The missing election ingredient: nothing here for the next generation – ABC News

Posted: May 15, 2022 at 10:28 pm

It was an idea hatched decades ago in the early hours of the morning.

Disillusioned with the state of the nation's political direction, a few of us decided to form our very own political movement, one that would capture the mood of the population.

Just a few years earlier, there had been mass demonstrations, marches through the streets and, for a while, it seemed as though a new generation realised it even had the power to force nations to stop a war. But then, in the aftermath, nothing.

And so was born the Australian Apathy Party. We even came up with a catchy slogan. "Who Gives a ****?"

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Unfortunately, it never went any further. No-one could be bothered doing anything more about it, which neatly captured the Zeitgeist and more than fulfilled the project's meagre ambitions.

A similar mood seems to be descending across the nation.

With less than a week to go before the nation heads to the polls, the two main parties are locked in a battle over pretty much nothing. There are no great ideological differences, apart from last week's scrap over minimum pay, and the campaigns have been remarkable for their almost complete lack of policy.

Nobody even seems to have noticed. Which all seems a little odd. For despite a simmering discontent between the generations the battle between Gens X, Y and Z and Boomers nowhere is there any co-ordinated plan to redress the economic bias against our youth. Nor is there even a debate.

It's not merely a question of inequality. There's also the issue of sound long term economic and budgetary management. The entire artifice is unsustainable.

The only inter-generational issue in the headlines is housing. If we didn't already know, it's almost entirely unaffordable for a large portion of the younger generations. Apart from a couple of gimmicky solutions, however, there is no plan to provide a real fix.

But what about the overly generous tax concessions that benefit older and wealthier Australians, the cost of which escalates each year, that have helped create the structural deficit destined to punch a hole in the nation's finance for decades to come? This isn't even on the radar.

As for climate, which usually registers as one of the key issues for younger Australians, there's largely been radio silence.

There's an old maxim that says oppositions don't win elections, governments lose them. And if the 2019 election taught our pollies anything, it was that oppositions should avoid policy at all costs and let the government simply fall over.

Having lost what was considered an unlosable election in 2019 with a plan to wind back the tax breaks on housing, the ALP under Anthony Albanese has walked back on it.

At some stage, however, regardless of which party is in power, tax reform around housing will become unavoidable. The main tax breaks negative gearing and the capital gains tax discount have two effects. They push up housing prices and denude our tax take.

Combined, the two tax breaks cost the federal budget around $28 billion a year in foregone revenue. And, as the blue line on the graph below shows, investors are surging back into the market with record levels of borrowing. As interest rates rise, the losses investors incur on rental properties will increase. That will result in even more tax revenue foregone.

Despite claims during the last election campaign that Australia's two million property investors were "ordinary" Australians, data released this month by the Parliamentary Budget Office show the overwhelming bulk of tax benefits accrue to those in the top 10 per cent income bracket. Negative gearing and capital gains tax breaks go to top income earners and men.

Defenders of the schemes argue that removing the tax breaks would see a shortage of rental properties.

They may be right. Because if investors only bought properties they could rent for a profit, there would be a lot less investors in the market, which would take the pressure off prices and allow renters to put a roof over their head.

As a nation, we're getting older. Proportionately, that is. At the moment, about 16.5 per cent of Australians are at retirement age. Within the next 40 years, that is expected to climb to 22.8 per cent.

No matter who wins the federal election, older Australians will benefit from tax and super policies that make their lives easier, while young people struggle with cost of living.Why does it seem like baby boomers are getting such a good deal?

So what, you say? What it means is that the burden will fall on a smaller proportion of working age Australians to pay for those in retirement. And with the number of those over 85 expected to triple, to 1.9 million, the cost of aged care will soar.

Look at it another way. Back in 1981, there were 6.6 working age people for every retiree. That's now dropped to 4 working age people. And within 40 years, according to Treasury analysis, there will be just 2.7 working age people to pay for those who've permanent clocked off.

Thank heavens for compulsory superannuation, hey! Well, yes, it was a great idea. But over the decades, our superannuation scheme has morphed into a tax haven for wealthy, older Australians.

You get a tax break for making contributions to super. And the more income you earn, the bigger the tax break. Not only that, the earnings from your super fund are tax free, on a fund with up to $1.7 million. Beyond that, you pay tax but at a concessional rate.

Essentially, if you're retired, and you earn 5 per cent on your $1.7 million fund, you take home $85,000 without having to pay a cent in tax.

But a young worker, who probably can't afford a home, earning $85,000 a year slogging it out on the tools every day, forks out just shy of $20,000 in tax.

How fair is that?

And it doesn't come cheap. According to the latest Treasury estimates, the tax concessions on contributions and earnings now cost the federal budget around $43 billion a year and, without reforms, those costs will overtake the cost of the aged pension within 18 years.

In a hugely unpopular move, former Prime Minister Malcolm Turnbull in 2016 wound back some of the more excessive concessions around superannuation.

Since then, however, older, richer Australians have enjoyed something of a reprieve.

During the pandemic, when most young and newly unemployed workers were desperate for cash, they were given the option of cashing out $20,000 from their super funds. All up, around $35 billion was withdrawn, most at the bottom of the market and shortly before one of the biggest market recoveries in history.

For many, it will be a personal disaster.

Retirees on the other hand were allowed to do the opposite. Until the pandemic, those living off super were required to withdraw 5 per cent of their super each year. Beyond 74, and you have to liquidate even larger slabs. It was a measure designed to limit the extent to which retirees use super as a tax shelter.

So, while younger Australians were encouraged to sell down, retirees were allowed to halve the amount they were forced to sell so as not to be disadvantaged by the market crash.

That was in 2020. Oddly, in the following federal budget, the measure was extended even as global stock markets were heading into orbit. And in March this year, shortly before the election was called, the measure again was extended in recognition "of the valuable contribution self-funded retirees make to the Australian economy".

As we've learned from bitter experience, unwinding a tax rort is nigh on impossible. It usually is portrayed by the opposing side as a tax slug. And that rapidly growing older cohort is likely to desperately hang on to all their entitlements.

At some point, however, given we have deficits extending to the horizon, someone will have to pay for all this largesse. When it finally dawns on the new crop of voters that it will be down to them, things could get ugly.

Could it be apathy? Maybe.

Or perhaps that lack of debate and action on key issues is one of the corrosive elements eating away at the base of our major political parties and fuelling the rise of independents.

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Posted7h ago7 hours agoSun 15 May 2022 at 6:34pm, updated51m ago51 minutes agoMon 16 May 2022 at 1:35am

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The missing election ingredient: nothing here for the next generation - ABC News

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