The Abbott Government

SirRumpole · 18 February 2015

sydboy007 said:
If this is ending the age of entitlement, then we truly have no hope left for sound economic policy from this Govt.

This is hot on the heels for a blanket ban on including the primary residence in the pension assets test from Morrison.

Each decision like this just goes to show that those under the age of 45 lost the intergenerational ware before a single shot was fired.

Unless the primary residence earns income I see no reason to include it in the pensions assets test.

Why should people have their pensions cut and therefore have their cost of living increased just because they want to live in their home that they have worked hard to pay for ?

sydboy007 · 18 February 2015

SirRumpole said:
Unless the primary residence earns income I see no reason to include it in the pensions assets test.

Why should people have their pensions cut and therefore have their cost of living increased just because they want to live in their home that they have worked hard to pay for ?

Why should gen x and y and millenials struggle to pay their mortgages and rent, seeing their cost of living continue to rise above inflation, just so older people can continue to live in their home and receive massive levels of Govt support?

I'm not advocating forcing people to sell their house, but some form of loan scheme that is paid when the house is eventually sold is the only way we can cope with the oncoming pension time bomb.

How does a reducing workforce support the ever burgeoning cost of the pension? The boomer retirements are yet to really hit, and already the pension is the single largest Govt spending initiative. Seems your advocating for income taxes and uni costs and all assortment of charges to be higher for younger people so as to support this. Why should workers slave away under massively high debts to pay taxes that are predominantly going to benefit older people?

Pensioners have had their income increased by the best of CPI or average weekly earnings, younger poor people on other forms of Govt support have had to make do with CPI increases, falling further behind.

Young people have gone backwards over the last decade. It's only those in 55+ age households that have gone forwards. Doesn't this mean they are now more capable of funding their retirement?

Also, younger people are falling behind in home ownership, so is it fair that older people get a free kick on treating the primary residence as an invisible asset?

In 1990 there was 5.25 workers per retiree. Today just 4, by 2025 3.5, and 2030 likely just 3. So you are expecting a group of people who are in aggregate terms much poorer that older people to continue to pay ever increasing amounts of taxation just so those same older people don't have to tap their accumulated wealth tied up in housing?

The pension already costs $40B a year, and we've only got 2.3M pensioners. By 2030 that figure will be more like 4M, but remember that cost burden will be paid for by a third less workers. That's a situation just 15 years away.

SirRumpole · 18 February 2015

Why should gen x and y and millenials struggle to pay their mortgages and rent, seeing their cost of living continue to rise above inflation, just so older people can continue to live in their home and receive massive levels of Govt support?

I doubt you would say that if you ever tried to live on the pension, and in any case your argument is flawed as your two precepts are not necessarily dependent on each other. You could as well say "why should most Australians live in affluence when there are people living in gutters in Delhi".

I suggest that changes to negative gearing to swing the balance from investors to first home buyers and bring down the cost of homes would be far more beneficial to your generation than the pension changes that you suggest.

pixel · 18 February 2015

SirRumpole said:
I doubt you would say that if you ever tried to live on the pension, and in any case your argument is flawed as your two precepts are not necessarily dependent on each other. You could as well say "why should most Australians live in affluence when there are people living in gutters in Delhi".

I suggest that changes to negative gearing to swing the balance from investors to first home buyers and bring down the cost of homes would be far more beneficial to your generation than the pension changes that you suggest.

+1

And another major aspect is usually overlooked:
More often than not, first home buyers are looking at the total package: 4 bed, 2 bath, double garage, home theatre ... you name it. If one suggested a more modest starting point, a blank stare would be the answer.
What happens if you tell them that our first home had two bedrooms, brick veneer, and we made do with hand-me-downs and DIY? They'll be offended because everybody tells them "You're worth it!"

I call it a consequence of the Age of Entitlement, which started under Howard and his squandered $Billions on middle class welfare. The GST added to the stupidity by aligning Government self-interest (let people consume, rather than save and make a personal effort, so we get more GS Tax) with people's vanity and laziness (let others "do"; we put it on plastic.)

Julia · 18 February 2015

Yes, we boomers did do the saving, working multiple jobs, making do with second hand furniture etc., but I don't think that has anything to do with the unreasonableness of age pensioners living in a multi million dollar home and drawing the full pension.

Scott Morrison made the point that the actual numbers of such pensioners are so few as to be fairly irrelevant in the whole scheme of the cost of the age pension, but there's the moral aspect as well. I can absolutely understand young people trying to save for a deposit on their first home being resentful that another group is apparently not doing their bit.

I agree with Syd: no one needs to leave their home. It would not be difficult to set up a government operated scheme with a type of reverse mortgage, to apply to homes over an agreed amount, perhaps $2 million, perhaps a bit less, replacing the age pension partly with privately funded income stream.

