It’s Friday the 6^th of June 2025 and the federal government is close to doing a deal with the Greens over its tax hike on superannuation balances above $3 million. It is the most controversial bill under discussion at the moment and would see the earnings tax rate on superannuation balances above $3 million rise from 15 per cent to 30 per cent.

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News in brief

For at least 35 years, Australia had been running a trade deficit with the US – we buy more from the US, than we sell to them. Then in February and March, Australia went into surplus, right ahead of Donald Trump’s Liberation Day tariffs. A case of very bad timing. Things have now returned to normal with the US trade deficit re-emerging in April.

Lithium and rare earth stocks haven’t had a lot to celebrate recently, but there was some good news yesterday for local critical mineral companies. European car makers said restrictions by China on exports of rare earth alloys, mixtures and magnets could cause delays and outages in EV production. That sent the share price of groups like Mineral Resources and Lynas soaring.

Ocean temperatures in the south-west Pacific reached fresh highs in 2024 as heatwaves struck more than 10 per cent of the world’s marine waters. Long stints of extreme ocean heat were experienced by nearly 40 million square kilometres of the region last year, including the waters surrounding Australia, according to the World Meteorological Organisation. Also, last year warming on land was higher than it had ever been.

Donald Trump has banned citizens of 12 countries from entering the United States and launched an investigation into aides of Joe Biden for allegedly concealing his mental decline.

A ship carrying about 3,000 cars to Mexico was abandoned in the middle of the Pacific Ocean earlier this week, highlighting a growing risk to the transportation of electric vehicles. 

Fear-o-meter

I am trying hard to sympathise with people saving for retirement complaining about being taxed at 30 per cent not 15 per cent for earnings on the balances above $3 million. That’s what the government’s super tax legislation does. But I’m not succeeding.

It is a tax on the rich, but I’m okay with that.

Admittedly, the tax rate isn’t the biggest issue. It’s the fact that unrealised gains will be taxed, which does seem unfair. Having said that, if the tax payment comes out of their super fund, then individuals won’t have to be coughing up money from their non-retirement savings.

The other part of the legislation that the government is close to passing with the Greens’ help, is the lack of indexation. That might be a problem in the future. But I can’t get too worked up on that either. In the future, the government of the day can index the amount if they want.

Tax reform is hard. The debate is healthy. But it doesn’t mean the legislation is poor.

Who's talking today?

On the role of smaller banks in the Australian market, and whether the regulatory system favours the bigger players: 

 

"We don't believe it's a level playing field. The regulatory environment artificially makes life tougher for small banks. The number of regulations and rules and laws that all banks have to comply with are massive. That weighs itself heavier on small banks. Larger banks have departments of people looking after one small piece of regulation. As a smaller bank, we have to be sort of jack of all trades in terms of regulations and be across the whole lot of regulation. 

It's an unusual environment where you have smaller organisations in an industry being penalised with heavier capital weights than the larger organisations. So the regulatory environment is actually tipped against smaller banks. So the large banks get an implicit government guarantee on their funding. They get lower risk weights on their capital. The two key things you need in banking is capital and funding. And so we think the environment's tipped a little bit too far against the smaller banks."

Greed-o-meter

Which sectors on the ASX have performed best so far this year?

Source: MarketIndex.com.au

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