Welcome To 'Your Advantage' Newsletter # 9

Next Generation, Ageing, Superannuation & Governance

Well, the New Year has come and gone and we are flying towards, would you believe, the 30th June!

In this small grab of time, we have seen one of Australia's leading banks brought to its knees (CEO and Chairman gone!), a new political messiah appear and take it up to the Government, with Mark Latham, and some new rules on Superannuation announced. Just to name a few.

But, some things will always be with us - Our age (and its growing demographic problems) and the good news...the footy season is upon us. Go ........!

All of the above are either commented on in this Newsletter or accompanying articles, so please read on and enjoy!.

Finally, please note we will be holding an exciting workshop seminar "Next Generation, Lifestyle v Wealth Creation" at the Next Generation gym on Tuesday 11th May. This is a chance for you to bring along your kids and friends and be entertained by our guest speakers.

For more information, please contact Tony Martin on 8333 1944.

This newsletter will provide you with a wide range of business related news and information, useful knowledge, profile some of our team members, introduce some of our clients and keep you informed of upcoming seminars and events.

We value your feedback so don't be backward in coming forward! Feel free to send suggestions, comments or your opinions to info@advantageone.com.au.

Comment - Not So Smart Policy - The Age Old Problem

It is laudable that the demographic problems are being spoken about in public by senior government ministers albeit many years after it was first identified.

However, there is a basic inconsistency between the government's public statements today about an ageing population and its actual policy.

On the one hand, we are warned that we must work longer, get more adults into the workforce, we must all work harder and smarter, and we must all try to live healthier lives to solve a potential financial crunch which begins to bite in about 13 years time and is expected to get steadily worse from that point on.

Note: superannuation is staying at 9%. Not one cent more unless the employer and employee want to do it voluntarily. But the government announced today that it wants to double the percentage of employees who participate in employee share schemes to 11% by 2009.

"There is no need for panic measures, but there is a need for careful and determined policy," Peter Costello recently commented.

This comment is based on the premise that the budgetary problems caused by ageing arise in 40 years time. They are projected to reach their peak in 40 years time and will be very apparent by then. But these problems are already with us but we aren't suffering from them to any extent.

In other words, the government does not appear to be entirely truthful.

I don't buy the line that we have lots of time on our side. We have a bit of time, but not much.

In a number of places the government's documents state, "the people who will be carrying the tax system in 40 years time have already been born."

If we are talking about 13 years time when the federal budgetary deficits begin to appear, then this statement is absolutely correct. But this statement assumes that someone born in 2005 will not do any work before age 39. Well, if they can get away with that, good luck to them. Perhaps what this statement is really trying to say is that in 2040 we will not have enough people born after today and before 2015 to make a sufficiently sizeable contribution to tax collections. If this is the case, why not say it?

The government claims a number of times that, "it was decided in 1997 that the preservation age will increase to 60 years by 2024." This is incorrect. This policy was first released in 1992 by John Dawkins in his 'Security in Retirement' document.

In all this, the government has refused to consider dropping its spending. This will please some of you and annoy others. Personally, I don't see why we shouldn't have a debate about how much the government spends. One of the reasons our tax rates are so high is because of the spending demands on government. Reduce those demands and you reduce the amount of tax you need to raise.

Nothing in recent government announcements make significant tangible differences to the identified problems. These changes probably reflect how far the government can push the policy agenda in an election year. Perhaps further changes might become politically possible in some future period.

If the government were really serious about solving these problems, it would introduce the following measures: