gillard swan budget in disarray, page-10

"Our super will be the next thing this incomptent government attacks via higher taxes etc etc."

Guess what, they already are by stealth, part of article courtesy Money Morning....This is about Swan's new "Competative and Sustainable Banking System policy"


First, that banks will be barred from charging exit fees on new loans. "So what," say the banks, "we'll just gradually increase our interest rates by tiny increments. What's next Swany?"

Well, the government will introduce a "new official ?Government Protected Deposits' symbol". That'll be nice. Nice for the graphic design firm that gets the contract anyway... we're sure there won't be much change from a hundred grand by the time they're finished with it.

This new "symbol" obviously means the government deposits guarantee will remain forever. Except now of course, it's called the Financial Claims Scheme.

The deposit guarantee was downgraded earlier this year. And there was the slim chance it would be done away with... eventually. Now there's no chance of that happening.

Which is bizarre, because correct us if we're wrong but doesn't the government deposit guarantee provide explicit backing for the banks?

The government is so keen to encourage competition in the banking sector that it's, erm, underwriting the four major banks' businesses.

Surely that would be like the government claiming it wants a more diversified hamburger market but then telling McDonald's and Hungry Jack's it will underwrite all of their hamburger sales.

Of course, the guarantee fills in the gap left by the Reserve Bank of Australia (RBA). The RBA has stated it won't bail out a bank if a bank was about to fail. All it would do is help with liquidity ? as it obviously did in 2008 when it borrowed USD$53.5 billion from the US Federal Reserve. It then loaned that money to the banks.

We can now see why the RBA changed its mandate earlier this year to include an entire section on Financial Stability. Something that wasn't present before.

Clearly it's the government's role to bail out the banks if they collapse, but the RBA's role to stop them from collapsing. A neat little double act.

But the finer points don't matter. Whether it's the RBA or the government doing the bailing the result is the same... taxpayers paying for corporate failure... again.

Then there's the fabulous news that the Australian Office of Financial Management (AOFM) will "invest a further $4 billion in high-quality, AAA-rated RMBS to continue supporting this vital funding market..."

As Swanny points out, this is in addition to the $16 billion of residential mortgage backed securities the taxpayer already owns, thanks to the AOFM's buying spree.

More taxpayer dollars. This time on trying to prop up the housing market... again. And as I'll point out below, another example of the trend towards disconnect between borrower and lender.

Finally, the government will "Allow banks, credit unions, and building societies to issue covered bonds."

It's this last one that's the doozy. Why? Because of what follows...

Covered bonds will "harness our national superannuation savings to domestically fund more productive investment in our economy."

What, building more houses? That's productive? Give me a break. But the key point is the mention of "national superannuation savings".

Notice how the word "national" is used. Notice how it doesn't say "individuals'" or "personal" superannuation savings.

Maybe the government's use of the term is harmless. Maybe it has used it as a way of describing all the superannuation savings in the nation.

But we don't think so. Little by little. Step by step. And dollar by dollar, the government is making a bee-line for your retirement savings.

The government talks about the need to "harness our national superannuation savings" to fund "more productive investment in our economy."

Clearly the government sees current investment by retirement funds as unproductive. And maybe it is. But so what. At least to some degree, the beneficiaries of those funds have a say in how the money is invested. And if they want it invested in something unproductive that's fine. That's individual choice.

After all, these superannuation funds are supposed to provide for an income in retirement.

But not anymore. As we've pointed out several times, these funds are on the way to becoming the next plaything for financial institutions and government bureaucrats ? need a new rail line built? Get the super industry to pay for it.

Need a new hospital or school built? Get the super industry to pay for it.

Naturally there will be the illusion that these things are generating an income. But only because taxpayer dollars are being snaffled to pay for it. It's one big cash roundabout.

It is just another Labour move to grab Super Funds, being they have squandered all other cash cows, just as Qld Labour's move to sell Qld Motorways to their own Superannuation Scheme, thereby moving debt from the Govt balance sheet to the Govt Employees Superannuation Scheme's balance sheet. Neat move, now the employees own the losing enterprise rather than all taxpayers!

I too amglad I have my own self managed Super Fund!