It costs $30 billion a year in fees alone and takes 11% of wages as a non-tax compulsory payment from families at the time they need the money most, yet there is no lobby group seeking to scrap the wasteful superannuation system.
I reckon you’ll struggle to sell “just get rid of super and leave in place the current 25% of AWOTE aged pension”. You may get more traction with “get rid of super and make the Commonwealth aged pension pay some fraction of your salary averaged over the last 5 years or so of your career”.
Good point re how well off are home owner aged pensioners. But we want to give the median voter(s) a reason to exterminate the bloodsuckers of the super “industry”. To attempt (roughly) to maintain pensioners’ pre retirement socio-eco status pecking order (as I suggest) would indeed be worse for vertical equity than if we could abolish super while keeping the age pension unchanged. But we cannot hit every policy goal with one policy measure! And I fear your proposal cannot get the median voter(s) across the line.
Your argument makes good sense to me, but I’d love to hear an advocate put forward the best possible case for super. Would be great if you tracked down someone and debated the issue.
The other thing i wonder is how we would even go about dismantling it without causing inflation and transferring a massive chunk of the proceeds to asset owners? Isn’t it a bit like one of those ‘tiger by the tail’ situations?
Otherwise, as a father of three young kids, i’m ready to man the barricades.
Great, will check it out. And what about the second part of my comment… what would be the best way to unwind the super system? My partner and i have (i think) about $300k between us. I’d love to spend that on bigger house, but i’d hate to be competing with thousands of other cashed up families/ investors with their eye on the same house.
For me, a gradual release of that $300k over 20 years (on top of an instant 11% pay rise) would make a big difference to our quality of life.
If your concern is about unwinding super pushing up asset prices, remember, that for people to spend super they must sell assets! So probably there will be net selling of equities and bonds, and maybe net buying of property by some people.
Yes, extra income is inflationary. But you can allow people to withdraw up to $10k per year the first year, 15 the next, 20 the next, etc for, say, 8 years. Then almost all super accounts will be emptied, and the remaining accounts can be rolls over into manage funds with not special tax advantages.
As someone close to retirement who was forced to pay into super, I'm really glad I have it. It makes a large difference to my retirement plans. It means I retire early instead of living off a disability pension cos the body is damaged. It means my house will be paid off.
Economists always believe people are rational and put money away for retirement, but that's a fallacy.
Instead of thinking of ways to be an economist, how about thinking of people. We're not rational machines slaving in the machine world.
The interaction of negative gearing, CGT discounts, and compulsory superannuation creates upward pressure on housing prices, making it harder for the government to address affordable housing needs. Policy reform in these areas could redirect resources towards low-cost housing solutions, easing housing affordability challenges for low- and middle-income Australians?
At present Compulsory Superannuation inflates debt-leveraged investments (like in real estate) causing an unsustainable balance between income and ever-concentrating wealth. A progressive reform of wealth growth is necessary therefore, for the longterm preservation of wealth and social stability. This might best be achieved by the careful phasing in of the gradual taxation of wealth whilst maintaining market stability, together with providing incentives for reinvesting in productive sectors, to avoid any unintended consequences of taxing unrealized capital gains and democratizing wealth?
Malcolm Fraser saId 'LIFE IS NOT MEANT TO EASY'. A politicians defect stating the obvious.
Yes some pensioners are well off, they own their own homes and get paid without working, not a lot mind you. Bear in mind most did raise families and contributed to the tax take. Sometimes they did that longer than some people have been alive. You speak of abolishing super. I agree a lot of entities grow fat on peoples sweat. Another issue not mentioned is GST a very unfair tax is there was one, we pay so politicians can look good when they give back money we gave them. It encourages them to waste it. Abolishng both would benefit everyone, I wont hold my breath though. Its hard to get a pigs snout out the trough once it starts eating.
Perhaps I can supply some "intellectual meat" since Paul Keating the father of Super disappointed you in justifying the super system.
There is no abolish supernannution lobby because it's a dumb idea and people see it is working and their retirement nestegg is growing. Our pension system is the envy of most of the world because of the compulsary nature of it and that it automates everybody's saving for retirement to benefit from compound interest which takes decades to generate large amounts of wealth and retirement income streams. You will earn more from super in your final 10 years before retirement than the 40 years before it. That's the magic of compound interest which every Australian benefits from rich or poor.
