FINANCIAL SERVICES POLICIES
Banking
The Banking sector is a disgrace, it works only for its own ends, whilst treating its customers like slaves. The Banks have the power to manipulate Governments and politicians into granting them too much power over the economy, businesses and the public. The RBA appears to operate on behalf of the banks, selecting the interest base rate, that best suits the banks at any given time. We are told that inflation is our worst enemy, but the Government doesn’t mind the banks increasing their fees and interest, when other businesses are told to lower their prices.
Banks, unlike any other business, are grated the power to lend money out of thin air, and to lend the same dollar nine times, through a mechanism known as fractional reserve lending. They apply interest at any rate they like, but typically for home loans, the interest applied is designed to generate a 100% return on profit over 25 to 30 years. The money that banks generate goes to shareholders and superannuation funds, helping to prop up the super industry, who in turn invest our money in the banks. The bond market is another example of printing money out of thin air, but is all backed by the tax payer, who underwrites the borrowing of any government, who ultimately pays for it through the taxation system. Usury is forbidden in the major religions and this has been the case for at least two thousand years. If there is nothing wrong with lending money for interest, then why does religion oppose it. The simple answer is, that usury destroys economies, by extracting more money than there is in circulation.
Example: If an economy only has $10, and that is all the money there is, if someone wants to borrow that $10, but the lender stipulates, that they can on the condition, that they not only have to repay the $10 in a year’s time, but they must also repay an additional $10 in interest, then where does the second $10 come from. And this is the crux of the issue.
To get around this problem banks lend out the same $10 up to nine times, fractional reserve lending. By doing this they bring into existence $90 more, which didn’t exist previously. It is from this $90 that the borrower is able to repay the $10 interest. This process is then repeated over and over again, creating a false economy. The money in the economy is only there because the banks created it, there was no increase in the wealth of the economy. So, what in fact has happened is, that the economy has been devalued by printing all this extra fiat currency. The banks don’t care because they get richer, on paper, but the economy has no real value, with the people working endlessly just to feed the banks with interest repayments, either through personal borrowing or government borrowing.
This is why we need to move away from a bank fiat currency-based economy and move to a sovereign based economy. A sovereign money-based economy will strengthen the economy and not diminish it.
All owner occupier home mortgages will be issued via the state bank with sovereign money. The private banks will be left with the private home investment market and the business and commercial market. The loss of the home mortgages will put pressure on the banks to up their game on business lending. The banks can still operate the credit card and personal loan markets. Banks will not be allowed to use the home owners’ property as collateral, as sovereign money properties cannot be connected to any loans, as the purpose is to keep a roof over a person’s head; and putting the home up as collateral could risk that.
Banks should lend money according to the risk, they should not lend it based upon what you can put up as collateral. The banks currently operate by a no risk rule, so they have nothing to lose, but you have everything to lose. By limiting the banks access to certain markets, this will force them to start acting like a business and to offer competitive loans, where they share part of the risk.
The loss of certain markets to the banks will be a concern, but as we fix and grow the economy, we expect more businesses to flourish, which in turn will see a growth in banking services for the new customers. What the banks lose on the swings they will eventually gain on the roundabouts. Banks will no longer be permitted to provide any insurance products or services. Banks will only be able to deal in banking products and services.
Central Bank Digital Currency (CDC)
We will not allow CDC to be brought into existence. This is nothing more than a controlling mechanism that will make people slaves to the banks and deny people the right to access their own money. It will also be a way in which the banks, corporations and governments will be able to spy on the people’s spending habits.
Bitcoin and Other Digital Money
Bitcoin is becoming more popular, because it sits outside the normal banking system and therefore outside government control. Bitcoin should be left to develop naturally; it will either fail or succeed based upon how the public perceives it. However, this should not mean that there should not be any regulation or controls put in place. We need regulation that protects consumers from being ripped off, that the sellers and intermediaries of bitcoin are licenced and adhere to a strict code of conduct.
