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Grandfathering the Australian dream

House prices, insecure work and growing debts … Who can afford a stake in today’s society?

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© Richard Wareham / Getty Images

June 2017Medium length read
 

The Liberal Party of Robert Menzies wanted all Australians to own their own home. The Liberal Party of Malcolm Turnbull wants us all to be landlords. The times, they are a-changin’.

Australia’s longest-serving prime minister set out, quite deliberately, to give young people a physical and financial stake in the country. Menzies saw housing as a way to ensure that the young were, quite literally, invested in Australia’s future. He knew that people with 25-year mortgages would be more likely to go to work, pay their bills and vote conservative. At a time when Australia was involved in the Cold War, and when riots were common in the United Kingdom and the United States, Menzies also saw widespread home ownership as an effective way to stave off “revolutionary tendencies”.

But where Menzies’ Liberal Party wanted people to put down deep roots in their community, today’s Liberal Party wants to keep people on their toes. It is not just the high price of housing that prevents many from “settling down”. Over the past few decades Australian society, and the labour market in particular, has been fundamentally reshaped in ways that prevent workers and employers making long-term investments in each other. Traditional apprenticeships and notions of job security have, like the quarter-acre block with a Hills hoist, become a thing of the past. As have sick leave, annual holidays and maternity leave for a growing army of casuals, contractors, consultants and workers in the “gig economy”.

After decades of labour market reform to make Australian workplaces far more “flexible” and decades of tax reform to make investment in rental housing “more attractive” it is now much harder for young Australians to form the kind of traditional families that conservatives often like to romanticise. It is no accident that it is now virtually impossible for young families to repay a mortgage on a single average income while one parent stays home to raise the kids. This is the inevitable consequence of those tax and labour reforms.

It’s no wonder older Australians worry about the decline in “Australian values”. And that conservative strategists seek to exploit such fears and doubts. But what is remarkable is how little analysis there has been of what drove the “loss” of Australian values. Or, more accurately, what drove both the new belief in individualism and the growing lack of faith in our democratic project. Keeping people on their toes might help to stem wage growth, but it does nothing to unite a rapidly growing population in a shared national project. Menzies must be rolling in his grave.


While older Australians worry about the decline in Australian values, young people worry about the decline in housing affordability, the decline in education funding, the decline in penalty rates and the decline in the number of full-time jobs for them when they finish school or their increasingly expensive university degree.

Australians in their 20s didn’t grow up in the laid-back land of the sickie, the smoko or the long weekend. They grew up with their parents coping with split shifts, unpredictable hours and weekend work. It’s hard to volunteer at the surf lifesaving club or coach the kids’ footy team when your work hours are “flexible”.

Australia has one of the highest rates of private-school attendance in the developed world. And most children grew up in a household with private health insurance. The idea that if we all pay our fair share of taxes we can all benefit from high-quality services seems utopian to a generation that grew up with the idea that public investment in education was “unsustainable” and that spending money on the public health system was a “burden”. University administrators even talk about their “student load”, as if, without all those young minds to fill, the task of running a university would be much easier.

In addition to paying more for their education than Australians did in the past, and leaving university with a debt that would have once been big enough to buy a house, today’s students get far less face-to-face teaching time than their forebears. The higher education reforms on offer typically vacillate between higher fees or the replacement of yet more academics with even more recordings of old lectures. And today’s young people working casual jobs to get through university have never in their lives received an increase in award wages that was higher than the rate of inflation. Not once.

With this in mind, it’s easy to see why young people have low expectations of both the public sector and those in public life. Consequently, and as the Australian Electoral Commission knows, they are far less likely to enrol to vote than older citizens. And even if they do enrol, they’re far less likely to show up to vote or for a democracy sausage.

It is easy to blame young people for not caring about the state of our democracy. But it is also easy for young people to blame their democracy for never caring about them. If they tuned in to the news, what would they learn? That university fees are to rise when the corporate tax rate is to be cut. That the meagre public support they get during stints of unemployment between casual jobs is to become harder and slower to access. Or that a government that says it can’t afford to reduce greenhouse gas emissions can afford to subsidise the construction of the enormous Adani coalmine.