We're all pretty good at criticising others for being unprepared to pay a contribution for GP visits etc., so I reckon we retirees need to accept some limitations as well. I don't think it would be unreasonable for the tax free status in pension phase to be looked at either.

SirRumpole · 18 February 2015

I agree with Syd: no one needs to leave their home. It would not be difficult to set up a government operated scheme with a type of reverse mortgage, to apply to homes over an agreed amount, perhaps $2 million, perhaps a bit less, replacing the age pension partly with privately funded income stream.

A meritorious idea that should be considered, as long as the threshold applies to those with more than average wealth in terms of their family home, but if this is only a small number of people is it worth the trouble ?

sydboy007 · 18 February 2015

SirRumpole said:
I doubt you would say that if you ever tried to live on the pension, and in any case your argument is flawed as your two precepts are not necessarily dependent on each other. You could as well say "why should most Australians live in affluence when there are people living in gutters in Delhi".

I suggest that changes to negative gearing to swing the balance from investors to first home buyers and bring down the cost of homes would be far more beneficial to your generation than the pension changes that you suggest.

NG losess are around $7-8B a year. Not insignificant, but certainly not growing at the rate of the cost of the aged pension.

I'm not saying the pension is a grand sum to live on, but how do does a falling worker base support a fast increase in the number of those receiving support?

Certainly making housing more affordable would improve the lot of younger people, but with a political class geared up to their eye balls in IPs how likely are changes?

pixel said:
+1

And another major aspect is usually overlooked:
More often than not, first home buyers are looking at the total package: 4 bed, 2 bath, double garage, home theatre ... you name it. If one suggested a more modest starting point, a blank stare would be the answer.
What happens if you tell them that our first home had two bedrooms, brick veneer, and we made do with hand-me-downs and DIY? They'll be offended because everybody tells them "You're worth it!"

I call it a consequence of the Age of Entitlement, which started under Howard and his squandered $Billions on middle class welfare. The GST added to the stupidity by aligning Government self-interest (let people consume, rather than save and make a personal effort, so we get more GS Tax) with people's vanity and laziness (let others "do"; we put it on plastic.)

Could you point me to the affordable housing available to a family of 4 in a major city? A couple on a median income of $100K would have trouble finding anything in the 3 to 4 times income range. Is trading up a smart option when you start facing massive stamp duty costs on each upgrade. That modest 2BR could become quite expensive. In NSW it's 9K for a 300K property, and you'd be struggling to find much available that price or less in Sydney.

Isn't the attitude I've paid my taxes I deserve the pension just the same kind of attitude you're criticising the young over? Is it the young's fault those who retired over invested in housing, due to the massive preferential tax treatment? Is it fair to penalise someone for having $1M in income producing assets when anothe rperson with a $2M primary residence can access a full pension?

banco · 18 February 2015

pixel said:
+1

And another major aspect is usually overlooked:
More often than not, first home buyers are looking at the total package: 4 bed, 2 bath, double garage, home theatre ... you name it. If one suggested a more modest starting point, a blank stare would be the answer.
What happens if you tell them that our first home had two bedrooms, brick veneer, and we made do with hand-me-downs and DIY? They'll be offended because everybody tells them "You're worth it!"

Are these the kind of dumb cliches you trade in at the retirement home?

SirRumpole · 18 February 2015

Could you point me to the affordable housing available to a family of 4 in a major city? A couple on a median income of $100K would have trouble finding anything in the 3 to 4 times income range.

I think we know that cheap housing is not available because it's in the interests of developers to build big to squeeze as much as they can out of home buyers.

It needs some planning intervention by State governments to allow "modular" type homes that can be extended later as a family grows.

The trouble is that developers are entwined in political parties like ivy and getting them out is very difficult.

drsmith · 18 February 2015

Julia said:
I agree with Syd: no one needs to leave their home. It would not be difficult to set up a government operated scheme with a type of reverse mortgage, to apply to homes over an agreed amount, perhaps $2 million, perhaps a bit less, replacing the age pension partly with privately funded income stream.

This sort of thing has been tried before, not in relation to the age pension but at the state level.

In the early 2000's, the then WA state Labor government proposed a premium property tax of 2%pa on properties valued over $1m. When confronted with the prospect of asset rich cash flow poor pensioners having to sell their family home to pay the tax, the then state government then suggested the tax debt in those cases could accumulate and be paid out of the estate upon their death.

No prizes for guessing what that got called and that tax proposal was subsequently dropped.

That doesn't make it necessarily wrong in principal but there are may other options before going down what is at an estate level a death duty. Also, like the existing assets test for the pension, it would need to be a tiered structure, say, full pension at a property value of $2m grading to no pension at $4m for example and property values over time would need to be indexed.

