How long will the rest of us be forced to pay for Australia’s luxury generation? Picture: iStock
How long will the rest of us be forced to pay for Australia’s luxury generation? Picture: iStock

Boomer burden Aussies should reject

COMMENT

Australia's Treasurer has been out and about this week justifying the need for a surplus by talking about the "economic time bomb" that is our ageing population.

Yesterday, Josh Frydenberg told young people they will have to pay for the retirement of the old as we have fewer and fewer working age Australians to support each old one.

It was an impassioned speech, but it ignored one key thing - Baby Boomers, aged 55-75, have a sweet ride on a gravy train consisting of franking credits and loopholes in superannuation and pension rules.

Australian households aged over 65 have 2.5 times as many assets and 16 per cent as many liabilities as those aged 25-34, according to official data.

Their average net worth is about $1.4 million.

But there's no urgency whatsoever from the Treasurer to tax them more fairly. He's let a hundred terrific opportunities go by to tighten the screws on Australia's luxury generation, from franking credits, to the pension age, to superannuation.

The older generation is all over Facebook these days and they're filling it up with holiday photos from yet another terrace overlooking the Pacific Ocean or the Adriatic coast.

As we glumly scroll past them, we have a right to feel aggrieved to hear the fiscal obligation of Australia is ours.

Facebook is full of pictures of Boomers spending their vast personal wealth in exotic locations. Picture: iStock
Facebook is full of pictures of Boomers spending their vast personal wealth in exotic locations. Picture: iStock

Younger Australians should utterly reject the false burden being placed on their shoulders by a Treasurer too gutless to tax the boomers fairly.

"If we don't remain fiscally disciplined today, the next generation will have to pick up the bill tomorrow," he told the Business Council yesterday.

This is the line Mr Frydenberg is pushing as he seeks to justify his surplus. It seems so simple. Almost a truism.

But it disguises a set of entirely optional choices that helps one generation live in near empty multimillion-dollar homes and collect the pension, while many in the younger generations are locked out of the housing market and paying off enormous higher education debts.

Both parts of the seemingly benign statement involve pain falling on younger generations. Fiscal discipline falls principally on the young, while the boomer cohort romp merrily through a world of superannuation tax discounts and pensions that rise faster than inflation.

The Treasurer is talking about putting older Australians to work. But don't assume this means bringing the current crop of older Australians out of retirement. He's not talking about the current retired generation. He's talking about making people work longer in future, i.e. just another way to make the burden of today's generosity fall on a younger cohort.

Four times the Government has made choices that could have evened up the burden and saved the Budget.

For example, Australians of pension age face a "means test" that determines if they are eligible to collect the pension. It determines if they have "the means" to look after themselves - after all, it doesn't make sense to give the pension to a retiree with $2 million in cash and shares. But the Government chose to leave the principal place of residence out of the means test. A retired couple living in a $2 million home can still collect their combined $1282 a fortnight. (You even hear rumours of people upsizing their home in order to reduce their cash holdings and qualify for the pension.)

The Government has begun a major review process of retirement incomes. But Finance Minister Matthias Corman neutered it before it even got going, promising in October it "will not lead to any change".

Federal Treasurer Josh Frydenberg is hellbent on delivering a surplus but refuses to properly tax our richest generation. Picture: AAP Image/Steven Saphore
Federal Treasurer Josh Frydenberg is hellbent on delivering a surplus but refuses to properly tax our richest generation. Picture: AAP Image/Steven Saphore

The Government scrapped existing plans to lift the pension age from 67 to 70.

Franking credits, mean if you own shares in a company and you pay no tax, you get a check refunding you for any company tax that company paid. That benefits retirees disproportionately. Labor wanted to change the rules on this at the last election and lost in part because of it.

The electoral mathematics behind these choices are apparent. Younger voters tend not to vote for the Coalition while older voters are more prone to. Polls at some points have shown a dramatic generational divide from 60-40 to Labor among the young (18-24), to 60-40 to Coalition at the other end of the age spectrum (65+).

Of course, while generational war wages, certain corporations are enjoying the fireworks. Boomers might get a nod and a wink from the Treasurer but resources companies get all that and more.

It didn't have to be a battle between young and old. There are other entities you can tax. Norway socked away $US1 trillion in assets in its sovereign wealth fund by levying taxes on the exploitation of its enormous oil resources.

Australia, you will remember, proposed a resources super profit tax that would have taken the cream off the top of the profits of the massive mining and extraction companies when the price of coal and iron ore were high. Instead those extra profits from digging up Australias dirt resources went to the owners of those companies, many of which are based offshore.

So while the generations go to war, don't forget that it didn't have to be this way.

Jason Murphy is an economist | @jasemurphy. He is the author of the new book Incentivology.