Fortunes favour the old

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By Leith van Onselen

Curtin University’s Alan Tapper, Alan Fenna and John Phillimore have released a fantastic research paper (below) examining the extent to which welfare policies across the period 1984 to 2010 have favoured the elderly at the expense of the young.

Their three main findings are that

  1. there has been a substantial shift over this period in favour of the elderly;
  2. this trend has accelerated rapidly in recent years under both the Howard and Rudd Governments; and
  3. as a result of this accelerated trend, elderly households today are on average well off by comparison with younger households.

Below are some key extracts from this report, which are particularly eye opening considering that Australia is facing an ageing population (with the proportion of workers to the elderly projected to shrink), and many younger Australians are already ‘locked-out’ of home ownership due to escalating housing costs (which have broadly benefited the older generations).

If we compare each age group with the trend for all households, two things stand out. First, there are large losses to two age groups: those aged 25–34 (down $109pw compared with the general trend) and those aged 55–64 (down $102pw); and there are large gains to those aged 65 and over (up $184pw). Support has swung sharply towards the end of life.

In Figure 1, we compare final incomes in these age groups across 26 years. The general trend (not shown in Figure 1) is flat for the first decade, rises slightly in the second, and rises sharply in the last six years; overall there is a 59 per cent gain. The relevant question is whether the five age groups rise or fall relative to that general trend. The youngest groups, 15–24, 25–34 and 35–44, gain by 44 per cent, 45 per cent and 47 per cent respectively. The middle age group, 45–54, gains by 50 per cent. The 55–64 age group remains rather flat in the first two decades, then leaps dramatically in the last period, gaining 75 per cent overall. Similarly, the elderly group, 65 and over, gains in the last five years, rising 98 per cent overall. Thus, the older groups gain relative to the general trend, while younger households fall relatively. The swing favouring the elderly is largely a feature of the 2000s.

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How should we interpret the trends in the age group data? In Table 2 we look at the break-up across time of taxes and expenditures for three household types. We include couples with dependent children, since they are one useful benchmark against which to compare the fortunes of elderly households. For a broader and more basic benchmark, we also compare the elderly with ‘all households’.

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Table 2 shows how changes in taxation have played an important part in changes in net social support. Income tax has both grown and shifted target. In 2009–10, those 65 and over paid $40pw in income tax, less than was paid in 1984; while a couple with dependent children paid $447pw, 50 per cent more than in 1984. For all households, income taxes grew by only eight per cent in that period. Indirect taxes have also grown and shifted target in a similar manner. They have grown for the elderly, but not as much as for all households, and markedly less than for couple families. Overall, taxes on the elderly grew by 42 per cent, on couple families by 70 per cent, and on all households by 30 per cent. Taxation changes have disadvantaged couple families. The elderly have also increased their share of taxation, but by a considerably lesser fraction.

On the benefits side, we can see that both the elderly and couple families gained very considerably when compared with all households. The biggest single factor here was health care expenditures, which have both grown overall and swung in favour of the elderly. In 2009–10, those 65 and over received on average $316pw in health benefits, while the average for all households was $181pw. Compared with 1984, the share for the elderly nearly tripled, while for all households the increase was 100 per cent (for couple families it was 80 per cent)…

The factors operating here are varied, as Table 4 shows. While taxes stayed steady, social expenditures were growing substantially. Overall benefits per elderly household grew by 29 per cent. The largest growth was in health expenditure, up by 37 per cent…

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Figure 2 shows the overall history of taxes and benefits for elderly households. What stands out is the recent surge in net benefits, which took place mostly under Coalition government. Critics might argue that in this period the long Australian tradition of relative restraint on expenditure on the elderly, under both Labor and Coalition, was here abandoned…

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We might suppose that increasing support for the elderly is an expression of increased recognition of need. To test this claim we need to be able to rank ‘neediness’. This can be partly done in terms of ‘equivalent final incomes’… Table 6 shows the equivalent final incomes of the elderly and all households. Note that this table exaggerates the increase in EFI between the two surveys, because here the EFI for 2003–04 has not been adjusted by the CPI. The point of the comparison is not the relative change between 2003–04 and 2009–10 within each group, but the gains and losses of the different groups relative to each other in this period.

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…the most interesting comparison is that with all households. Rapid gains to the elderly in this period have brought them close to the EFI for all households. The gap in 2003–04 stood at about 21 per cent (based on an estimate that the EFI for all elderly households was about 505). In 2009–10 it had fallen to only about five or six per cent (estimating that the elderly EFI was about 960)…

As Table 7 shows, wealthier households are older households. Net worth peaks at around age 60. A sharper picture is obtained if we take household size into account using equivalence scales. Here we have used the square root of household size (a method that approximates quite closely to the ‘OECD modified’ scale used by the ABS to calculate equivalent final incomes). The resulting ‘equivalent net worth’ indicates that even households aged 75 and over are one-third better off than the mean for all households, while households in the 65–74 age group are 60 per cent better off than the mean…

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Given that equivalent final incomes for the elderly are now close to the average for all households, and that the net-worth distribution is skewed in favour of older households, we can reasonably infer that an integrated measure would show that households headed by persons 65 and over are better off than the average for all households under that age.

If all this is right, the Australian system of social transfers to the elderly is much more than a safety net. Viewed in ‘lifecycle’ terms, it shifts resources from the income-rich but asset-poor stages of life to the asset-rich but income-poor stage. Viewed in terms of the ‘vertical’ dimension, it is a system of upwards redistribution from the less well off to the better off…

Back in March, I wrote how the developed world is facing an inter-generational war as the ageing of the population and transfer payments to the elderly (paid for by a declining tax base) threatens economies and creates social tensions. This report from Curtin University highlights the extent of the issue in the Australian context.

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Age Bias in the Australian Welfare State (2013)

102 Responses to “ “Fortunes favour the old”

  1. flawse says:

    “3.as a result of this accelerated trend, elderly households today are on average well off by comparison with younger households.”

    Dammit why not? We made this country from what it was to what it is today!!!!

    • reusachtige says:

      “Dammit why not? We made this country from what it was to what it is today!!!!”
      .
      Ummmm, thanks for that ???

    • Deenominator says:

      The answers lie back in time, isn’t that what you always say Flawse?

      So you lot stuffed the place and gave yourself a payrise? Sounds like parliamentary salaries..

      Note: being mostly facetious..

      • flawse says:

        Note: being mostly facetious..

        Note: But reasonably accurate none the less!

        Still I prefer to divide between productive and non-productive.

        We just produced an economy that was mostly non-productive and borrowed what we needed to plug the difference then sold the country off to cover the debts.
        What are all you young lot complaining about?

      • Deenominator says:

        Glad you took that in the spirit it was intended Flawse.

        Re productive and non-productive I feel my parents generation (and subsequently my own) were conned. Their belief was they’d done the hard yards in manual jobs building the country up so that my gen could do the soft courses at uni and shine our suit pants in cushy jobs. It turns out that wasn’t ever going to be possible..

    • dumb_non_economist says:

      Hey Flawse, so you’re taking responsibility for inflated house prices, decimation of manufacturing, political standards and the CAD???

      • Lori says:

        Guys, the intelligence requires to see the problem in our system, not in a person or a generation. If this is a problem for the whole West, isn’t it a systemic problem?

        Any system is evolving and capitalism does it with the ever highest speed. It has its nasty crisis and what most people are blind to see, it has also fictitious/speculative growth, but accompanied by ever growing claims on the very real wealth.

        If you want the wealth distribution to be fair, change the system, don’t blame any generation or self-serving politicians, who are there to support and to preserve the system that feeds them so generously.

      • flawse says:

        DNE…IF I’m representing the Boomer generation here the answer is YES! :(
        Remember my opinion is that this BS started back in the late 1950′s and has therefore been going on for 50 odd years which about covers Boomers I reckon.
        The stupid economic theory that started to get promulgated in the early 60′s was quite in vogue by the time I did economics in the late 60′s.

        The stupidity has just been expanded and amplified ever since

      • flawse says:

        Lori
        “If this is a problem for the whole West, isn’t it a systemic problem?”

        Exactly

        As I said it should be framed in terms of what is productive and what is non-productive otherwise we get the wrong answers for going forward.

      • dumb_non_economist says:

        Flawse,

        by the way it was light hearted as I suspected your original post was!

        Still haven’t bothered with learning how to do smileys!

      • flawse says:

        DNE Yes I realised your post was written with your tongue in your cheek and with humour although, like Deenominator above, there is a large element of truth in it.
        Re smileys…and I thought I was out of date! :)

      • Opinion8red says:

        “intelligence requires to see the problem in our system, not in a person or a generation”

        Another superb comment Lori. Thank you for saying it.

        Very much approve of your attitude.

        We should all be EVER on guard against these bullshit “divide and conquer” memes.

      • dumb_non_economist says:

        Lori,

        I don’t agree. It’s a matter of doing what’s right not self-interest.

    • The Patrician says:

      Chris B,
      Can we revisit the MB office christmas party gif to remind everyone that the generations can get along?

  2. reusachtige says:

    Science is rapidly discovering how to put the brakes on aging so it is only going to get worse!

    • willy_nilly says:

      It is not individual ageing or increased lonjevity thhat is the issue. It is the demographic momentum, or more peoiple living longer that is the agequake. It is unprecended in history.

      It also looks looks the average life span is stabilising and with increased diabetes and obesity is may even fall into the future.

      This story shows why the PPOR should be counted into the asset test (amount over $750k) towards the pension eligibility. Reverse mortgages need to be provided exclusively by Centrelink and the money given by Centrelink would be redeemed at death/disposal of the property.

    • disco stu says:

      My bet is that nature will eventually provide a solution to the problem we have created – birdflu is a likely candidate. The black death certainly worked in the peasants favour back in the 1400s… for those of them that survived that is.

      Look to Europe and Japan for an idea as to our future, it is only going to get worse. Importing foreign workers to try and bridge the demographic gap will only delay and then accentuate the trend, as those imported workers age themselves.

      Frankly for the modern day peasant, ie anyone younger than 40 a new plague is ironically their brightest hope – sadly democracy, self interest and the demographic bulge will doom these papers to little more than well meaning intellectual discussions.

  3. thomickers says:

    Reverse mortgage is inevitable

  4. loonyright says:

    To the extent that we need a welfare system, then it is only natural that those payments will flow to those with greater need – it is a bit rich to suggest larger health spending on the elderly is somehow biased. A younger person has greater physical capacity to work, and through their greater income potential will generally make the same transition to an asset-rich phase. Rather than advocating the brutalising approach to the boomers which a few on this site seem to relish, perhaps focus on why housing and health care is so expensive – it wasn’t a conspiracy of the elderly. There is already reform of the aged pension and aged care system which will start to force the boomers into tapping their housing equity, there is no need to keep fanning the flames of a so-called inter-generational war because the generation X and Y just want it NOW.

    • willy_nilly says:

      Gen X and Y want it now? What bs. They only want a fair go and the same opportunities that the generations before them had. They certainly will object to being taxed higher to pay the pensions of those elderly living in a $10 million dollar homes, with $1m in cash who still get a part pension.

    • Loonyright. Did you read the report before commenting? It clearly shows that the increased benefits received by the oldies are not based on need, but represent unjustifiable transfers from the younger, poorer generations.

      • flawse says:

        Only problem is instead of correcting the mistakes of the boomers the younger generations, guided by advanced unrealistic theories of the world seeded to them by Boomers but now developed to a higher order, are seeking to amplify those mistakes.

      • 3d1k says:

        ‘Most likely gains to the elderly are not the consequence of deliberate policy. They probably arise from incremental adjustments, no one of which is significant but which cumulatively produce substantial net effects.’

        It appears that this ‘unjustifiable’ transfer was in reality almost accidental. A number of modest measures over time accumulating transfer benefits to the elderly. It is no surprise that the elderly consume more of the health dollar just as it is no surprise that the young consume more of the education dollar. It is no surprise that the elderly generally enjoy higher net worth – surely that is to be expected.

        It is timely to note the cumulative effect various welfare measures have and the impact on future generations – particularly health cost and an ageing demographic in conjunction with rising demand for a range of welfare benefits and social expenditures.

      • Gunnamatta says:

        3d1k – nice try

        ‘It appears that this ‘unjustifiable’ transfer was in reality almost accidental. A number of modest measures over time accumulating transfer benefits to the elderly.’

        and who has been deciding on these measures?

        and all those ‘modest measures’ have been going one way…

      • Alex Heyworth says:

        @ flawse: can’t blame the younger generations yet; the boomers are in power. Most of the mistakes have been made initially by pre-boomer leaders. They are being compounded by our current leaders, who are still mainly boomers. Eg Rudd was born in 1957. Gillard in 1961. Howard is a pre-boomer (born 1939). Keating is a pre-boomer (born 1944). Hawke is a pre-boomer (born 1929).

      • Alex Heyworth says:

        @ Gunnamatta who has been deciding on these measures?

        It ain’t the boomers. See above.

      • 3d1k says:

        As the report notes consecutive governments have contributed.

