Emerging from the recent Canberra gabfest is a growing sense that the government will increasingly focus its policy settings on confiscating the wealth of older Australians accumulated under policies of prior governments that facilitated this wealth creation.
This direction has emerged without a critical evaluation of which of those former policies might still be apt to help younger Australians accumulate their own wealth over time, and without explaining what new policies, which grow rather than redistribute the pie, might be explored by the government of today.
The positive policy outcomes to emerge from the Roundtable so far are underwhelming. While the ‘big ten’ ideas outlined by the Treasurer are something at least, they don’t bespeak a bold policy frontier.
The implicit premise behind the proposed ‘intergenerational fairness’ policies seem to be that governments of past decades sabotaged younger Australians to have worse lives than older Australians through terrible policies like tax-concessional compulsory superannuation. This fails to recognise that prior governments, both Labor and Coalition, were motivated to deliver wealth and improve the living standards of the populations they governed at the time. And they achieved this aim. The intergenerational fairness rubric has thus been relied upon as justification for raiding pensioners’ piggy banks and nest eggs and has the attractive patina of social justice. In reality, it’s largely driven by a calculation of electoral risk, as the target demographic doesn’t carry as much electoral sway as the intended recipients of the planned redistribution i.e. more populous younger Australians, and specifically younger welfare recipients, a depressingly growing cohort.
There are a few problems with blaming and targeting older people. First, it’s unfair. Most old people have paid taxes their entire lives, some served their country in wars and built the nation. They didn’t work four-day weeks, have avo on toast three days a week, maybe went overseas once before they were 40 years old, ate out infrequently, shared cars and bedrooms with their siblings … I could go on. They also reasonably responded to the policy signals sent by the government of the day, diverting their income into super rather than spending it, and investing in favoured asset classes.
More importantly, targeting older generations is a get-out-of-jail-free card which avoids the need to develop new growth policies. Rather than formulating new wealth creation policies for young people and growing the national economic pie, let’s take a piece of the pie from grandma’s and grandad’s fork just before they eat it, after waiting a long time for dessert! Contrast the nation building foresight of Hawke-Keating in actually creating compulsory super and establishing a wage/price accord, or Howard’s introduction of a broad-based GST with the current government’s big policy play of increasing the tax on super for the electorally insignificant big balance holders, or backing own goals like demands for fewer working hours for more pay with no proper productivity assessment or modelling expected welfare dividends. It’s like chalk and cheese.
Now, of course, this old-person-bashing thesis I’ve outlined above has limits and can only be taken so far. It must fairly be acknowledged that there are some huge macro forces at work that impact on the welfare of the population at large and present new and unprecedented policy challenges. These include advancements in digital technology which are an order of magnitude greater than the impacts of post-industrial technology people over 60 experienced in their younger years. Further, energy transition (some necessary, some religious) is a big factor. But mostly, the problem of stagnant economic growth, low productivity, housing shortages, and unaffordability are not the result of policies promulgated by Menzies, Hawke, Keating, Howard, or even Gillard, but ones that have been implemented since about 2010 and continue today.
Predecessor governments were responsible for deregulating the economy, modernising our institutions, and evolving our tax laws and IR systems thereby allowing world-class resources, agriculture, and banking sectors to emerge, and generally oversaw continued wealth accretion and increased living standards for all Australians (not just already wealthy Australians) from the mid-1980s onwards.
Yes, some now-old policy settings have had deleterious lag impacts, such as property-favoured tax settings, including negative gearing. However, many of our so-called ‘intergenerational’ inequities have in fact emanated from poor current government policies of only the last few years (Labor and Coalition), and there seems no appetite to review these policies. Prime examples include the proliferation of middle-class welfare; profligate spending through Covid; unsustainable levels of immigration, especially of unskilled workers; welfare dependency through an unchecked NDIS; burgeoning red, green, and other coloured tape; a confused and incoherent energy policy; failure to develop new trade partners and industries; and an implacable resistance to root and branch tax reform or industrial relations overhaul. Our education system also needs a total rethink.
The current government and future governments need to find some policies of their own rather than just tweaking the dials on the ones in place. The opposition also needs to break out of its post-election fugue and develop a coherent responsive policy framework.
Yes, there is a role for tax-based redistribution and changing incentives or disincentives, but our tax policy needs a complete review not just a volume adjustment.
Further, the focus needs to shift to growing the pie so that young Australians can enjoy the same improvements in living standards that older Australians experienced. If the government elects to pile onto older Australians in a show of industrial-scale elder abuse, older Australians will simply bring forward their inheritances or do whatever it takes to avoid losing their legacies to the ATO. Who could blame them? The most important young Australians in these old people’s lives are their own families. This living intergenerational wealth transfer will do little to improve the economy or social equality over the longer haul. In fact, it will only cement inequalities. This is particularly so if the tax take is not spent efficiently or effectively on building infrastructure and a more resilient and agile economy but is squandered, as it’s liable to be.
The policies that resulted in continued improvements in living standards and wealth creation were right for the time. If they weren’t then they would not have succeeded in creating a wealthy generation. That is not to say that these policies haven’t lost currency or are no longer fit for purpose. Further, the unforeseen ill effects of policies can take decades to manifest. This is accepted. However, the governments of the day need to develop positive new policies as well as review and adjust old ones. This seems lacking.
The mindset seems to be mired in a complete lack of ambition and in a win/loss welfare state perspective. Like useless children waiting for their parents to die so they can inherit their parents’ wealth, so the nation looks to wealth accumulated rather than to wealth yet to be earned.
