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One of the wisest moves I have seen by a bunch of politicians in the world was the introduction of the superannuation system in Australia. I have lived in a num

One of the wisest moves I have seen by a bunch of politicians in the world was the introduction of the superannuation system in Australia. I have lived in a number of countries around the world and I don't understand why more countries don't adopt a similar system.

te_chris 15y ago
We did it here in New Zealand as well in the 1970's, one of our previous Prime Minister's portrayed it as "reds under the bed" etc etc, destroyed it, and now we're paying for it dearly. Stupidest move in NZ's economic history as far as I'm concerned. According to current studies, we would've had one of the largest soverign wealth funds in the world if we'd kept up with it since its inception. Policy blunders like this are par for the course here though, Normally committed by the right-wing/conservative (as in economically, not religious, we don't really give them much space in our national discourse) National Party.
- nl 15y ago
  Superannuation (at least in Australia, generally speaking) is privately run. You don't end up with a soverign wealth fund. (Although you do end up with a large amount of capital looking for places to be invested)
brc 15y ago
There are many good policy ideas implemented in Australia. The superannuation system is pretty good - it has problems but overall is good for the country. The healthcare system also manages to tread a fine line between having a public safety net (ie, everyone gets free treatment) but also encouraging private health insurance and private healthcare for those who can afford it. There are many sensible insurance regulations around, such as compulsory third-party-personal insurance that comes attached to vehicle registration, so that if you're a licensed driver driving a licensed vehicle, even if you run over 50 pedestrians you're covered for their losses and they are all covered for medical insurance, compensation payouts and rehabilitation. The dividend tax system is also quite good, in that, if you're an Australian taxpayer, you can claim a tax rebate on the dividends you receive from revenue arising from an Australian company. So an Australian company pays tax on it's earnings, then pays some of those earnings out to taxpayers via dividends. The dividend recipient can then claim what is called a 'franking credit' on that dividend which is offset against their own earnings. It sounds complicated but what it essentially means is that Australian corporate income is only taxed once - you don't get double taxed for paying out dividends. As a result, Australian companies pay healthy dividends, which underpins investment in Australian companies by individuals requiring income from shareholdings. Of course, there are some dumb policies as well, but in general things work pretty well, and, as the article says, quality of life and income spread at ranked very highly in world terms.
- vacri 15y ago
  There are many sensible insurance regulations around, such as compulsory third-party-personal insurance that comes attached to vehicle registration, so that if you're a licensed driver driving a licensed vehicle, even if you run over 50 pedestrians you're covered for their losses and they are all covered for medical insurance, compensation payouts and rehabilitation. That's the case in Victoria with the TAC, but I'm not sure about the other states.
  - brc 15y ago
    It's the case in all Australian states. I don't know if this is because of a copycat pattern, or if it originated from a Federal initiative, or why. I just know it is a good thing because it increases the pool of premiums and produces fairly even results for the victims of traffic accidents and prevents people being bankrupted for making a mistake while driving - unless they were driving an unregistered vehicle or DUI.
    - caf 15y ago
      Even for unregistered drivers I believe there is a "defendant of last resort" scheme for personal injury claims.
    - vacri 15y ago
      At least with the TAC, it's medical coverage only. The TAC picks up the tab for all medical care in road-transport-related accidents. It won't help with property damage - run into a maserati and may still be bankrupted. Property insurance is still privately run (hence 'third-party' vs 'comprehensive' car insurance)
      - brc 15y ago
        That's the case in all states. You can still be bankrupted by not taking out third party property insurance, but physically maiming someone for life is an order of magnitude worse than writing off someones Ferrari by running into it. All Australian states have compulsory third party personal insurance attached to the vehicle registration.
jbarham 15y ago
Conversely, a very foolish policy in Australia is negative gearing, which IMO is one of the major reasons behind the property bubble. See http://en.wikipedia.org/wiki/Negative_gearing_%28Australia%29 http://en.wikipedia.org/wiki/Negative_gearing_%28Australia%2... for details.
- brc 15y ago
  Negative gearing seems to be a whipping boy for all sort of ills. The fact is in the USA most people can claim their mortgage payments interest as a tax deduction - which is more bizarre. I agree it's a stupid strategy, but it's plain foolish to think that negative underpins property investment. If you removed it, in the short term there would be a dip in property investment, but this would only work towards creating a further supply shortage. Negative gearing isn't a tax ruling - it's an investment strategy. Businesses use the tax deductibility of interest payments as a legitimate expense, so it's difficult to argue why this should be different for individuals.
  - coenhyde 15y ago
    Only 1 out of 10 negatively geared properties is for the construction of a new property. The rest is for the purchase of existing stock. The problem with negative gearing in the context of a tax deduction on housing investments is that it encourages speculation by reducing the losses on bad investments. This is why we have such a disconnect between housing prices and rental prices.
  - mahyarm 15y ago
    It is bizarre, but as far as I know the tax deduction is limited to your personal residence, while negative gearing is more open to speculative investing.
- motherwell 15y ago
  You HAVE TO have negative gearing - and it isn't like a family home is tax deductible!
ajtaylor 15y ago
As a new resident of Australia, I love, love, love the idea of superannuation. My employer contributes 9% (IIRC) to my retirement. I never see it, so I never miss it or spend it. I can also choose to make extra contributions if I like, which I most likely will once moving expenses are paid. It's a 401k, but better.
- ryanackley 15y ago
  If you don't plan on living in Australia permanently, be aware that your effective tax rate on contributions to your superannuation is 50%. You pay a flat rate of 15% on your contributions like everyone else. When you leave Australia permanently, they take out 35% before giving you back your money. http://www.ato.gov.au/superfunds/content.aspx?doc=/content/32119.htm&pc=001/149/021/001/001&mnu=0&mfp=&st=&cy= http://www.ato.gov.au/superfunds/content.aspx?doc=/content/3...
- brc 15y ago
  Well, it's good, but don't for a minute think that your employer is contributing to your retirement. You're contributing to your retirement by deducting 9% of your wages into a retirement fund. In most salaried positions, they drop the charade of 'employer contributed super' and talk about your 'total package' which includes your super payments. I'm not arguing against the merits of forced investment, but you shouldn't believe your employer is paying it for you. You are paying it.
  - nl 15y ago
    Yes and no. It is different to salary, because it is taxed differently, and when the superannuation rate increased (which happens occasionally) you never see a reduction in your take-home pay. But it does reduce the amount they can afford to give you as your take-home pay. Actually, the really interesting discussion is about superannuation-as-forced-savings vs a sovereign-wealth-fund. They aren't really equivalent, but they have some similar outcomes (eg a large amount of capital available for investment). I've gone back on forth on if we should have a sovereign wealth fund - there are good arguments both ways.
- vacri 15y ago

