Baby Boomers sitting pretty

While the Baby Boomers lap up the good times, young Tasmanians are increasingly having to ‘go it alone’ in life as seen by the lack of initiatives expressly aimed at supporting younger generations in the 2006-07 Budget.

Nowhere is this more evident than in the major initiative to radically reform taxation of superannuation announced on Tuesday Budget night, which goes a step further towards enshrining the wealth of the Baby Boomers.

Many Baby Boomers have significant investments in superannuation, are near retirement and more than any other age group are likely to own their own home. Measure this against younger generations who are renting for longer or have a large
home loan to pay, subject to another interest rate increase due to the tax cuts announced in the Budget and with minimal initiatives directly aimed to improve their situation.

While the superannuation reforms will simplify the system, encourage more involvement in the workforce and encourage self-financing for retirement, at the same time a younger Tasmanian, many years away from retirement, could view the reforms as yet another comfort for the Baby Boomers at the expense of themselves.

The superannuation reforms are estimated to cost 6.2 billion dollars over three years with costs increasing significantly as more Baby Boomers retire.

Coupled with the increase in the income tax threshold levels and the decrease in the marginal rates that mostly benefit people on higher incomes (older Baby Boomers have the highest median income of all age groups), the Baby Boomers are sitting very pretty indeed.

Highly favourable to the Boomers

The taxation reforms are just the latest in a line of reforms and economic conditions highly favourable to the Baby Boomers.

Baby boomers were the beneficiaries of the recent housing boom, being the age group most likely to own their own home outright, and are therefore not as subject to interest rate increases.

Baby boomers were able to purchase their homes in the 60s and 70s where average incomes compared to house prices were significantly more favourable than they are today. They were able to purchase at a younger age and many had the opportunity of a free tertiary education, something young people today can only dream of.

With banks doing more wild and wonderful things with their money to attract customers, many Baby Boomers will even consider reverse mortgages where they maintain or increase their standard of living further, perhaps to buy that Winnebago so they can travel Australia before they die. Do not worry about the kids’ future; the youngsters can look after themselves.

Alas, the Baby Boomers will not be able to escape the petrol price increases when they join the Grey Nomads in their Winnebagos. But I guess they can not win EVERYTHING.

Baby Boomers are also being offered very flexible work conditions, so they can put their feet up most of the time but still be paid a nice little salary. Meanwhile the poor up and coming young Tasmanian does all the hard work at a lower salary. “We can not afford to lose all that corporate knowledge!” is the call of Senior Management, who, by the way, also happen to be Baby Boomers. Is anyone sniffing out collusion here?

Delaying home ownership

Meanwhile, on the other side of the age spectrum, young people are delaying home ownership, most likely due to cost. If they do buy in, it is with a very small deposit and a very large loan — a very precarious position to be in. Home ownership of course being an aspiration of successive Australian generations is now further from the reach of young Tasmanians.

Australian capital cities have the lowest housing affordability in the developed world. Hobart was ranked 15 in an international housing affordability survey which measures the median house price to the median household income multiple. Hobart’s unaffordable housing comparables with Sydney, London and New York.

Young Tasmanians are also shouldering massive higher education debts, paying 4-8% of their pre-tax income in repayments that may last for 15 years or more of full time employment. For those paying 8% on their income in repayments, that essentially makes each marginal tax rate 8 cents in the dollar higher — a significantly higher tax rate than someone, like a Baby
Boomer, on the same income without a higher education debt.

Young Tasmanians are also looking at a longer working life in order to manage the costs associated with housing, other living expenses, and looking after the Baby Boomers. Over the next few years, Tasmania will have a higher proportion of those over 65 than any other State and Territory and a smaller proportion of people of working age to look after them. Meanwhile many young Tasmanians have decided to delay their entry into the fulltime workforce and spend their time travelling or in other pursuits — perhaps because they know the burden they have to carry and have thrown in the towel before the fight has even begun.

What is the solution

The problems for young Tasmanians are significant and will only get worse without a realignment of priorities by the Federal Government. It appears that the Howard/Costello tag-team are more concerned about shoring up their own and focusing on healing problems once they have become acute rather than being proactive.

So what is the solution? Free or more equitable access to education, policies acted upon that will lead to more incentives for the young, more money into repairing environmental damage to save future generations having to do so and a reformed tax system that provides incentives for the young rather than giving incentives through the superannuation system for the retired.

But you don’t want to hear me whine about any of these things. After all, I’m young, have no kids, I am nowhere near retirement age and therefore far from important within the current political climate.

Thomas Stockmann is a twenty-something Tasmanian, policy analyst and postgrad economics student with an angst about Baby Boomers. He doesn’t want to work his arse off to support what he regards as ‘the most exploitative,
selfish, socially and environmentally destructive generation that has ever existed’ — the Baby Boomers.