Picking up the Baby Boomer Tab

28 December 2009

This blog cannot go past today’s announcement that from this week another 3.5 million Baby boomers will be eligible for the aged pension. Not only will government need to cover the pensions of this age group, it will also be required to pay the medical bills and the interest on all the debt this generation has incurred. This blog has mentioned this before though it is time a serious debate occurred within our nation regarding what kind of economy we want future generations to inherit. We talk plenty of the environment future generations will inherit but what about the health, education and infrastructure future generations are to be left with?

 

By 2020 25% of Australians will be eligible for the pension and baby boomers have not put enough super away to fund themselves so the money will come from Generations X Y Z. Australia also has more government debt now than at any point at its post World War 2 history and again it is left to our generation to pay for it. Of course Generations X and Z are putting money away for their own retirement thanks to compulsory super contributions so future generations will not face this pension burden, so why should we pay the way of Baby Boomers?

Australia’s housing is some of the most unaffordable in the world and yet your primary place of residence is not means tested when applying for the pension. We are faced with the ridiculous situation whereby younger generations who cannot afford a house, are forced to pay for older generations so that they can remain in theirs. Generations Y and Z and to an extent X have had to contribute to 25% – 33% of their higher education costs under HECS which is perfectly reasonable however this imposition was never placed on baby boomers. Baby Boomers have racked up phenomenal levels of debt – despite are largely free education, building no real major infrastructure (lets face it the last large scale project completed in Australia was the snowy mountains scheme) and enjoying a growing, relatively stable world economy.

The debate never gets a hearing because the youth are largely politically powerless and older voters represent such a mass voting block that our politicians are unwilling to make such tough unpopular yet necessary decisions. Firstly capital gains tax needs to be placed on your primary place of residence. It occurs in most other western democracies and needs to occur here. This will stop people parking all their money within their own home to avoid tax and claim welfare. The next is to cap the value of the primary place of residence – say $500K – if your home is above this value then you are not eligible for the pension.  It is not our generation’s fault that you did not save enough money for your retirement. For $500K you can still buy a nice home in outer suburbs and with the profit made on the sale of the home you can self fund or partially fund your own retirement.

There would be large social consequences to such a policy and no doubt further debate and research is required. Elderly people rely heavily on a nearby network of carers, which save the government billions in care. Some people are lucky to of bought in the right area, have all their networks in a suburb and have lived in the same house all their lives. Moving such people out of their homes would be most insensitive though some sort of reverse mortgage scheme could be implemented in such situations. The economics of various scenarios need to be modeled and a debate had.

These measures are politically tough but totally necessary. With medical inflation running at twice that of the regular economy, with so much debt, with so much infrastructure to build, with so many people leaving the workforce, with so many pensioners to fund to older ages such measures are only fair. Quiet simply the young who are often derided by older generations should not have to pay for the irrational spending of the past.

It is time for the baby boomer gravy train to end and they take responsibility for themselves. This nice little arrangement which abuses once well intended lurks within our taxation system need to be addressed. For if Baby Boomers it is time to be as altruistic as they claim to be and take some responsibility for themselves.