Financial Solution #2

Some one in the Labour party must have read my Post about financial literacy (probably some one in the party here in the Territory, I understand that Ken’s blog has become compulsory reading for NT party apparatchicks ) and, following the dictum that the Government should have a policy that matches whatever the opposition proposes, (there must be an election looming)

Assistant Treasurer Helen Coonan is today launching a new taskforce to develop the first ever national strategy for financial literacy, aimed at improving levels of knowledge about financial issues for the whole community.

Closer analysis of the report appearing in the AFR 24/2 suggests that $800,000 will be spent on a Task Force; that’s right taxpayers, a group of obscenely rich people, who have no idea of what is required and can relate to financial-product consumers in the same way as Murdoch does to readers of the NT News, is going to undertake “the onerous job of devising a strategy that will reduce poverty, create well informed consumers and bolster national savings.”

When will actual financial literacy programs be introduced into Australian schools and VET courses. Probably never. All this fuss is simply because there is an election soon, Governments will continue to talk about the subject and Australian Consumers Association remain more interested in greater regulation and financial advisers holiday arrangements than educating consumers.

Notwithstanding the fact that my concepts have been adopted without attribution, I have another idea that will simultaneously solve the dilemma of first home buyers (FHB) and the dearth of aged-care facilities. FHB have been priced out of the market by the rapid increase in the cost of residential real estate, right ? There is limited availability of rental accomodation and the conventional wisdom holds that everyone should buy property rather than rent, because owners benefit from the increase in capital value while renters do not. There is limited rental space largely because little old ladies are clogging up the system by living by themselves in four bedrooom houses instead of residing in appropriate aged care facilities.

And it’s expected to get worse as the population gets older;

1 Treasury paper states that in the next 40 years, the number of Australians aged 65 and over will soar from 2.5 million to 6.2 million, or from 13 per cent of the population to 25 per cent. At the same time, annual growth in the number of people of working age is expected to drop from 1.2 per cent to zero within 40 years. The paper says that in 2002 there were more than five people of working age supporting every person over 65. By 2042 there will be only 2.5 people of working age for everyone over 65.

What’s the Government response ? “a range of policy measures that could be used to encourage people to work longer and harder. These will include discouraging use of superannuation lump sums, encouraging use of market-based or growth superannuation pensions, deregulation of the workforce to promote part-time work by older Australians and disincentives to take early superannuation benefits.”

Labor will also address the challenge of Australia’s ageing population today when frontbencher Craig Emerson proposes a “new national reform agenda” aimed at increasing productivity and promoting regional growth. Labor’s workplace relations spokesman will outline a plan based on “a positive infrastructure and population policy” aimed at promoting a “high-skill, high-wage society”. Central to Labor’s plan is a push to provide more workplace flexibility through greater regulation of the labour market. For example, this would allow parents returning to the workforce “a reasonable right” to request part-time work.

Now call me pessimistic but neither proposal will ever be implemented (there’s an election remember) and even in the unlikely event that they were, neither is likely to have much effect on the problem. Little old ladies in their 80’s are not going back into the work force; they were never in the work force, how do you think they outlived their husbands ? And, contrary to Labour orthodoxy, increased regulation will cause more people, both employers and employees, to eschew work rather than increasing participation rates. The recent announcement by the Salvation Army indicates that providing care for the aged poor will consume much more of it’s resources than in the past.

No, the solution lies in simultaneously removing the elderly from their houses, freeing up residential rentals and providing the same oldies with accomodation bonds that are necessary to provide the capital necessary to build and upgrade aged-care facilities. The Commonwealth Bank should be tasked with establishing a system that advances a capital sum (call it an accomodation bond, repaid on the death of the resident) to the aged care facility based on a first mortgage over the ex-resident’s property, the mortgage interest payments to be met from the rent paid by the new occupier of the property.

With a little planning this could provide the capital needed to expand the aged-care facilities at little cost to the taxpayer and at the same time free up low cost rental accomodation so that FHB can save the deposit to enter the capital appreciation race.

Expect to see this proposal as Labour policy in the near future. What do you think ?

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2024 years ago

Nothing against financial literacy, mind you, but why not try for literacy first? Once we get that among the teachers, we could even consider attempting to extend it to the students.
Or am I going too far?

Tiu Fu Fong
Tiu Fu Fong
2024 years ago

The auditing industry has been wanting this for a while. It suffers from the public perception that an audit = 100% verification of the financial statements of an audited body. That suffering is being reinforced heavily by the audit reforms currently in the Senate. Increasing financial literacy is one way of reducing the tendency of retail investors to scream “why didn’t you tell us” at the auditors.

That said, the audit firms also make a lot of money. Suffering in context.