“The Rich aren’t to blame for being Rich, It’s Policy" (stupid)Abbott/Hockey could balance the budget, increase Productivity, deflate housing prices and improve the 40-yr outlook with a low-cost, high-impact Policy: Reduce Tax Expenditures, the Treasury keeps tabs.
- $45B/yr is spent of Capital Gains exemptions on main residence. The USA doesn't do this, why do we?
- $30B/yr is spent on Superannuation tax discounts: the majority going to the top 10%. Equity suggests a cap.
- $5-6B/yr now goes on Negative Gearing. If you earn a Salary, you're not in Business, don't ask for business deductions.
Compare to $6.4B/yr for GST on Food and $3.9B/yr for GST on Education.
Which is fairer: $80B taxes lost for most wealthy or $10B for everyone?
There are massive structural problems with the Australian economy that aren’t mentioned in Hockey’s IGR, nor being raised by the ALP.
Anyone under 40 has to be deeply concerned for their financial future as a result.
According to the Government:
The Intergenerational Report is the social compact between the generations – with our children, grandchildren, parents, grandparents and each other.Yet there is no mention of Housing, Housing Affordability, Rental or Mortgage Stress, First Home Buyer rates, or even Household Disposable Income.
The Hockey IGR is the biggest con-job is Australian Political History. The average working Australian is being shafted so badly, they can’t imagine the outcomes. It’s the Great Australian Dream, not Workchoices or Co-payments, that is “dead, buried and cremated”.
The real issue is that the people now 20-30, for whom this 40-yr forecast predicts their entire working lives will be lifetime renters, saddled with onerous debts for what should be societal “hand-ups not hand-outs", Education, Health, unemployment benefits, will have no job security over their entire lives and end up without sufficient superannuation savings and with a below-poverty-line aged pension.
They’ll expect to have 20-30 jobs and 4-5 ‘careers’ in their lifetimes. Each forced job change carries a real danger “fall between the cracks” and into a poverty trap. Ask the middle-aged workers sacked from the ABC or SMH/Fairfax how they pay mortgages now.
If you think the 20% youth unemployment rate now looks sad, its only going to get worse in the future.
Where are investments in the IGR to address systemic unemployment, like everyone born in Elizabeth, SA suffers now? The stats show that if you don’t get work when young, you’ll never recover financially, never be be able to catch-up in the job market.
All this before you add an overlay of falling exchange rates and a flagging economy.
A lower dollar is both a consumption tax on locals and makes foreigners more able to out-compete us for houses.
Look to Japan’s 25 years of stagflation for where we’re headed: but they have a vibrant manufacturing sector and global exports.
We import so much, we have a long-term Current Account Deficit and a mind-boggling debt in our Capital Account.
We’re selling the farm every day in order to buy the essentials we import.
I’ve visited this future Australia: it’s Maine, USA.
A great place to visit or live if you’re rich, but the locals are born into a poverty trap.
Outsiders own “vacation houses” and most of the businesses.
Locals can’t afford to live in the houses their parents and grandparents built and there’s no local ‘industry’, it’s all low-paying service jobs or primary industry.
You don’t need an MBA to mow lawns or wait tables for the Rich and Famous.
Education and Healthcare costs are astronomical compared to their salaries and the numbers living on benefits and/or receiving food stamps is high.
The local councils and State government have an incredibly low tax base to work with, because the wealthy earn their income elsewhere and don’t get hit with capital gains and property taxes.
Maine Locals either have to rent old, tiny places in the worst parts of towns, or live far away from jobs and amenities in poorly serviced areas with terrible roads.
Too many are lifetime renters, too many must choose between eating and keeping warm or even buying medicine.
Almost every local is just one bad break away from bankruptcy and homelessness. Stress is the norm, social dysfunction the outcome.
Here’s the LNP agenda we know of so far:
- stop superannuation savings. [Keating wanted min 12%, preferably 15%, LNP stopped at 9%]
- sell-off all government assets that are income producing and/or job providing & training.
- kill the local manufacturing industry: Cars ‘gone’, ships ‘gone’, steel making ‘gone’, military/armaments ‘gone' and high-tech ’never came’
- reduce or freeze real wages, remove all working conditions, increase ‘workforce flexibility’ (24/7 hours) and abolish all penalty rates
- force all job seekers into Higher Ed, then saddle them with lifetime debt for it.
- force “user pays” into the Health System.
Since the 1990’s, housing prices have quadrupled, well ahead of real average earnings (50%, at best).
Look at the graphs: the rate of increase is so high, super-exponential, even the RBA has to resort to changing scales to logarithms.
Even then, prices are rising at an increasing rate.
Who decided that Unaffordable Housing (more than the long-term rate of 4 times avg earnings) was a good idea and the Banks should become 25% of the ASX? Where does that path end? Enough economists have shown we don’t have a “Housing Bubble”, so what do we have?
Until the 1980’s/90’s, those “big, inefficient & wasteful” Government Utilities did three things:
- provided lowest cost power, gas, water, phone, roads and trains for everyone, were self-funding and even paid ‘dividends’ back into Govt coffers.
- provided, not just free but paid, traineeships for thousands of youth after year 10.
Lifeskills and work skills were provided as well, along with gainful employment and ‘keeping them off the streets’.
