It’s super, but not as we know it

The federal government has made it abundantly clear it is opposed to the superannuation guarantee increase. Picture: iStock image.

The Callaghan review has superbly moved the sometimes partisan debate around superannuation to it being just one leg of the retirement incomes policy with a clear need for more focus on the retirement leg with better products to boost income.

Too many people worry about living on the income of their retirement savings when the whole idea is to also spend the savings and do with the safety of a net which includes healthcare and other benefits older people have earned through their life.

The federal government has a covenant in place to force superannuation trustees to force them to create viable plans for member retirement but somewhat bizarrely it doesn’t come into effect until July 2022.

This is not to criticise the government because it should have been a basic part of the compulsory savings program from day one in 1992, instead of the focus on accumulation which has netted the industry $30bn in fees and created $3 trillion in assets.

The industry’s focus needs to be on retirement income products and that need is already recognised and will become clear in the months to come as the innovative industry funds lead the way.

The value of the superannuation industry was evidenced this year by the fact the government could liberate $35bn in savings as part of its Covid recovery plan.

That value is sometimes forgotten as it is when it comes to the $33bn in equity raised by corporate Australia to help offset the impact of the lockdown and campaigns by Anthony Pratt and others for more lending from the funds.

Much of the focus for largely ideological reasons has been on the impact of the proposed increase in the compulsory rate from 9.5 per cent to 12 per cent starting next year.

The federal government has made it abundantly clear it is opposed to the increase and the Callaghan review backs its claim saying it may come at the expense of wage increase.

The argument misses the point in the reason for the creation of the scheme which was to generate wage increases outside the industrial relations system and any worker who willingly forgoes 2.5 per cent in wages growth via the superannuation system may regret it.

The panel rightly stressed four legs, adequacy, equity, sustainability and cohesiveness.

The adequacy is cleared with ease importantly by looking at the wider net like free healthcare for older people which is equivalent to having your pension, equity needs restoration and one wonders whether Prime Minister Morrison will undo the tax concessions out in place by Peter Costello back in 2006 which means there are now 11,000 Australians with over $5m in their superannuation accounts generating $70,000 a year in tax concessions.

The panel noted “changes to superannuation tax concessions would have the largest impact on higher-income earners. Further improvements in targeting superannuation tax concessions would improve the equity of the retirement income”

The end of the increase in the superannuation guarantee is a given but an end to the tax breaks not so sure.

A key message from the review was “more efficient use of savings in retirement can have a bigger impact on retirement income “than the guarantee.

Cutting carbon emissions

Orica’s Alberto Calderon has committed to cutting carbon emissions by 40 per cent by 2030 underlying the dubious claims of some to become carbon neutral by 2050.

That is 30 years away and probably the career spans of the next three chief executives so here is a plan to cut emissions in the lifetime of the present boss.

This is a global company and Calderon has the advantage of being able to make use of a superior Canadian Government policy granting carbon credits for emissions reductions.

He also plans to produce so called green ammonia in Australia which he sees as being viable in nine to 10 years time when the much vaunted hydrogen dream is two decades away.

Ammonia is easily transportable and can be used as feedstock for Orica’s fertiliser and explosives business.

Calderon has recently won a contract from rival Incitec based on its Wi-Fi explosives technology.

After a strong run the Orica stock price fell 4.1 per cent to $16.28 a share after reporting a 31 per cent in net profit to $168m.

The second half earnings were hit by Covid closure of mines in the US and South America.

The Orica boss was a high-profile advocate of a return to its Melbourne head office amid the recent lockdown which prompted a health department check of the premises and subsequent decoration of a COVID safe environment.

Bega in the box seat

Bega Cheese has emerged in the box seat to acquire Lion’s dairy assets after Saputo dropped out but rival Tanarra Capital has raised public policy concerns for the ACCC concern to consider over the reported $550 million deal.

The imminent deal follows the collapse of Lion’s agreement last year with Chinese Government controlled Mengniu which was blocked in August by Treasurer Josh Frydenberg against FIRB official advice and after the ACCC approved the deal.

Dairy Farmers Co-op a major supplier to Lion has expressed support for Tanarra and in a letter its chief Mark Kebbell said the co-op “has concerns about further consolidation in the dairy industry and the likely reduction in competition for farmgate milk in some key dairy regions.”

If the deal proceeds Bega will control five of seven dairy processing plants in NSW.

The ACCC dropped its investigations into Saputo’s bid on Friday after the Canadians advised they had withdrawn their offer.

There are four major milk processors in Australia and if this deal proceeds there would only be three.

The issue is complicated by the fact the big supermarkets are increasingly engaging directly with farmers leaving the processors with less market control.

The Tanarra bid is backed by SunSuper and other industry funds but is presumed to be below the Bega offer because of the lack of synergies.

The ACCC has already quietly cleared the Bega bid and it generally tries to avoid being a player in takeover battles.

Bega has declined to comment.

Market power

Woolworths boss Brad Banducci will be one of few people not backing the ACCC case against Peters ice cream for alleged exclusive dealing with distributors PFD.

The ACCC said from 2014 to 2019 PFD distributed Peters ice cream like Maxibon and Connoisseur around convenience stores and petrol stations on the condition that PFD refused to take rival products.

Streets and Peters control around 95 per cent of the petrol station convenience trade which is a big point of sales for single serve ice creams and smaller rivals complained they had little to market.

When PFD dropped the deal it started taking rival products to the stores.

The reason why Banducci won’t be impressed is he has a $550m bid on the table seeking ACCC clearance to buy PFD.

The Streets case perfectly underlines the market power of PFD especially when combined with the supermarket behemoth.

That deal is due to be decided on December 17.