Pollies lose plot on taxes and demographic tsunami

ScreenHunter_08 Feb. 03 14.45

By Leith van Onselen

The AFR’s Brian Toohey over the weekend posted a interesting article articulating some of the longer-term structural headwinds facing government finances and the need for meaningful tax reform if the government is to mitigate an “ageing tsunami”:

…the tax system is badly broken. It can’t generate enough revenue to deliver long-term structural surpluses that underpin a successful society. While there are good opportunities for targeted spending cuts that don’t damage the economy’s productive base or the basic social safety net, solid demographic figures suggest this is unlikely to be enough to restore a viable surplus.

In 1970, the ratio of Australians of working age able to support services and subsidies to those 65 or older was 7 to 5. Today, the ratio is 5 to 1. By 2050, it will drop to 2.7 to 1, placing an unconscionable burden on the workforce. Simply boosting labour market productivity can’t offset the big increase in the cost of services and subsidies for older people.

Perversely, the present arrangements will let a lot more people spend as long in retirement as they did in the workforce. Yet, thanks to former treasurer Peter Costello, the existing tax system will allow more people to retire at 60 and pay no income tax for another 30 or more years. Many will be better off financially than those slogging away in a workforce that is far smaller proportionally than it is now, let alone in 1970.

…growth will run into stiff headwinds as more baby boomers retire. Neither Labor nor the Coalition shows any inclination to tackle this looming fiscal tsunami. Both are preoccupied with patching up the existing budget structure and defending components that make it harder to achieve a surplus…

A recent PwC study recommended broadening the tax base and tightening means tests to cut budget support to those who can fend for themselves…

Like other reformers, PwC supports greater reliance on taxes that do the least economic damage. This means increased consumption and land taxes, and reduced corporate and personal taxes, stamp duties, and possibly payroll taxes…

Serious reform requires federal leaders to tighten means tests and broaden their own tax bases much further than they even hint at post election.

Spot on. A glance at Australia’s long-term demographic data and projections from the United Nations shows that the proportion of workers to retirees is set to plummet over coming decades as the large Baby Boomer cohort shifts into retirement (see next chart).

ScreenHunter_09 Aug. 12 10.42

The implications for Australian government finances are immense. Not only will governments have a much smaller pool of workers with whom to collect taxes from, making it much more difficult for the Government to raise the required amount of tax revenue. But they will also have to contend with rising health and aged-care expenditures, significantly increasing overall Budget outlays.

It’s not as if these ageing pressures have come from ‘left-field’. Demographic shifts are fairly easy to predict from decades out. As such, it is an indictment that no side of politics has to date engaged meaningfully on this issue or commenced a frank and honest discussion on society’s expectations of government and the costs of meeting those expectations. Meanwhile in the election campaign we have one side of politics madly cutting taxes and the other madly pursuing a fear campaign over tax hikes. Go figure.

[email protected]

www.twitter.com/leithvo

Unconventional Economist
Latest posts by Unconventional Economist (see all)

Comments

  1. ‘Demographic shifts are fairly easy to predict from decades out. As such, it is an indictment that no side of politics has to date engaged meaningfully on this issue or commenced a frank and honest discussion on society’s expectations of government and the costs of meeting those expectations.’

    100% correct

    I actually took part in the compilation of a report which went to the Treasury in about 1998, through the then Dept of Workplace Relations, and involved Defence (the largest APS employer) ABS, and Centrelink. The same process also involved the then 5 largest private sector employers including banks.

    It was identified then that circa 2009-2015 (as I recall was the timeframe identified) the departure of the babyboomer set would start to place significant stress on the budget (obviously they didnt factor in a mining boom) and drew a range of implications for budget outlays, the economy, and employment practices (and in particular IR – which was my then focus) from that point forward.

    But step forward to 2013 and what do we have policy wise that reflects some forward planning?

    • The aging, my solution is look after the young, let the older ones die out. I don’t feel sorry for this age group in general. In my life time they have sold off most of the national infrastructure, created more homeless, more crime, allowed citizens to be displaced by cashed up foreigners, exported working opportunities such as manufacturing and services for the next generations to countries like China, created property bubbles then allowing easy credit to create debt slaves for life, eroded government services such as health care, education etc…

      This is what the older generations have left for the young of both NZ and Australia. So why should we fund their retirements and look after them. To hell with that.

      • +1

        i hope you boomers get the vibe and start saving, one day we’ll control policy, and this is how we feel about the demographic you’re in.
        if ever the concept of karma was justified, it will be in it its application to you fine folk… one day we’ll hear about aged care about as much as we’re currently hearing about housing affordability. wanna sell our houses to china to prop up your ponzi ? well prepare to have your children adopt some chinese attitudes on retirement.
        enjoy the good times and the holier than thou sermons on ‘work ethic’ and ‘property investment’ now… while you can

      • As a boomer, fine by me.

