Superannuation, the ultimate government cash cow?

[k.smith]

'.....Now everyone goes to university we have to charge.lol

I wonder who will be better off in the long run?
A uni student who puts in 5 years and is left with a huge HECS bill. or a school drop out who doesn't have the HECS bill, gets a job as a labourer, stays home with his parents, saves and buys a house within the same timeframe?

 

[FxTrader]

I wonder who will be better off in the long run?
A uni student who puts in 5 years and is left with a huge HECS bill. or a school drop out who doesn't have the HECS bill, gets a job as a labourer, stays home with his parents, saves and buys a house within the same timeframe?

If one views higher education just from a monetary benefit perspective, the tradesman has an early lead and if he/she invests wisely and/or starts a successful business may indeed end up better off financially longer term. Higher education can and does have a higher purpose than simply making more money; it overcomes poverty of the mind, enriches the lives of those who participate and provides many benefits to society as a whole. Making higher education less accessible and affordable is born of an elitist ideology promoted by those who embrace economic rationalism and free market mechanisms as the best way to value everything.

 

[sptrawler]

I wonder who will be better off in the long run?
A uni student who puts in 5 years and is left with a huge HECS bill. or a school drop out who doesn't have the HECS bill, gets a job as a labourer, stays home with his parents, saves and buys a house within the same timeframe?

A lot will depend on the degree the student takes and his/her aptitude. Most of the university graduates I met during the course of my working career, were extremely well paid, when compared to those on wages.

Also I have observed that just because a person is well paid and well educated, doesn't necassarily mean they are astute investors. Conversely, just because someone leaves school early and is on low wages, doesn't mean they won't make a success out of life, spiritually and financially.

I have a sibling who did an engineering degree, has been highly paid, yet has nothing but an old home in a country town. Always spent everything.

I have a good friend who left school at 14 always worked for wages, lives on the river in a multi million house and bought 500,000 telstra when they were $3.30.
He is a canny investor.

 

[sptrawler]

Most people face difficult periods in their lives. There seems to me a huge variation in how we cope with such times. Do we allow ourselves to be overwhelmed by apparent insoluble hardship, lament how tough it all is, or do we look at each of these situations and consider how we might instead find a way through, turn it to our ultimate advantage?

So true Julia, it is easy for people now, to say you had it easy due to inflation.
However when you took on the risk, you weren't to know how things would pan out.

You actually did nothing other than borrow money and make that money work for you.

It is a bit pathetic, all this baby boomer bashing, there was an opportunity for everyone to make money, six years ago.
Westfarmers $12 - now $42, CBA $26 - now $80, ANZ $13 - now $33 , there were heaps more.

How many people took the risk and borrowed money to buy into the market? Only the lucky ones, people will say.

It is a bit the same with SMSF, I know ex workmates that always talked about starting their own fund.
Most(27 out of 30) have just left it in the fund they were in during their working lives, it's easier and takes less responsibility.

 

[k.smith]

If one views higher education just from a monetary benefit perspective, the tradesman has an early lead and if he/she invests wisely and/or starts a successful business may indeed end up better off financially longer term. Higher education can and does have a higher purpose than simply making more money; it overcomes poverty of the mind, enriches the lives of those who participate and provides many benefits to society as a whole. Making higher education less accessible and affordable is born of an elitist ideology promoted by those who embrace economic rationalism and free market mechanisms as the best way to value everything.

Absolutely agree with you, just think that it will so obviously be hard for some to do a higher education.
Education should be accessable to all. Geez, I'm 60yrs old, and remember this issue at high school ! I feel like we are going backwards...

 

[brty]

Throw out a line or two and look at all the bites. Where to start...

Firstly Julia,

No chance of people saving outside Super? Seems like a large and very negative generalisation to me. Certainly it's tough for people on low incomes, but I still see people doing extremely well in their 30's. Own their own home outright and have two or three IPs.
No financial assistance from family.