Your arguments of abolishing Super would just end up bidding up house prices because supply is limited and demand is already too high. It would mean people end up with no retirement savings and still have the same existing problem of too much competition for the same relatively fixed amount of existing homes and new home building that is much lower than underlying demand. Only now people who have pissed away their retirement savings in higher house prices will then turn up in 40 years with their hand out looking to recieve an age pension indexed risk free pension off the backs of a dwindling population pyramid where there will have to be ever higher taxes on the young to fund the older house rich generations. How fair is that?
The whole point of saving and investing is the criticality of starting early and often. That's how you can self fund retirement at the lowest cost way over time, because more and more of that final retirement nestegg is funded by investment earnings and not capital contributions from people sacrificing thier consumption by massive gobs as they get closer to retirement in the final 10 years and finally Super goes from "boring" YOYO to oh shit I have nowhere near as much savings needed to fund my decades of retirement and my work prospects are diminishing.
Listening to your conversation. You don't acknoledge that the money you put into super is not the same as the money you take out. When you take it out you are taking out multiples of what you put in due to exposure to growth assets which compound at a rate where your money generally doubles every 10 years.
A small proportion of people who never get to enjoy their super retirement because they are ill or dead by retirement age can't be used as a valid argument for the vast majority of people in Australia that will live into their late 80s and 90s. That's decades of retirement to be funded. Who's going to pay for that? The age pension was never designed to be paid out for so long. If we are not careful, spending on the aged will consume the government coffers and place a burden on young people that causes them to leave for places they can keep more of what they earn.
Super is not a tax because it remains your money and it is lightly taxed so your money will grow far faster inside the super tax structure than outside it. It's so great politicians on both sides have been gradually winding back the tax breaks on Super. How much extra you can put in there how much you can take out tax free. No way they would be doing that if Super was so bad and people were being forced to save unwillingly. The only ones unwilling are precicely the ones you do want to compel to save otherwise they would just live it up during their life and get to retirement penniless and then expect others to fund their retirement.
Super is not a tax. It's your money. You get it back with investment earnings at retirement. Those who have a concern about fees, well they can open up a Self managed super fund or invest in Host plus which charges next to nothing 0.02% PA on their indexed investment option. High fees is being dealt with underperformers forced to rebate high fees to stay in business or fold into a better performaing fund.
Where you say "1 in 8 men won't make it to retirement" I flip it around in my head and think "7 in 8 men will make it to retirement" so ofcourse it's a good idea for government to compel people who generally spend everything they earn or put any money they do have into bidding up house prices to save and invest for their own retirement. The alternative is that those 7 in 8 men demand taxpayer funded pensions leeching off the young after a lifetime of living large and not self. Conflating the outcome of the Super becoming like a life insurance death benefit for a spouse or children for 1 in 8 people is not a valid argument. Everybody gets their Super once they get to retirement age. You don't have to die to get it. It's not just to be a proxy for life insurance for your spouse and kids as beneficiaries. It's primary purpose is simply to fund people's retirement and it does a fantastic job of it taking pressure off the age pension.
The economy grows at 2-3% PA. Super compounds at 8-10% PA because we invest in not just Australia but have exposure to investment opportunities globally and you need patient capital to be able to generate those kind of returns over time. We have a tidalwave of baby boomers retireing and aging population that is propped up by immigration at the moment but guess what even immigrants get old and demand age pensions too. There is just not going to be the tax revenue to fund all the people that would be drawing free pensions from the government. It's a mobile world. Young people can choose to leave Australia or work less and both those things make for the economy grinding to a halt. Try increasing taxes in the 2030s and 40s to pay for pensions growing at much faster rates than that. See how long before the young people revolt and leave. There is not a single pension system in the world where it's been universal and fully funded without there being someone else footing the tab on the side, like oil revenues from the rest of the world for example. Compare it with America where social security will be bankrupt within a decade because they overpromised benefits and self interested politicians have kicked the can down the road pretending it's not unaffordable and that they haven't actually been raising the taxes to fund it. Your idea for relying on the age pension would ONLY work if the government did actually make Super 11% as a tax and confiscated the money to put into the Future Fund to invest and target meeting future pension liabilities. There is no free lunch where you can simply turn off people saving for retirement and just fund it out of consolidated revenue. Just look at the disaster the NDIS is turning into for following unfunded bottomless pit logic like you are suggesting.