In broader terms though, we should be looking at the robustness of the income and consumption tax bases before taxing assets. Taxing assets because assets can't be moved (as Ken Henry suggested) is just going after the low hanging fruit.

pixel · 18 February 2015

Julia said:
Yes, we boomers did do the saving, working multiple jobs, making do with second hand furniture etc., but I don't think that has anything to do with the unreasonableness of age pensioners living in a multi million dollar home and drawing the full pension.

I mentioned one aspect that's rarely mentioned. That doesn't mean I dismiss -

the injustice of pensioners living in mansions;
the price gouging by negative gearing and subsequent Auctioning;
the abundance of tax loopholes favouring the unscrupulous;

Those are all issues for the Abbott Government to fix; but given the general sound of this Captain's calls, I won't hold my breath.

Julia · 18 February 2015

drsmith said:
When confronted with the prospect of asset rich cash flow poor pensioners having to sell their family home to pay the tax, the then state government then suggested the tax debt in those cases could accumulate and be paid out of the estate upon their death.

No prizes for guessing what that got called and that tax proposal was subsequently dropped.

Well, the facts are what they are. Syd has put up the graphic reality of the future for the age pension - massively increasing with fewer taxpayers to support it. Something has to give.

Of course people wouldn't like either inclusion of the family home in the assets test, or any scheme which diminishes the present excellent preservation of family wealth. The whole generosity of everything to do with Super has become a wealth management sinecure for the very affluent.

No one is going to leap up and down in unbridled joy at any suggestion they be taxed/penalised in any way at all. We all want it to happen to someone else.

We need a government that will simply point out what needs to be done, consult widely with relevant interest groups as to the fairest way to do it, and then just say "this is what will happen".

The aggressive media, plus the power of social media, seems to have turned politicians into apologetic, approval seeking wimps which may well be one of the reasons they are currently earning so little respect.

Tisme · 18 February 2015

SirRumpole said:
I think we know that cheap housing is not available because it's in the interests of developers to build big to squeeze as much as they can out of home buyers.

.

Two other major factors are 1) councils pushing greenfield and brownfield infrastructure spend (roads, drainage, power, etc) onto the developer 2) the adoption of BCA and all it's high cost addons to a simple wall and roof house.

Apparently all those 100 year old houses out there that have stood the test of time are not adequate to live in these days...which makes me wonder why they can be inhabited.

noco · 18 February 2015

Julia said:
Well, the facts are what they are. Syd has put up the graphic reality of the future for the age pension - massively increasing with fewer taxpayers to support it. Something has to give.

Of course people wouldn't like either inclusion of the family home in the assets test, or any scheme which diminishes the present excellent preservation of family wealth. The whole generosity of everything to do with Super has become a wealth management sinecure for the very affluent.

No one is going to leap up and down in unbridled joy at any suggestion they be taxed/penalised in any way at all. We all want it to happen to someone else.

We need a government that will simply point out what needs to be done, consult widely with relevant interest groups as to the fairest way to do it, and then just say "this is what will happen".

The aggressive media, plus the power of social media, seems to have turned politicians into apologetic, approval seeking wimps which may well be one of the reasons they are currently earning so little respect.

i believe the social welfare and the medicare crisis is finally beginning to trickle out of the government and from various quarters of the media....On the Richo/Jones show on 601 Foxtel, Jones emphasized this in the interview with Chris Bowen that something has to be done......Bowen was a like stunned mullet when asked what the threshold was for payment of tax....Jones asked him something like 4 times and he evaded the question each time....Why didn't he say "I did not know?"......Bowen was also asked what was the rate of tax above the $18,200..... Was it 15% or 19%...once again he did not know....Can you imagine the media flogging if that had been Joe Hockey....And Bowen wants to be the treasurer in the next government IF labor should win.
Bowen finally succumbed to the fact that welfare and medicare was rising at a rapid rate......But Bowen had no answer as to how to fix the problem...He kept saying we will release all our policies in the next 12 months but in the mean time he and Shorten are happy to let the situation get worse.....I don't think what ever the government propose to rectify the situation, the Green/Labor party in the senate along with PUP will find reason to reject it on the grounds it is not fair.

sydboy007 · 18 February 2015

noco said:
i believe the social welfare and the medicare crisis is finally beginning to trickle out of the government and from various quarters of the media....On the Richo/Jones show on 601 Foxtel, Jones emphasized this in the interview with Chris Bowen that something has to be done......Bowen was a like stunned mullet when asked what the threshold was for payment of tax....Jones asked him something like 4 times and he evaded the question each time....Why didn't he say "I did not know?"......Bowen was also asked what was the rate of tax above the $18,200..... Was it 15% or 19%...once again he did not know....Can you imagine the media flogging if that had been Joe Hockey....And Bowen wants to be the treasurer in the next government IF labor should win.
Bowen finally succumbed to the fact that welfare and medicare was rising at a rapid rate......But Bowen had no answer as to how to fix the problem...He kept saying we will release all our policies in the next 12 months but in the mean time he and Shorten are happy to let the situation get worse.....I don't think what ever the government propose to rectify the situation, the Green/Labor party in the senate along with PUP will find reason to reject it on the grounds it is not fair.