I have no doubt there are many in that category, but certainly not the majority nor the average. We are not talking about those doing extremely well, more those on median incomes which are below average. They are struggling with HECS debt on top of the mortgage and a family. I have a sister who is basically a child minding service for her grand children, it's the only way her kids can keep up with all the payments needed. One of them just crossed the line recently of paying extra on their earnings for HECS. They had forgotten about when repayments kicked in, and plans to pay off the mortgage with the extra are out the window for a few more years until HECS is paid off.
The girl in particular was not an outstanding student, did the wrong course originally (ie couldn't get a job in the field), then a second one where there was employment. Husband works in low to middle earning job without qualifications nor much prospect of advancement. There are no $100 breakfasts, nor $500 phones every few months. The house (outer suburbs Melbourne) and the HECS debt will not be paid off until they are in their 40's. Only then can they really start thinking of retirement savings.
My wife and I however paid off our first house in our 20's, and had invested in property by 30, a huge difference, yet types of jobs/incomes for the age were roughly equal.

RY,
It is quite easy to interpret whatever you want from those graphs. Sometimes they correlate, sometimes they don't. Change the scales, lag one or other by some period and they say whatever you want them to, but you knew that when you posted them.

Not for a moment am I saying this stuff is easy or inherently obvious.

I agree entirely.

K.Smith

I wonder who will be better off in the long run?
A uni student who puts in 5 years and is left with a huge HECS bill. or a school drop out who doesn't have the HECS bill, gets a job as a labourer, stays home with his parents, saves and buys a house within the same timeframe?

I tried for years to talk my own children into being plumbers, electricians, mechanics, none of them listened. I suspect you are correct for many, but not all. It comes down to the career path chosen. Going to Uni to do 'arts' is probably a dumb idea with HECS, yet successfully completing a medical degree is an entirely different matter.

The original concept of this thread was about super being a cash cow for governments in the future. I fully agree that they (politicians, both parties) will not be able to resist raiding it at some point. They are already heading down that path.

 

[sptrawler]

Absolutely agree with you, just think that it will so obviously be hard for some to do a higher education.
Education should be accessable to all. Geez, I'm 60yrs old, and remember this issue at high school ! I feel like we are going backwards...

If you are 60 years old, the issues are nothing like the were. Since you were in high school technical colleges have been made into universities and tafe courses are now degrees.

The junior certificate was dropped and all students automatically went through to year 12.
The leaving and matriculation exams were dropped and everyone, even those doing multiple choice passed.
Now laws have been passed that all students do year 12.

So how you fund free university for everyone, and I mean everyone, seems a bit far fetched.

If the system isn't prepared to examine students, then a system has to be put in place that makes the student self appraise their commitment and ability. IMO

Seems like we definitely are drifting down the woe is me path and not the superannuation path.
It just seems nobody wants to answer the hard self effacing answers, much easier to say it's too hard.

 

[DeepState]

RY,
It is quite easy to interpret whatever you want from those graphs. Sometimes they correlate, sometimes they don't. Change the scales, lag one or other by some period and they say whatever you want them to, but you knew that when you posted them.

The graphs are contemporaneous. They are plainly drawn. They show large violation of your stated relationships to highlight that things like this are not bread and butter even if you think about it for a minute. That was all they were intended to do. You can change the scales however you like. They show the same thing. Feel free to redraw them to accord with your view. You will become the next Picasso.

What I do know is that you have a remarkable ability to look at a cat and see a giraffe.

 

[medicowallet]

And yes, this thread is about Superannuation. So why, with such growth of high enders contributing into super why are they opting to pay 15% on their super if they can negatively gear and pay zilch?

http://www.smh.com.au/business/bank...exploiting-superannuation-20140522-38po9.html

''...Analysis by Fairfax Media of Australian Taxation Office statistics shows almost 9200 self-managed super funds have a balance of more than $5 million, a rise of 76 per cent in the past three years, and the number of funds with over $10 million has doubled.

Because

1. Diversification
2. You don't have to know how to invest money wisely to have lots of money
3. That might be chicken feed for a lot of them
4. Risk management / protected money.

and many others which I don't wish to brainstorm at the moment.

The fact is that I can make more money off $1000000 negatively geared into property, than $1000000 in super, even after tax. Unfortunately I don't invest in property any more.

