But investors certainly want it. That is, they want to see whether an administration rapidly running out of scope for fresh initiatives might offer some incentive before the May election.
So far, the major incentive has been for older investors to keep quiet.
In case you missed it, Minister for social services Amanda Rishworth has already leaked a key piece of news: The deeming rate — which is the rate of return the government “deems” retirees have made on their investments for pension purposes — is to be left unchanged.
Now, that’s all fine … politically.
In fact, it proves beyond reasonable doubt the ALP does not want to upset pensioners or retirees (as Bill Shorten did in the past with the ill-fated franked dividend reform campaign in 2016).
But, here’s the thing. The benchmark deeming rate is at 2.25 per cent, it’s been unchanged since 2021. Entire administrations have come and gone in Canberra since Scott Morrison stopped the clock in the dark days of Covid.
The rate is meant to track in-line with RBA rates, but that’s now history.
RBA rates are currently 4.10 per cent. You can get term deposits — government guaranteed — for nearly twice the deeming rate.
In other words the deeming rate is a joke — the Coalition and the ALP know it and so too do almost 1 million pensioners who have other sources of income.
The government could have saved at least $450m per year by bringing the rate up to ‘natural’ levels, but neither side of parliament will do it.
The Albanese regime just happens to be the regime which has confirmed the deeming rate is now taboo — it can be classified as politically untouchable, alongside negative gearing or taxing the family home.
Why? Because the ‘grey army’ is massing at the polling booths — one in four voters are now over 55 — the highest portion ever, and the number is going to rise every year for as far out as the forecasts go.
As The Australian reported this week: “New research from the Challenger group has found Australians over 55 have reached their largest share ever on the electoral roll at 39 per cent, and this share will keep rising until they ultimately represent half the entire electorate over coming decades.”
It’s a crucial and noisy constituency. If you doubt the potential of the grey army vote, keep in mind the research from Challenger says there are 10 marginal seats with a “high concentration” of retirees.
The electorates which lead the list are Lyne and Gilmore in NSW, Hinkler in Queensland and Flinders in Victoria.
The problem is not every investor is a pensioner — a lot of them are still paying a heap
of tax and have a string of hurdles on the long road to becoming independent investors.
One thing we will see in the budget is a confirmation inflation indexing will lift the threshold for tax free super from $1.9m to $2m on July 1.
Which is all very well if you are comfortably retired, but if you are paying 47 per cent tax and trying to put something away for super, you don’t get the system improvements continually coming through for retirees.
For example, the contributions concession limit is not going to change on July 1, it is going to stay at the same dollar-cap you could have enjoyed almost a decade ago.
At every life stage the investment tax system is loaded against ‘younger’ Australians — those in the accumulation stage of super — and loaded in favour of ‘older’ Australians — those in the retirement stage.
As CBA put it in the bank’s pre-budget note: “The government is likely to limit the number of major new initiatives in the budget — significant commitments have already been announced this year and they won’t want to be accused of adding inflationary pressure or giving the RBA a reason to delay further interest rate cuts …”
Sure, well that’s what happens when you have already promised an $8.5bn Medicare package and a 20 per cent discount on HECS bills. And, you can add a batch of energy bill relief measures coming your way next Tuesday.
Treasurer Jim Chalmers pulled off a politically astute move in adjusting the personal tax rate changes (which kicked in last July 1 so middle-class workers got better tax cuts than higher earners). But, he also made a major mistake with a clumsy effort to introduce a new super tax based on unrealised gains. The idea has hit a brick wall in parliament, but it is not dead yet.
This week he placated the pensioners — but an artificially low deeming rate is not an investment incentive, it’s a pay-off.
As for everyday investors who happen to be under 60, there is nothing promised, nothing leaked … but, who knows? Chalmers might break another taboo by doing something for them at last.
James Kirby hosts the twice-weekly Money Puzzle podcast.
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