National Seniors put an 80 page submission, along with hundreds of other organisations into the Retirement Income Review. And we’ve heard nothing about that. So once again, is the government waiting until the budget’s out of the way to look at the Retirement Income Review. And are they waiting to reform the retirement income system, when they look at that report. There’s a lot of waiting and hoping going on.

Tracey Spicer

Ian just briefly, would you characterize all of this as deliberate neglect by the government of older people, or simply a sensible approach in a stimulus budget when you need to get the money to younger people to create jobs?

Ian Henschke

Well, you could have done both. I mean, this is where the really clever financial engineers, if you like, are able to see the solutions. Now I’ll give you an example. Ken Wyatt addressed the National Press Club when he was aged care minister and he talked about the massive opportunity for employment because we need 600,000 extra jobs in aged care between now and 2050. That’s 20,000 jobs a year. Now, that’s a lot of jobs. And we know that we’ve got a lot of people looking for work, mature age Australians and also younger Australians.

We’ve also cut back on immigration and many of those jobs would have gone previously to people that came to Australia as immigrants. What I think we have to do is reframe ageing. And this could have been a great opportunity for the government because you could have training programs where you get a first aid certificate, where you’re cleared with a police check. Then you go into a training program. You’re selected for that training program on the basis of your aptitude.

Then you do a mixture of classroom work and on the job training and you raise the level of the aged care worker to what should be a skilled job with good pay. And you put them into aged care and you fix the problem.

Now, you could have had 20,000 workers by the end of this year or even within six months. If you’d roll this out across the country. There’s a pilot program that’s been proffered in South Australia and it was involving 100 trainees. And I have told the minister about this program. And I was sitting there waiting last night thinking, am I going to hear about a number of training programs across Australia?

Because these are not training programs with no job at the end of it. Remember the old days, people used to go into training and they wouldn’t get the job because they just train. There was criticism of the universities that people were being trained and given degrees and not getting jobs. We were training more lawyers than we actually needed. The one area where we need the workers is aged care. So train them, pay them, upskill them, put them out there, and you can stimulate the economy, provide employment and fix the problem.

Now, it sounds simple when I say it like that. Maybe it’s not that simple, but it’s certainly worth including in your budget and it wasn’t spelled out.

Tracey Spicer

Ian Henschke, thanks so much for your time.

Ian Henschke

Thank you very much indeed. And look, I should just point out, in case people are wondering, I’m talking from my hotel room in Canberra and I’ve been down there this morning outside Parliament House. And I had to come back in because it was drier inside here. It’s been raining, it’s been raining money, but it’s also been raining money in certain areas, and not other areas. So thank you very much. Been lovely to talk to you.

And a quick word about super as well. There have been some good changes in the superannuation in terms of eliminating unnecessary costs and a bit more transparency. So we’re pleased about that as well. So to all the SuperGuide viewers this morning, hello from Canberra and goodbye now.

Tracey Spicer

Thanks for your time and take care.

Tracey Spicer

We’re joined now by the CEO of the Financial Services Council, Sally Loane. Sally, what’s your overall response to the Federal Budget?

Sally Loane

Thanks Tracey. And my response, I guess, is like everybody’s that this is an enormous budget. We’ve got extremely big spending numbers. We’ve got extremely big deficit numbers. But I think and I hope what it does is put a lot of confidence back into the community.

I think now we’re seeing COVID being suppressed in great parts of Australia, and people starting to return to work. I’m really hoping that this will give employers the confidence, particularly to start to employ young people again. I think that’s the key to our recovery.

Tracey Spicer

What do you say to those who suggest the money should have instead been spent on increasing JobSeeker? Because these are the people who are going to be more likely to immediately spend the money to stimulate the economy?

Sally Loane

Yes, I think that’s a really good point. But I do think the government has to weigh up the law of diminishing returns about those sorts of things. And I think what they’ve done instead is, give the onus to employers to say, we will give you money if you employ more people rather than keeping people on JobSeeker. I can understand why the government’s doing that. I think there is a time that we as a country need to, I guess, step away more from JobSeeker.

I think it’s done a great job and it will continue to do a great job for people in great need. But I can see why the government is shifting views towards the employers, because that’s really important too.

Sally Loane

Moving on to those measures that were announced to simplify the superannuation system and tweak around some of the edges. How much will this benefit Australians?

