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Whatsapp An unnamed industry group has reportedly suggested that low income earners be allowed to opt out of superannuation contributions

The superannuation industry has condemned suggestions the federal government should allow low income earners to opt out of super. Meanwhile, the iron ore price is on the up and Britain considers leaving the EU. Sheryle Bagwell takes a look at the week in finance.

What are the changes being proposed for those on low incomes?

Reports over the weekend said an unnamed 'industry group' was pressing the government to consider allowing workers earning less than $37,000 a year to opt out of super contributions.

Forcing the poorest Australians to put part of their wages into super when they will probably never be able to save enough to live without the aged pension seems to make little sense.

Under the proposal, they would instead receive their employers' contributions—of around 9.5 per cent of their wages—directly in their pay packets.

I suspected the unnamed industry group was the Property Council of Australia, perhaps as a quid pro quo for any negative gearing changes. Maybe people could put the extra cash towards a deposit on a property? Though opting out of super would only put about $60 a week extra into low income earners' pay packets.

But the Property Council says it wasn't them. Indeed, no one has put up their hand to claim ownership of the idea, although presumably it won't stay secret for long, as all budget submissions are eventually made public.

Is it a good policy idea and is the treasurer keen on it?

If the treasurer is keen on it, he's not saying. According to Scott Morrison's office, reports that he is considering these changes are just not true.

We do know that philosophically, conservatives both in and outside the Liberal Party have always been against the very idea of compulsory super. They say Australians should have the choice to spend their wages on whatever they want.

Some on the left are also coming around to this idea, particularly as the financial industry built around super becomes more and more monolithic and returns become more volatile.

Certainly forcing the poorest Australians to put part of their wages into super when they will probably never be able to save enough to live without the aged pension seems to make little sense. The same point has been made by the chair of the financial system inquiry, David Murray.

But allowing low income earners to opt out of compulsory super would probably prove to be the death knell of the whole system, as it would open the way for others, such as first home buyers, to demand the same.

The big banks and the super industry would no doubt fight hard to prevent that, and I suspect Morrison won't want to fight this battle just now.

What does the rise in the iron ore price mean for the budget?

Last week the price of iron ore rose to a three-month high of US$48 a tonne as Chinese steel makers ramped up their production after the Lunar New Year holiday. That's a good US$10 a tonne more than it was fetching back in December. Of course, it's still a long way from the halcyon days when it touched US$180.

Still, this recent appreciation could give the budget a real boost. Treasury had assumed in its latest forecasts that the price would hover around US$39 a tonne this year.

Deloitte's Chris Richardson has done the numbers and says if the higher prices are sustained, it would add an extra $1.4 billion in revenue to the government's coffers this year.

It would a brave treasurer who counted on these higher prices being sustained, however. The iron ore spot price is highly volatile and even the Chinese are forecasting that steel consumption will decline this year.

British PM David Cameron has named June 23 as the date for a referendum on the UK's membership of the European Union. What does the business sector say about that?

Not surprisingly, the British business community is totally opposed to the prospect of the UK leaving the EU, although it will be glad the matter will finally be brought to a head.

For many multinationals, London is their entry point into the European Union; they also feel that Britain, with its Anglo-Saxon ways, is a steadying influence on the whole project.

The UK business community fears an exit might trigger a flight of capital to Ireland or perhaps even Scotland—if Britain exits the EU, then pro-EU Scotland will almost certainly hold another independence referendum.

'The EU referendum is a significant risk, not just for the UK, but also for Europe and the world,' Andrew Formica, the Australian-born CEO of Henderson Global Investors, told RN Breakfast.

'It's a very big decision. Clearly it's a decision for the British public to make. But I think both the UK and Europe would be weaker if they were apart. I think the economic arguments stack up that both are better together.'

According to recent polls, British voters are split over whether to remain part of Europe, although betting markets are still heavily backing the likelihood of a vote to stay in.

Nevertheless, a quarter of Prime Minister David Cameron's cabinet will campaign for a Brexit and London's popular mayor, Boris Johnson, has thrown his support behind the 'vote to leave' campaign.

British and European markets may react to that this week, as traders say the risk of a Brexit has yet to be factored in.

Listen to the full analysis Sheryle Bagwell previews the week ahead in finance.