        Of course, that is after the young pay for every meal they ever had, every piece of clothing and footwear, every night of accommodation, school costs and other entertainments. In addition, we should make sure that we spend every cent of our wealth including homes using reverse mortgages to make sure that the young do not receive any unearned and undeserved wealth. That is fair enough, right? Heh. I would like to see that. Snicker.

        Let us balance off the books before we go, eh? LOL.

        As for what the boomer generations have done. When the boomers came to adulthood, the Australian economy was sclerotic and hidden behind tariff walls, women were actively discriminated against in jobs, gays were regularly bashed and sometimes killed, censorship was rife, concern for the economy was a joke, there was a cold war siphoning off huge amounts of money. Oh, and the young of today would not dream of living in the shoe boxes that most boomers were brought up in, so we provided them with much more in the way of smaller school classes, bigger houses, etc etc etc.

        By the way, what exactly have the X and Y generations actually done that means they deserve any better than they have at the moment? Self indulgent and waiting for their parents to give them more and more while contributing less and less. LOLOLOL.

        I guess if gen X and Y think that the boomers have done so bad by them, perhaps they might like to reconstruct the Australia of the fifties and see how much fun that was…wheeeee.

      • Oh, and the young of today would not dream of living in the shoe boxes that most boomers were brought up in, so we provided them with much more in the way of smaller school classes, bigger houses, etc etc etc.
        The young of today generally live in shoe boxes no bigger, if not smaller, than the ones the boomers grew up in.

        On top of that, they live in them cheek-to-jowl as apartments rather than small houses on 1/4-acre blocks, and are often in some form of shared housing until their late 20s (or longer).

        The rest of your rant is similarly ill-considered and inaccurate. The boomers inherited an incredible legacy of public services, public infrastructure and egalitarianism from their parents, then burnt it at the altar of selfishness and greed.

    • In first year economics, circa 1990 it formed the basis for several lectures.
      Re. Comments below. Hilarious! I thought I had a hate on for the boomer, but I’ve got nothing on you guys!

  2. Bring it on. Perhaps the demographic tsunami will wash away the nonsense and bring a return to common sense.

    • notsofastMEMBER

      The nonsense is the very concept of retirement. That people work flat until a given age and then stop working, stop contributing and become a burden on society. Retirement is fine for a country with a pyramid shaped population distribution with a lot more young people than old people, but for a country with a flat population distribution it is an unaffordable concept. And using immigration to increase the number of young people only delays the time when you need to ditch the retirement concept to a later date when you will have even more retirees to provide for. People who use this argument to justify immigration are infact talking about a ponzi scheme.

      This needs to be more about a transition to lower hours of work, lower levels of responsibility and lower levels of pay as people get older. About keeping older people in the work force and connected to jobs because once they are lost to the workforce post 65 for any length of time then they are typically lost to the work force for good.

  3. As with the Americans dealing with their fiscal cliff we need to look not only at cutting expenditure and but closing tax loopholes. The one of the biggest tax loopholes of all being negative gearing.
    Why is NG not on the table?

  4. If we’re going to talk about taxes, why not open up the topic and talk about wealth taxes in general, such as those levied by Swiss cantons.

    Wealth taxes are the counter-point to consumption taxes. Consumption taxes are regressive. Wealth taxes are progressive (on wealth) but are not a direct disincentive to earning income. (Indeed, they may be an incentive to earn income to prevent the slow erosion of wealth!)

    Generally they are levied at a low rate based on (from http://www.pwc.com/us/en/hr-international-assignment-services/assets/switzerland-folio.pdf):

    – immovable assets (real estate);

    – movable assets (securities and other investments;

    – cash, gold, precious metals;

    – cash value of life assurance policies;

    – shares in undistributed inheritances;

    – business capital, shares in a partnership;

    – motor vehicles, boats, etc.

    Pension funds are not considered as assets.

    All liabilities can be deducted in order to determine net wealth. In some cantons there is an allowance depending on the status of the taxpayer (married, single, number of dependants) while in others an allowance is made in the tax rate.

    Taxpayers must declare worldwide assets belonging to all immediate family members. Foreign real estate and qualifying business interest are exempt but made be taken into account in determining the tax rate. Liabilities are allocated according to the location of gross assets.

    From the same source, tax rates for 2010 on CHF1,000,000 owned by a married couple were:

    Zurich 0.2% (CHF2,000)

    Basel City 0.58% (CHF5,800)

    Geneva 0.62% (CHF 6,200)

    Because the wealth tax rate is so low, variations in the assessment of assets has a smaller effect on tax paid than a similar variation in the assessment of income.

    • p.s.

      It is also worth emphasising that these taxes are collected on a cantonal basis.

      A very important aspect of tax policy that is studiously ignored by the Australian elite is that people are more likely to pay taxes if they can see a direct connection between what they pay and what they get out of it. That means much greater localisation of fiscal arrangements.

      In Australia, however, the elite (and that certainly includes Mr Abbott and not a few of the writers here) is committed to fulfilling Henry Parkes’ dream of a highly centralised Australian state with Sydney as its magnificent (albeit de facto) imperial capital.