Look, I think what the government announced last night on super, which was a big piece of microeconomic reform, which not many of us saw coming, we thought that it was going to be a big piece of work that might take them a bit longer to achieve that. They actually put it in the budget this time. It’s really sensible.

The problem with super, and we have a very good superannuation system in Australia, is that every time we get a new job, you go from job to job, you default into a new super fund. Many people, about 80 percent of us default. We don’t choose our own super fund. And that means that people can accumulate up to 10 super funds. They get eroded by fees. And it’s been costing Australians $2.6 billion dollars every year in fees.

I walked into a newsroom, I won’t say which network, about six months ago. And a journalist there told me that she had eight super funds. Now, that’s a terrible waste of money. We should really have one or maybe two, but really one.

So this measure that the government has chosen to do, and the law, means that people will default once into one fund and take that fund with them for life, unless they choose to change that fund and then they’ve got a choice to do that. So this is a measure that will be extremely good for consumers because it’ll mean that all that wastage in fees, unnecessary fees and perhaps unnecessary insurance payments will be channeled into one fund, not over several.

Tracey Spicer

Some commentators have ideological concerns, saying that these tweaks might mean that super funds are less likely to pursue social change projects such as around the climate, or equal rights. What are your thoughts on that?

Sally Loane

Oh, I don’t think that’ll change at all. I think this is a tidal wave that’s sweeping the world. I mean, one of our fund managers said to me the other day, ESG ethically directed funds is where the money’s going, because younger people are wanting to put their money into those funds. So I don’t think this will change that direction at all. I think this is global. It’s very, very good here in Australia. And as this fund manager said, follow the money, where the money is being directed.

Tracey Spicer

Are you disappointed this nothing in the federal budget to narrow the superannuation gender gap?

Sally Loane

Look, I think that’s something that does need to be tackled. We’ve talked about this for a very long time here at the office. Women traditionally get paid more. The the the wage gap leads to the superannuation gap. When you’re in your 20s, you can see that wage gap is that’s where it starts, unfortunately. So if we can fix that wage gap, we’re always going to fix the super gap.

There are other measures that will allow women to catch up later. And I think one of the things that does need to be addressed in time, and maybe quickly, is that women of a certain age, perhaps when they finished raising their families, when they’ve got perhaps a job that pays them a bit more, can put more money into their super fund. We do have a method now where you can catch up. You can put a three year window of funds into super. That’s quite good. It does help women.

But I do think there are some other measures, policy measures, that can help really narrow that gap because it’s still there. It’s persistent, but it does start with wage equity. And that’s something that I think we all should push for.

Tracey Spicer

A small package has been announced in the budget for training to get women back into the workforce, but the bulk of the money is being spent, as you mentioned earlier, on incentivising businesses and employers to hire young people. Are you concerned that some middle aged and older women might be left high and dry?

Sally Loane

I think this is an issue with every economy. I think women were very vulnerable and have been very vulnerable during this COVID-induced recession. It would have been obviously ideal to have more money for women in this budget. I did notice the Prime Minister has been talking about employers employing women equally to men. Let’s hope that that happens. I really hope that the incentives will go into a lot of jobs that do employ a lot of women because clearly we don’t want to be left behind as the country comes out of recession. We need to keep up.

Tracey Spicer

Sally, thanks so much for your time.

Sally Loane

Thanks Tracey.

Tracey Spicer

Hi, I’m Tracey Spicer, and today we’d like to dig a little bit deeper into those changes announced in the Federal Budget around superannuation. For that, we’re delighted to be joined by Professor of Finance at the University of Sydney, Susan Thorp. Hi, Susan.

Professor Susan Thorp

Hi, Tracey.

Professor Susan Thorp

Do the changes announced in the budget in relation to super really address the structural flaws?

A lot of the changes that are announced in the budget have been on the table for some time, being raised by some of the previous inquiries, actually going right back to 2014, the Financial System inquiry then and then through to the Productivity Commission’s review of the super system and more recently, the Hayne Royal Commission.

So taking a lot of recommendations from those reviews of the super system. Some of the changes that the government’s brought in through this current budget have really been directed at continuing the implication of some of those recommendations.

