Cruel Coalition pork barrels retirees, shafts unemployed

Yesterday, Fairfax reported that around 600,000 retirees are about to receive fortnightly pension increases from reductions to the deeming rate – a move supported by Labor:

Prime Minister Scott Morrison’s expenditure review committee will consider how to minimise the budget impact of changes to the deeming rate for pensioners, while acknowledging many are feeling short-changed because of the government’s failure to match interest rate cuts.

Deeming rates have remained unchanged since 2015 but official interest rates have fallen from 2.25 per cent to 1 per cent – leading peak body, National Seniors, to accuse the government of using them as “milch cows” to prop up the budget.

A government source familiar with the process confirmed an update was expected within a week as the expenditure review committee considers more than three options for a rate change.

Analysis by Labor shows matching the five interest rate reductions over the past four years (1.25 percentage points) would see some single non-home-owning pensioners more than $3000 better off, while couple home owners would see up to an extra $1850.

The move would cost at least $1 billion a year and eat into a forecast surplus of $7.1 billion for 2019-20…

Opposition social services spokeswoman Linda Burney accused the Coalition of “deliberately short-changing pensioners for years”.

As I noted on Monday:

There is no doubt that falling interest rates are hurting those relying on term deposits to fund their retirement. But deeming rates apply to all financial assets, including equities like shares and unit trusts. And equities typically boom as the cash rate falls.

Deeming rates have to provide a simple benchmark that takes account of cash returns, dividends and other equity returns. That’s the main reason there are two deeming rates – a lower one biased to cash (1.75% on the first $51,800 of investment assets for a single), and a higher one biased to equities (3.25% on investment assets over the amount of $51,800 for a single).

Any discussion of deeming rates needs to take account of both deposit rates and equity returns, not focus solely on the former.

Before the May Election, retirees argued that if franking credits were taken away, then the government would need to give retirees more money. Now the Election is done, and Labor’s franking credits policy is dead, retirees are still demanding more money.

This special pleading comes as the number of seniors paying tax has halved:

And on average senior households are paying less income tax in real terms than senior households did 20 years ago:

Moreover, while retiree groups are demanding more pork, Australia’s unemployed languishing on Newstart are falling even deeper below the poverty line:

And this deplorable situation has arisen because the Newstart Allowance has not increased in real terms (i.e. above the Consumer Price Index) since 1994, whereas the Pension has received significant increases:

If there’s one segment of society that deserves some taxpayer love, it’s the unemployed, not retirees. Sadly, Prime Minister Scott Morrison strongly disagrees:

“We’re for jobs. Labor’s just for welfare. I heard the other day that they are thinking of increasing the Newstart payment. Well I’ve gotta tell you. If I thought I had the money to do that, I recon I’d do that for pensioners first”.

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Comments

  1. Unfortunately, better welfare is not a vote winner – unless it is universal welfare like Medicare or free bus travel.

    Most voters are not on Newstart and most voters think they will never be on it themselves. Or they think the program has not changed since 1985.

    Newstart is now lethal and needs to be replaced with a GBI:

    Work for the Dole ‘should be scrapped’, say family of teen who died while working for the program

    Even in whacky America, 48% of the people want UBI. In not-as-wacky Australia, the figure is probably 60%.

    Younger Americans, aged 18-35, are most likely to support UBI, at 54 percent, while only 38 percent of respondents 66 and older supported UBI.

    So the penionsers over the age of 66 do not want younger voters to get the pension. Selfish and hypocritical.

    • But all those pensioners worked hard all their lives. They deserved the pension at 55.

    • Strange Economics of Deeming

      To pay for Newstart there could have been slightly less tax reduction for the high earners – each of whom getting 5 to 10K back from the tax bill!
      Newstart should be a higher priority than deeming, but the retirees votes saved Morrisons bacon in the election in queensland.

      One benefit though of the lower deeming rate – it reduces the pension disadvantage of non-home owner retirees vs the home owner retirees.
      A 500k house has an effective deeming rate of 0% as it is not included in assets.
      Reduce from 3 to 2 % at 50% drop in the pension gives $2500 to the non-homeowner.
      If it was fair –
      Houses should be included in the asset pension test and deemed at the same rate
      – if the $1 million home owner needs income then reverse mortgage.
      But then supporting the property market is the no. 1 aim of the new (otherwise aimless) govt.

  2. If we had real democracy (not this monopolised two party winner takes all system) a youbg people party(s) would have at least 1/3 seats and full control of what gets passed.
    But we don’t have representative democracy but rather some pseudo thing created by British aristocracy 2 centuries ago to make system look like a democratic one while retaining all the power.

    • DominicMEMBER

      To be fair, I wouldn’t trust the young to make many good decisions either: they’re entitled, social media addicted and largely clueless.

      • “Young voter” in Australia is everyone born after around 1970.
        Whatever these “young” people are and whatever they want should be respected and represented in parliaments but it’s not because both parties are non-democraticaly ruled by elite backed by BBs and no other party has any chance due to undemocratic electoral system (two party majority system with preferential vote in which party with 4 million votes has majority of 77 MPs while party with 1m votes has 1 MP).
        In a bit more democratic proportional kind system in just one or two cycles major parties would loose majority even when combined or be forced to change policies toward younger people.

      • St JacquesMEMBER

        What would the young know? Unless they are geniuses this is the world they’ve always known and the ideas that have been planted in their heads by their parents, teachers, the mass media, and everyone who is cool, ie has money. This is the way you get a head. They will only start to wake up only as their lives remain stalled and everything starts to fall apart around them.

      • DominicMEMBER

        Oh, and I forgot to mention ‘easily triggered’

        Thanks for the reminder! Sleep tight, cupcake 😉

      • St Jacques, you are spot on.

        When I was young, I believed the privatisation lies peddled by vested interests.

        Today, the youth are not in the job market but in “uni” and are fed globalist propaganda from both The Guardian and The Murdoch.

        The PM of Denmark is 41 years old and she knows that mass immigration destroys wages.

        Alexandria Ocasio is 29 years old and wants a “job guarantee” but her open borders policy means 90% of the jobs will be taken by foreigners. She is either fake or an absolute fool.

    • DominicMEMBER

      By “young” I was kind of thinking twenty something — they are mostly dumb as rocks (from a life experience perspective)

      • Despite your comments largely being true, they’re still vastly better than any generation that’s come before them on pretty much any metric.

        For some reason, each generation looks back glowingly on their own youth, despite each of our respective generations being a rabid mess during their youth.

      • DominicMEMBER

        By what metric are they ‘better’? I’m sure you’re right in certain respects but they’re generally not street-wise and they tend to have a touch of the ‘snowflake’ about them. I think social awareness is necessarily a strength either as this typically involves suspending the harsh reality that is the world and dreaming of a utopia that doesn’t (and cannot) exist.

      • They drink, smoke and gamble less. A lot less. They’re better at finances and work (I remember seeing a few years ago – either RBA or ANU research – showing they had higher savings rates than previous youth cohorts). The proportion that are not either working, or studying, is surprisingly low. They’re not idle, at all. They better educated and have better social skills (empathy, in particular). They may be overly idealist, but that’s true of any youth cohort that’s come before them.

        Yes, they’re a pain in the ar*e, but so what? They’ll grow and mature. Like every generation before them. They’re just starting from a higher base.

      • I am a twenty-something. Yes we can be quite educated and do all those things. But educated doesn’t mean some aren’t thick as thieves. The majority of the cohort are SJW and like to show that off on social media. They wish for immigration to doubled or even tripled – for it is racialist to have border controls. Some of my friends (from Sydney) want to move to London – because its more inclusive, diverse and less racialist. They say while living in Sydney’s whitest suburb, in a pub exclusively full of white people. Gee, wonder why they choose to live in this area and not Lidcombe/Auburn where the vibrancy is off the charts?

      • does anyone remembers how idealist BBs were in 60s, and they were commies as well … so not better than millennials

      • Sure, but at least their parents had the good sense to give them ‘the belt’ every now and again 😉

        Today’s lot are coddled long after they’ve left home (those that actually leave home, that is).