      This is a recipe for rent-seeking as those close to the centre of power ensure that tax revenues are spent on themselves. As long as fiscal policy is conducted in this way we may expect to see opposition to any form of taxing.

    • I strongly support land taxes, which are a wealth tax.

      It’s also worth noting that the Swiss model, like Germany’s, facilitates more efficient and responsive planning since local governments are incentivised to support development and population growth since they share directly share in the increased tax revenue. Compare this to Australia, where the Feds receive most of the tax revenues, whereas the states incur most of the costs related to population growth. No wonder then that the states opose expanding the urban footprint in order to save on infrastructure costs.

      • Just one one of many perverse consequences of centralised fiscal policy.

        I think I am correct in saying that Australia has far and away the highest degree of vertical fiscal imbalance of any country of comparable size and diversity.

        And that is something that will be further entrenched under an Abbott government. He has made no secret of his contempt for federalism.

        One further point on urbanisation.

        The Swiss and German models (and indeed the US model) allow for the development of cities other than the state/territory/national capital.

        The perversity of Australia’s fiscal arrangements is not just between the states and the centre. It is within the states as well. The state capitals have grown at the expense of regional centes because – hitherto – they have controlled the state finances. People move in close to the centre of power and wealth leading to vast capital cities and an empty hinterland.

    • Stephen, you are absolutely spot on. I see the reason why the Swiss cantons work is because they localise their pains while sharing their gains – which is the exact opposite of the federally centralised system we are pushing in Australia.

      What I mean by this, is that impacts of any poor decision made by individual cantons are isolated, while any good ideas are spread throughout the other cantons. Limited downside, as the other cantons can help in times of need, with unlimited upside when pollies get things right that every canton can share..

      In a few weeks we have a referendum that will ask the people to hand over ever MORE power to Canberra, by allowing them to financially control our local councils (hey, they already have the states by the balls. Might as well go finish off the rest of the competition!). It’s an abomination that I am still yet see even 10 seconds of news coverage…

      Oh well, time to move to Switzerland.. both federal party’s have an interest in perpetuating their powers, so don’t expect anything to change any time soon

      • As so often in politics, there is endless chatter about frivolities and personalities while huge structural changes are being enacted without most people even realising that it is happening.

      • Switzerland would be a great spot to live if it were only possible to export all the Swiss, gosh they’re a boring lot. So although I’ve never actually lived in Switzerland, over the years I have spent enough time in Neuchatel to think of it as a home, and believe me the Swiss are boring.

      • I lived for 18 months in a small town on the Swiss-Italian border.

        The Swiss aren’t boring. They’re just grown up. It comes from having to govern themselves through their system of Democracy.

        Just as children have their decisions made by adults – and they regard the adults as boring – so people in non-democratic countries have their decisions made by politicians.

        Not surprisingly they regard democratic people as “boring”.

      • Which is precisely why I often miss Russia…..

        They Havent got the faintest idea about democracy, never known it, and would coq it up if they had it.

        They get their decisions made for them….

        They spend most of their time working out ways around these decisions….(and couldnt possibly be relied upon for almost any outcome) and are utterly exasperating into the bargain.

        But they couldnt ever be accused of being boring.

      • Gunna, I agree completely, I used to love visiting our office in St Petersburg because I never knew what mischief I was likely to end up being involved in. I think our Russian managers were more conniving then any American soap opera could even dream to be. It goes without saying that they were educated by experts, so, weather you knew it or not, you entered the room with a loosing hand, now if you managed to leave with your shirt and maybe your wallet then you considered yourself lucky (and educated). I sure miss those days.

        BTW: as general advice: NEVER get drunk with a bunch of Russian astro-physicists and agree to play chess (poker or any game of chance) for serious money.

  5. The Bureaucrats won’t admit it, but this is why they are so keen on Skilled Migration.

    It fixes all the problems without having to do all the work involved in changing the Tax System.

    • This has been discussed before but it only kicks the cans further down the road. The migrants will bring their families and in many cases elderly relatives with them.

      Also at the rate of decrease of the ratio, that is a lot of migration that will put big pressure on infrastructure etc.

      Lastly, the assumption that people will want to move here if the economy is in trouble and the government is forced to reduce welfare safety nets is a weak one.

      • notsofastMEMBER

        flyingfox,

        As long as we continue to drive immigration at all costs, we the powers that be in our country will continue to throw our older generation on the scrap heap, rather than treating them as the valued and productive members of our society that they deserve.

    • Yes, it’s seen as the easy solution. Until the immigrants themselves get old, when they in turn need to be replaced by yet more immigrants, and so on.

      • I think the point that Skilled Immigrants want to move their parents here is an interesting one, certainly the Bureaucrats wouldn’t be happy with that.

        It’s going to be interesting to see how the current Temporary Skilled Migration system will hold up against rising unemployment.

        I think Skilled Migration will win.