Your racially charged argument about Super being racist because aboriginal men don't have the same life expectancy is the kind of low brow narrow minded logic I'd expect from a tabloid or fox news. Not you. Aboriginal men die young because of their issues. Issues in their family in their upbringing in their motivation in life and issues in their communities. Super is equal to all. It's not racial. Everyone pays 11% of their income. So if people, doesn't matter if they are aboriginal or not don't earn much, they don't put away much for retirement and then default to relying on welfare. That is a simple fact. The law of the land should not discriminate based on race. What you think there should be a separate more favourable tax and super system for aboriginals and another tax and super system for everyone else? We are all australians and subject to the same rules.
Sorry Cameron. You wrote an amazing eye opening book about housing which changed the way I understood the property market forever. But you are out of your depth when talking about Super. Stick to Property. it's what you're good at.
If I read correctly, your main argument is that compound interest is a special kind of thing that superannuation can leverage, and age pensions cannot.
But that' is not true. The same compounding growth of the economy that creates returns to asset ownership also creates compounding abilities to fund the age pension via taxation.
The economy grows at 2-3% in real per capital terms, but nominally it grows much closer to the rate of growth of superannuation and asset markets generally. In fact the nominal growth in GDP has been about 7% for the past 40 years.
Keating's super idea, while its implementation may be flawed, holds significant potential. Its core principle, providing a means for individuals to amass wealth and wages through their work, remains sound and relevant.
However, the wealth should be available when needed. In today’s world, it is very hard for an individual to invest, and most people do not have the time or the skills, so they don't. It is also almost impossible for a small investor to invest in stable, reliable and safe investments because of institutional incompetence and regulatory barriers. We need to reform the operation of super and make it more efficient. You cannot invest the money in your self-managed super fund in a business or house you own, and there is no way to set up super funds to invest in small businesses. Essentially, small super funds can only be invested in financial products. The reason appears to be to stop tax minimisation.
The urgency for a comprehensive reform of the investment system is evident. Everyone must have the necessary tools to control their investments and to benefit from selling shares, not just from dividends or selling property. This aligns with the 'Warren Buffet method of investment ', a strategy that advocates for long-term investment in stable companies with a proven track record of growth and profitability.
One way is the automatic acquiring of investments when purchasing goods and services. For example, we get shares in the water authority when we purchase water. When we pay rent, some money buys equity in the occupied house. This way, we build wealth that we can sell when needed. Instead of getting an allocated pension from a super fund, I could sell some of my shares in the water supplier. This simplifies the finance system by removing middlemen and replacing them with automated systems that operate for individuals and households at the time of payment. It reduces the cost of goods and services( where most of the cost is the cost of capital) by more than half.
When we purchase money with a loan, we pay simple interest. The simple interest can be higher, so the lender wins, and we win because we pay off the loan quickly. The benefits to both come from the increase in the velocity of money. Simple interest is higher, so the depositor gets a higher interest rate, and the borrower pays less.
A bank loan of $100,000 over five years at 6% compound interest rate gives a return to the Bank of $18,698 for payments of $118,698, while five years at 10% simple interest increases the bank's profits by $11,302 for repayments of $100,000 and a saving of $18,302 to the borrower. I cannot understand why the Reserve Bank does not require home loans to purchase an existing home to use simple interest. When asked, they said they did not have the power to require banks to use simple interest on a loan to transfer an existing asset. It would be a 30% productivity improvement in bank loans, solve the housing affordability problem, and eliminate inflation “overnight” with a simple change to a payment.
If you are looking for a movement, get home loan borrowers to agitate to the super funds to invest in home loans for their members, use simple interest and cut out the banks altogether while reducing inflation back to zero. (PS. an allocated pension gives 10% for ten years. With simple interest an allocated pension could give 10% for twenty years from the increased efficiency of the financial system).
There are more opportunities like this throughout the economy. We have more than enough to Rewire Australia and decarbonise the economy within ten years.
Great episode. Super is just a claim on the productive capacity of the economy. Governments can redistribute economic resources in far more efficient ways than the Superannuation industry. We’d be far wealthier if we spent and invested that income in our local communities, rather than sending it to capital cities to inflate the value of capital assets to make the 1% richer. We’d also be more productive if everyone in the Super industry was employed in industries that actually create value for people and the environment.
Super has been a scam since day one. Make something really attractive initially then once it’s enough to fund most peeps retirement make it really hard to access unless it’s drip fed back to you in paltry amounts
I reckon you’ll struggle to sell “just get rid of super and leave in place the current 25% of AWOTE aged pension”. You may get more traction with “get rid of super and make the Commonwealth aged pension pay some fraction of your salary averaged over the last 5 years or so of your career”.
Sure. We can increase the age pension. Fine.
But of all groups in society, home owning age pensioners are the LEAST financially stressed.