MW

 

[Julia]

I have no doubt there are many in that category, but certainly not the majority nor the average. We are not talking about those doing extremely well, more those on median incomes which are below average. They are struggling with HECS debt on top of the mortgage and a family. I have a sister who is basically a child minding service for her grand children, it's the only way her kids can keep up with all the payments needed. One of them just crossed the line recently of paying extra on their earnings for HECS. They had forgotten about when repayments kicked in, and plans to pay off the mortgage with the extra are out the window for a few more years until HECS is paid off.
The girl in particular was not an outstanding student, did the wrong course originally (ie couldn't get a job in the field), then a second one where there was employment. Husband works in low to middle earning job without qualifications nor much prospect of advancement. There are no $100 breakfasts, nor $500 phones every few months. The house (outer suburbs Melbourne) and the HECS debt will not be paid off until they are in their 40's. Only then can they really start thinking of retirement savings.
My wife and I however paid off our first house in our 20's, and had invested in property by 30, a huge difference, yet types of jobs/incomes for the age were roughly equal.

brty: a truism for you:
"We are where we are as a result of the decisions we make, taking into account the circumstances which surround us at the time".

We cannot expect governments to pick up the pieces when we stuff it up.
Then, if we become accustomed to being so supported by government largesse, we will fail to develop self sufficiency.
I have no expectation that such a philosophy will be acceptable to anyone who prefers that governments of any persuasion will continue to provide succour when we can't be bothered to do it for ourselves.

A lot will depend on the degree the student takes and his/her aptitude. Most of the university graduates I met during the course of my working career, were extremely well paid, when compared to those on wages.

Also I have observed that just because a person is well paid and well educated, doesn't necessarily mean they are astute investors. Conversely, just because someone leaves school early and is on low wages, doesn't mean they won't make a success out of life, spiritually and financially.

I have a sibling who did an engineering degree, has been highly paid, yet has nothing but an old home in a country town. Always spent everything.

I have a good friend who left school at 14 always worked for wages, lives on the river in a multi million house and bought 500,000 telstra when they were $3.30.
He is a canny investor.

+1.

 

[Julia]

I wonder who will be better off in the long run?
A uni student who puts in 5 years and is left with a huge HECS bill. or a school drop out who doesn't have the HECS bill, gets a job as a labourer, stays home with his parents, saves and buys a house within the same timeframe?

Great question. However, it has to do with more than just the financial benefits or otherwise.
Sadly, many people who have spent a great number of years at university, doing multiple post grad work etc., cannot now find a job in their chosen field.
Which would be your choice, k.smith, if you were 20 now?
(No obligation to answer, of course. No wish to intrude on your personal decisions about anything.)

 

[sptrawler]

Another interesting side to the super debate, on Q &A a couple of weeks ago, one of the panelists was a media executive.
They were debating the budget and he commented that he is on a six figure salary, yet gets his super tax free, he felt it was wrong.
I also have a friend, who is a staunch Labor voter, he says he shouldn't get his super tax free as he has a lot of money. I suggested he draw the money out and put it in the bank, that shut him up.
Maybe the tax department should have a declaration, these tormented individuals can sign, to allow them to pay tax.lol

 

[Julia]

Another interesting side to the super debate, on Q &A a couple of weeks ago, one of the panelists was a media executive.
They were debating the budget and he commented that he is on a six figure salary, yet gets his super tax free, he felt it was wrong.
I also have a friend, who is a staunch Labor voter, he says he shouldn't get his super tax free as he has a lot of money. I suggested he draw the money out and put it in the bank, that shut him up.
Maybe the tax department should have a declaration, these tormented individuals can sign, to allow them to pay tax.lol

 

[brty]

RY,

How about you come out of the 9nth dimension and into the real world.

Just because I offered proof that one of your high flying ideas does not always work, as claimed, you seem intent on harrassing at every opportunity, give it a rest, it is so tiresome.

In the graphs you presented, as the surplus shrunk from '99-02 the $aus fell. As the surplus rose from '02 to late '07 so did the $Aus, both fell in the GFC. As the deficit reached it's largest in early '10, it correlated with a low in the dollar. From that point the deficit reduced and the $Aus rose through to late '12. Then from early '13 as the deficit got larger, the $Aus fell again. Yes there were a couple of times they went in different directions.

Did you even look at your own graph??

Do you really think that if governments racked up huge deficits it would not have an influence on interest rates, just because a graph showed it didn't happen in the last 20 years??

Julia,

We cannot expect governments to pick up the pieces when we stuff it up.