      • @Swizzy. What will the “skilled” migrants do? As it stands we have very few industries that are globally competitive …

      • @flyingfox

        Purchase overpriced houses, of course! Sheesh FF, get with the program, will you? 😛

      • 4.1 million boomers born here and now we have 5.3 million to support due to immigration. 80% of boomers will require part or full pensions.
        You do the math….

  6. This strays into speculative territory, but I think life extension research is going to have a huge impact in the economic sphere in the decades to come.

    Even if you discount a Kurzweillian singularity making us all immortal supermen by 2030, anti-ageing and personal genetics research is advancing rapidly. Even at this early stage, lab rats can have their lifespans extended by up to 65%.

    I can easily see a not-too-distant future where the average life expectancy at birth is 100+ in developed countries. And once you accept that the research could soon take us that far, it’s not too much of a stretch to eventually add another century or two on top of that. Crazy times.

    • If people stop dying then we will need to put an end to retirement. Perhaps anyone born after a certain date would not be allowed to retire. Perhaps 1964 would be a date acceptable to the majority of voters.

      • Don’t worry about people stop dying, the real tsunami building is climate change

        A great many folk are going to leave early due to CC. & not to far in the future.By 2050 it will be in full swing.

    • I can easily see a not-too-distant future where the average life expectancy at birth is 100+ in developed countries. And once you accept that the research could soon take us that far, it’s not too much of a stretch to eventually add another century or two on top of that. Crazy times.

      Why is that crazy?

      All that means is how long do you have to work. We could create an equally ridiculous imbalance if we legislated the retirement age was 35 with current life expectancies.

      If we live longer, with equal medical (and sensible) regimes like decriminalising steroids and HGH/peptides and TRT, as well as further study into this area, we can mitigate much of the effects of aging, well except female fertility.

      • Well for one thing you’d have a lot more people hanging around for longer and refusing to die, which means the global population is going to peak higher than projected, and for longer.

        Not to mention all of these bicentennial men and women will want to keep consuming resources at the same rate for their long working lives.

      • I didn’t mean in terms of its impact, i meant as a rational conclusion.

        It’s perfectly rational we attempt to achieve longer life spans.

      • reusachtigeMEMBER

        Yes, it is true that discoveries are being made all the time that help stretch out our life span and an extra century or more is actually possible but the problem is most of that will still be spent in a rather aged state in which people will not be primed to work.

      • The increase in longevity may not happen due to obesity and diabetics. Some studies are projecting a decrease.

  7. In 1970, the ratio of Australians of working age able to support services and subsidies to those 65 or older was 7 to 5.

    is that meant to be 7 to 1?

    For the young people, here is your queue…

    By 2050, it will drop to 2.7 to 1

    Leave, make the ratio 0.5 to 1, or 0.1 to 1. Hasten the imbalance.

    Elders are meant to lead and guide, not leach and subjugate. You owe these users no reciprocity, you only owe it to your own children, and they are in the sites of the boomers too.

    You are harming your own children by having them stay here.

    • While I agree with your sentiments, and many people including myself may just leave Oz, the situation isn’t much different anywhere else except India and Africa.

      • Young people go to a low population locality, capture the polity.

        NZ would be a perfect location or 4+ million young Australians to move to, barring the fact is a paradise for socialist softcockery.

      • The difference is that other countries have lower alcohol taxes, more functional public transport, cheaper houses and more attractive people, many of whom love exotic Australian accents.

        As the Australian dollar falls further more young people, particularly those with experience and skill sets, will work overseas. Additionally as children and grandchildren of Europeans many are eligible for EU citizenship.

      • I agree that many will leave and possibly be better off. However we live in an almost universal aging society. Parts of Asia, Europe etc.

  8. Steven Spadijer

    PwC supports greater reliance on taxes that do the least economic damage. This means increased consumption and land taxes, and reduced corporate and personal taxes, stamp duties, and possibly payroll taxes…

    Consumption taxes do huge economic damage – they create added input costs into the very act of living (even if exemptions exist – although even this might be subject to the winds of a legislative majority, and under existing arrangements a whole range of transactions are taxed). Who can afford to “multiply and replenish” when you become Spain/Lativa/Portugal/Greece/Bulgaria/Romania/Scandinavia and have to add 23-25% on all supplies? So you ultimately end up like Western Europe.

    Really consumption taxes are:

    1) a tax production – with labour being an input in production. That is why Adam Smith condemned taxes on wages or on the necessities of life: labour has to be repaired and replaced as much as machines;

    2) virtually only residents consume locally and GST is only on local consumption. GST is therefore basically a tax on Australian residents only;

    3) GST is really a tax an income tax (or how you spend your income) which exempts not only savings but also exempts foreign investors.

    The advantage of land taxes have been well document on here and in the economic literature.

    • The only tax reform that seems to get any oxygen in mainstream media is increasing and broadening the GST.