        A report focussing on say the transfer from single/couple no dependants households might show a significant net gain to households with dependants.

        It is probably fair to assume most elderly derive net worth from property and savings which one would expect to be greater than those in younger demographic. Spiralling health budgets signal not only an ageing demographic but also exceptional growth in a range of diagnostic services that are enthusiastically offered by the medical profession and there seems no limit in sight in this area – expect continued pressure on health budgets/transfers. Add to the mix growth in nursing home volumes and we are likely to see this ”unjustifiable’ transfer benefit grow. As Peter Fraser notes above the time may come where the elderly are required to dispose of assets to access services…but their kids may not like that idea…

      • loonyright says:

        What is driving health care costs higher? Demand from the old ? Or monopoly pharmaceutical companies, over-prescription of drugs, increased wages of specialists, increased wages of nurses, increasing costs of technology, increased occurrence of certain conditions, increased regulatory requirements, increased professional indemnity and public liability insurance costs, lack of productivity increases? All of which drive increased transfers of Govt spending on health to those who disproportionately require more health care – the old.

        So the response is to soak the boomers before we attempt to address the rise in health care costs at their core ?

      • 3d1k says:

        Spot on Loony.

      • drsmithy says:

        Demand from the old ?
        Yes.

        There are a lot more, older people than there ever have been before, and their care is disproportionately expensive in terms of what it delivers.

        Ie: lots of demand.

        So the response is to soak the boomers before we attempt to address the rise in health care costs at their core ?
        First you would need to show that health care costs have actually risen, in the context of the results.

      • Alex Heyworth says:

        I am hopeful that the post-boomer politicians, who may be our leaders fairly soon (Bowen was born in 1973, Hockey in 1965) will reverse most of the excessive generosity to the elderly we currently see in taxation and pension arrangements.

        However, I am not hopeful that they will address the excessive land price issue.

      • loonyright says:

        Disaggreate the cost increases driven by demographic factors (the demand from an increasing cohort of elderly) against the increases driven by those other factors, and then tell me how much boomers are to blame and how much they should be soaked for it as part of this inter-generational war.

        The cost of health care IS disproportionately expensive – but that is a function of ALL of those factors I mentioned, not to be blamed on the boomers, and to be dealt with as a separate issue.

      • flawse says:

        Loony
        “What is driving health care costs higher? ………. increased regulatory requirements, increased professional indemnity and public liability insurance costs, ?

        Lawyers are a huge problem for doctors and drive much of the inefficiency, over-servicing and cost increases.
        The lawyer monopoly industry is out of control through the whole society creating a wanton wrecking ball for its own monetary reward.

      • drsmithy says:

        The cost of health care IS disproportionately expensive – but that is a function of ALL of those factors I mentioned, not to be blamed on the boomers, and to be dealt with as a separate issue.
        Those sources of costs apply to the care given to everyone, so why should they be separated ?

        The proportion of healthcare costs taken by the elderly is increasing because people are living longer and because the cost/benefit of care for the elderly is relatively low. The treatments needed to keep the average 90 year old alive for another year probably costs as much as the medical care used by the average 20 year old until they turn 30.

    • Bluebird says:

      Er no, we just want house prices to not be propped up by the socialism loony rights love when it suits you.

      Rudd vs Abbott seems to be an embodiment of this war.

      For instance NBN vs, crap.

      I swear all these talk back listening boomers still think it’s 1980.

  5. KeenEyeKen says:

    May I remind everyone of the speech by Druckenmiller that MB posted a while back:

    http://www.macrobusiness.com.au/2013/03/the-coming-inter-generational-war/

    Let the intergenerational war continue!

    (never before has the world seen a generation with such contempt for its offspring.. such strange times we live in)

    • Peter Fraser says:

      There aren’t that many boomers in retirement yet, but of course it will happen as they retire over the next 15 to 20 years.

      I would expect to see sensible changes to the generosity of the aged pension scheme as time progresses and as they put pressure on the national revenue.

    • Lori says:

      I would say just the opposite: “never before has the world seen an offspring generation with such contempt for its parents.”

      It depends on the point of view. Never before has the world see a more consumptive offspring generation. Maybe this is the problem, isn’t it?

      Young people want to have NOW everything their parents have acquired through their life. They compare themselves with their parent generation directly without considering the years of work and sacrifices. Don’t blame the generation, not everyone in this baby boomer generation is very rich.

      At the end, vote for someone who would change the rules for the housing and the wealth will get better distribution immediately.