- trained, for free, all the apprentices needed in Australia. We needed no ‘457’ visas 30 years ago, we had all the tradies we ever needed.
The Governments, local, state and national, that sold off all those enterprises have landed the generation covered by the IGR in deep trouble.
All their post-year 10 education costs have been transferred to the taxpayers, along with massively increased employment risk.
The Greens rightly say that Climate Change is a lens through which every aspect of the future and our economy should be viewed.
Yet there’s already been a monumental and life-altering change in one of capital cities, and it’s gone completely unaddressed.
Since 1975, the long-term average rainfall for Perth has halved, resulting in 1,000 forest fires in the 1st 8 weeks of 2015. This is due to the “Sub-tropical ridge” moving south. The Ridge is the belt of High pressure systems that sits across the south of the continent and in winter prevents cold-fronts from coming North. Perth gets most of its rainfall in winter, courtesy of those cold-fronts. The Ridge moved south just a little, and they’re suffering for it. I’ve no idea of what happens next for them.
The Hockey IGR fails to mention the most powerful and important factors that will affect the entire working lives of the current generation, which sets the stage for their retirement. Don’t believe Hockey's health and longevity forecasts for average Australians: people on low-incomes or unemployed are highly-stressed, suffer poor nutrition and endure much worse health outcomes.
The LNP’s changes to the Health System will compound the problem: the Rich, just like in the USA, will suck-up most of the public funding in massively expensive End of Life Care, which the low-income average earners will live much shorter, less productive and less happy lives than now.
We’ve had low and decreasing Interest Rates for over 15 years, with now record-low Rates, set to decrease more. The average mortgagee regards this abnormal situation as ‘the norm’ and doesn’t understand their risks or the consequences.
If Interest Rates return to long-term levels, the numbers of distressed loans will balloon, creating a very large cohort of mid-career Professionals forced out of their houses, disrupting families and causing huge social disruption.
Howard’s legacy as Treasurer to Keating in 1983 was:
- record Public Debt and an increasing Deficit,
- double-digit Inflation
- double-digit Interest rates
- double-digit Unemployment.
There is a considerable chance that the Abbott/Hockey government will inflict the same diabolical problems.
Already GDP growth is “soft”, with falling Productivity, rising unemployment and the RBA forced to cut interest rates beyond any previous level.
It’s not unreasonable to suggest a major Recession or Economic downturn in the next 10 years, let alone next 40, since we’ve not experienced one since 1991.
The impact on highly-leverage mortgagees, especially newer owners with less equity, will be widespread and disastrous.
Consider the scenario of the average couple.
- They do year-12 and are forced to University, getting saddled with 2 * $75,000 HECS/HELP debt before they start earning.
- a large fraction of Uni enrolments result in ‘abandons’, leaving those suckers with no degree, no prospects and still a big debt
- even qualified graduates aren’t immune from high youth employment. Not sure of their jobless rate, will be over 10%.
- they will likely have to live at home till age 25-30 to afford education and low-income first jobs.
Their parents disposable income is reduced keeping them.
- The Deposit Gap problem (Yates et al from AHURI) from the super-exponential run-up in house prices means house prices increase faster than the average 25-30 yr-old couple can save, worse if you account from increasing proportion of income going on rent.
- Rental Incomes are tied to current, not locked-in historical, house prices.
Average households will require both partners to work, even to pay Rent.
They’ll only be able to afford apartments within the 10km of the City, or need to commute very long distances to work to live in a house
Over 55% of people live in just two large Capital Cities, with 90% in all capitals. People go where the jobs are, they have to.
- High Stress and low disposable Income results in higher divorce rates, more sickness & injury, higher rates of drug and alcohol abuse and domestic violence.
- the number of single-parent families can only increase, and they are always low-income, even if working, due to high childcare costs
- the largest factor cited for marriage breakdown’s
- a lifetime of financial stress, forced job changes and multiple careers will leave the now-divorced average couple with no house, poor health, no savings and little superannuation.
- there are no plans or policies to help change the long-term age bias that prevents people over-50 from ever getting back into the work-force
- the number of people who ever return to the workforce after just 5 years of unemployment is vanishingly small.
- Women have traditionally fared much worse in these conditions as they are the majority of single-parents, are the majority of part-time workers and
suffer systematic lower pay-rates.
- If Bunnings model themselves on the US retail giant Wal-mart, then they’ll spread wages so thin, that 80% of their staff will require assistance buying food.
Summary:
The System is badly broken in Australia, with no hope in sight for correction and no mention, let alone Policies, from either major Party.
Creating wealth via House Price Inflation, fuelled by Private Debt, isn’t a ‘Productive’ Industry or beneficial for the majority:
over half the school leavers today will never own a house, possibly all but the top 1%.
Neither side has Policies to create 21st Century Industries and make Australia globally competitive in anything but Tourism and service industries.
Nor do they have programs to invest in Productive Infrastructure or programmes to address systemic unemployment.
The future of the Education market looks bleak as our standards of living decline and the Brain Drain becomes real:
our brightest graduates (PhD’s) must already flee the country to have careers. We’re eating our own University Seed Corn.
Prognosis:
Sucks to be an Young Australian.
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