      There has been a world-wide trend to substitute property taxes with GST and we can expect this in Australia too. Banks and property billionaires do not like land tax because it leads to lower land prices and therefore less debt to pay bank interest on. Land tax is naturally progressive and hard to avoid as land is immobile.

      The very wealthy spend surplus income on more assets so increased GST will not impact on lifestyle. The poor spend all their income on essentials.

      There are plenty of people who are not poor but are double income families who have little disposable income after mortgage payments and increasing with GST the cost of food, education and health would impact on lifestyle for them too.

      This podcast or transcript of an interview with Professor Michael Hudson entitled “Who are Rising Property Prices Good For?”

      http://www.earthsharing.org.au/2013/08/07/renegade-economists-300th-show/

      discusses the bipartisan objective of the Australian government, along with governments of USA, Britain and Europe to support the banks with ever higher property prices and private debt.

      Hence GST is the tax reform that will dominate debate until the population is acquiescent.

      Australia still has a lot of firepower for supporting banks with increased private debt, the latest being the capacity of SMSF’s in pension phase to buy and sell residential and commercial property with zero capital gains and the unmeasured effect of foreign investment on property prices.

      Professor Hudson explains the objective of supporting the banks re interest rates and the AUD, and discusses the other firepower still in reserve, such as selling off Australia’s about 200 Billion of utilities and dipping into the super savings of young Australians for mortgages to expand private debt.

      A design for the Australian flag more representing our nation’s reality would be to remove the Southern Cross and replace it with the big four bank logos.

      • Steven Spadijer

        Excellent you mentioned the GST. I refer readers to Section 55 of the Constitution.

        Laws imposing taxation, except laws imposing duties of customs or of excise, shall deal with one subject of taxation only….

        Although Justice Hely inO’Meara v FCT said the GST is a tax on “final consumption” (yet no discussion of how land transfers and restrictive covenants are “consumption” was provided), the criterion of liability for a GST is not consumption (it does not even appear in the text of the Act), but “supply”:

        (1) A supply is any form of supply whatsoever.

        (2) Without limiting subsection (1), supply includes any of these:

        a) a supply of goods;
        b) a supply of services;
        c) a provision of advice or information;
        d) a grant, assignment or surrender of real property;
        (e) a creation, grant, transfer, assignment or surrender of any right;
        (f) a financial supply [which deems an acquisition to be a supply];
        (g) an entry into, or release from, an obligation:
        (i) to do anything; or
        (ii) to refrain from an act; or
        (iii) to tolerate an act or situation

        The Act goes on to paying state taxes, charge and fees to be a supply: s81-5.

        Supply, by its very nature, presupposes the existence of a whole range of disparate and separate subject matters; indeed, a “supply” without a subject matter attached to it is utterly meaningless. All that a “supply” tells us is the point in time, or the taxing point, in which an unspecified subject of taxation is being taxed. In each and every case there is “that which is supplied”, “something provided by the way of supply”.

        The very fact it is an avowed tax on something (and that something could be anything) clearly shows the GST lumps together subject matters necessarily separate and distinct: a tax on goods, a tax on services, a tax on real property; a tax on contracts; a tax on financial interests. But a tax on “anything” does not need any unity of subject matter. It taxes and lumps together thing simply because they exist in the marketplace.

        And, of course, the Senate was not sitting around debating “supplies”. It was debating taxing land transfers, or services, or goods, or contracts (natural rather than artificial constructs). The Senate – despite the complaint of 29 Senators – was not given an independent vote on each subject of taxation. It was simply a matter take it or leave it (with exemption sweeteners provided).

      • notsofastMEMBER

        And change our National Anthem to “Advance Australia’s Banks” which will include lines like “with boundless mortgages to share” etc. While our 7th state New Zealand, can change their National Anthem to “God Defend Australia’s Banks”, which will include lines to remind all New Zealanders that they must burst their real estate bubble before Australia bursts theirs.

    • There are two ways to replace PAYG personal income tax with VAT: the usual way, and the right way.

      The usual way is to allow the forgone PAYG tax to be paid out in wages and salaries, so that the extra business income needed to cover the VAT must come from elsewhere, namely higher prices. Therefore the change is regressive and politically difficult. Therefore PAYG tax can only be partly replaced. That’s how it was done when the GST was introduced.

      The right way depends on the fact that PAYG “personal” income tax isn’t really a personal tax. It’s a business tax paid by employers. Oh, yes, employees get credit for it in their PAYG payment summaries (formerly known as group certificates). But if the tax isn’t paid, the government goes after the employer. So it’s a business tax — wherefore it appears on the BAS along with company tax and GST (VAT).

      So, if employers keep the withheld PAYG tax (all of it) and collect a higher GST in its stead, they will not need to raise prices in the aggregate, because the retained PAYG tax will cover the additional GST. Indeed, because PAYG tax will no longer add to the cost of labour, there will be more jobs, hence less welfare spending and more consumption, hence less revenue to be raised from a broader consumption base, so the required GST rate will allow prices of Australian products to fall.