Actually, that is exactly what I thought government welfare was all about, to help the down trodden. Not everyone makes the correct choices in life, people make mistakes. They are the people that I want my taxes to go to. How we separate those that are the bludgers on the system from those that tried and failed is the hard part. Both can present as the same.

Julia, my point is that there is less space for error for the young today compared to the baby boomer generation. We were the lucky ones with relatively cheap housing, free tertiary education, and easily obtained ongoing employment, plus the helping hand of inflation in paying off our early loans.

 

[sptrawler]

RY,


Actually, that is exactly what I thought government welfare was all about, to help the down trodden. Not everyone makes the correct choices in life, people make mistakes. They are the people that I want my taxes to go to. How we separate those that are the bludgers on the system from those that tried and failed is the hard part. Both can present as the same..

Who says they are down trodden, they make mistakes, they make life choices.
You can make a choice and give your money to them, you can take them into your home, you can volunteer your time.
That is your choice, why does it have to be mine?

My point is that there is less space for error for the young today compared to the baby boomer generation. We were the lucky ones with relatively cheap housing, free tertiary education, and easily obtained ongoing employment, plus the helping hand of inflation in paying off our early loans.

How do you know you/we are the lucky ones, you are making your assesments by looking back over the last 20 - 30 years. You haven't got a clue what the fiscal landscape will be in 10 years.

You may be on the forum in 10 years saying, I wish I had sold my house 10 years ago, or you may be saying houses were cheap 10 years ago.
You may be retired with $1m and everyone saying it should be taxed, in 10 years the average wage may be $250k/yr. Then your $200k that's left will look pretty sick.

Tertiary education was free because there were not many going to uni, in W.A back in the 80's there was UWA and Murdoch.

If you had a loan when inflation was high, interest rates were high.

Easily obtained employment, obviously you had a government job in the 1982 and 1990 recessions.

If the national debt blows out to the expected $600b, the issues we have now will seem miniscule.

 

[brty]

SPtrawler,

You haven't got a clue what the fiscal landscape will be in 10 years

Please enlighten me.

Who do you think the government should help?

If you had a loan when inflation was high, interest rates were high.

Yes we locked in a loan at 14%, they then dropped to 12%, then rose to 18%, by then we had paid off the loan with deflated dollars, a choice not currently available. Wages doubled in about 6-7 years due to inflation, made it easy to pay off a loan despite high interest rates.

You may be on the forum in 10 years saying, I wish I had sold my house 10 years ago, or you may be saying houses were cheap 10 years ago.

Not a chance, you know nothing about me. We have more than one property without loans.

You may be retired with $1m and everyone saying it should be taxed, in 10 years the average wage may be $250k/yr. Then your $200k that's left will look pretty sick.

You might be getting closer, but why would I only have $250k left in 10 years??

You can make a choice and give your money to them, you can take them into your home, you can volunteer your time.

We do donate to charities and have sponsored aid organizations for over 35 years. We also spend a lot of time in voluntary work and have for many years.

What is the point and relevance of any of this??

Why the venom?? Do you think I am completely wrong and it is easier for the young??

 

[DeepState]

RY,

How about you come out of the 9nth dimension and into the real world.

1. Just because I offered proof that one of your high flying ideas does not always work, as claimed, you seem intent on harrassing at every opportunity, give it a rest, it is so tiresome.

2. In the graphs you presented, as the surplus shrunk from '99-02 the $aus fell. As the surplus rose from '02 to late '07 so did the $Aus, both fell in the GFC. As the deficit reached it's largest in early '10, it correlated with a low in the dollar. From that point the deficit reduced and the $Aus rose through to late '12. Then from early '13 as the deficit got larger, the $Aus fell again. Yes there were a couple of times they went in different directions.

Did you even look at your own graph??

3. Do you really think that if governments racked up huge deficits it would not have an influence on interest rates, just because a graph showed it didn't happen in the last 20 years??

Tiresome? For whom? I am examining the factual accuracy of assertions which get made and posted as truth. Sometimes I agree. Sometimes not. In this case, I do not.


1. Did you look at all the documents and references - supplied by others - who confirmed that what I was saying all along was accurate?