Regulatory Bodies ASIC APRA AFCA
There is far too much regulation in Australia, especially in the finance sector. It is important that the finance sector is regulated to ensure best practice, but it is pointless having regulations if they are not going to be enforced. ASIC and APRA have both failed in their primary duties and yet this does not stop their senior executives from being paid $800,000 a year, salaries; and here lies the problem, over paid executives. When you are paid a ridiculous amount, it ceases to be about the job and more about preserving your huge salary. The executive in fear of losing this lucrative income spends a lot of time making sure everything appears normal, even if it means not investigating complaints, so that the clear up rate can be fudged.
ASIC, APRA, AFCA, ICAC, IBAC and all other regulatory bodies to come under the control of the Home Affairs department. These regulatory bodies are in effect civil police, but their role is to act like the Police to keep the law and order and to catch criminals. By making these bodies departments of the Home Affairs, they can be restructured to become efficient departments, where the department heads are paid a modest wage, but not exceeding $200,000 per annum.
The other thing to bear in mind is, if a person is willing to commit white collar crime, then they are just as likely to commit other crimes, so having the whole policing apparatus under one department will hopefully make the sharing of information more efficient resulting in more crimes being stopped and solved.
Competition
The ACCC will continue to monitor competition in the market to ensure fair play and a level playing field. We will work with the ACCC to help develop legislation that is fair and equitable, but without crushing business and commerce. We want to encourage a sense of cooperation between government and corporations, so we can all work together for the greater good of Australia.
Charities
There are an estimated 700,000 charities in Australia, which is quite a lot. The question begs what do they do and achieve and are they really fit for purpose. We will ensure that all not-for-profits are properly regulated, with strict controls in place for the handling of money. Charities will need to demonstrate that they are fulfilling a practical purpose and not just being used as vehicles for people’s ego
Credit Cards
Credit cards and their fees need to change. Basically, the banks get the best of both worlds. They charge interest fees to business as well as a monthly fee and a set up fee. They then charge the user interest of up to 23% when they do not repay their credit on time. There is nothing wrong in charging businesses a modest monthly fee, but the credit card interest fee, must either be scrapped or reduced across the board to a fixed amount of only 0.5%.
Credit card amounts, the amount of credit available to a person, should be no more than the gross monthly wage. So, someone earning $75,000 a year, which equates to a gross monthly income of $6250, this figure will be the maximum amount of credit that they can have on a credit card. The minimum repayments on a credit card should be no more than one year. So, if they max their card at $6250, then the monthly repayments will be $521. We do not want people carrying over large amounts of credit debt, which is accruing 23% interest.
Credit Unions and Small Banks
These entities will continue as they are.
Micro Lenders
These entities will continue as they are.
Superannuation
Superannuation can be used to offset mortgage loans, if there is an interest-bearing loan in place.
No taxation on any additional contributions.
Upon retirement 50% of superannuation can be taken as a lump
Upon retirement 50% of superannuation should be taken as an annuity, private or government
Voluntary employee contributions should be encouraged up to 5%
Ideally, superannuation should be increased from 12 to 15% plus a 5% compulsory contribution from the employee, making 20% in total, if retires are to be financially stable during their retirement.
How much super do you need. If the cost of living, excluding mortgage and rent, is approx. $50,000 per year then you need the following, not factoring in inflation.
10 Years – 65 to 75 – $500,000
15 Years – 65 to 80 – $750,000
20 Years – 65 to 85 – $1,000,000
25 Years – 65 to 90 – $1,250,000
30 Years – 65 to 95 – $1,500,000
Super rate of 12%. Typical wage either single or combined $100,000 = $12,000 super per year.
Using 45 years of employment 45 x $12,000 = $540,000. 15% tax equates to a reduction of $81,000, so the net super is only $459,000.
This is not an exact science, as your wages start low and increase over time, super firms invest your money, which may make a return or a loss; and super rates may increase. However, cost of living may increase and inflation erodes savings.
Working on the status quo and all things being equal, it is a reasonable assumption, that if a person lives a long time, say 85 plus, then they may run out of super to live on.
So, we either have to:
- Increase the rate of superannuation.