If all young Australians got off their bums to vote they could swing an election. But victim-blaming is not the answer. Imagine if the only version of politics you had ever been exposed to included Kevin Rudd walking away from “the great moral challenge” of climate change; Tony Abbott promising no cuts to health, education or the ABC before proceeding to propose savage cuts to all three; and, of course, a ten-year Punch and Judy show between Rudd, Gillard, Rudd, Abbott and Turnbull. Is anyone surprised that young people might not believe there is much to be gained from political engagement? Are you going to tell them they are wrong?


American political activist Ralph Nader once quipped that half of democracy is about just showing up. And anyone who has ever missed a meeting knows how dangerous it can be to be out of the room. So perhaps it should come as no surprise that, come budget time, a parliament (that has only one member under 30, and knows young people are less likely to vote than older Australians) decides year after year to deliver something extra for the “grey vote” while lecturing the young about the need to search harder for jobs that don’t exist, and save harder for houses they’ll never be able to afford.

Even the pressure to do something about housing affordability has been turned into an opportunity to deliver more cash to the wealthy. Take, for example, the idea of “encouraging” older Australians with multimillion-dollar homes and $1.6 million already in super to sell their mansions in order to “free up” more houses and “boost the housing supply”. What better way to help a young couple struggling with the rent in the outer suburbs than to increase the supply of mansions in Toorak or Potts Point for overseas buyers to snap up?

There is some logic to encouraging older people to downsize their residence. But to suggest that allowing older Australians to tip some of their multimillion-dollar capital gain into tax-free superannuation accounts is an effective or equitable way to help young people buy or rent a house is yet another cruel hoax.

The government’s other big idea is to create the First Home Super Saver Scheme within the concessionally taxed superannuation system. People will be able to reduce income tax payable by making voluntary contributions of up to $30,000 to their superannuation, which they can then withdraw for use as a housing deposit. As with the idea of giving tax breaks to those who sell their mansions, the idea of concessionally taxed savings accounts is as inequitable as it is instinctively appealing to conservatives. The reality, of course, is that by offering support to avoid income tax, the new accounts deliver the greatest benefits to the highest income earners. That should level the playing field.

Once upon a time the standard post-budget headline screamed ‘Beer and cigs up’. But in recent years it’s more like ‘Uni fees up, school funding down’. While a conventional reading of an economics textbook would suggest we should tax emitters of greenhouse gas pollution and subsidise education, the alchemy of Australian politics has somehow transmuted those conclusions into the idea that we should subsidise new coalmines and increase the cost of going to university. And we blame the young for not taking political debate seriously.


While Malcolm Turnbull didn’t pay for his university degree, since 1989 Australian students have been picking up a larger and larger slice of the cost of their education. While the original idea was that uni fees only had to be repaid once a student started to earn more than the average wage, the income at which students have to start repaying their HECS-HELP debts has been declining steadily, now reaching $42,000.

While we are regularly told that retirees who live in their own home need at least $50,000 per year to live “with dignity”, apparently young people, who may be raising kids and saving for a house on an income well below that, need to start repaying a debt that older citizens never had to repay in the first place.

Of course, HECS-HELP repayments aren’t the only costs loaded upon the young. They are also pressured to buy private health insurance they don’t need to make it cheaper for older people who need it a lot. (Imagine if we made older people pay more for their car insurance to help keep prices low for younger people.) And young people must put 9.25% of their income into superannuation in order to ensure they can “fund their own retirement”. But they must also pay enough income tax to fund the retirement of those who didn’t have to save for their retirements.

The easy way to introduce new policies is to phase them in slowly and to “grandfather” any changes so that they don’t affect anyone who is presently in a position of power. Put another way, the easy way to introduce new policy is to load up the future costs on people who can’t vote yet or who aren’t looking out for their political interests.

The cumulative impact of 20 years of such political pragmatism is that the neoliberal policies of spending cuts, fee increases and tax changes have been aimed almost exclusively at younger Australians, while older Australians have been grandfathered into relative safety.

