Fairfax’s Ross Gittins has continued his great run of form, nicely summing-up how the older generations are screwing over the young:
When they look at the economy that older generations are leaving for them, young Australians have a lot to be angry about…
It is a bit rich for federal governments to have been tightening up on subsidies to students at the same time as they’ve been increasing subsidies to the retired, particularly those who believe themselves entitled a handout because they’re “self-funded” (that is, too well off to get the age pension).
You can understand why young people resent being lumbered with education debt when governments have gone for years tolerating distortions in the tax system – negative gearing and the capital gains tax discount – that favour older people buying investment properties over first-home buyers, and push the price of homes and the size of home loans even higher.
And it’s understandable that graduates should be uncertain about the economic value of their degrees at a time when so many uni leavers are taking so long to find a full-time job… [This is] partly because universities have lowered the average value of their degrees by lowering entry standards and by educating far more people for particular occupations than are ever likely to be needed…
There are other ways in which the young are being shafted by our politicians, including through:
- Maintaining high levels of temporary and permanent immigration without ensuring commensurate infrastructure and housing is put in place. This has raised competition for jobs at a time when youth labour underutilisation is already around 30%. It has also lifted housing prices and rents, especially in Melbourne and Sydney.
- Restricting land supply in our cities by erecting urban growth boundaries that preclude the urban footprint to expand outwards as the population grows via mass immigration. This has helped to further fuel the escalation in housing costs.
- Maintaining distortions in our tax laws. Obvious examples include negative gearing and the capital gains tax discount as discussed above, which has helped push-up the price of homes. But others include ridiculously generous superannuation rules that allows older Australians to avoid paying tax, pushing the burden onto working Australians, as well as largely excluding owner-occupied housing from the assets test in assessing one’s eligibility for the Aged Pension.
- Discriminating against renters. Unlike many other countries (e.g. in Europe), long-term rentals are not generally available in Australia. Accordingly, the growing army of young Australian renters are left with insecure tenancy and required to move home often.
- Refusing to crack down on money laundering in real estate, despite repeated requests from the global anti-money laundering regulator – the Financial Action Taskforce – to do so. This has also helped to inflate housing values as billions in foreign money (especially from China) has flooded into our homes, especially in Sydney and Melbourne.
Those are the main micro-economic distortions. But at a macro-level the war on youth works in an economic model that consumes future standards of living growth in support of current over-inflated standards. This is the current account deficit model of growth that must expand either public or private debt loads forever if it is to grow.
This model, in turn, is driven by a social contract with the baby-boomer demographic bubble that has been promised ever rising house prices as the road to wealth and prosperous retirement. The political economy manifestation of MB calls the politico-housing complex.
There are also the public guarantees for the nation’s banks that have prevented markets from-restoring balance to the system, again supported by: the local level restrictions on housing supply; the record high immigration levels and un-policed foreign buying activity of existing real estate. These policies explicitly degrade our national political economy and future standards of living in the name of boosting baby-boomer dominated property-owner wealth.
The war on youth is wider still in climate change policy which successive Coalition governments have sought to trash.
In short, Australia is a closed loop of economic child abuse that needs to be torn down and thrown out.
