SYDNEY, Australia – Almost 100,000 superannuation accounts got entirely drained after the Australian government allowed individuals to gain early access to the savings.
Due to the health crisis in the world due to the coronavirus pandemic, countries closed their borders months ago. Businesses faced lockdowns, workers are out of jobs and income, and an increasing number of Australians suffer debt and struggle for the daily expenses of their household.
The country’s financial struggle as the economy closes led the Australian government to provide billions worth of cash subsidy to individuals and households. Among the early moves made by the government is granting early access to the people’s superannuation accounts.
Latest data on the superannuation accounts shows that between 73,000 and 95,000 super savings all over the country are now sitting empty. That amounts to 5.4% and 7% of exhausted super accounts.
With the early access to superannuation savings provided by the government, over $11 billion worth of cash got withdrawn as Australians look for funds through the pandemic. Although it helped a lot of Australians during the financial stress caused by the COVID-19 crisis, the massive number of drained accounts now sparks fears and anxiety.
A hundred thousand of drained superannuation accounts are causing risks for an increase in administration fees. According to Jo-Anne Bloch, the interim chief executive of Mercer and Link Group super funds, drained accounts are now a meaningful conversation and issue.
With the coronavirus pandemic heavily impacting the Australian economy, over a million Australians were able to gain access over their super accounts. Most of them those looking for funds to brave through the pandemic as they got laid off when businesses and industries started closing in line with the COVID-19 restrictions.
The financial crisis brought by the coronavirus pandemic brought young savers to rationalize their savings and current accounts. It led most of them to remove some of their savings accounts that got forgotten through the years to help minimize the premiums and fees over the Productivity Commission.
Forgotten superannuation accounts provide over $2.6 billion worth of payments per year. With the uncertain market and economy due to the coronavirus pandemic, thousands of super members started reorganizing their finances. Most of them started to reduce or eliminate automatic charges sustained on their other accounts.
According to Ms Bloch, the recent move of Australians regarding their super accounts caused massive numbers of savings that are no longer funding the overall super scheme. She added that this issue could cause a considerable increase in payments to help subsidize the operational costs of the funds.
Ms Bloch commented that the situation is a difficult one for everyone involved. Everything is getting a boost, except for the super fund membership, she said.
Meanwhile, the early access to the superannuation accounts got blocked, following countless allegations about sham withdrawals. Around 150 super fund holders claim reported identity theft, causing them to lose over $120,000 to fraudsters, following a hacking incident on a tax agent. It caused exploitations on the personal details of superfund accounts under that agent. The Australian Federal Police is currently making an investigation on over 100 cases regarding the issue.
The current health crisis, due to the coronavirus pandemic, hit the Australian economy hard. Experts expect that the epidemic could result in a downturn in the country’s economy, with an estimated $50 billion decline by the end of the second quarter of 2020.
Josh Frydenberg, the Australian Treasurer, said that they expect that the country’s staged lifting of COVID-19 restriction will cost the economy around $9.4 billion per month after July. Further, he commented that it could also lead to a 16% decline in overall household consumption. Not to mention, they also expect an 18% drop in home and business investments compared to the figures recorded before the health crisis happened.
Innes Willox from the Australian Industry Group also commented on the issue, stating that the Australian government should be willing to change and challenge old notions for a faster economic recovery.
He commented that discussions around the changes in policies need some reconsideration. The government should approach these changes by taking productivity, competitiveness, fairness, and growth into account.
Meanwhile, the latest data on the country’s wages growth for March will be out in the middle of next week. The recent figures from the labour force will also be out the following day, which most expect will add to the gloomy picture of the country’s economy.
Craig James, the chief economist at CommSec, stated that the unemployment figures from the labour force department could significantly affect the country’s consumer sentiment. He added that it showed continuous growth from the previous record lows before the coronavirus pandemic hit the country.
On the other hand, Mr James admitted that the easing of COVID-19 lockdown restrictions helped increase consumer morale in Australia. The positivity about the country seeing the back of the worst impacts brought by the coronavirus pandemic also helped increase the sentiments, he added.