In the eyes of many Australians, regardless of political persuasion, the outcome of this year’s budget would make or break ‘Kevin 07’ as the country’s preferred prime minister.
In a budget many have described as solid and stable, the government chose not to slide further in the polls by offering no wild promises and engaging in overspending.
Overall, the financial services industry responded in favour of the budget.
Key savings outside of superannuation in the form of tax discounts on bank deposits, bonds, debentures and annuities as well as the decision to further promote Australia as a global investment hub were also welcomed.
“The 2010/11 budget will greatly advance Australia’s ability to become a global investment hub,” Investment and Financial Services Association (IFSA) chief executive John Brogden said.
“The announcements to reduce interest withholding tax, introduce a new managed investment trust regime and establish a Centre for International Finance and Regulation all advance Australia’s standing internationally.
“These measures will make Australia more attractive for international investment and attract a greater share of global capital.”
IFSA also welcomed the decision to provide tax cuts for interest on authorised deposit-taking institution (ADI) deposits as well as bonds, debentures and annuities, ensuring a level playing field for comparable investments.
“This will minimise any capital market distortions that would have arisen if only ADI deposits were included in the scheme. Further, the success of these measures will reduce the cost of capital,” Brogden said.
“At the macro level the return to surplus in 2012/13 is good news for the economy.”
The budget comes at a time of industry division.
The past month alone has born witness to dramatic proposals for change that have left the industry in conflict.
Commissions, fees and volume bonuses have for the moment left the hands of the associations and are now under watch by the government.
The state of Australia’s tax system and superannuation has also been placed under the microscope, with many disillusioned by the government’s tax on resources.
Earlier this month, opposition superannuation spokesman Luke Hartsuyker claimed super funds had lost more than $14.5 billion following the government’s tax announcement.
“Since the 40 per cent super tax on mining companies first appeared in the media on 13 April, the metals and mining index has dropped by 13.2 per cent,” Hartsuyker said.
“With around 9.3 per cent of all superannuation assets invested in the mining sector, a 1 per cent fall in the value of the mining index equates to a $1.1 billion loss in superannuation.”
Though after much debate within the industry, a number of superannuation bodies have called for bipartisan support for the government’s changes, declaring super fund balances would not take a big hit from the mining tax.
The Association of Superannuation Funds of Australia, Australian Institute of Superannuation Trustees, IFSA, Industry Super Network and the Self-Managed Super Fund Professionals’ Association of Australia have warned the opposition that millions of Australians will be threatened with less than adequate retirement savings if the changes are opposed.
The proposed changes include boosting the superannuation guarantee to 12 per cent and top-up arrangements for people over the age of 50.
“These landmark reforms will see super accounts boosted for average workers by $110,000 and aggregate national retirement savings up by half a trillion dollars,” a joint statement by the five bodies said.
