Paul Chamberlin, The Age, 18 July 2000
Victoria will be starved of money for big infrastructure projects as an unintended consequence of the federal superannuation surcharge, fund managers warned yesterday.
Super funds, which have been driving much new investment, are now likely to desert long-term, job-creating projects and put available money in the share market and fixed-interest accounts, they said.
The fund managers believe the surcharge will accidentally hit many low-income earners as well as the wealthy.
Fund members will be asked to provide their tax-file numbers when the surcharge is introduced, but will not be compelled to do so. Fund managers fear that most people will generally fail to notify funds of their numbers, thus exposing many to the surcharge who were not intended to pay it.
The Government is confident Australians will comply, but in previous campaigns by funds on tax-file numbers, the response rate was only about 15 per cent.
If this occurred across the industry, cash flow to funds would be reduced by 12 per cent as almost all fund members were slugged with the surcharge, according to the chairman of the Development Australia Fund, Mr Les Fallick.
The DAF has already invested about $200 million worth of super contributions in large Victorian projects such as City Link, City Square and United Energy.
The associate director of infrastructure investments for Hastings Funds Management, Mr Matt Williams, said "certainly we can see it might slow down growth of funds".
Mr Peter Downes, of Jacques Martin, said there were 16.2 million super accounts in Australia, an average of two and a half accounts per contributor. If people unfairly paid the surcharge and had their own funds reduced, "that's more than five million angry voters just before the next election".
Capital for new projects is already drying up after the Treasurer, Mr Peter Costello, said infrastructure bonds would be scrapped because of fears the scheme would create a new Budget blowout. The Government has promised to look at a replacement in the Budget.
It has been estimated that $30 billion of private infrastructure investment alone is either certified or in the pipeline.
Although many of the big Victorian infrastructure projects are already funded - such as City Link - others are awaiting investment.
The chief executive of the Australian Council for Infrastructure Development, Mr Dennis O'Neill, said for Victoria these could include Docklands developments, rail links to regional centres, and big improvements to town water supplies and sewerage systems.
The intended targets of the 15 per cent surcharge are those on incomes above $85,000. It is to be phased in above $70,000, and raise about $500 million a year.
Meanwhile, Mr Costello has told Parliament that forcing the funds to collect the surcharge was within the Commonwealth's constitutional powers.
The question arose last week with the release of a legal opinion from a former top Government legal counsel that the surcharge bill was probably "wholly invalid".