What has been created is a two-tier political system. Thanks to the Seniors and Pensioners Tax Offset, a person aged over 65 pays a lower rate of income tax than a person under 35 who earns the same income. Our political class really seems to believe that it is tough for retirees who live in their own homes to make ends meet on less than $50,000 per year, tax-free. But the same people seem to think that the unemployed are having the time of their lives on less than $300 per week and that the minimum wage must be kept from rising lest we make Australia “uncompetitive”. Meanwhile, the government now expects wage growth to double over the next four years, helping to deliver an eventual surplus. So whose wages will do the growing? Take a guess.


Not all baby boomers are rich. Indeed, many single women approaching retirement don’t even own their own home. And of course the papers are full of stories about young people with enormous wealth that they inherited early, made from their start-up or, not coincidently, both. There are baby boomers who love to engage with new technology and 20-year-olds who feel dumb when they use a smartphone. There are young people with great attention spans and older people who can’t focus on one task for more than five minutes. The idea that everyone born in the same decade has personality traits in common makes as much sense as the astrological belief that everyone born in a given month shares something meaningful.

While there is no doubt that the tax, health, education and workplace reforms of the past decade have hit the young hardest, there is also no question that poverty and disadvantage can be found across all age groups. But rather than poor young people and poor old people and poor Indigenous people working together to demand the abolition of tax loopholes that cost the budget tens of billions per year, skilful politicians have succeeded in pitching “the youth vote” against “the grey vote” in a permanent war over which disadvantaged group gets some crumbs from the $400 billion budget feast.

Generational labels play a key role in dividing people who might otherwise work together. It is the policy equivalent of the Depression-era Hungry Mile, whereby desperate advocacy groups plead for “their” constituency, while corporate Australia secures a $65 billion tax cut. Labels such as generation X, generation Y and millennial are used to help to disguise structural problems as behavioural traits. In turn, these labels also prevent large numbers of Australians from focusing on simple questions: Why doesn’t Australia have a wealth tax? How will cutting the company tax rate help young people, or old people in need? And how on earth can someone who earns $1 million per year pay not a cent in tax?

In the 15 years since the then treasurer Peter Costello’s first Intergenerational Report encouraged us to stop worrying about people who are poor today and start worrying about the people who might be poor in 2050, the cost of tax concessions for superannuation has risen from $10 billion per year to more than $30 billion per year. Over the same period the age pension has fallen as a percentage of the average wage, and the unemployment benefit of $267 per week is now so low that even the Business Council of Australia agrees it should rise.

Despite the fact that politicians can get paid more for one night’s travel allowance than the unemployed get in total for a week, the unemployment benefit didn’t rise in the latest budget. Instead the poorest people in Australia, a disproportionate number of whom are young, got another dose of lecturing. As details of the plan to “crack down” on the unemployed somehow leaked in the lead-up to the budget, the Advertiser in Adelaide ran with the headline ‘Federal Budget 2017: Lazy welfare bludgers to lose payments under demerit system’. On budget night we learned of a trial program in which unemployed people will be randomly tested for drug use to ensure they “deserve” their meagre incomes. If we want to start down that road, perhaps we should first drug-test politicians to ensure they “deserve” their travel allowances.


I used to be unemployed. And, even though no politician called me lazy or a bludger, it was horrible. The irony that the four years leading to my unemployment had been taken up with studying the economics of labour markets did nothing to cheer me up. (It did make some of my friends laugh, though.)

I finished uni in 1992 and I was on and off the dole for well over a year. If eight years later someone from Centrelink had asked me to prove which weeks I had earned what amounts in, I’d have had no chance. There’s no doubt I’d have been issued with some sort of debt notice under this government’s “data matching” policy, but young people weren’t treated like that back then. Luckily there was no drug testing either. I have been safely “grandfathered”.

Despite having picked up an honours degree in economics, I couldn’t escape the consequences of the recession we had to have. The national unemployment rate hit 11% and the youth unemployment rate peaked at nearly 20%. No one, certainly no politician, called me a leaner. Or a bludger. Or anything else.

