One of the more alarming aspects of the investor market at the moment, driven as it is by retirement savings, is that 50 per cent of Australians don’t actually think they’ll have enough to live off once they stop work. That’s according to a wealth sentiment survey conducted by MLC for the June quarter.
Indeed, that survey found only 32 per cent of people felt they would have enough. While that is a vast improvement on the 19 per cent reported last year, the fact is that the majority still don’t feel secure and at the very least they’re unsure.
Perversely, Australians themselves have never been wealthier. One would think that the vast majority of citizens would therefore feel very secure in their retirement. That they don’t is clearly a failure of policy and notionally a national crisis.
The population is aging and direct income support to seniors is already set to place significant pressure on the budget – with estimates it will rise 20 per cent over the next four years (not including health and disability support). If population growth is set to slow, as many economists believe, then the pressure on the budget becomes markedly worse, as it will account for a higher proportion of revenues.
The problem is that it’s government policy itself that’s driving this fear, creating the problem and exacerbating it. People are right to feel anxious as a result.
Think of the backdrop. For a retiree, income is the one obvious concern. Unfortunately though, we live in a world where income will be increasingly difficult to come by. Looking through the short-term noise concerning a Fed rate hike etc, we know that interest rates will be significantly lower over coming years, especially when compared to what we saw prior to the GFC. Central banks have told us this and of course there is an apparent glut of global savings. These are two factors that will act to keep yields lower.
This lower yield environment puts significant pressure on investors to accumulate capital in order to fund retirement. Thought another way, in an ultra-low rate world, retirees will need a much larger asset base to earn income from. That leaves retirees relying much more on asset price growth.
Yet ask any economic talking head and they’ll tell you property is a bubble just waiting to burst as are equities. Up until recently, they were over-priced and in need of a correction, globally they still are. For anyone looking for long-term savings options, this rhetoric -- the threat of some broad-based asset price deflation -- is obviously a cause for concern.
Then think about the regulatory and policy environment. Property, naturally enough, would feature highly as an investment for anyone looking to try and secure their future. So, what are regulators doing about that? Everything they can to bring fear into the market. The communications strategy is plain to anyone.
Similarly, actions taken against those who are trying to save for their golden years are increasingly punitive in nature. There is a constant threat that negative gearing will be abolished. There’s also a very aggressive push to tax property holders more: the rapturous calls to scrap capital gains tax concessions for instance or to impose land taxes. These are deeply troubling to those who are trying to save and invest in order get ahead and build up funds for their retirement.
At the same time, though, the option of receiving any state support is looking bleaker. Wasteful spending by the government and the bureaucracy and an inability to balance the budget has prompted an unjustified attack on seniors. The call is to restrict access to pensions. The nation can’t afford it and so ‘rich’ retirees should be deprived.
Unfortunately, the definition of what it means to be rich has been distorted by ultra-low rates. No thought is given to the difficulties that these ‘rich’ retirees have in earning income or to the constant attacks made on those who seek to save for themselves. One can only imagine this process becoming ever more vindictive as time goes on, what with the ageing population and slowing population growth.
With all that to contend with, is it any wonder few in Australia feel secure about their retirement plans?