      Job creation and its benefits will be all the greater because GST, unlike the cost of labour, doesn’t inhibit exports or capital formation.

      But employees will still get credit for the retained PAYG tax, so there’ll be no reduction in take-home pay, and no widening of after-tax wage inequalities.

      Conservatives and libertarians should welcome the reduction in welfare expenditure. Progressives should welcome the improved bargaining position of workers and the fall in domestic retail prices of domestic products. The only downside is the rise in retail prices of imports. That’s a small price to pay for the extra job opportunities. The only people who might need compensation are those outside the workforce, and only if the rise in import prices outweighs the fall in retail prices of domestic products.

      So, those of us who bat for workers and consumers need to take over the pro-GST camp and make sure that the right way becomes the definitive way!

      P.S. on Section 55 etc.: If the GST/VAT were re-implemented as a Cash Flow Tax (as suggested in Chapter D of the Henry Report), the net “cash flow” would be recognizable as a subject of taxation. That would help solve the s.55 problem. Furthermore, businesses would be payers of the CFT rather than collectors of it. That would help solve the s.82 problem and the s.51(xxiiiA) problem.

  9. A couple of politcally easy solutions (maybe not for this election but definitely the next one).

    1. Increase immigration – bring in 150k permanent immigrants a year between the ages of 25-35 (they’re already lining up in Europe, China and India).

    2. Spend less on health care – freeze spending on public aged care / hospital system (exlcuding child related health programs / hospitals) and let waiting lists blow out.

    Deomgraphic problem solved.

    • Our NOM would need to treble to compensate for the falling natural growth. Not going to happen in this aged anti-immigration Oz

    • So let the people who built this country and paid taxes all their life here die off unaided while disinheriting their offspring by importing massive numbers of third world foriegners – sounds like a plan.

      • I watch exactly that happen in Central Eastern Europe, declining populations, shrinking tax base, brain drain, young working elsewhere in the EU, demographics crashing the tax system, hitting health care, social security (Hungary 3 months dole, then work camp to continue), etc. and exorbitant taxes to pay for it…..

        Positives are remittances, expertise, ideas returning etc.. but in case of Serbia, Bulgaria etc. they cannot pay for infrastructure which requires maintenance even when under utilised (they EU does a lot in this respect via transfer of development funds)

        Recently ABC Big ideas Australia: Growing Pains looked at exactly this

        http://www.abc.net.au/tv/bigideas/stories/2013/07/29/3810642.htm

        Peter Mares, explained net overseas migration etc.. and suggested it’s not useful to describe students, 457 workers etc.. as “immigrants” when they pay taxes but have no citizen or permanent resident rights (must leave at end of their visa), yet temporary workers and flows of people is what makes the world go round……

        Bernard Salt and Waleed Aly could barely disguise their contempt for Sustainable Population Australia people asking vague almost unintelligible cliche filled questions asking why we need immigration etc.

        Salt’s reply was to try living in a country with a declining (or restricted) population, first spike in unemployment, house prices drop (very quickly) and crashing tax base that’s unable to support services, social security, infrastructure etc., that’s not a future for the younger generations.

      • For everyone,s information aiecquest has vested interest in increasing population.
        The ageing population scare tactic is based on lies. I notice the original “Big Australian” Rudd, is now resorting to this line of argument. Of course immigrants are so wonderful they don’t age or bring ageing relatives with them.
        Salt suggests a gentle rise in population growth to meet the temporary needs of the boomers and then a gradual weening when the bottle neck passes. This seems reasonable but we are not seeing such a plan. Instead we are seeing Nation destructive brute force numbers of immigrants in response to a manufactured and illusory crises.

      • “The ageing population scare tactic is based on lies.”
        Figure 7.13 on the page below makes your comments, well, stupid.
        http://www.abs.gov.au/ausstats/[email protected]/Lookup/by%20Subject/1301.0~2012~Main%20Features~Population%20projections~48

        Note, Mr Salt has no qualification in sociology, or demography, at all. He is a social commentator only.

        Number of persons aged 60 years or over
        There are approximately 810 million persons aged 60 years or over in the world in 2012 and this number is projected to grow to more than 2 billion by 2050. At that point, older persons will outnumber the population of children (0-14 years) for the first time in human history. Asia has more than half (55 per cent) of the world’s older persons, followed by Europe, which accounts for 21 per cent of the total.

        Proportion of the total population aged 60 years or over
        One out of every nine persons in the world is aged 60 years or over. By 2050, one out of every five persons is projected to be in that age group. The proportion of the total population that is 60 years or older is much higher in the more developed regions than in the less developed regions: one in five persons in Europe; one in nine persons in Asia and Latin America and the Caribbean; and one in 16 persons in Africa. Although ageing is evolving fast in the more developed regions, the less developed regions will experience faster ageing over a much shorter period of time.