I worked random shifts at a petrol station, had bursts of work doing data entry and, given the vagaries of pay rates and pay periods, worried fortnightly about whether my income was more or less than I had told Centrelink it would be. Nobody ever told me that my unemployment or underemployment was due to my personal failings. No one suggested I should spend even more money buying a masters degree, and absolutely no one suggested that I borrow money from my parents to set up my own small business. While such advice would have been a useful way to deflect blame for my predicament away from the government and onto me, 25 years ago no one would have bought it.

The “advice” handed out to young people by the conservatives worried about “Australian values” would be laughable if it wasn’t so politically powerful. In translating their folksy rants it is important to realise that their advice is not really designed to help the young, who aren’t watching the news. Rather, delivered on radio stations the young never listen to, it’s designed primarily to get the older folk nodding. But you can’t blame them for agreeing: most people over 60 have never looked for work when unemployment was in double digits, or been “breached” by Centrelink through bureaucratic error or pedantry. They have been grandfathered.

Take Barnaby Joyce’s suggestion that young people complaining about the price of housing in Sydney should move to Armidale where the rents are cheaper. The first point to note is that one of the reasons there are so many people bidding for houses in Sydney is that’s where the jobs are. If young people from Armidale could find good jobs in their hometown, Sydney housing would be more affordable. The second problem is that, thanks to all of the “crackdowns” on “dole bludgers”, if a young person moved from Sydney to a region with higher unemployment, they would risk being booted off the dole for 21 weeks.

Joe Hockey famously told young people who were struggling to afford a house to get a better job. A more recent solution, put forward by the prime minister, was similarly constructive. When ABC Melbourne radio presenter Jon Faine brought up the issue of housing affordability, Turnbull replied, in relation to Faine’s own children, “Well, you should shell out for them. You should support them, a wealthy man like you … You’ve got the solution in your own hands … You can provide a bit of intergenerational equity in the Faine family.”

Menzies’ corpse must have done somersaults.


Today, there are more than 730,000 unemployed people in Australia, and the youth unemployment rate is above 15%. The problem is not a lack of job-hunting effort from the young, but a lack of job creation by the old. The endless training and breaching, and now drug testing, of young people doesn’t create more job opportunities for them, but it does keep them on their toes.

Older voters remember that Australians once did “a good day’s work for a good day’s pay”. Younger Australians know that to get a job you often need to work as an unpaid intern. Or do some unpaid “training shifts”. And you might need to keep your mouth shut when the franchise you work for systematically underpays you or simply forgets to pay your superannuation contributions.

Once upon a time, older workers, a significant proportion of whom were unionised, would have stood up for young people who were being exploited. But while conservatives claim to love the Anzac spirit, they hate it when people stick by their mates in the workplace rather than in battle. Indeed, Australian laws against striking and union organising are now among the most extreme in the world. While many older Australians bemoan the loss of Australian values, young Australians learn early that in a dispute with your boss you are often left to look after yourself.


As most young people know, biting your tongue really hurts. In the mid ’90s, after finally finding a secure job but completely failing to find secure housing, I decided for once to give tongue-biting a try, as the real estate agent from whom I wanted an apartment patiently patronised me. Yes, it was strange that a man with a shaved head was an academic. Yes, it was strange that a single man might want a two-bedroom apartment. Yes, it was strange that I didn’t have a current residential address. (It was because no real estate agent would rent me a house!) As a well-paid, albeit balding, professional with a tenured academic job, I found it hard to look like a “more attractive” tenant than the other desperate faces I saw at open inspections. I can’t imagine how much harder it must be for 25-year-olds working in the gig economy to convince some patronising property manager to take a chance on them.

Much is made, rightly, of the rising cost of housing and its impact on individuals and our communities. But what is happening in the housing market is both a cause and a symptom of the broader changes to the labour market and the provision of public services.

