It seems it’s baby boomer bashing time again. Apparently us old farts are increasingly a drain on the national purse. We don’t pay tax and we want pensions and healthcare. All those poor young people earning wages and paying tax right now are forking out for us. We’re an undeserving burden. And we shouldn’t come out with all that rubbish about how hard it was for us. These days it costs half a million to a million to buy a decent house in a reasonable location. Both parents have to work to pay the mortgage, too.
Look, I get it. I feel sorry for young people saddling up to a mortgage with eye-watering numbers like $650,000, even with interest rates at an all-time low. And if both parents work and they have children, half their income goes on childcare. For many, they’re better off if the wife doesn’t work. And then, if you went to university you’ll have to pay back your HEX debt as well.
But let’s get all this into perspective.
My first fulltime job was as a graduate clerk in Canberra where I worked in the Archives office. It’s one of the few salaries I actually remember because it seemed like such a lot of money to a kid from a poor family. It was a little over $5,000pa, around one hundred bucks a week. Back in Perth a few years later, as a clerk in the public service I earned a bit over $8,000, which was around the median wage of the day.  Most married women didn’t work. Although women were no longer obliged to resign from Public Service jobs when they married, that was a recent change. Around the same time (1976) the median house price in Perth was $33,000, which was roughly four times the median salary. Sounds cheap, doesn’t it?
Let’s look at what that house was. Around then 7-800 sqm blocks were common. The house would have been fibro or increasingly, double brick because that’s what they build in Perth. It would have had two or three bedrooms, one bathroom, a laundry, kitchen, lounge, maybe a family area. No games room, ensuite, reverse cycle air conditioning, outdoor kitchen, theatre room, swimming pool etc etc. Maybe not even a garage or car port. And a new house would be out in the sticks with no gardens, no schools, and very little public transport. These days those little houses which used to be out in the sticks are coveted inner city properties worth near on a million because of their location. In Manning, where I grew up in the fifties’ and sixties in a little State Housing Commission (these days Homes West) house, home units are being sold for $700k and up. Home units!
Interest rates in the mid-seventies were around 9%, soaring in the eighties to over 18%.  Actually getting a loan was hard, and near on impossible if you were a single woman. And a lot of things today’s generation take for granted didn’t exist. For instance the only financial assistance the Government offered families was a tax deduction for a child.
The ageing workforce is not something we’ve only just recognised. Paul Keating as treasurer in the Hawke government saw the writing on the wall. He introduced a compulsory superannuation scheme for all tax-payers, with contributions taken from their salary. The rhetoric said the employer paid but at the end of the day it was part of employee remuneration. Keating intended that as far as possible, tax payers would pay for their own retirement. We tax payers were encouraged to contribute extra to our super fund and many of us did just that because there were tax breaks. In fact, we were encouraged to retire to make room for the next generation needing jobs. My mum didn’t want to retire at 65 but she had to. Those were the rules. In the mid-nineties a lady I knew at Australia Post went to the tribunal because she didn’t want to retire at 65. Like most women, she didn’t have much superannuation so she would have had to survive on the old age pension. Nevertheless. She was forced to give up her job. Those were the rules. As an aside, women aged over 55 are the fastest growing group among the homeless in Australia.
Australia’s big super funds are very, very wealthy. The Government has been eyeing off these riches and trying to devise ways of getting access to some of that money. Bear in mind that the super funds derive income from tax payers (our money) and then invest those funds to grow the profits for us. The super funds pay tax on monies earned. Some people with private funds derive income from dividends paid by companies in which they own shares. Some of these are franked credits which can be used to offset tax payable – because the company has already paid the tax.
Because the big funds expect significant fees from their members, people were allowed to set up their own, self-managed super funds (SMSF). There were rules and regulations that had to be followed, of course, like any other business, and at first it was a great idea. I had my own fund, associated with my consulting business.
Pete and I made our plans, worked out how much we’d need to have on retirement day to enjoy a reasonable lifestyle, and put those plans into action.
And then the Government started moving the goal posts.
Pensions in Australia are means tested. If you’ve accumulated too much wealth, you don’t get a pension although you are entitled to medical benefits (so far, anyway). The Government has (so far) refused to include the family home as part of the asset test. But there’s pressure on to change that. The argument is that a couple of old farts living in a house in Manning or Morley that’s now worth a million bucks should sell up and use the proceeds to fund their retirement. It’s the same little house they bought back then, maybe with an extension and an air conditioner. They’d have to leave the neighbourhood they know and relocate – somewhere. A nursing home? Some place on the outskirts of town a cut lunch and a compass from anywhere? If that’s brought in, just about anybody who saved enough to buy a house will be struggling to be entitled to any pension. There’s also pressure on to tax franking credits, because it’s income. But if it’s taxed, what it really means is the government will be receiving tax twice at the expense of retired people generating an income from those funds.
Over time the rules governing SMSFs became more and more draconian and the costs of maintaining a SMSF were such that it wasn’t finacially viable unless you had a LOT of money. It actually cost more to pay for accounting, reporting, and auditing than the profits generated from the investments.
When we first retired, Peter and I received a miniscule pension from the Government. But because of that, we were entitled to claim for discounts for council rates and car registration. Then the Government changed the way the asset test was calculated and reduced the amount above which claimants were not entitled to a pension. Since we no longer qualified for a pension, we lost the other benefits. The financial impact of the change was much larger than anybody had anticipated. As usual, the bureaucrats had a good idea but didn’t carry out any proper analysis. (Some of those benefits have now been widened to cover all retirees.)
What’s so unfair about these changes is that they are effectively retrospective. The plans we made in the past no longer fit because the rules we worked under no longer apply.
There are considerable financial pressures on the Government to provide benefits for many people. Payments to help families pay for qualified childcare so mothers can work, payments for disabled people, increasing health care costs etc etc. And us old farts live so much longer these days. Instead of encouraging people to retire early, now the age at which people will be able to claim a pension has been raised and we’re all encouraged to work longer. Needless to say, the cost of living goes up for retirees as it does for everyone. The difference is we have a fixed income and even if we wanted to find work, if you think being over fifty is a disincentive to potential employers, try being over sixty-five.
I’ll admit I wouldn’t like to be saddled up with a half a million dollar home loan to go on top of HEX repayments to pay back the thousands I might owe the Government for financing my education. But then again, young couples don’t need to buy a first home at City Beach or Peppermint Grove. House and land packages on the edge of cities or (heaven forbid) in larger towns outside the main capitals are much more affordable. Visit the display homes at new housing estates on the fringes of the big capitals and you’ll find two-storey houses with four bedrooms, two bathrooms, a theatre room, a family room, and an outdoor kitchen on a tiny block. What’s wrong with a small, older-style house until you can raise enough equity for something grander? Or perhaps move elsewhere, where there’s more room and less traffic. Here in Hervey Bay you can buy decent-sized homes for $300k+. All you need is a skill for a job so you can get work. Trades people are always welcome. That’s what we had to do back in the day.
I’m too old to expect ‘fair’. But we Baby Boomers worked and planned for a comfortable retirement – paying tax all the way. Hang in for another decade or so and we’ll have shuffled off. Then you can all look forward to getting similar complaints from your own offspring.