Retirement strategies. Saving for and spending during. The world is awash with writings on how to save and invest for retirement. The volume of material is vast and it is being added to daily, including by me. Why is it so? If ever there were a topic that should have been settled over 100 years ago, retirement savings is it. There is no need for continuously adding to the material. The fact that such material is ever growing hints that there is a problem. If the topic was settled, there would be no need for a constant barrage of new material.

There most definitely is a problem in retirement savings (in advanced economies): it is the futility of trying to save effectively on an individual basis without any risk sharing arrangements in the context of lengthening life-spans, higher costs of living and higher expectations of lifestyle. It is a cruel hoax foisted on the bulk of the population that insists they can do it, provided they have the right investment strategy, the right draw-down strategy, the right contribution strategy and so on. But the right combination does not exist. That is why people are always looking for new ways, new ideas, some development or technique that will allow them to save effectively and retire securely in a lifestyle that meets their expectations. Yet it cannot happen but for the small proportion of each country’s most wealthy. Continue reading

Turnbull achieves what Chifley could not

The Australian retail banks have effectively been nationalised. What Ben Chifley tried to do in 1947 but failed has been achieved in 2017. Chifley was a Labor PM. Turnbull is nominally Liberal.

The banks all operate with a government guarantee on deposits. In effect, the Government, ie the taxpayer, has assumed a fundamental risk of the banking business. They operate within a big 4 policy framework that shuts down the possibility of mergers and restricts competition from other parties. The Government is now going to impose an arbitrary tax on the banks outside normal company tax rules. The Government is going to regulate bank executives behaviour, keep a register of ‘acceptable’ vs ‘non-acceptable’ bank staff, control bankers’ pay and the gender make-up of the employees. There are very few aspects of banking business that are not under covert or overt Government control.

This is the path to socialism.

The end of conservative government in Australia

I am not a particular fan of the big Australian banks – they enjoy privileges granted by Government policy that makes the business of big banking too sheltered from competition, too easy to extract economic rents and protected by barriers that prevent new entrants to that sector. Yet in the wake of the Federal budget for 2017-18 announced last week, I find myself on the same side of the fence as the bankers. The proposed bank tax is disturbing. Continue reading

Unlimited #vacation leave policy – a pricing error

It sounds like a good thing – unlimited holiday time, still meeting budget, making bonuses. Here’s a recent piece on the topic. It might work for some, perhaps not others.

It will be clear if it isn’t working. Customers will suffer, other colleagues will complain about being overworked to make good the leave, budgets will not be met. It will be a shambles, obvious very early on. Continue reading

Give me your #money. I know what to do with it better than you do.

What happens when people are appointed to leadership roles in organisations such as the World Economic Forum and the Australian Chamber of Commerce and Industry? Ostensibly, these organisations should favour free markets over regulated, free enterprise over Government-sponsored monopolies (and monopsonies) and have faith in the individual consumer to know best what they want rather than a bureaucrat or a political insider. Yet these leaders make speeches that call for action exactly in opposition to normal perceptions of free markets.  Continue reading

Is the #pension a safety net or an asset in a portfolio?

Malcolm is not as popular as he once thought he would be. Here is a little window into his waning popularity with Australians in receipt of the age pension:




The difficulty here is that the purpose of the age pension is no longer clearly established and accepted by the (majority) population. Is it a safety net that pays only to those in genuine hardship? Or is part of a retiree’s personal wealth portfolio, a defined benefit lifetime annuity independent of other sources of assets or income?

The pension was established (over 100 years ago) as a safety net. For much of the 20th century, anecdotal evidence suggests the population accepted that fact and ‘going on the pension’ was almost seen as an indicator of low social standing and to be avoided. The pension is means-tested, so phases out entirely when assets and income exceed thresholds. Clearly, it has been operated as a safety net, although there is a genuine debate over the appropriate threshold levels.  Yet the angry pensioners argue that they have earned the right to their pension and no politician should take it away even if they have a million dollars in other investments and they own their own home outright.

As is often the way in political economy, when Governments fail to do the spadework before pulling the policy levers of change, we end up in an unholy mess. The spadework must prepare the ground based on values, principles and attitudes. Only when the population is in broad agreement and understanding with and of these principles should policy be developed or reformed.  Only when Australians  agree on the purpose of the age pension should it be amended.

Corporate #tax – why?

Why does Australia have a corporate tax rate? What does it mean to tax a legal construct that is not actually a person?

In large part, it means complexity in tax laws, regulations, numerous bureaucrats, advisors, accountants, court cases and government regulators. So much wasted time and nugatory effort. Think about the advantages in freeing those people from the daily tax grind and allowing them to do something more useful, something that would be valued by other people in society.

A corporation is merely a means of allowing investors, entrepreneurs, managers and customers to cooperate efficiently. It was the concept of the limited liability company structure, devised and refined over 200 years ago that allowed investors to participate in shares, with their liability limited to their investment. Continue reading

Why Government #economic policy is all wrong

The typical thinking in Governments and central banks when it comes to current monetary and fiscal policy can be summarized as:

  • fiscal deficit spending is needed to avoid recession, and kickstart investment, growth and economic activity;
  • lower interest rates are needed to stimulate borrowing and spending by consumers;
  • economies need inflation; persistent low inflation or even deflation is to be avoided.

That this groupthink continues to dominate even after years of practical experience to the contrary, is amazing in itself. More seriously, it is very damaging for our economies and will make economic recovery and future growth delayed and harder. Continue reading

There’s a pattern here

Is it just me? Or have others noticed it, too? The number of articles written about climate change and published in the trade magazines and professional journals follow a common language and structure. Almost invariably, the articles will begin along the following lines: “The risks of climate change are becoming increasingly well-known.” Then, there will usually be reference to some global body, such as the UN, the World Economic Forum, the World Bank and of-course the IPCC. This part of the article could say: “[insert name of global body] believes that the world’s climate is at a tipping point and any further delays in action risk catastrophic damage to the planet.” Then, there is reference made to global commitment to action, taken from the most recent gabfest: “Fortunately, real agreement and commitment to action to halt the extent of global warming and transition away from a carbon-based economy is emerging. Leaders at the [name of summit] signed on to a new set of carbon-reduction targets by 20[xx].” Continue reading