2. Did I look at the charts? Yes.

What matters for currency is not the change in the rate of budget surplus, but the level of the surplus. The level affects the rate of debt accumulation. The change in the budget surplus, a concept you have - perhaps unknowingly and not unreasonably given the technicality - used to explain away the 99-02 period, represents the rate of change in the rate of change in the debt position. It is entirely inappropriate to correlate that with the exchange rate. You cannot invest in a rate of change of the rate of change in the debt position.

When you looked at the graph you might have noticed a red line representing the terms of trade. It is the single biggest driver of currency performance over that period. Ask the RBA - perhaps their charts are plainer and consistent references to such might help you understand this point. Do you think that a currency appreciation from early 2002 to 2004 from around 50c to 80c was due to a marginal improvement in the budget position? Surely you must be joking.

You surely could not be so blind to the relationship between the AUD and terms of trade that it isn't even mentioned in your retort? Given it's absolute towering prominence in the performance of the AUD, that point could not have escaped you.

Apparently you see that from early 2013 period the deficit got larger too. On whose chart? Not the one I posted. The size of the deficit was shrinking. And yet the Australian dollar fell. How could you conjure this statement?


3. Now let's look at the real world - which does include the 9th dimension. Apparently loading up with "huge deficits" leads to higher interest rates. Let's have a look at what is happening in the real world right now.

What has the US federal debt grown to? Whoa....Interest rate: 2.53%
What about France? Whoa.....Interest rate: 1.79%
What about Japan? Whoa....Interest rate: 0.60%
How about Italy? Whoa....Interest rate: 2.97%
United Kingdom? Whoa...Interest rate: 2.64

I mean, these are only the biggest economies in the developed world. They have "huge deficits"...and their interest rates are at historic lows.

As to the future and whether other "huge deficits" will lead to higher interest rates or, more accurately "have an influence" on them. The answer, very surprisingly, actually is - it depends. As has been shown by straight observation of 20 years in the current monetary regime, it is not simply a matter of saying higher deficits leads to higher interest rates and a lower dollar. Far from it. Who'd have guessed? I too would not believe it if it were not right in front of me.


Where we do agree is that this stuff is not simple or necessarily intuitive. A point you have made.

 

[sptrawler]

SPtrawler,



Please enlighten me.

Who do you think the government should help? ??

Firstly those who can't help themselves, then those who are trying to help themselves.

Yes we locked in a loan at 14%, they then dropped to 12%, then rose to 18%, by then we had paid off the loan with deflated dollars, a choice not currently available. Wages doubled in about 6-7 years due to inflation, made it easy to pay off a loan despite high interest rates.??

Well our local council workers have just recieved an 8% payrise, correct me if i'm wrong but inflation is about 2% and loans are about 5%.

Not a chance, you know nothing about me. We have more than one property without loans.??

Of course I know nothing about you, I was answering your statement that you had cheap housing, it proved cheap because wages went up. Who is to say wages will stay stagnant.

You might be getting closer, but why would I only have $250k left in 10 years????

I was again using a generic example, it wasn't about you.

We do donate to charities and have sponsored aid organizations for over 35 years. We also spend a lot of time in voluntary work and have for many years.

What is the point and relevance of any of this??

Why the venom?? Do you think I am completely wrong and it is easier for the young??

Yes I think it is easier for the young, if you remove the abnormal housing cost issue out of the equation, the young have much more disposable income than the baby boomer generation had.

I have a daughter who is a single mother working 3.5 days a week on $45k/annum. She has a small mortage on a 2 bedroom unit. She has her hair coloured every 3 weeks and acrylic nails, the three year old grandson has new toys everytime we see him. I ask her if everything is o.k, does she need any money, she says everything is great.

So in a nutshell I think you are a careing person, but I think, it isn't as bad as you think.

But let's get back to super.lol

 

[brty]

SP,

I have a suspicion it's because we are in different parts of the country, and conditions are varying for the different perceptions.

I agree we should get back to the topic of Super.

Most of our assets are outside super, for the very reason that governments keep changing the rules. In another 10 years they are likely to be vastly different to today, irrespective of who is in power.

 

[sptrawler]

SP,

I have a suspicion it's because we are in different parts of the country, and conditions are varying for the different perceptions.

I agree we should get back to the topic of Super.

Most of our assets are outside super, for the very reason that governments keep changing the rules. In another 10 years they are likely to be vastly different to today, irrespective of who is in power.

Agree 100%