Way to Go

  1. 39,800 Posts.
    lightbulb Created with Sketch. 3
    Here's a real plan to stop intergenerational theft

    Opinion
    The Drum
    By Ian Verrender
    Posted earlier today at 6:43amMon 16 Feb 2015, 6:43am
    Photo: Why have Tony Abbott and Joe Hockey not delivered the Intergenerational Report yet? (AAP: Lukas Coch)
    For a Government so concerned about future generations, why did it pursue an economic agenda that attacked our youth while the wealthy baby boomers were largely spared? Ian Verrender writes.
    "Reducing the deficit is the fair thing to do - because it ends the intergenerational theft against our children and grandchildren." Prime Minister Tony Abbott, address to the National Press Club, Canberra, February 2.
    "How am I ever going to afford a house?" School student's question to Reserve Bank governor Glenn Stevens at Club Central, Hurstville, Sydney, February 13.

    It took a 16-year-old a couple of seconds last Friday to ram home the bitter reality of wealth transfers between the generations. And it is a problem that extends far beyond the mere balancing of the nation's books.
    For a Government languishing in the polls and suffering a credibility problem, the Prime Minister remarkably has opened up yet another avenue of attack.
    For if he is so concerned about the wellbeing of future generations, why has his Government been so tardy about meeting its obligations to deliver the Intergenerational Report?
    The Treasury-prepared document is now more than a week overdue and, if reports from Canberra are correct, is unlikely to be delivered before March.
    As a result, Treasurer Joe Hockey now is in breach of the Charter of Budget Honesty Act that requires the report to be delivered every five years, within a strict time period.
    The last report, delivered by Wayne Swan in 2010, highlighted two main threats to our future prosperity. One was the cost associated with an ageing population. The other was climate change.
    Given Tony Abbott once dismissed climate change as "crap", has hailed coal as a fuel to lift the developing world out of poverty, and has presided over a Government that has removed a price on carbon and waged a war against renewable energy, it is fair to assume that the cost of climate change doesn't rate highly on his personal register of intergenerational theft.
    That aside, Abbott and Hockey both are acutely aware of the potentially enormous challenges of an ageing population, the serious negative impact that will have on the budget in future years and the onerous costs to be borne by future generations.
    Unfortunately, many of the policy initiatives outlined in the yet-to-be-passed 2014 budget were a direct attack on our youth while the wealthy, older generation of baby boomers was largely spared.
    It outlined a tertiary education plan that would load up students with the kind of debt that once bought a house, opted to penalise the unemployed (most highly concentrated among the youth), cut the superannuation co-payment for those on minimal incomes and added a range of taxes and imposts that will hit the most vulnerable in the community the hardest.
    Those measures, which save little, have brought a stinging rebuke from the community, exhausting the Government's political capital for virtually no gain.
    It was a different story at the other end of the social spectrum.
    Superannuation lurks, which allow those on the highest incomes to reduce income tax, were maintained. Capital gains tax exemptions and negative gearing, a driving factor behind surging city real estate prices, were never mentioned.
    It's little wonder our youth are feeling just a little disenfranchised.
    For whatever reason, Abbott and Hockey instead have stuck to their old "debt and deficit disaster" routine, a soundbite that proved so effective in opposition.
    Don't get me wrong, I love a good bit of alliteration. But endless repetition by multiple ministers makes for a mind-numbing monologue.
    Let's get a couple of things straight here. Australia has a structural deficit problem that needs to be addressed. It is not a disaster. At least not yet. But the problem is getting worse and at a pace that is accelerating.
    Fixing it requires leadership and initiative and at least the perception that the pain will be equally shared.
    It also requires an understanding of where the problems lie. And unfortunately, this Government continually misses the mark on why our finances are deteriorating.
    While the Prime Minister and Treasurer bang on about spending, and point the finger at the former government, it is a revenue shortfall that is the culprit. And it's been that way for years.
    The Government's own budget papers tell the story.
    Apart from the period in 2008/09 at the height of the financial crisis, spending during the Rudd and Gillard era as a proportion of GDP was on par with that of the Howard years. In 2012/13, spending was 24.1 per cent of GDP, a performance Howard beat only once in the new millennium.
    Revenue, on the other hand, dropped sharply after the financial crisis as capital gains tax receipts plunged, corporate tax went backwards as earnings deteriorated and income tax cuts by Howard and Rudd took effect.
    Despite all the bravado in opposition, including boasts that the budget would be in surplus in the first term of an Abbott Government, Hockey last week confided to his party colleagues the deficit may be permanent unless they pushed ahead with his austerity program.
    You have to give him marks for persistence. But the alarming deterioration in the nation's finances have occurred on his watch. And it is completely out of his hands.
    The recent plunge in commodity prices could wipe out an expected $40 billion over the next four years.
    That will add to national debt and ballooning interest payments, which will further damage the budget.
    A revenue crisis cannot be fixed by cost cutting alone. There now is an urgent need to tighten up the tax system and remove the loopholes that allow multinationals - including our homegrown ones - to shift billions around the globe to avoid tax obligations.
    And if Abbott is serious about intergenerational theft, here's a neat little solution.
    He could consider axing the $13 billion a year in superannuation sweeteners that accrue to wealthy older Australians.
    And he could tighten up the negative gearing and capital gains tax exemptions that cost a further $7 billion each year.
    That could go a long way towards repairing the budget. And it may just help deflate a property bubble that threatens to, at best, create a landlord class of inherited wealth and, at worst, forever lock future generations of Australians out of the housing market.
    Ian Verrender is the ABC's business editor.
    ------------------------------------------
    Just what I have been saying
    Dave R.
 
GET SUPPORT arrow-down-2 Created with Sketch. arrow-down-2 Created with Sketch.