      Disclosure: I don’t have and never had any investment property and am living in a small unit.

    • KeenEyeKen says:

      Lori, I take your point. There are always individuals from each generation that conform to / break the mould. In the end, we’re all the same hunter gatherer nomads, just at different points in our lives.

      It’s unfortunate that these intergenerational issues seem to get bogged down by people taking it personally. i.e. I worked hard blah blah blah. My kids are lazy, etc.

      It’s really not the point. We should focus on how shifting demographics have seen policital debate favour an older generation at the expense of a younger one. Keeping aside offspring taking potshots at their elders and vice versa.

      One can only hope.

      • Lori says:

        It is strange how you interpret my comment. I don’t take it personally at all. My kids have studied very hard and are working hard now. I don’t have any complaint against them, just the opposite. I am proud of them and would help them with everything I can.

        But I see the culture, which tends to privilege the renters and rewards very poorly the genuinely deserving people. It is everywhere, but the most propagating is the media. Is that a creation of baby boomers, most of whom cannot even stand this cultural shift?

      • KeenEyeKen says:

        Sorry Lori, I actually wasnt making reference to yourself! Although, I can now see how my comment can be interpreted as such… my apologies. I was making a more general comment about the typical conversations around this topic.

      • disco stu says:

        Sorry Lori,

        popular culture is a reflection of the values of the generation that has demographically held the reigns for power for nearly 40 years. The emphasis on me began with the “ME” generation. If you don’t like what you see, don’t criticise the mirror.

        There is certainly no evil arch-boomer council sitting in some opulent room somewhere going “Now, what next can we do to disenfranchise and impoverish our young”. Rather it is the inevitable outcome of a generation with sufficient numbers to incrementally tilt policy towards their own self interest.

        At the end of the day I tend to agree with Flawse – this isn’t a new thing. The old have always oppressed the young since the Roman’s wrote of Saturn devouring his young. The only thing that has changed is that the natural order of things has been turned on its head, with the extension of life made possible during the 20th century.

        Previously it was the abundance of youth that was the cause of most of the worlds problems, a problem that was solved by timely wars, civil and global. Today it is a plague of the elderly with little mechanism other than nature available to solve the problem…. just keep an eye out for someone under the age of 40 whose be christened Jupiter.

      • Lori says:

        disco stu, you have to be very angry to your parents. Obviously it didn’t occur to you that maybe those policies were accepted with the idea that our children will be living in better conditions and fairer state.

        Don’t forget that the main tilt policy was Howard tax and superannuation policy. He was almost acclaimed as a national hero, but he left long lasting disproportions, which are very difficult to re-balance now with small steps of reform.

      • disco stu says:

        No not angry with my parents – read all my statement, we are where we are as the inevitable result of human nature and the force of demographics coming through.

        You say the policies have been enacted with the view that our children will be living in better conditions in a fairer state… unfortunately the economic consequence of those very policies is actually undermining our ability to deliver those better conditions.

        The road to hell is paved with good intentions, these policies are just another paver.

    • Peter Fraser says:

      Willy – I replied here but it mist have gone to spam.

      You are still wrong. Divide the numbers by the years and you will see why.

      • willy_nilly says:

        The numbers are the correct years for the generations as defined. Yes they are different lengths, however it is not up to you or I to reclass the years to suit your bias.

        The same mistake I suspect Alan Kohler made.

    • Peter Fraser says:

      Good grief.

  6. Stephen Morris says:

    This is why younger people (broadly, those born after 1960) will never get to see their superannuation “savings”.

    We have already seen an increase in the age at which lump sum payments can be taken (rising by 1 year for every 6 months the birth date is after June 1960). The superannuation lobby is trying to have lump sum payments abolished altogether.

    In parallel with this, the rate at which superannuation “savings” are taken from wage and salary earners is rising from 9% to 12%.

    In addition, the private infrastructure lobby is trying to have a minimum proportion of superannuation funds forced into their projects (effectively a return of the old “30/20 Rule” which applied up until September 1985). Such forced “investment” is required only if the rate of return is less than that which would attract investment voluntarily.

    The next step will be the imposition of a tax on the balance of superannuation funds unpaid at the death of the member . . . effectively a reintroduction of death taxes but applying only to those wage and salary earners who are forced to keep their “wealth” in the form of government-controlled superannuation funds. Private wealth (that which the wealthiest people enjoy) will continue to be exempt from death taxes.

    Superannuation is – and always has been – a confidence trick on wage and salary earners. It is a hidden tax which has the added effect of supporting the (largely Sydney-based) funds mangement and finance industry.