    • There is a young people’s party, the Property Party. It has an LNP wing and a Labor wing, and most people vote for it, young and old.

      https://www.abc.net.au/news/2016-06-10/fact-check-would-voters-aged-under-30-possible-elect-a-green-pm/7467068

      I agree with you about proportional representation or multi-member electorates, but it is something of a pipe dream. Even if we could force a major party into minority government, both major parties would quickly forget their differences and vote together to block any such change.

    • If the unemployed want a go, they get a go.

      Them and the 500,000 dudes we imported in the last 2 years. They all get goes. The 500,000 dudes we will import over the next 2 years will get goes too.

      • Jumping jack flash

        Any long term unemployed “career bludger” will generally develop some ailment through lack of activities and income and make the switch to DSP and then have the sweet NDIS money!

        So the unemployed on newstart are really the motivated ones who are down on their luck and still feel hopeful.

        We should celebrate those ones because they are special, and not bash them because its fun to go “bludger bashing”.

    • You guys do know that there are currently about 3 unemployed people for every job vacancy, right?

      • Meh. They can offer to cut my grass, walk my dog, wash my car etc. and I’ll happily give them a go. They just have to be proactive, presentable, trustworthy, diligent, and attractive in terms of price. There’s an unlimited amount of potential work in the World.

  3. Anyone who is retired should pay tax.
    They still use things.
    Also they should pay more for private health as they are riskier

    • The notion that I paid tax all my life so I am entitled to free government money in the form of a pension is an entitled one.
      But not as galling as Jacob’s recurrent calls for free government money for never paying tax but receiving free government money.
      That is the highest form of rent-seeking and makes one a right wing prick.

    • DominicMEMBER

      It all sort of depends whether you’ve paid tax already on the money you’ve put into your retirement savings doesn’t it?

      But in the long run it depends on whether what you take out matches what you put in and, in aggregate, people have been taking out more than they are contributing. A hundred trillion dollars of global gubbermint debt is evidence of that. I agree that the Boomers are a lucky lot in that most will enjoy comfortable retirements, although they did work and save a lot, whereas subsequent generations are more in the borrow and spend camp – worry about tomorrow when tomorrow comes. In any event, I’m guessing that most of the comfortable living for these latter generations will be done in midlife, funded by debt, and that they will end up enjoying much less comfortable retirements. At some point, the rubber has to meet the road and the debt issue addressed – it won’t go away of its own accord.

      • Boomers are a lucky lot in that most will enjoy comfortable retirements, although they did work and save a lot, whereas subsequent generations are more in the borrow and spend camp

        oh for fvcks sake. free education, cheap houses, livable wages etc. subsequent generations driven into debt is the correct assertion

      • super money has been taxed only 15% on the way in … so not a fair share if someone is taking >$70k out per year

        In this sense USA system is much fairer – retirement money is taxed only on the way out at the normal rates

      • I don’t disagree but it’s 6 of one and half a dozen of the other. Pick your poison. Tax before, tax after.

        The bottom line however is that the big picture is being ignored here. The advantage the Boomers had was that they owned property and stocks going into the biggest inflationary boom in history. The reason the current generations are doomed is because they’ve all been piling in at the top — right before it’s all about to go t!ts up (they believe past is prologue … but they are wrong). Central banks are trying manfully to keep this edifice propped up by inflating the money supply but they will fail eventually. It’s poverty all round for those who are currently invested in the wrong assets: financial assets are toast but at least property will be worth something (just not units).

      • by giving free money only to the rich Central banks are only trying to create asset inflation not CPI inflation

        which means debt held by the bottom 90% of population is not going away

      • doc, I don’t disagree, but recall that the boom of the 80s and 90s had nothing to do with QE, it was all down to the massive expansion of the financial system i.e. the “Make Debt Great” era. It is debt that drove up asset prices, while inflation remained subdued because ‘technological advances’, outsourcing manufacturing to China etc etc. (Note that those tailwinds largely no longer exist so perhaps the CPI inflation that has been so absent for so long may return).

        QE is a purely post-GFC artefact, and yes, benefitted only the wealthy.

