The real intergenerational injustices of our time
By David Hughes
First published in the MRC’s Watercooler newsletter. Sign up to our mailing list to receive Watercooler directly in your inbox.
Younger generations are taught to deride the past, fear the future and question their own identity in between.
A recent poll found 75% of young Australians are concerned about climate change. Alarmingly, two-thirds of young people said climate change was hurting their mental health.
Our leaders, teachers and journalists have fostered fears and anxieties with little regard for their responsibility to equip young people with the confidence, capability and creativity to address the challenges ahead.
In Australia, debates around climate change and housing affordability have left little room to talk about any other possible causes of intergenerational inequality.
In the short term, economic growth is set to slow, unemployment set to rise and it will become harder to buy your first home.
When a 20 year old Australian hits the peak of their working career down the track they look set to be punished by the most inequitable tax system we have seen. With government debt set to rise, economic growth to slow and spending to rise — the only real debt reduction strategy appears to be higher taxes on the working population. As the chart below demonstrates, half of all government revenue will soon come from income tax as workers are disproportionately punished.
Most young Australians are unaware of these economic challenges and that's fair enough. They have enough to worry about as it is, and it is the responsibility of older generations of leaders to reform the failing system they created.
In just over 30 years, the number of people aged over 65 years will have more than doubled and the number of people over 85 years will have more than quadrupled. In contrast, the number of people under 18 will have fallen. As we have previously pointed out, five of the top seven fastest growing areas of government spending relate to health and ageing. At the same time, the ratio of workers to retirees is shifting and the tax burden on our working-age population is increasing.
As a result, workers look set to face the highest average tax rate in history (despite all the talk around recent tax cuts).
Concerningly, we have seen little to no scrutiny of the fact that the Albanese Government's debt reduction strategy (if it exists at all) is focused on increasing the tax burden of workers.
This is a great economic injustice. The Left in Australia and around the world have manipulated definitions and perceptions of what is ‘fair’. They focus on temporary dividends from policy decisions at the expense of the long term costs. What they call ‘fair’ in the short term is often grossly unfair, unjust and inequitable in the long term.
The obvious example is when governments borrow to increase short-term spending with little regard for those who will be forced to pay it back down the track. Our measure of what is fair should always factor in the longer term consequences.
The Left have also manipulated perceptions of what is fair in relation to tax reform. Bracket creep is often disregarded as a challenge faced by those on higher incomes. Yet, bracket creep does not affect all taxpayers equally, even if their income is growing at the same rate. In Australia bracket creep has the strongest effect for those earning just above the $45,000 tax threshold. Women are more likely to earn an income in this range. This in part reflects higher rates of part-time work and, on average, causes women to experience bracket creep to a greater extent. This is one of the reasons why the Menzies Research Centre is advocating for automatic indexation of income tax thresholds to create a fairer tax system.
We need to challenge the current understanding of fairness and intergenerational inequality. Excessive government spending and an outdated tax system are the great intergenerational injustices of our time.
If young people are armed with this understanding, greater emphasis will be placed on government waste, spending and tax policy.
As Peter Costello said, “The best youth policy is a debt reduction policy. We can give them a society where all they have to do is pay for their spending, not pay for their spending and our spending.”
Young people will pay for these failures, it is not just their money that is being wasted, their future prosperity is being traded for extra votes today.