- Decrease the long-term cost of living
- Increase the returns on super investment
- Reduce or abolish tax on all superannuation
- Die early or not live too long, not a preferred option
Private Annuities
You can hand over your entire super to a private annuity firm, who will invest your money and guarantee to pay you an annual percentage. They will evaluate you, your life style and life expectancy and determine what amount they will pay you each year. However, the annuity will only pay for as long as there is money. If the savings do not grow, then the annual payments will be paid from the savings until they are all used up, then the annuity payments will stop.
Unless it is agreed with the annuity firm that they will pay you a fixed amount each year, until you die. Then after you die, they keep the balance of any residual. The problem with this arrangement is, that you are more likely to live longer than your money lasts, so it will cost the annuity firm more, in the long run. As such, they are unlikely to enter into an arrangement, or if they do, the amount they will pay you annually will be below what you require to live on. Annuity firms rely on people dying early and being able to keep the balance of the retirement fund.
State Pension
You could maintain the state pension, but it will be a large financial drain on the public purse, so either the pension will have to be reduced or taxes raised. By maintaining the state pension, it defeats the purpose of introducing superannuation in the first place.
Superannuation Impediments
Superannuation has been undermined by the fact, that too small a contribution was levied on the wages, people started late with their supers and taxation erodes the amount of super, both on the initial payment and the subsequent investment returns. The cost of living is forever increasing and people’s life expediencies have significantly increased. All these factors will render, all but the most lucrative supers, insufficient for the average person’s requirements. In simple terms, old aged people, that live long enough will run out of superannuation. And then what do they do.
Increasing the Rate of Superannuation
Increasing the Super rate to 20%. Typical wage either single or combined $100,000 = $20,000 super per year. Using 45 years of employment 45 x $20,000 = $900,000. 15% tax equates to a reduction of $135,000, so the net super is only $765,000.
The difficulty with this proposal is, that increasing the rate of super, will place an increasing financial burden on businesses, that are already struggling to keep afloat.
This proposal will increase the amount of super, which hopefully will grow with sound investment, but it still means that you only have $50,000 per year to live on and it may only last 20 years. However, even though the money gets extended, unfortunately, many people will die within that period of 20 years. So, for some people it may just be enough, but what will your quality of life be like.
Whichever way you try and work it, we must start facing the reality that there are too many negative factors that could render your long super redundant. If we are to have any chance of making superannuation work, then we must do the following, but we must also remember the negative consequences that may ensue.
- Abolish all taxation on superannuation
- Increase superannuation to 15% employer contribution
- Impose a superannuation 5% compulsory contribution from the employee
- Abolish all taxation on superannuation investment returns
- Strive to keep the cost of living under control
- Work to minimise long-term inflation
- Completely change the way we live our lives, place more emphasis on responsible living
- Reduce overall taxation and encourage people to save more.
- Work with existing annuity firms to develop a long-term strategy for life long superannuation retirement payments.
- Introduce a Government Annuity Scheme.
- If taxation is maintained on superannuation, then all the tax raised should be placed into the Government Annuity Scheme, and invested to grow the pool of money. As Government’s can’t be trusted, not to use the money for something else, nor do they have the expertise to invest the money wisely, then it is probably wiser and more financially rewarding to abolish tax and allow the professional investors to use the extra money to grow the portfolio investments, rather than keep the taxation.
Government Annuity Scheme
Unless we intend to just let old people die when their super pension runs out, then the Government will have to intervene and pay some kind of old age pension. With the very real prospect that most people are going to live much longer, then an old age long-term state pension will have to be maintained or introduced. State hand outs are provided by tax payers. So, a percentage of the nation tax take will have to be allocated for state pensions. This will place an increasing burden on the tax payer as each generation increases and lives longer. It will possibly get to the same point where the current superannuation is at, not enough money to go around.
So, how do we maintain superannuation, which guarantees a fixed annual amount, index linked and lasts the life time of the pensioner. In short, the Government will have to be the nation’s Annuity provider.
