The government is launching an ambitious plan to build a super fund to replace the Reserve Bank’s current reserve requirement of a 1 per cent return.
The Reserve Bank said on Tuesday it would be forced to buy bonds and other assets to pay the cost of servicing its current superannuants.
It has been struggling to pay off its $2.4 trillion super fund over the past two decades, and in the past few weeks it has been forced to sell assets and cut its dividend.
Prime Minister Tony Abbott is expected to announce the fund’s creation at a press conference later on Tuesday.
Its creators said the scheme would provide the government with a “new source of funding for the state and local government system” while helping to reduce debt.
“The Coalition is determined to deliver on our plan to boost the superannuity market, to make it easier for Australians to access the super fund, and to reduce the impact of superannuitisation on their finances,” the Reserve Board said in a statement.
Labor and some of its backbenchers have raised concerns about the scheme, saying it is too expensive for the country and should be phased out.
Treasurer Scott Morrison has previously said he would like to see the Reserve Fund phased out completely, but has indicated he wants the scheme to be kept alive until it is profitable.
Some of the super funds in Australia are funded through the super levy, which the Government has said is too high a tax and that would reduce its revenues.
However, the levy is paid on all Australians’ superannoends, not just the top 20 per cent, and some argue the Reserve has too much power.
A recent review by the Institute of Public Affairs found the Reserve could become a “super-rich private person” that is not a financial burden for the Australian public.
Mr Morrison has been accused of using the Reserve to prop up his own political career.
Under his leadership, the Reserve’s net asset value has been growing faster than the economy, and as a result it has become a more significant contributor to state and territory revenue.
On Tuesday, the government is expected make the Reserve a priority as it seeks to boost revenue and cut spending.
There are concerns the scheme could be a windfall for wealthy people in wealthy states such as New South Wales, Queensland and Victoria.
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