By Emily Millane
Our national policy architecture is caught in an earlier epoch of steady jobs and home ownership, which could be devastating when our younger generation reaches retirement, writes Emily Millane.
Popularised in a television show of the same name, economist John Kenneth Galbraith described the advent of the 1980s as the Age of Uncertainty. Anti-protectionism, a diminution of the welfare state and technological change were coalescing to transform the way countries interacted with each other and understood themselves.
Thirty years on, uncertainty has become a defining feature of our lives. Who can really say what an education will cost, other than it is likely to cost much more in real terms once the shackles of fee regulation come off. Regular, decent work and home ownership are assured to no one. People plod along. No one feels particularly relaxed and comfortable, irrespective of our national wealth.
And yet, our national policy architecture is still catching up to this reality. It is caught in an earlier epoch, a different Australia from the one we see today, and the one we see unfolding ahead of us.
This schism is instructive. It shows that many of our politicians have no understanding of the lived experience of the people they represent. Recall that there are some fairly senior Canberra types who believe poor people don’t drive cars.
Housing and retirement income policy are two key examples through which this democratic deficit can be seen.
Among over 65s home ownership rates remain high, at 82 per cent. However one in three Australian households are renting. The National Housing Supply Council found that as early as 1991 the long-term decline in home ownership among younger age cohorts was already beginning to show up in home ownership decline among older cohorts.
Rents are going up faster than wages, and mortgage debt for those moving into retirement is increasing. Per Capita analysis in The Entitlement of Age showed that mortgage debt among this cohort is skewed towards low-income households.
Outright home ownership at, or near, retirement is almost certainly going to be out of reach for growing numbers of Australians. However Australia’s retirement income system is predicated on just that. As any pensioner will tell you, the rate of the age pension is one thing when you are homeowner; it is another thing entirely when you are renting in the private rental market.
Try getting by on $22,000 when you need to pay hundreds of dollars a week in rent and with only a modest amount of rent assistance.
Superannuation works if you have regular, well-paid employment up until at least the pension age. Think public servant, circa 1980.
Already, about 40 per cent of the Australian workforce is in casual or insecure work, many of them young people. Going in and out of the workforce is common, not just for those having children. Superannuation is not designed for this generation. Superannuation never was designed for women.
Paul Keating made one of his periodic forays into the superannuation debate last week, suggesting that Gen Y should be able to dip into their retirement savings to buy their first home. Rather than adding more demand in an already-undersupplied market, let’s start with one reason why housing prices might be where they are.
While we are at it, let’s stay with the Keating theme and head back to 1987 and the removal of quarantined tax deductions on negatively geared property. The ATO’s 2011-2012 statistics showÂ that tax deductions on negatively geared property were worth about $13.8 billion in expenditure.
The building industry would have us believe that negative gearing is in fact good for housing affordability. Interesting, then, that the REIA has defined “affordability” through the prism of rental property. Possibly because negative gearing has the effect of generating a rental market?
Through negative gearing our tax system encourages the growth of the rental market. In doing so, it precludes younger people from getting into a housing market that their quality of life in retirement will depend on.
Consider another part of the retirement story affected by the housing story: aged care. People who aren’t on the full age pension must come up with an accommodation deposit based on a market price for the room, in addition to the cost of the care and payments for the room itself. Fancy coming up with a $300,000 accommodation deposit without any home equity to draw on?
It is little wonder that vast numbers of Australians disengage from the political process when the policies that come out of it do not reflect their lived reality. The tectonic plates of Australian life have been shifting for some time. There’s a big electoral gorge awaiting the policymakers who don’t attempt to understand this.