When a person retires, they should be allowed to choose how they wish their superannuation to be maintained and paid. The rich may wish to conduct their own affairs; and why shouldn’t they. The poor on the other hand, with their minimal supers may not have any choice in the matter, unfortunately. The problem with the freedom of choice approach is, will enough super be invested in the GAS to make it viable. The “all in” approach will mean that the richer supers will help subsidise the poorer supers. There are pros and cons and depending upon one’s situation will determine whether they support the “all in” policy or not.
What the Government must do, is work out the viability of the scheme with and without the independent supers. For the GAS to work and be a success, then all supers may have to be placed into the GAS.
The concept of the GAS is, that all private supers are placed into the GAS. The GAS will invest the money to keep it growing. This may be done by the Government or through the private investment firms. Basically, whoever is the best at maximising returns. The Government will then pay an agreed annual amount that meets the “cost of living” requirements. The annual amount will be paid fortnightly and the annual amount will be index linked to take in account the annual inflation. This annual amount will be paid, until the death of the person, where upon it will cease.
This concept will remove all the worry from the minds of old aged pensioners who are concerned about not having enough to live on. For people with limited supers, this is an ideal solution, which means they can have a relatively peaceful retirement. For people with larger supers, they may feel aggrieved that they have saved all their life, for a good retirement and now only get the same as the person who didn’t save. This is a fair point and perhaps there needs to be adjustments made, where the annual amount paid, on large supers, is higher. At the time of writing this it is not clear how to address this anomaly, to make it fair and equitable. Our main focus is on the majority of people who will not have enough to retire comfortably on as opposed to the minority who will.
This policy is not the perfect solution and it is quite probable that the Government will have to prop up the scheme with additional Government funding. But the hope is that any additional government funding will be less than the state pensions currently being paid.
All retirees will have the right to enrol and work on any Government Work Programme to earn additional income, without jeopardising their pension. They can also undertake full or part time employment to supplement their pension.
If we do not address this issue, then the overriding concern is, that we could end up finding ourselves with a significant number or elderly people in their eighties and nineties, who are incapable of working in any capacity and having no money to live on, except for a meager state pension that is insufficient to pay their bills.
An important point to remember is, if we introduce interest free sovereign home loans, then once a home loan is repaid, if the home owner continues to pay the equivalent monthly amount to their super fund, then with a typical mortgage of $500,000, the additional $500,000 that would have been paid as interest, can be paid into their super over the following 15 years, which would add another $500,000 to the existing super rate of approx. $459,000, if we leave things as they are. Or $900,000 if we increase the super rate to 20% and abolish taxation. Then people could be retiring on $959,000 or $1.4 million, which would alter how we prepare for the aging population.
National Workers Compensation System
National Workers Comp System, processed by the insurance industry. Re-evaluating how premiums are calculated, not based upon wages, but on occupation type, where each occupation type is allocated a monetary value, you then select the number of staff of a type and apply the dollar amount occupation code.
Workers Compensation
All sole-traders and company directors will be eligible for worker compensation insurance.
National Approach
Workers Compensation will be one national insurance product sold and administered by insurance companies; there will be no more Government involvement. There will be no State differentiation, with all Australians being rated on their occupation and not the State in which they reside. This will end cross border issues, as it will not matter where you operate as the rates are national not State based. Companies that have multiple business activities can be insured on one policy. Example; Admin staff will be rated as admin and builders will be rated as builders, so the correct premium will be charged on the correct occupation. We will review how workers comp is rated wages versus turnover or numbers.
Currently Workers Comp is administered by each State and the States operate differently and have different rules. Directors in Victoria cannot get Workers Comp, but a director in WA can. Some states just use the base wages of the employees and some include the superannuation payments as well. The same occupation can attract different gazetted rates depending upon the state. This is an unacceptable way to conduct this type of insurance. An Australian should be treated the same regardless of the State they work in. Furthermore, the Workers Comp policy should be Australia based and not State based.