Probably the biggest and to my mind, most important structural change that they’ve announced recently is the changes to the way that default accounts are being allocated to people when they start new jobs. So, as you know, in the past, employers chose default my super accounts for their employees. So a new employee that starts a new job, if they didn’t choose a super fund for themselves, would be allocated to the default fund chosen by their employer. And the big difference brought in by the current budget is that that will no longer be the case.

If you start a new job, your employer will go to the tax office and check to see if you already have a superannuation account, and unless you tell them otherwise, you will be having your superannuation contributions from your new employer paid into that old account.

The Hayne Royal Commission used the, I think, unfortunate metaphor of talking about default accounts being ‘stapled’ to people, which none of us really wants to think about. But perhaps a better terminology is to talk about our accounts following us as we move from job to job. So we will have less of a problem with people accumulating multiple superannuation accounts, which is really inefficient from lots of points of view.

Tracey Spicer

Yes, I was worried about the stapling terminology as well. It sounded painful. With regards to the benchmarking tools and the comparison tools. How much will that help workers?

Professor Susan Thorp

This was something that was again raised in the Productivity Commission review and they were saying ‘how can we better protect people from being stuck in a fund that’s not done well for a long period of time, and it’s really going to cost them over the course of their life’. There have been a series of different ideas put forward. The one that the Treasurer has settled on here has two parts, really.

The first part is to establish a comparison tool which they’ve labelled YourSuper, which is going to be hosted by the Australian Tax Office again. So a site that people can go to that gives information about the comparative performance of different superannuation funds. And I think the long term intention is that like a lot of comparison sites, not only will it show you information about the different funds, but I think eventually it will allow you to switch from one fund to another.

What’s in the budget at the moment suggests that people will be able to see their own accounts and consolidate accounts. But the implication of some of the other things that have been said is that eventually you’ll be able to choose a fund through that portal as well.

At the moment, there’s no publicly available space that you can go to sponsored by the government that would make comparisons between different MySuper products. There are lots of commercial providers who provide this information really helpfully and a lot of people use those commercial comparison sites.

But this is the first time that the government has said that they will make a place where people can make comparisons between MySuper options to start with, and then I suspect later between other options as well. So this is really new and this is quite radical in the sense that this direct comparison is being offered by the government and that it’s being offered on the basis of a set of metrics that the government is choosing.

Tracey Spicer

I’d love to find out what other changes you’d like to see the Federal Government implementing in the future when it comes to superannuation?

I’d like to see these ones work before they do much more. So one of the things about these changes that have been brought in, the default account one is interesting. There are lots of aspects to that. One of the obvious ones is that if the account that follows us our first superannuation account, will that mean that the types of funds and superannuation offerings that people take when they first enter the workforce?

And if I think back to my first job it was waitressing, when I look at my own children, it might have been working as a tutor or for a fast food outlet. That’s the first place a lot of people will accumulate the first superannuation account.

Does that mean that those types of funds are likely to attract the majority of defaults super fund members? Or does it mean that the super funds will spend a lot of time promoting themselves to employers of young people or to young people themselves?

I think things that move the super funds to try to engage young people more will be a good thing. But that’s a very difficult task. Most people don’t get that interested in their super until there’s a sort of substantial amount of money there. So that will be a challenge in itself. So in terms of the default setting, there’s one thing.

In terms of the comparison tools, that’s a very interesting space. So one thing we know about people’s approach to super is that many people find it intimidating and confusing. So a challenge for the Tax Office will be to make a comparison site that people find easy to understand transparent, usable, user friendly, and they haven’t got long to do it.

So this site has to be up and running in a relatively short period of time, which makes me wonder about the process around testing it. Will they be able to test it thoroughly and see not only whether people like it or not, but how they use it, what decisions they make when they’re using it?

So in terms of structural change, I think there’s a lot to recommend for what the government’s proposing. But let’s see how it goes. Let’s see what happens next.

And we have a history in this country of even though we have access to a lot of quite useful information about superannuation and many providers who are very interested in helping their members, we as members ourselves are not always very interested or active in our approach to our super, which is completely understandable. It’s not front of mind from most of us most of the time. So let’s get this part of it working and then see how it goes.

Tracey Spicer

Yeah time will tell. Will be interesting to see what happens in a generation. Susan Thorp, thanks so much for your time.

Professor Susan Thorp

OK, thanks. Tracey.