    That is why it was introduced by Treasurer Keating in 1985.

    • Lori says:

      “Superannuation is – and always has been – a confidence trick on wage and salary earners. It is a hidden tax which has the added effect of supporting the (largely Sydney-based) funds management and finance industry.”

      Exactly

    • Opinion8red says:

      +1

      BTW Stephen, I was reading down this thread hoping to see another excellent, eloquent rant from you, explaining to all the brainwashed binary-thinkers on here who (want to) think that their older Australian fellow citizens have willfully and consciously designed and implemented the policies that have us where we are today, when in truth, their fellow citizens (like all of us) have simply been taken along for the ride; that there is no “democracy” in Oz, there is a ruling class and the ruled.

      Please Stephen … tell ‘em again.

    • Cognitive Dissonance says:

      Amen Brother !

    • aj. says:

      Superbly put. I pay a percentage fee to keep a part of my super savings in cash? wtf. I pay another higher percentage fee to have the rest of my super in bonds and the ASX8 wtdoublef.

      Super – a lurk for the rick, pointless for the poor and patronising on the middle class. And i should add a cash cow for the finance parasites.

      Super should be advertised as something you won’t be able to access when you need it and that will get taxed when the government needs it (like when all the private debt becomes public debt).

      • aj. says:

        To add to this, when i used to have a mortgage i was (like many others) in the absurd place of paying a bank for the privilege of the debt they created, and paying another bank for the privilege of paying me low interest on my cash savings and charging a fee to boot.

        That is just plain finance industry organised theft.

  7. flawse says:

    “Private wealth (that which the wealthiest people enjoy) will continue to be exempt from death taxes.”

    Capital gains tax on the subsequent transfer of assets on death needs to be tightened a bit. Death taxes, of themselves, are pretty evil.

    • Lori says:

      Why are you considering it Death tax? It is tax on inheritance, on something the person who inherit it doesn’t have any contribution to its creation.

      This is a tax which would improve productivity, because many young people would not inherit extreme fortune without any effort and contribution to the society. It is much fairer than consumption tax and income tax.

      • flawse says:

        Lori
        You can use whatever nomenclature you like.

        I lived through times when Death Duties applied. The devastation to small business, farmers etc was immense particularly where one death in a family was soon followed by another. The amount of tax you pay depends on and is inversely proportional to the length of time you live. Tell me what is fair, or efficient, about that?

        In more personal terms, at the time of your bereavement you had rude over-bearing obnoxious public servants who didn’t give a s..t pawing through your personal stuff.

        There is nothing good about it.

        As I said all we have to do is tighten the Capital Gains tax which was introduced, rightly, to fill the gap instead of death duties and is generating many times the revenue that death duties ever did.
        Capital gains are a fair system. Death Duties are awful no matter how you look at it.

      • willy_nilly says:

        Small business and rural will be exempt from the new death taxes of 25% for any amount over $750k.

      • Lori says:

        flawse, It is always about the design. The tax should target the very great fortune, which allows parasitic existence. It is not so difficult to construct it in this way.

        Otherwise you are right about small business, but they shouldn’t be included. Any $ quantity doesn’t define the same socioeconomic quality and the definition and status of a person would be very different, hence the tax would be none or high.

      • flawse says:

        Sooooooooooo we’re going to slug everyone with half a successful enterprise with 40% capital gains tax and 25% death duties….blimey that’s going to leave a lot of working capital in a business!
        You wipe out 65% of a business just because the old man dies? Then if the son or daughter dies anytime around that time we take another 25% of what’s left?

        And if the business doesn’t have the cash immediately on hand we force foreclosure of the business, dismantle a life’s work and all the jobs that go with it. I’m having trouble seeing how that adds to efficiency and prosperity.

        Just please tell me why would I bother if the Govt is just going to steal it all if I happen to die any time soon. Instead of saving I’d have boats and Porsches. Would I forego consumption to invest in the business and employ more people? What for?

        Will someone around here THINK about consequences of stuff they just wheel out because they feel a bit aggrieved? Please!

      • Alex Heyworth says:

        It is generally unnecessary to tax the inheritance of great fortunes. History shows that the majority of such fortunes are built by one generation, maintained by the second and dissipated by the third. Very few people inherit great fortunes and it is usually their misfortune, rather than something one would wish on anyone.

        Very little tax to be gained from it either. CGT does the trick just as well and with relatively little pain, being more distributed over the life cycle.