For example, I took a look at how much a family has to earn to be as well off as a pensioner couple.
https://www.fresheconomicthinking.com/p/how-much-does-a-family-need-to-earn?utm_source=publication-search
Good point re how well off are home owner aged pensioners. But we want to give the median voter(s) a reason to exterminate the bloodsuckers of the super “industry”. To attempt (roughly) to maintain pensioners’ pre retirement socio-eco status pecking order (as I suggest) would indeed be worse for vertical equity than if we could abolish super while keeping the age pension unchanged. But we cannot hit every policy goal with one policy measure! And I fear your proposal cannot get the median voter(s) across the line.
Your argument makes good sense to me, but I’d love to hear an advocate put forward the best possible case for super. Would be great if you tracked down someone and debated the issue.
The other thing i wonder is how we would even go about dismantling it without causing inflation and transferring a massive chunk of the proceeds to asset owners? Isn’t it a bit like one of those ‘tiger by the tail’ situations?
Otherwise, as a father of three young kids, i’m ready to man the barricades.
I had a debate with Scott Philips last year. Part 1 is here https://www.fresheconomicthinking.com/p/the-great-superannuation-debate-part
Part 2 is here
https://www.fresheconomicthinking.com/p/the-great-superannuation-debate-part-ace
Let me know what you think?
Great, will check it out. And what about the second part of my comment… what would be the best way to unwind the super system? My partner and i have (i think) about $300k between us. I’d love to spend that on bigger house, but i’d hate to be competing with thousands of other cashed up families/ investors with their eye on the same house.
For me, a gradual release of that $300k over 20 years (on top of an instant 11% pay rise) would make a big difference to our quality of life.
There is an easy way to unwind it.
If your concern is about unwinding super pushing up asset prices, remember, that for people to spend super they must sell assets! So probably there will be net selling of equities and bonds, and maybe net buying of property by some people.
Yes, extra income is inflationary. But you can allow people to withdraw up to $10k per year the first year, 15 the next, 20 the next, etc for, say, 8 years. Then almost all super accounts will be emptied, and the remaining accounts can be rolls over into manage funds with not special tax advantages.
New super payments can just be taken as wages.
Ok, spotted my own logical error. There’s no way to do it without pushing up prices.
As someone close to retirement who was forced to pay into super, I'm really glad I have it. It makes a large difference to my retirement plans. It means I retire early instead of living off a disability pension cos the body is damaged. It means my house will be paid off.
Economists always believe people are rational and put money away for retirement, but that's a fallacy.
Instead of thinking of ways to be an economist, how about thinking of people. We're not rational machines slaving in the machine world.
The interaction of negative gearing, CGT discounts, and compulsory superannuation creates upward pressure on housing prices, making it harder for the government to address affordable housing needs. Policy reform in these areas could redirect resources towards low-cost housing solutions, easing housing affordability challenges for low- and middle-income Australians?
At present Compulsory Superannuation inflates debt-leveraged investments (like in real estate) causing an unsustainable balance between income and ever-concentrating wealth. A progressive reform of wealth growth is necessary therefore, for the longterm preservation of wealth and social stability. This might best be achieved by the careful phasing in of the gradual taxation of wealth whilst maintaining market stability, together with providing incentives for reinvesting in productive sectors, to avoid any unintended consequences of taxing unrealized capital gains and democratizing wealth?
Malcolm Fraser saId 'LIFE IS NOT MEANT TO EASY'. A politicians defect stating the obvious.
Yes some pensioners are well off, they own their own homes and get paid without working, not a lot mind you. Bear in mind most did raise families and contributed to the tax take. Sometimes they did that longer than some people have been alive. You speak of abolishing super. I agree a lot of entities grow fat on peoples sweat. Another issue not mentioned is GST a very unfair tax is there was one, we pay so politicians can look good when they give back money we gave them. It encourages them to waste it. Abolishng both would benefit everyone, I wont hold my breath though. Its hard to get a pigs snout out the trough once it starts eating.
Perhaps I can supply some "intellectual meat" since Paul Keating the father of Super disappointed you in justifying the super system.
There is no abolish supernannution lobby because it's a dumb idea and people see it is working and their retirement nestegg is growing. Our pension system is the envy of most of the world because of the compulsary nature of it and that it automates everybody's saving for retirement to benefit from compound interest which takes decades to generate large amounts of wealth and retirement income streams. You will earn more from super in your final 10 years before retirement than the 40 years before it. That's the magic of compound interest which every Australian benefits from rich or poor.