te_chris 15y ago

We did it here in New Zealand as well in the 1970's, one of our previous Prime Minister's portrayed it as "reds under the bed" etc etc, destroyed it, and now we're paying for it dearly. Stupidest move in NZ's economic history as far as I'm concerned. According to current studies, we would've had one of the largest soverign wealth funds in the world if we'd kept up with it since its inception. Policy blunders like this are par for the course here though, Normally committed by the right-wing/conservative (as in economically, not religious, we don't really give them much space in our national discourse) National Party.

nl 15y ago
Superannuation (at least in Australia, generally speaking) is privately run. You don't end up with a soverign wealth fund. (Although you do end up with a large amount of capital looking for places to be invested)

brc 15y ago

There are many good policy ideas implemented in Australia. The superannuation system is pretty good - it has problems but overall is good for the country. The healthcare system also manages to tread a fine line between having a public safety net (ie, everyone gets free treatment) but also encouraging private health insurance and private healthcare for those who can afford it. There are many sensible insurance regulations around, such as compulsory third-party-personal insurance that comes attached to vehicle registration, so that if you're a licensed driver driving a licensed vehicle, even if you run over 50 pedestrians you're covered for their losses and they are all covered for medical insurance, compensation payouts and rehabilitation. The dividend tax system is also quite good, in that, if you're an Australian taxpayer, you can claim a tax rebate on the dividends you receive from revenue arising from an Australian company. So an Australian company pays tax on it's earnings, then pays some of those earnings out to taxpayers via dividends. The dividend recipient can then claim what is called a 'franking credit' on that dividend which is offset against their own earnings. It sounds complicated but what it essentially means is that Australian corporate income is only taxed once - you don't get double taxed for paying out dividends. As a result, Australian companies pay healthy dividends, which underpins investment in Australian companies by individuals requiring income from shareholdings. Of course, there are some dumb policies as well, but in general things work pretty well, and, as the article says, quality of life and income spread at ranked very highly in world terms.