    • Jumping jack flash

      They do.
      We have a GST here.
      We should start to use it properly.

      As for PHI I’m fairly sure old people pay more… i know i pay more then a young person <25 or whatever the cutoff is, and I'm not even all that old.

      "Paying more" is disguised as "you dont get that incentive" but the effect is that the old people pay more.

      • There are hundreds of different taxes. Just because people pay GST, it doesnt automatically qualify them as ‘paying their own way’.

        As for PHI, you are technically correct. The older you get, particularly past 35yrs, the more you pay. Despite this, the young/healthy still *heavily* subsidise the older. Commensurate to their risk profiles, PHI for young people should probably be half of what it is and double for older people.

  4. It is surreal to think that we were at our peak probably between 2004-2010….its been a downslide since then and it seems to be gathering pace. Quite sad, really. We are becoming the South Pacific Argentina.

    • what was at the peak in 2004-2010 ?
      diminishing benefits from going into huge personal debt?
      It’s easy to have a good life for a short period after getting a big loan so that doesn’t count as having it good.

      Peak was probably around 2000 when the quality of life relative to debt was at the peak.

  5. If Labor, Greens, Australian media, had any empathy for Australia’s unemployed they’d oppose massive immigration.

    They are all full of shit.

    • they only acre about big businesses
      Don’t forget, the biggest business in Australia (big financial corporations) are children of Labor’s privatisation and deregulation of financial/insurance sector

      • I can smell the red herring from here. Who demonised public debt? Step forward LNP Costello and JeffK

  6. reusachtigeMEMBER

    Cruel? What because old people have given their lives to build this great nation? What have the unemployed done? Nothing! Literally! They’re unemployed. Cut the socialist crap and start to give credit where it’s due. Including property investors who are our biggest strivers. This blog has become the “Hate successful giving old people, love societies evil leeches” mouthpiece.

    • it was the silent generation that built the country not BBs, they destroyed it once they took over

  7. Jumping jack flash

    Yeah, they’re just looking after the ones who put them back in power. Nothing really that spectacular here.

    Unemployed people generally vote Labor.
    No money for you!!

    Best campaign ever, Mr. Morrison. Best campaign ever. So easy too: Just do and say absolutely nothing while everyone else busies themselves poking holes in the suggestions of the other guy.
    Stunning.

    Next election there isn’t going to be a single peep out of Canberra from anyone, and then everyone will head to the polling places shrouded in deafening silence, completely mystified and confused about what they’re actually even doing.

    Because opening your mouth is a great way to get a foot in it and saying anything is a good way to attract criticism.

    • “…looking after the ones who put them back in power. Nothing really that spectacular here.”
      ^This. Sad, but true.

      “Unemployed people generally vote Labor.”
      Categorically not true. They voted for the Coalition this time around. The outer suburbs of Melb/Syd, where unemployment is at its worst (in those states, at least) went Right.

      The rest of your post = yes 100%. Reform is dead. Small target politics (or politics-of-personality) is the new black. This will cost us dearly. Australia’s toxic political culture will see the country fall far behind its peers. We’ll all pay for it, long after the current mob of Canberra muppets are gone.

      • Small target politics (or politics-of-personality) has been the only policy since late 90s in Australia, nothing big really happened after and what happened before was even worse (deregulation, privatisation, globalisation …)

        The only reason life is still good in Nordic countries is that nothing changed since 80s thanks to proportional fragmented multi party voting system where the largest party has something like 20% seats and governments need support of 5 or more ideologically diverse parties so nothing can be changed.

  8. I wonder if everyones reluctant to increase Newstart because theres going to be millions more people claiming it soon enough…

  9. I think it is fair make the following analogy following the federal election:

    “It’d doesn’t matter if administration is via a drench or enema, you just get a different type of bad when the medication is Drano.”

    Your guess is as good as mine when it comes to determining into which end the tube is inserted.

  10. It was indeed the silent generation that built this country. And not the Baby Boomers. They rolled back all the good work done and leave a legacy of consumerism, materialism, greed, and selfishness. That’s why they sold the youth out by voting for the 2 major parties especially the LNP via self-interest.