What we learned this week 15 May
Staff reporter |
15 May 2015
1. Surprise in the Budget
The SMSF Association has welcomed the government’s light touch on superannuation, but also highlighted a “surprise” measure announced by the treasurer. From 1 January 2016, the level of income from defined benefit superannuation that can be excluded from the pension income test will be capped at 10 per cent, explained the SMSF Association. The government estimates that around 65 per cent of income support recipients with payments from defined benefit superannuation have deductible amounts of 10 per cent or less, which is expected to raise $465 million over the forward estimates. “This measure tightens a loophole which allowed superannuants with defined benefit superannuation to access the age pension.
2. But overall no major changes
SMSF Association (SMSFA) chief executive, Andrea Slattery, said the "minor Budget measures" affecting super were positive for the sector. "We have been active in advocating for Governments to stop tinkering with the superannuation system and it is pleasing to see the Coalition Government is heeding this advice," she said "The stability to superannuation in the current Budget cycle allows SMSF trustees and members to take a deep breath and assess their long-term strategies without having to confront constant regulatory change." However, Slattery warned that SMSF trustees would need to consider the impact of the Government's decision to change the assets test for the age pension, and consult advisers.
3. But richer retirees will lose perks
Retirees who no longer qualify for the part pension stand to lose, at a conservative estimate, $1500 in benefits, which often include discounts on car registration, property costs and council rates, in addition to thousands of dollars in income from the pension payments themselves.
Treasurer Joe Hockey confirmed on Tuesday night that new budget asset tests would still allow retirees to receive a Commonwealth Seniors Health Card, which would entitle them to subsidised medical care and pharmaceuticals, as well as some utilities discounts.
However the loss of a series of other Pensioner Concession Card benefits is expected put further strain on the finances of the affected retirees, including about 91,000 Australians who will have part pension payments cut.
Added subsidies for retirees with the pensioner card vary on a state-by-state basis, but often include heavily discounted public transport travel, car licensing and registration reductions, and discounts on property and water charges.
4. Reflation may be back
Bond yields are soaring because the world's central banks have demonstrably done enough for now to stop deflation taking hold. The short-term monetary cycle is turning. The reflation trade is on.
The broad M3 money supply has been growing at a 7pc rate in the US over the past six months (annualized), and nearly 8pc in the eurozone. Fiscal austerity has run its course as well. Budget policy is no longer contractionary in either of the world's two biggest economic blocs.
Unless the normal mechanisms of monetary policy have broken down altogether - which is possible, but would you bet your pension on it? - the burgeoning M3 data point to a reflationary revival of some sort later this year.
-- Daily Telegraph
5. A bubble in oil and commodities?
The big global banks have begun to warn clients that the blistering rally in oil and industrial commodities in recent weeks has run far ahead of economic reality, raising the risk of a fresh slump in prices over the summer.
Barclays, Morgan Stanley and Deutsche Bank have all issued reports advising investors to tread carefully as energy and base metals fall prey to unstable speculative flows in the derivatives markets.
“Watch out: this rally may not last. The risks for a reversal in recent commodity price trends are growing,” said analysts at Barclays.
“There is a huge disconnect between the price action in physical markets where differentials are signalling over-supply and the futures markets where all looks rosy.”
-- Daily Telegraph