        Share of persons aged 80 years or over
        The older population is itself ageing. Currently, the oldest old population (aged 80 years or over) accounts for 14 per cent of the population aged 60 years or over. The oldest old is the fastest growing age segment of the older population. By 2050, 20 per cent of the older population will be aged 80 years or over. The number of centenarians (aged 100 years or over) is growing even faster, and is projected to increase tenfold, from approximately 343,000 in 2012 to 3.2 million by 2050.

        Sex ratio of older persons
        The majority of older persons are women and the sex ratio (number of men per 100 women) is lower the older the age group. In 2012, at the world level, there are 84 men per 100 women among older persons, and only 61 men for every 100 women among the oldest old. The ratio of men to women at older ages is lower in the more developed regions (89 men per 100 women) than in the less developed regions (men per 100 women) because women outlive men by a wider margin in the more developed regions.

        Life expectancy at age 60
        The world has experienced large improvements in longevity, while the gap across development regions has narrowed. In 1950-1955, life expectancy at birth was 66 years in the more developed regions compared with only 42 years in the less developed regions. By 2010-2015, it will reach 78 years and 67 years, respectively. On average, of those surviving to age 60 in 2010-2015, men can expect to live an additional 18 years and women an additional 22 years. Life expectancy at age 60 varies significantly across development regions. Men reaching age 60 can expect to live only 18 more years in the less developed regions compared to 21 more years in the more developed regions. Women reaching age 60 can expect to live an additional 20 years in the less developed regions compared with an additional 25 years in the more developed regions.

        Proportion of older persons who are currently married
        Older men are more likely to be married than older women. At the world level, 81 per cent of older men are currently married, compared to only 50 per cent of older women. Sex differences in the proportion married are largest in least developed countries (85 per cent for men compared to 38 per cent for women), where the age difference between spouses is higher and widowers are more likely to remarry. Most older unmarried persons are widowed. Women are more likely to outlive their spouses because they live longer and are, on average, younger than their husbands.

        Proportion of older persons who are living independently
        Living independently, that is, either living alone or only with one’s spouse, is rare among older persons in developing countries, but is the dominant living arrangement in developed countries. An estimated 40 per cent of the world’s older persons live independently, with no discernible difference by sex. The gap in the proportion living independently between the more developed regions and the rest of the world is remarkable. Almost three quarters of all older persons in the more developed regions either live alone or only with their spouse compared with only a quarter in the less developed regions, and just over 10 per cent in the least developed countries. The predominance of independent living among older persons is likely to increase as the world’s population continues to age.

        Old-age support ratio
        The old-age support ratio, that is, the number of persons aged 15 to 64 years per person aged 65 years or over, is an indicator of demographic ageing and of the degree of dependency of older persons on potential workers. Since 1950, the world old-age support ratio has been continuously declining, which means that there are less “workers” to support every person aged 65 years or over. The ratio fell from 12 to 8 working-age persons for each older person between 1950 and 2012, and is projected to further decrease to 4 by 2050. In 2012, the old-age support ratio was much higher in the less developed regions (11 working-age persons per older person) than in the more developed regions (4 working-age persons per older person). The old-age support ratio has important implications for the solvency of social security systems (pensions and public health), as well as for the demand of private transfers from the working-age population to older family members.

        Proportion of the older population in the labour force
        Labour force participation among older persons varies by development region and gender. In 2012, the proportion of older persons who are economically active is much higher in the less developed regions (50 per cent among men and 22 per cent among women) than in the more developed regions (26 per cent among men and 15 per cent among women). Older persons in the less developed regions work until more advanced ages owing mainly to the limited coverage of social security schemes, as well as the relatively low value of the pensions received by those who are covered.

        Statutory retirement age
        The statutory retirement age, which is defined as the minimum age at which people can qualify for full pension benefits, tends to be higher in developed countries than in developing countries. Also, in all countries of the world, the retirement age for women is the same as or lower than that for men—generally by five years. In most developed countries, men and women become eligible for full pension benefits at age 65 years or over, while in developing
        countries, they often become eligible between 55 and 60 years. The lower statutory retirement ages common in developing countries is a reflection of their more incipient social security systems, their lower life expectancies and their higher old-age support ratios

        From http://www.un.org/en/development/desa/population/publications/pdf/ageing/2012PopAgeingandDev_WallChart.pdf

      • Why cut and paste a bunch of irrelevant crap here willy? Was it to obscure the fact that the ageing scare tactic is all lies and a calm and considered approach is more appropriate than an insane destructive immigration program? Next time a link to the UN article would be sufficient and less tedious.

        http://www.theglobalist.com/storyid.aspx?StoryId=8321
        Snippet:
        “Among its primary tactics, Ponzi demography exploits the fear of population decline and aging. Without a young and growing population, we are forewarned of becoming a nation facing financial ruin and a loss of national power.

        Due to population aging, government-run pensions and healthcare systems will become increasingly insolvent, according to advocates of Ponzi demography, thereby crippling the economy, undermining societal well-being and threatening national security.