      • Lori says:

        flawse, I am not familiar with the death tax in Australia, sorry. Presented in this way together with CGT it looks punitive, which is not the purpose of any direct tax.

        In principle the possibility to transfer one’s wealth to the next generation is a very powerful motivation for growing a business and earning higher income. We all do it with our kids in mind. But as we see fortunes are dissipated by next generations and maybe that is why is better to have inheritance tax for big fortune than nothing. There are so many other countries with this kind of tax and they are doing very well with transferring the wealth to the next generations. I personally would be happier if we don’t have such a tax, but this is not my professional opinion.

      • drsmithy says:

        Why would a business be paying tax because a person dies ? Isn’t the whole point of a business entity to isolate its assets from any personal liabilities ?

  8. Neznam says:

    re “The largest growth was in health expenditure, up by 37 per cent…”

    Surely the govt could set up an agreement with another country to have some of the procedures performed overseas and it still being cheaper. We could have a A320/757 full of the elderly needing non life threatening surgery. Brings a new definition to the term bulk-billing.

    I’m sure the AMA won’t agree but if it is okay to send other jobs offshore then why should they be exempt.

    • Lori says:

      This is wonderful idea.

    • Gunnamatta says:

      Yep, a free holiday in Thailand (or wherever) with loads of minor surgical procedures, and probably even some more substantial ones.

      In the last few years I have been to medical types in Russia Turkey North Cyprus and Australia for either myself my wife or kids. The most expensive and least focussed on service and patient by a fair way has been the Australian experience. So much so that we are thinking of ditching our private health insurance (which after ten+ years I find one of the all time great rorts I have ever had shoved up me) and just making sure we use the medicare and fly OS whenever we want something serious done.

      The other thing I find fascinating is that with all the hoo ha about Unions and competitiveness, medical types are the most averse to change and invariably have the tightest restrictions on their fields – indeed I tend to be surprised when I come across an Australian specialist or GP – so basically we tell loads of our kids they cant become medical specialists, the ones that do get worked into the ground, and we import lots of international ones to cover the shortfall – all to (effectively) keep a labour premium.

    • aiecquest says:

      It already happens to an extent in the EU for aged care (and other health sectors) e.g. Germany, those requiring (low level) aged care can choose to stay in Central European facilities as a way of lowering their costs (southern Turkey is also developing something similar especially low season).

      Further, like other industries, there is also sub contracting of fly in fly out health workers from Central Eastern Europe e.g. aged carers doing 2 weeks on 2 weeks off in U.K.

      One of the benefits of EU is work mobility, common skills recognition across region, keeps pressure off wages and still allows workers to return home if needed without major disruption, known as ‘turnstile migration’.

  9. Cognitive Dissonance says:

    Good discussions so far guys…….this topic so easily gets pulled with emotional silly retorts from people that don’t like a particular comment or line of conversation.

    My two cents………democracy is mob rule it is not a consensus, the larger ‘wont’ rules for good or bad. Government is a self serving institution, we know this because we understand they do things to win votes to get to the top, be the head honcho, it’s not about higher order ‘governing’ or guidance as they like to put it, it’s about much more primal instincts. So invariably these people are just pandering to the largest interest groups….nothing new here. But our societies and futures are shaped by the comings and goings of the largest interest groups, so in our variety of democracy should we not look at what we can do about ‘interest’ and who and why people should get a ‘say’.

    What are the unemployed and non working mass more likely to vote for ? – more and better benefits

    What are the elderly more likely to vote for ? – better heath care and more and cheaper pills

    What about if we said, if you have a job you can vote, if you contribute to the pool of money that we spend on this and that you can have a say about how it is spent. No job, no vote.

    • drsmithy says:

      What about if we said, if you have a job you can vote, if you contribute to the pool of money that we spend on this and that you can have a say about how it is spent. No job, no vote.

      Is this going to come along with Government policy to ensure proper full employment ?

      • Cognitive Dissonance says:

        Is this to say that the government are not really trying at the moment.

        Your comment also suggests you accept that government as a self serving institution, should we not promote minimising such a thing ?
        (We can all debate about what the minimum requirements of government should be)

        Governments should not be an employer perse, its role should be to create the environment that creates employment.

      • drsmithy says:

        Is this to say that the government are not really trying at the moment.
        Are there people who want to be working more but can’t find anyone to employ their labour ?