The problem with the current system is, that the premiums are calculated using a gazetted code, which has a percentage rate, which is applied to the declared wages. In simple terms, if the rate is 10%, then on a $100K wages the base premium is $10,000 to which charges, duties and taxes are applied. So, where you have two identical businesses, doing the exact same thing, each with ten employees, but one business pays in total $100K and the other pays $200K, then the premium for one is $10K and $20K for the other. So, the company that pays its employees well is penalised with a higher premium. Arguably the better paying business, is less likely to have a claim as the workers are happy and careful, whereas the lower paying business, might have unhappy staff, that cut corners, increasing the risk of accidents. This is why, to make the whole system fairer and more reflective of the risk as opposed to the remuneration, is to charge a fixed figure for each occupation type, then it will not matter how much the worker is paid.
The premium rates for each occupation should be set by the Workers Compensation Insurers, each insurer should produce their own book of rates, which will create competition and enable insurers to offer higher or lower rates, depending upon which occupations they prefer to underwrite.
Set Up A UAC Syndicate System, Backed By The SIC
There are over 100 Underwriting Agencies operating in Australia, most of whom are backed by Lloyd’s of London. The amount of business placed through these Underwriting Agencies is approximately $2 billion annually, of which the majority goes to London.
Underwriting Agencies have a “can do” attitude and attempt to provide insurance solutions to difficult risks. We propose that we create an equivalent Lloyd’s insurance model in Australia, where the UACs act like Syndicates and the Government acts like Lloyd’s, where it supports the UACs. To this end we will set up a State Insurer and a State Reinsurer. The State Insurer will provide Underwriting Binding Authority to the UACs to underwrite risks, which will all be backed by the State Insurer, which in turn will be backed by the State Reinsurer.
The advantage of this scheme is, that we will be able to provide affordable insurance to those risk sectors that are otherwise declined or charged excessive premiums by the main insurers. Home owners in Queensland above the 49th Parallel, home and businesses situated near flood plains and other natural disaster risks; will all be able to obtain insurance at a reasonable premium. As the State normally steps in with financial support packages when a disaster occurs, it is only logical to put that funding into making premiums affordable so, that the State does not have to fund a disaster recovery, it can be left to the insurers.
The financial benefits to the economy will be significant as $2 billion will stay within Australia, instead of going overseas as profit. We will generate more Stamp Duty as overseas placements do not attract any Stamp Duty and there will be more investment in Australia from the premium pool generated. Long term, we could become the leading insurance facility in the Asia Pacific region, which will generate even more investment.
Set up a State Insurance Company
We will first establish a licenced State-Owned Insurance company, whose primary focus is to support the new UAC Insurance system. The insurance company will be setup and funded by Sovereign money. Once all the systems, policies and procedures are in place, it will be ready to start supporting UACs.
With any new project there will be bugs to iron out and periods of trial and error, so initially we will invite all UACs to apply for membership of the UAC system, of those that apply we will select an initial ten who will be the guinea pigs for the first six months to a year. By having only ten UACS, will enable us to implement processes and procedures that will help us perfect the whole system. Once we are happy that the new insurance system is working satisfactorily, we will then open the membership up to another 40 UACs and we will repeat the setup process for these new ones, building upon what we have learnt. This second phase will take between six and twelve months, whereafter all other UACs will be invited to join.
The whole process from the initial ten to all UACs may take between 1 to 2 years, but once set up and perfected, this insurance facility will prove to be an invaluable source of insurance cover for the consumer.
Set up a State Re-Insurer
We will establish a licenced State-Owned Re-Insurance Company, whose purpose will be to support the State-Owned Insurance Company with its reinsurance requirements. The reinsurance company will be setup and funded by Sovereign money. The State Reinsurer will not be exclusive and other re-insurers will be welcome to participate in providing various reinsurance cover for the State Insurer. The State Reinsurer will also be able to participate in the Global Reinsurance market.
Compulsory Insurance
Insurance is perceived by some as a waste of money or a con, whereas others see it as a necessary evil, but when a claim occurs these opinions are somehow forgotten about. Insurance is a risk transfer mechanism to provide you with peace of mind, but most people see it as a costly annual expense, that they find hard to pay, hence they buy policies based upon price and not quality of cover. Price driven clients are normally the ones that complain the most when they discover that the policy will not pay for something. Whether you agree or disagree with insurance, the simple fact remains, that it is the best way to deal with disasters, whether on an individual basis or a national basis. Because there is significant non-insurance and under insurance, when a loss occurs, especially a natural disaster, these people that did not want to contribute to the premium pool are the first to hold out their hands for Government assistance. With a fully functioning insurance industry there should be no reason for government intervention. To ensure that appropriate insurance is obtained, it will be necessary to introduce certain types of compulsory insurance.