        Low birth rates, especially those below replacement levels, are considered a matter of national concern. Without higher fertility rates and the resulting population growth, the nation, it is claimed, faces a bleak and dreary future. “

    • notsofastMEMBER

      1) you are recommending a ponzi scheme.

      2) Your only looking at a small portion of the “health care” problem. As I see it health care costs are exploding across all demographics because of
      – the food industrial complex that is giving us crap food and crap water,
      – alcohol and illicit drug use again filled with all types of crap
      – a health industrial complex that is coming up with ever increasingly expensive treatments and solutions to our aliments with the main purpose of getting even more money off us and governments.
      – a health system that is trying to be perfect and prevent the possibility of mistakes with more resources and more people.
      – a standards system that can no longer protect us and a legal system that has totally lost its way.
      Sorry but IMHO denying our older generation adequate, suitable and affordable health care won’t come close to solving our health budget woes.

  10. The agequake started in the early 2000’s as savings rose, retail declined and emigration started to trend up. 5.4 million boomers will die and over the next few decades our natural growth may drop to zero or even negative.

    Land tax, death taxes and raising the GST are critical to avoiding a generational war. Already we can see the lines being drawn.

  11. The IGR 4 was put back to next year for political reasons. It will shock from my look at the prelim data.

    • Will it shock enough to shake whoever is governing then (presumably the Torynuffs) to do something about private debt now?

  12. The article and many comments support the wide held view that governments can fix things. They cannot. And certainly should not be relied on.

    If demographics is a problem with aged relying so heavily on the young why is the highest unemployment with young people. If more immigrants are brought in to lower the average age what will that do for employment prospects of young people.

    Initiative and self-reliance are lacking and that is the role of individuals not government. Government paid pensions should be viewed as a safety net not the objective. Leave it to insurance companies to fill that role and take it out of the hands of government. Make it clear to people that they are expected to prepare for self-funded retirement.

    • How would you “make it clear to people that they are expected to prepare for self-funded retirement”? How would you stop people from retiring early, spending their savings, then going on the old-age pension?

      • Set a time frame to eliminate the age pension.

        Japan is possibly the only country that has the offshore investments to fund their decay so the last person to retire there could be very wealthy. Germany is in a fair position but their investments are not as diversified as Japan. Hard to see the young in Greece working to support the aged in Germany as well as the aged in Greece although the movement of working age people in Europe suggests that is already in progress. China has targeted the young in Africa to support its decay.

        Most other countries have pension funding based on growth forever. Without growth the pension systems go broke anyhow. Hence it is a matter of an orderly transitions to individual control or a chaotic one where government cannot transfer enough output from young to old and keep the young motivated.

        Australia is in a similar position to Greece and Spain with its massive offshore debt. So young in Australians will be working to support the aged in Japan, China and Germany as well as the retirees in Australia.

        Once the decay starts it can compound and spiral down. Detroit is a good example of how it deteriorates when people are promised something that cannot be delivered:
        http://billjohnsondetroit.com/wp/?p=1682

    • notsofastMEMBER

      “Initiative and self-reliance are lacking and that is the role of individuals not government.”

      Maybe it is training and opportunity that are lacking which I think is the role of businesses, if they want to do business in Australia.

      One of the problems for a high income country like Australia with good infrastructure is that it will always be more attractive for capable people to come from low income countries to Australia to do the jobs that less capable Australians once did but are “no longer prepared to do”. David Cameron had it right when he spoke about “welfare and immigration” being different sides of the same coin. Maybe you should read up on it.

      Ultimately though what this all boils down to is the type of society and country we want and how to achieve it. And the answer to that question, believe it or not, will have a much greater impact on the quality of life in retirement for the average Australian than any dollar figure they could possibly hope to accrue in their superannuation or retirement savings. That is to say, the quality of Australian Society is more of a store of value than Australian money.

      • @ notsofast
        “That is to say, the quality of Australian Society is more of a store of value than Australian money.”

        The value of Australian money has declined about 20% in the last year against the world currency. Its decline is probably matched by the decline in the quality of Australian Society. Governments have fooled the people into thinking they are in control. This misplaced faith eats away at individual responsibility and control of their own circumstances. These are qualities that improve the quality of Australian Society.

  13. And yet …….

    many of the posters above would also rail against the Baby Bonus and other incentives towards having children.

    We either start to recognize that bringing babies into our world and raising them to be decent human beings serves a worthywhile social goal

    OR

    start accepting more boatloads of immigrants.

    Sliding into demographic oblivion like Japan is not an option I think any of us want to contemplate.

    • if people can’t afford to buy houses, they stop having kids…

      ‘bringing babies into our world and raising them to be decent human beings’ only becomes ‘a worthywhile social goal’ if it can be afforded… the baby bonus doesn’t make raising a kid in the modern australian society anymore affordable

      • Bingo castor

        the baby bonus doesn’t make raising a kid in the modern australian society anymore affordable…..but lower land/house prices do.

        Maybe reducing land and house price inflation can help solve the demographic dilemma