        Your comment also suggests you accept that government as a self serving institution, should we not promote minimising such a thing ?
        (We can all debate about what the minimum requirements of government should be)

        My comment is suggesting that if we, as a society, want to constrain voting privileges only to the employed, the we have an obligation to ensure that everyone who wants a job, has one, otherwise we are actively engaging in disenfranchisement.

        Governments should not be an employer perse, its role should be to create the environment that creates employment.
        Government will always be an employer to some degree.

  10. Virus says:

    I dont hate boomers, infact I have many friends and family who are boomers! .. :-)
    .. now to serious matters..

    Inter-generational war has always been present and will be present. In my view, the problem is “sense of entitlement from the society/government” that is of more concerning.
    As I have seen, the more diligent of “boomer”-people have “managed” their wealth accordingly during good times and and then passed on that “managing-skill” and inheritance to their kids.
    On the other hand, the ones that “had a sense of entitlement from society/government” have not managed their wealth during good times and of course they have “nothing” to pass as inheritance to their kids!
    Yes, the “circumstances/policy have benefited the boomer”, the “well-managed” ones will pass it on to their kids (hence they would not complain) where as the not-so-well managed ones will not pass it to their kids.

    I feel, be it either “boomer” or “not-boomer”, if you have a “sense of entitlement from society/government” then everything seems to be working against you!

    my 0.99 cents

    • willy_nilly says:

      Pity the majority of boomers have no intention of leaving 1 cent to their chidren as SKIN and the like grow. So we accept that a boomer may go out and blow their super at a casino, then rely on the pension. Lump sums needs to be stopped now!

    • flawse says:

      Well said virus!

    • Bluebird says:

      Yeah there’s some good, some bad, but it’s the bad ones setting the tone, but I guess that’s the same for all generations. You have gen y’s on big brother, and others becoming doctors. You have gen x soccer mums wanting 4WDs to take the kids to school, and you’ve got gen x’ers who like to learn the truth of the world like on here.

      Some of the boomers have said to me “it’s SO hard these days”, yes it is, others have given me death stares because I didn’t get married at 23 and buy a house on the north shore for $300k in real terms like they did. It’s the latter ones that have given me a fairly permanent boomer hatred. Morons until proven innocent.

  11. willy_nilly says:

    http://www.apia.com.au/aussie-baby-boomers-kill-inheritance

    72% of Australians aged over 50 say they would rather spend their money in order to enjoy their retirement than leave it for their kids, according to new research commissioned by Apia, the leading Australian insurer for over 50s.

    • 3d1k says:

      Wow – that is surprisingly high. I guess I’ve not really thought about it other than purchasing an apartment (big balcony and superb city views) with the intention of giving my kid the keys when he leaves home. Alternatively he may prefer the family home in which case he can have it and I’ll have the apartment.

      That seems a fair enough start the rest is up to him…but yeah whatever is left when I kick the bucket is his.

      • willy_nilly says:

        3d
        I would suggest that any boomers here are proavtive and possibly the ones who want to leave something. Most boomers, the me generation, do not give a toss about anyone else or society at alarge.
        Their mantra, “It is all about me”

    • KeenEyeKen says:

      yeah, that is surprisingly high… who would’ve known

      3d1k, you make an interesting point about inheritance.
      “it’ll be yours once I’m gone”. I think people dont give themselves
      enough credit for how relatively healthy they are (my folks included).
      The baby boomer generation will be ‘handing over’ inheritance close to
      the time when their offspring will be approaching retirement themselves. I’m not saying this is a good/bad thing – just an observation.

    • GSM says:

      Genuinely shocked about that willy. I had no idea. Thanks for the link.

      To each his own. All I can say is that I am not in that group and I know plenty who aren’t either. Sure they will spend some and be comfortable but that will be evened out by generous planning for what they leave their kids and the help they provide presently. It’s the timing of the transfer that many seem to be getting some quite upset, which can be understandable though crass at times.

    • Bluebird says:

      Still don’t believe it. I remember those cliquey circle jerk apia adds of the early-mid 2000s. Where in classic boomer style they all sat around in a TV panel style thing, had a couple of boomer z grade celebs, and made out like they were all responsible for the “good times” we were living in. Yay for Johnnie Howard.

      They clearly have a very certain type they are marketing to. Ie, boomers who buy into the image of them caring a damn that they’re boomers. Their insurance prices won’t be any better.

      The simply fact is most boomers won’t eat their house because it is morally on par with shooting up. Not unless they have to and they are really sick or something and want to eke out some disgusting existence.