There is no doubt that some features of our tax system, such as negative gearing and capital gains tax discounts, have made investment in housing an attractive proposition. But these concessions are not the primary causes of inequality in Australia. They simply work as a magnifying glass that amplifies the structural inequalities that have always existed in Australia. As the gap between the rich and the poor continues to grow, is it surprising that those with the most find it easier to snap up their third home at an auction when they are bidding against people who haven’t seen a real wage rise in years?

Similarly, when the proportion of the nation’s wealth held in the hands of the top 10% continues to rise, is it any surprise that the children of the wealthy find it easier to scrape together a deposit with the kind of parental help recommended by the PM than a young couple whose parents are still renting?

Menzies saw housing policy as a way to close the gap between those with the most and those with the least. But over the past 20 years, changes in housing policy, labour market policy, and taxation policy have all served to deepen the divide between rich and poor, cities and regions, and, increasingly, Australians from different ethnic and cultural backgrounds. While Menzies sought to lock people into a common goal, the modern Liberal Party seems happy to lock a growing proportion of the population out of the benefits of economic growth. What could go wrong?


There is political logic to the strategy of loading up young people with a disproportionate share of budgetary pain: it comes with a disproportionately small amount of electoral pain. While squeaky wheels in the business community get the good oil of corporate tax cuts, young people get to rack up a much larger HECS-HELP debt (which is, of course, a good debt from the government’s point of view).

It’s always easier to blame the victim. Just as some people believe that unemployment is caused by laziness, and that domestic violence is caused by nagging, some think it’s fair that young people who don’t stand up for themselves in a democracy should suffer. But even if you think it’s OK for experienced players to exploit novices, it is becoming increasingly obvious what happens to democracies where large numbers of people feel marginalised. Brexit and the election of Donald Trump are but two high-profile examples.

Australia doesn’t have compulsory voting, but it is compulsory to enrol to vote, to attend a polling place and to lodge a ballot paper. It is, however, between you and your pencil whether you cast a valid vote or a vulgar insult. That said, voting here is far more prevalent than in most countries. And the high rate of voter participation has played a major role in making Australia such a stable, secure and prosperous democracy.

But just as culture and policy have chipped away at our high rates of home ownership, culture and policy have been chipping away at our democratic engagement. The AEC does little to enforce existing laws, and the parliament does even less to help young people, who move house far more often than older people, to both get on the electoral roll and stay up to date. It’s OK to match young people’s Centrelink file to an eight-year-old tax file, but apparently it’s not OK to send them a letter offering to update their electoral enrolment.


Twenty years of deregulation (or “light touch” regulation), privatisation, contracting out, tax cuts, spending cuts and welfare reform have created a radically different Australian economy and society to the one that remains burned into the memories of older voters and politicians.

The economic rationalists killed the culture that once lauded a prime minister for celebrating a yacht-racing victory with the exhortation that “any boss who sacks anyone for not turning up today is a bum”. Imagine calling someone a “boss” these days! They are our employers, and if we give them the tax cuts and industrial-relations reforms they want they might even “create” a job for us. And imagine what today’s tabloid papers would make of a young person who missed a Centrelink interview because of a big night on the piss celebrating a sporting victory.

Young people and new arrivals are not to blame for the loss of Australian values. Those values have been killed by decades of sustained effort from generations of older politicians and business leaders.

Meanwhile, a problem of a different and more diabolical kind awaits future generations. The science is quite clear: children leaving school today will experience the harmful effects of our current determination to burn growing amounts of fossil fuel. However, the long lag between burning coal and rising sea levels means that, yet again, older Australians will be insulated from the eventual costs. They have been grandfathered.

Menzies’ desire to give young Australians and new arrivals a stake in their home, and their community, was not a reflection of socialist tendencies but conservative ones. It also reflected a concern for the future. Unlike the modern Liberal Party, Menzies saw the benefits of uniting the country. Then again, he was trying to build something. If all you want to do is maintain the status quo, it’s much simpler to divide and conquer.

But of course driving in wedges is how you break something, not build it. And breaking up a cohesive society seems more like a radical political strategy than a conservative one.

About the author Richard Denniss
Richard Denniss is the chief economist at the Australia Institute.
 
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