Your arguments of abolishing Super would just end up bidding up house prices because supply is limited and demand is already too high. It would mean people end up with no retirement savings and still have the same existing problem of too much competition for the same relatively fixed amount of existing homes and new home building that is much lower than underlying demand. Only now people who have pissed away their retirement savings in higher house prices will then turn up in 40 years with their hand out looking to recieve an age pension indexed risk free pension off the backs of a dwindling population pyramid where there will have to be ever higher taxes on the young to fund the older house rich generations. How fair is that?
The whole point of saving and investing is the criticality of starting early and often. That's how you can self fund retirement at the lowest cost way over time, because more and more of that final retirement nestegg is funded by investment earnings and not capital contributions from people sacrificing thier consumption by massive gobs as they get closer to retirement in the final 10 years and finally Super goes from "boring" YOYO to oh shit I have nowhere near as much savings needed to fund my decades of retirement and my work prospects are diminishing.
Listening to your conversation. You don't acknoledge that the money you put into super is not the same as the money you take out. When you take it out you are taking out multiples of what you put in due to exposure to growth assets which compound at a rate where your money generally doubles every 10 years.
A small proportion of people who never get to enjoy their super retirement because they are ill or dead by retirement age can't be used as a valid argument for the vast majority of people in Australia that will live into their late 80s and 90s. That's decades of retirement to be funded. Who's going to pay for that? The age pension was never designed to be paid out for so long. If we are not careful, spending on the aged will consume the government coffers and place a burden on young people that causes them to leave for places they can keep more of what they earn.
Super is not a tax because it remains your money and it is lightly taxed so your money will grow far faster inside the super tax structure than outside it. It's so great politicians on both sides have been gradually winding back the tax breaks on Super. How much extra you can put in there how much you can take out tax free. No way they would be doing that if Super was so bad and people were being forced to save unwillingly. The only ones unwilling are precicely the ones you do want to compel to save otherwise they would just live it up during their life and get to retirement penniless and then expect others to fund their retirement.
Super is not a tax. It's your money. You get it back with investment earnings at retirement. Those who have a concern about fees, well they can open up a Self managed super fund or invest in Host plus which charges next to nothing 0.02% PA on their indexed investment option. High fees is being dealt with underperformers forced to rebate high fees to stay in business or fold into a better performaing fund.
Where you say "1 in 8 men won't make it to retirement" I flip it around in my head and think "7 in 8 men will make it to retirement" so ofcourse it's a good idea for government to compel people who generally spend everything they earn or put any money they do have into bidding up house prices to save and invest for their own retirement. The alternative is that those 7 in 8 men demand taxpayer funded pensions leeching off the young after a lifetime of living large and not self. Conflating the outcome of the Super becoming like a life insurance death benefit for a spouse or children for 1 in 8 people is not a valid argument. Everybody gets their Super once they get to retirement age. You don't have to die to get it. It's not just to be a proxy for life insurance for your spouse and kids as beneficiaries. It's primary purpose is simply to fund people's retirement and it does a fantastic job of it taking pressure off the age pension.
The economy grows at 2-3% PA. Super compounds at 8-10% PA because we invest in not just Australia but have exposure to investment opportunities globally and you need patient capital to be able to generate those kind of returns over time. We have a tidalwave of baby boomers retireing and aging population that is propped up by immigration at the moment but guess what even immigrants get old and demand age pensions too. There is just not going to be the tax revenue to fund all the people that would be drawing free pensions from the government. It's a mobile world. Young people can choose to leave Australia or work less and both those things make for the economy grinding to a halt. Try increasing taxes in the 2030s and 40s to pay for pensions growing at much faster rates than that. See how long before the young people revolt and leave. There is not a single pension system in the world where it's been universal and fully funded without there being someone else footing the tab on the side, like oil revenues from the rest of the world for example. Compare it with America where social security will be bankrupt within a decade because they overpromised benefits and self interested politicians have kicked the can down the road pretending it's not unaffordable and that they haven't actually been raising the taxes to fund it. Your idea for relying on the age pension would ONLY work if the government did actually make Super 11% as a tax and confiscated the money to put into the Future Fund to invest and target meeting future pension liabilities. There is no free lunch where you can simply turn off people saving for retirement and just fund it out of consolidated revenue. Just look at the disaster the NDIS is turning into for following unfunded bottomless pit logic like you are suggesting.
