-1.svg "Close Icon (3)-1")
.svg "Close Icon (3)")
- Share
-
“Will future Australian economic and taxation policy mean that the super pool will be driven to invest in a different direction?”
This was the question posed to the two speakers who took the stage straight after lunch. First up was Dr Martin Parkinson, Secretary, Department of Treasury, followed by Heather Ridout, Board member of the RBA, Director of AustralianSuper and recently retired Chief Executive of the Australian Industry Group.
Dr Parkinson started by saying that providing all Australians with a better income in retirement would require super to have three key things :
- Adequacy
- Sustainability
- Integrity
He then spoke about the economy, dividing his comments into the issues that he saw as affecting the economy in the short term, and those likely to continue to affect it over the longer term.
Short term factors were, not surprisingly,
- Volatility and weakness in global markets and the general anxiety and uncertainty that this produced ;
- Structural change due to the rise of Asia, the high Aussie dollar and the pervasive shift to services that we have seen over the past years.
Over the longer term, the issues that policy makers need to grapple with are :
- Sustainability (including the environment)
- Technology
- Shifting demographic (including ageing)
- The rise of Asia. By 2030, it is predicted that 60% of spending by the middle classes will be from Asia.
Dr Parkinson agreed with Paul Keating about the huge importance of productivity, particularly given that it has slowed in Australia over the past few years, and said that the ultimate driver of increased living standards would always be gains in productivity.
He then spoke about super itself, outlining the very great benefits that savings have for an economy, and for our economy in particular, saying that our compulsory superannuation system, and the ensuing high levels of saving that we have as a country insulated us in part from the worst of the GFC.
He said that super exists to fund retirement and as such is a long term play and that Australians were right to expect growth and to expect managers to manage the peaks and troughs of investment markets. Again he agreed with Paul Keating, citing an over investment in equities as a challenge, given the volatile nature of this asset class and the need for security in retirement.
He also expressed concern about the move of many Australians into SMSFs saying that the perceived flexibility and lower fees often came with increased risks that were not always understood, and the benefits could prove illusory.
He praised the Government for guaranteeing concessional tax rates for super and called on the industry to take their responsibilities seriously by investing prudently, particularly as more Australians move into the retirement or withdrawal stage. He said that a focus on developing products for retirees at the withdrawal stage was key.
Dr Parkinson concluded by saying that Governments and Australians really needed to have the hard conversation about what Governments could reasonably be expected to provide.
Tax revenues are down as people’s expectations of services (particularly in aged care and health) are going up, and the truth is that some basic maths will show you it just isn’t possible for Governments to provide for everyone adequately.
Medium term fiscal sustainability needs to addressed … now.
Heather Ridout, then took to the stage and started by praising the Australian economy.
She pointed to rising GDP, wages growth, high savings, low inflation and engagement with Asia as the positives but then said that challenges were also present.
The high Australian dollar has turbo charged structural change and tourism and retail in particular have really felt the impact. Nothing is the same, and how we respond to that will be key. Business model innovation is necessary.
She said that Australia has become a really expensive place to do business, and that makes it difficult to be competitive on the world stage.
Ms Ridout then outlined her view on some changes that could have a beneficial effect :
- A greater focus on skills and education. Our literacy levels are still way too low ;
- Greater cooperation between unions and employers over productivity and IR ;
- Be careful that restructuring in education (think TAFE) does not mean cutting ;
- Do better on infrastructure ;
- Tolerate more public debt in order to fund infrastructure;
- Look at our tax system – company tax and stamp duties are too high ;
- GST has done a reasonable job, but we are still too reliant on income tax.
Again productivity came in as the number one overarching issue, but Ms Ridout said it was the only thing that could raise our standard of living, it would be foolish to think that it will fall in our laps, some reform is needed to help it along.
Ms Ridout finished by sharing her vision for Australia – to be the leading knowledge-based democracy in Asia.
