The federal government has been slow to consider the needs of self-funded retirees in the current low interest rate environment, despite relying on their support to win the last election, according to the opposition.
Opposition financial services spokesman Stephen Jones said while efforts by the Reserve Bank of Australia to keep official interest rates at their current low levels were necessary to support people through the COVID-19-driven economic downturn and into recovery, the adverse impacts on self-funded retirees had been ignored.
“Most of the talk that we hear about the benefits of low interest rates, they don’t tell the whole story. If we think of persistent low rates as a net shift in wealth from savers to borrowers, then we can understand that there’s a group that are going to be worse off – self-funded retirees,” Jones said during an address to last week’s virtual SMSF Association National Conference 2021.
“Now, it seems the government is blind to the predicament. This really is extraordinary, given that one of the big reasons that Scott Morrison is Prime Minister today is because of self-funded retirees. It seems that post-election, he’s dropped them quicker than a hot potato.”
He said claims by the government that it was unable to soften the impact of low rates on retirees were untrue and an easy policy change to achieve this, which it had been slow to enact, was to change deeming rates.
“At 1 per cent, the deeming rates for small investments sits alongside the Reserve Bank cash rate, but for too long it remained well above the rate that investors could ever hope to get in the bank interest or short-term deposits,” he noted.
“In times of hardship, a swift response is needed from government and the same can also be said for the rates the government charges retirees to access the pension loan scheme.
“If lower returns in the retirement cycle of investment are to be a feature of the future, then we’ll also have to reassess our assumptions about what is adequate to sustain retirees over the long term.”
He also claimed the government was planning to halt any further increases to the superannuation guarantee contribution rate, which would break a direct promise made by the Prime Minister before the last election.
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