vacri 15y ago
There are many sensible insurance regulations around, such as compulsory third-party-personal insurance that comes attached to vehicle registration, so that if you're a licensed driver driving a licensed vehicle, even if you run over 50 pedestrians you're covered for their losses and they are all covered for medical insurance, compensation payouts and rehabilitation. That's the case in Victoria with the TAC, but I'm not sure about the other states.
- brc 15y ago
  It's the case in all Australian states. I don't know if this is because of a copycat pattern, or if it originated from a Federal initiative, or why. I just know it is a good thing because it increases the pool of premiums and produces fairly even results for the victims of traffic accidents and prevents people being bankrupted for making a mistake while driving - unless they were driving an unregistered vehicle or DUI.
  - caf 15y ago
    Even for unregistered drivers I believe there is a "defendant of last resort" scheme for personal injury claims.
  - vacri 15y ago
    At least with the TAC, it's medical coverage only. The TAC picks up the tab for all medical care in road-transport-related accidents. It won't help with property damage - run into a maserati and may still be bankrupted. Property insurance is still privately run (hence 'third-party' vs 'comprehensive' car insurance)
    - brc 15y ago
      That's the case in all states. You can still be bankrupted by not taking out third party property insurance, but physically maiming someone for life is an order of magnitude worse than writing off someones Ferrari by running into it. All Australian states have compulsory third party personal insurance attached to the vehicle registration.

jbarham 15y ago

Conversely, a very foolish policy in Australia is negative gearing, which IMO is one of the major reasons behind the property bubble. See http://en.wikipedia.org/wiki/Negative_gearing_%28Australia%29 http://en.wikipedia.org/wiki/Negative_gearing_%28Australia%2... for details.

brc 15y ago
Negative gearing seems to be a whipping boy for all sort of ills. The fact is in the USA most people can claim their mortgage payments interest as a tax deduction - which is more bizarre. I agree it's a stupid strategy, but it's plain foolish to think that negative underpins property investment. If you removed it, in the short term there would be a dip in property investment, but this would only work towards creating a further supply shortage. Negative gearing isn't a tax ruling - it's an investment strategy. Businesses use the tax deductibility of interest payments as a legitimate expense, so it's difficult to argue why this should be different for individuals.
- coenhyde 15y ago
  Only 1 out of 10 negatively geared properties is for the construction of a new property. The rest is for the purchase of existing stock. The problem with negative gearing in the context of a tax deduction on housing investments is that it encourages speculation by reducing the losses on bad investments. This is why we have such a disconnect between housing prices and rental prices.
- mahyarm 15y ago
  It is bizarre, but as far as I know the tax deduction is limited to your personal residence, while negative gearing is more open to speculative investing.
motherwell 15y ago
You HAVE TO have negative gearing - and it isn't like a family home is tax deductible!

ajtaylor 15y ago

As a new resident of Australia, I love, love, love the idea of superannuation. My employer contributes 9% (IIRC) to my retirement. I never see it, so I never miss it or spend it. I can also choose to make extra contributions if I like, which I most likely will once moving expenses are paid. It's a 401k, but better.

ryanackley 15y ago
If you don't plan on living in Australia permanently, be aware that your effective tax rate on contributions to your superannuation is 50%. You pay a flat rate of 15% on your contributions like everyone else. When you leave Australia permanently, they take out 35% before giving you back your money. http://www.ato.gov.au/superfunds/content.aspx?doc=/content/32119.htm&pc=001/149/021/001/001&mnu=0&mfp=&st=&cy= http://www.ato.gov.au/superfunds/content.aspx?doc=/content/3...
brc 15y ago
Well, it's good, but don't for a minute think that your employer is contributing to your retirement. You're contributing to your retirement by deducting 9% of your wages into a retirement fund. In most salaried positions, they drop the charade of 'employer contributed super' and talk about your 'total package' which includes your super payments. I'm not arguing against the merits of forced investment, but you shouldn't believe your employer is paying it for you. You are paying it.
- nl 15y ago
  Yes and no. It is different to salary, because it is taxed differently, and when the superannuation rate increased (which happens occasionally) you never see a reduction in your take-home pay. But it does reduce the amount they can afford to give you as your take-home pay. Actually, the really interesting discussion is about superannuation-as-forced-savings vs a sovereign-wealth-fund. They aren't really equivalent, but they have some similar outcomes (eg a large amount of capital available for investment). I've gone back on forth on if we should have a sovereign wealth fund - there are good arguments both ways.
vacri 15y ago