Grattan Institute chief executive office Danielle Wood delivered a considered but scathing verdict on the world that Australia’s next generation will inherit at the annual John Button Oration held in Melbourne in November.
In her speech, Wood described national climate policy as “frustrating” and a “political sideshow” and asked Australians to work together to leave a better country for our children.
Wood spoke in seven “parts” about the failure of current policy to adequately prepare for the financial and environmental challenges faced by young people and put forward eight discussion points she believes should be at the forefront of any policy changes.
Young people were struggling in a financial environment that was increasingly financially hostile, she said. Housing is becoming more expensive, the tax burden is increasing and job prospects and pay are flatlining.
“Growing wealth gaps are not because young people don’t work hard: more young people today combine work with post-school study to get by,” Wood said.
“Nor can we blame too many avocado brunches: young people spend less on ‘discretionary’ items – recreation, alcohol and tobacco, clothes and personal care, household services and furnishings – in real terms today than people of the same age three decades ago.
“They are spending more on essentials – housing, power, food, medical care, and transport – with rises in housing costs being the biggest contributor.”
While younger Australians had drawn a rough lot financially, there were also costs to the environment.
“All of these debates about tax and even house prices seem small compared to the ultimate generational transfer – the impost of a changing climate and the shifting of most of the heavy lifting on mitigation,” Wood said.
“The world has not done enough and is unlikely to do enough, based on the most recent Glasgow negotiations, to keep temperature rises within the 1.5 degrees needed to avert serious and potentially irreversible shifts in environmental systems.
“It is extraordinarily frustrating to see the political sideshow that is climate policy in Australia.”
Wood’s recommendations to improve policy are:
- Get macroeconomic policy settings right, with a focus on creating jobs and lifting wages growth. That means not being trigger-happy on interest rates at the first sign of inflation, and not pushing for budget consolidation until unemployment is durably low and wages are rising
- Revisit the long list of productivity-enhancing reforms advanced by Grattan Institute, federal and state productivity commissions and others to boost long-term living standards
- Do not increase the Superannuation Guarantee – compulsorily taking more money off young people now when they need it, given that they are already being forced to save for a higher living standard in retirement than they enjoy today
- Improve housing affordability including boost housing supply by changing planning rules to allow more homes in the inner and middle rings of our capital cities, reducing tax breaks for investment in housing including reducing the capital gains tax discount to 25 per cent and winding back negative gearing, and exploring more innovative proposals such as shared-equity schemes
- Improve outcomes for people who don’t own their homes by giving tenants more rights, increasing the supply of social housing, and boosting rent assistance for those on income support
- Increase support for accessible and affordable early learning and care – giving the parents the opportunity to work without facing prohibitive out-of-pocket care costs
- Wind back aged-based tax breaks by taxing superannuation earnings in retirement at 15 per cent, and removing the seniors’ and pensioners’ tax offset, and the special Medicare levy rate for over-65s. This would re-establish the principle that existed pre-Howard, that income tax contributions should be based on income rather than age. And crucially it would represent a de-escalation of policy decisions that cumulatively ask working-age Australians to underwrite much larger transfers to older Australians than any previous generation
- Grapple with taxes on intergenerational transfers, at least for very large ones. If the money collected were used to fund income tax cuts, most people under 50 would be ahead financially. At a minimum, we should not be subsiding inheritances via some of the rules that allow the accumulated value of super tax breaks to be inherited by the next generation as well as the exclusion of virtually all the home from the age pension asset test.
The John Button Oration is hosted by Melbourne University’s Melbourne School of Government.
The John Button Foundation was established in 2009 in memory of John Button, the late industry minister, senator and writer. The foundation donated its fund to Melbourne University in 2016.