Your racially charged argument about Super being racist because aboriginal men don't have the same life expectancy is the kind of low brow narrow minded logic I'd expect from a tabloid or fox news. Not you. Aboriginal men die young because of their issues. Issues in their family in their upbringing in their motivation in life and issues in their communities. Super is equal to all. It's not racial. Everyone pays 11% of their income. So if people, doesn't matter if they are aboriginal or not don't earn much, they don't put away much for retirement and then default to relying on welfare. That is a simple fact. The law of the land should not discriminate based on race. What you think there should be a separate more favourable tax and super system for aboriginals and another tax and super system for everyone else? We are all australians and subject to the same rules.
Sorry Cameron. You wrote an amazing eye opening book about housing which changed the way I understood the property market forever. But you are out of your depth when talking about Super. Stick to Property. it's what you're good at.
Thank you for your comment.
If I read correctly, your main argument is that compound interest is a special kind of thing that superannuation can leverage, and age pensions cannot.
But that' is not true. The same compounding growth of the economy that creates returns to asset ownership also creates compounding abilities to fund the age pension via taxation.
The economy grows at 2-3% in real per capital terms, but nominally it grows much closer to the rate of growth of superannuation and asset markets generally. In fact the nominal growth in GDP has been about 7% for the past 40 years.
The lack of response or counter argument from Cameron Murray while he comments on other newer posts says it all.
I have a complete article in the works that responds to some of these points in detail.
Keating's super idea, while its implementation may be flawed, holds significant potential. Its core principle, providing a means for individuals to amass wealth and wages through their work, remains sound and relevant.
However, the wealth should be available when needed. In today’s world, it is very hard for an individual to invest, and most people do not have the time or the skills, so they don't. It is also almost impossible for a small investor to invest in stable, reliable and safe investments because of institutional incompetence and regulatory barriers. We need to reform the operation of super and make it more efficient. You cannot invest the money in your self-managed super fund in a business or house you own, and there is no way to set up super funds to invest in small businesses. Essentially, small super funds can only be invested in financial products. The reason appears to be to stop tax minimisation.
The urgency for a comprehensive reform of the investment system is evident. Everyone must have the necessary tools to control their investments and to benefit from selling shares, not just from dividends or selling property. This aligns with the 'Warren Buffet method of investment ', a strategy that advocates for long-term investment in stable companies with a proven track record of growth and profitability.
One way is the automatic acquiring of investments when purchasing goods and services. For example, we get shares in the water authority when we purchase water. When we pay rent, some money buys equity in the occupied house. This way, we build wealth that we can sell when needed. Instead of getting an allocated pension from a super fund, I could sell some of my shares in the water supplier. This simplifies the finance system by removing middlemen and replacing them with automated systems that operate for individuals and households at the time of payment. It reduces the cost of goods and services( where most of the cost is the cost of capital) by more than half.
When we purchase money with a loan, we pay simple interest. The simple interest can be higher, so the lender wins, and we win because we pay off the loan quickly. The benefits to both come from the increase in the velocity of money. Simple interest is higher, so the depositor gets a higher interest rate, and the borrower pays less.
A bank loan of $100,000 over five years at 6% compound interest rate gives a return to the Bank of $18,698 for payments of $118,698, while five years at 10% simple interest increases the bank's profits by $11,302 for repayments of $100,000 and a saving of $18,302 to the borrower. I cannot understand why the Reserve Bank does not require home loans to purchase an existing home to use simple interest. When asked, they said they did not have the power to require banks to use simple interest on a loan to transfer an existing asset. It would be a 30% productivity improvement in bank loans, solve the housing affordability problem, and eliminate inflation “overnight” with a simple change to a payment.
If you are looking for a movement, get home loan borrowers to agitate to the super funds to invest in home loans for their members, use simple interest and cut out the banks altogether while reducing inflation back to zero. (PS. an allocated pension gives 10% for ten years. With simple interest an allocated pension could give 10% for twenty years from the increased efficiency of the financial system).
There are more opportunities like this throughout the economy. We have more than enough to Rewire Australia and decarbonise the economy within ten years.
Great episode. Super is just a claim on the productive capacity of the economy. Governments can redistribute economic resources in far more efficient ways than the Superannuation industry. We’d be far wealthier if we spent and invested that income in our local communities, rather than sending it to capital cities to inflate the value of capital assets to make the 1% richer. We’d also be more productive if everyone in the Super industry was employed in industries that actually create value for people and the environment.
Super has been a scam since day one. Make something really attractive initially then once it’s enough to fund most peeps retirement make it really hard to access unless it’s drip fed back to you in paltry amounts
🙋 sign me up