COMPULSORY INSURANCE – BUSINESS
- Workers Compensation
- Public & Products Liability
- Professional Indemnity – *where applicable
- Management Liability – Corporations only, excluding family-owned businesses
- Association Liability
- Building Insurance
- Motor Insurance – TPO
- Landlord Insurance – minimum of
- Building Insurance
- Contents Insurance *where applicable
- Tenant Rent Default *where applicable
COMPULSORY INSURANCE – PERSONAL
- Home Building Insurance
- Motor Insurance – TPO
- Travel Insurance – International trips only
*Where applicable – means only where the cover is required, due to the profession, occupation or asset risk.
Catastrophe Temporary Removal and Storage Cover
Where contents cover is purchased either through a home or business insurance policy, there needs to be a new provision of cover, that provides for the cost of temporary removal and storage when a potential catastrophe is declared. When a catastrophe happens, the losses involve damage to the building and loss of contents. In the case of floods, although the building can be saved, the loss of contents is often total, adding to the overall cost of the claim. In a loss event, most people lament the loss of their contents and the memories that they held. The loss of the building, although distressing, is less of a loss when compared to the loss of the contents. With minimum contents cover typically starting at $35K, where there is a total loss, the insurer is guaranteed to payout at least $35K.
Under the new provision, where there is a likelihood of a total loss due to a bushfire or flood, the policy will cover and pay for the professional removal and storage of contents, pending the end of the emergency. Basically, where there is a potential risk that homes or a town will be engulfed in fire or flood, the residents will be able to have most of their important contents packed, collected and placed in storage. The average cost of a house removal is approximately $3000. Because this is an insurance cover designed to minimise the loss and distress, the insurers will be able to negotiate a cheaper rate, but whatever the cost, it will still be less than the cost of replacing the contents of an entire home or business.
There may be issues surrounding the logistics of such a policy and do the benefits outweigh the cost. What is the real price of the risk and is this an overreaction to a problem that may never occur. First, this is a provision that will allow someone the opportunity to safeguard their belongings. It is not the table, chairs, settees, TVs that are important, but all the valuables, memories, clothes, kid’s toys, pictures, heirlooms etc. These are the items that most people would want to protect.
The way the process would work is, when a bushfire is nearby, homeowners can organise for storage boxes to be delivered, which they will proceed to fill with all the contents that they wish to protect. The boxes can then be stored in the garage, pending developments of the fire. If the area is at risk, then the homeowner can organise for their contents to be collected and stored. It is up to the homeowner, whether they just want to protect the basic or the entire home contents. If the fire passes, then the contents are returned, if the fire destroys the building, then the contents are protected.
If the removal is a false alarm, then it has cost the insurer, but it is better to be safe than sorry. This provision will benefit homes and businesses in fire or flood threatened areas, so these owners may wish to err on the side of caution. By doing this it will lessen the effect of the loss if it were to occur.
Say 1000 homes are evacuated costing $3m, this expense will be included in the insurer’s catastrophe reinsurance claim. But if all 1000 homes are destroyed the contents claim could total between $75m and $150m depending on the sums insured. It will only take 40 homes each with $75k contents to be destroyed to justify the expense of evacuating 1000 homes. This proposal is designed to give homeowners and businesses the option to evacuate contents, if they so wish. There is nothing more heartbreaking than knowing that your home will be destroyed along with everything in it.
If main stream insurers are reluctant to offer this product, then it is a product that the State Insurer will offer. Other advantages are, that it will help the removal and storage industries in generating additional work for them, but most importantly, it stops residents from risking their lives, by not evacuating and staying to defend their property from the fire. It is a risk prevention mechanism that should be thoroughly considered.