The cost of medicare has increased roughly with the rate of incomes.

It's pretty much shown through history that the wealthier we get the more we spend on healthcare.

Now one can debate as to how effective that spending is, but please don't try to pull the Government line that medicare costs are increasing at an unsustainable rate.

If spending on super tax concessions and the pension can rise at multiples of the increase in medicare, and the Govt sees no problem, well there's half the reason why the budget deficit is ballooning by $100M a day. When NG and over investment in housing is not seen as a problem.

Morrison has pretty much said go big in housing, over invest as much as you can, so when you hit retirement you can down size and store maybe $1M in income generating assets invisible to the pension assets test. there'l be 2 types of pensioners with this policy. Those living the high life due to property, and those who made non housing investments seeing their access to the pension severely curtailed when compared to their property owning friends.

Soon we'll have a worker / retiree level back to where we were in the 1970s, yet the tax base has been significantly eroded.

The below wealth graph shows which age cohort is most able to help with the expanding cost of aged care, and it's definitely not the youth of today facing the highest levels of unemployment since Oct 1998!

basilio · 18 February 2015

I'm a bit peed off with the constant comparison of no of workers Vs no of older pensioners. It's true but not a complete picture.

In the past 20 years we have seen a mass reduction in employment by almost all employers. Rationalisation, cutbacks whatever. But as far as I can see the remaining workforce is being forced to do the jobs of those who have been retrenched and in many cases for less money ( I have watched this process in a number of industries.)

Meanwhile the management that has engineered these rationaisations is giving itself multi millionaire dollar bonuses - effectively the wages of people they have sacked.

And to make sure they keep all this money they use every trick in the Superannuation handbook and tax avoidance industry.

To top it off many of the companies that rationalise their workforce but still make enormous profits have become adept at simply not paying tax through creative accounting. Or alternatively they just import all product from China and have a few sales staff at minimum wages providing exceptional profits to a its owners.

So in the big picture we have a workers work force that is squeezed both numerically and financially with a small number of super rich managers and a corporate structure that treats tax as optional.

And we wonder why we have trouble balancing the budget ?

SirRumpole · 18 February 2015

Isn't the attitude I've paid my taxes I deserve the pension just the same kind of attitude you're criticising the young over? Is it the young's fault those who retired over invested in housing, due to the massive preferential tax treatment? Is it fair to penalise someone for having $1M in income producing assets when anothe rperson with a $2M primary residence can access a full pension?

If you are going to say that your generation is worse off than previous ones, you may like to mention the current mortgage interest rate of around 4.5% compared to the 18% that some of us paid.

Bintang · 18 February 2015

basilio said:
And we wonder why we have trouble balancing the budget ?

In the bigger, bigger picture fiscal responsibility is required on the spending side as well as the revenue side if the budget is to be balanced.

The trouble is voters of all stripes always want their own particular ‘free lunches’, to be maintained. They will only agree to spending cuts that affect the ‘other guy but not me’.

Meanwhile in order to get elected the politicians will continue to promise ‘free lunches’ to all and sundry especially because they don’t pay for it themselves – ‘other people’ pay for it.

By all means soak the rich (companies and individuals) to the maximum extent possible but by itself the measure will still never balance the books. Especially, when there is always a Labor party waiting in the wings who will find ways to increase spending faster than the rich can be soaked.

Bintang · 18 February 2015

SirRumpole said:
If you are going to say that your generation is worse off than previous ones, you may like to mention the current mortgage interest rate of around 4.5% compared to the 18% that some of us paid.

Interest rates were at the 18% level around 1991/2 if I recall correctly, at which time the Australia-wide median house price was around $140,000

Median house price today is probably around $600,000 (I’m estimating – haven’t had time to look it up).
So:
18% x 140,000 = 25,200
4.5% x 600,000 = 27,000

I’m not sure the relative advantages/disadvantages are quite as extreme as 18% versus 4.5% might suggest.

SirRumpole · 18 February 2015

Especially, when there is always a Labor party waiting in the wings who will find ways to increase spending faster than the rich can be soaked.

I doubt if a lot of Labor MP's especially prospective Cabinet Ministers are interested in soaking the rich, because most of them are rich themselves, or at least not badly off.

I'd suggest that they want to keep their negative geared investments and super tax breaks as much as anyone else.

Why do you think that they did nothing about this for the 6 years they were in ?

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