Deregulation of the Australian economy has done more than seriously undermine local industries and create a growing underclass. It has led to unprecedented intergenerational theft, as Pat Byrne reports.
One of the great human virtues is to strive to leave the world in better shape for the next generation – more peaceful, better organised, more prosperous, more family-friendly, and with strong values to underpin family life.
But as the baby-boomer generation approaches retirement, their legacy will be an Australia where the X and Y generations will be left with the intolerable debts of a nation sliding towards second-world status.
Consider how superannuation was supposed to ease the baby-boomers’ social-security burden on the next generation of taxpayers. It’s not going to happen. Current household debt is over 160 per cent of household income. This means that when many baby-boomers retire, they will take a big lump sum from their super to pay off their debt, and then go on the pension.
Such is the folly of a much needed superannuation system, badly structured to allow retirees to take large lump-sum payments instead of giving priority to income streams over the period of a person’s retirement.
The X and Y generations are likely to be called upon by the international financial institutions to repay Australia’s huge foreign debt, which is will hit $400 billion this year. When they come to repay this debt, the next generation will find that much of the nation’s assets have already been sold off by the current generation – our manufacturing industry, many financial institutions, former government utilities and infrastructure.
The X and Y generations will have to carry the burden of Australia’s huge, growing underclass. As revealed by the Australian Family Association-initiated report, Men and Women Apart, Dr Bob Birrell and colleagues confirmed that 29 per cent of 24-45 years-old men are not in full-time work. This is having a disastrous effect on the marriage and fertility rates among Australians with no post-school education. It is the direct result of the ongoing destruction of agriculture and manufacturing.
The combined cost of the growing number of retirees and the growing underclass is that the social security and welfare bill has risen from 27 per cent of the Federal budget in 1987, to 44 per cent today – growing at almost one per cent per annum. This cannot continue. It is unsustainable.
Furthermore, the X and Y generations will have to pay extraordinarily high prices for a home. One major cause of high housing-market inflation has been deliberate Federal Government policies to drive investment in the housing market to keep the economy growing, in order to mask the terrible destruction of agriculture and manufacturing.
For those of the X and Y generations who do decide to buy a house, they will be paying higher interest rates compared to the rest of the world. This is because Australia has to offer an interest rate four per cent higher than the US in order to attract the hot foreign capital needed to keep a pool of reserves to pay the interest on Australia’s foreign debt.
It is likely that, on top of that, the X and Y generations will be required to save 15 per cent or more of their incomes for their own superannuation. They will also have to pay more for their tertiary education and health. As the social security and welfare bill grows, the Federal Government’s ability to fund education and health is squeezed.
Finally, the X and Y generations have been robbed by the demutualisation process. The assets of Australia’s mutual funds were accumulated by previous generations who saved for the benefit of themselves and future generations.
From 1985 to the late 1990s, demutualised companies, with assets worth $180 billion, handed $21 billion in shares to the baby-boomers.
The deregulatory, free-market policies of the past 20 years have led to unprecedented intergenerational theft. Is it any wonder that so many young people have given up on ever being able to buy a house, or get married, or have children … or have a permanent, full-time job?
This will create a social disaster, pushing marriage and birth rates lower, diminishing the future workforce even more, and worsening the ratio of aged dependents to working taxpayers.
The one, and perhaps only, redeeming feature of the Australian economy is the huge $595 billion in superannuation savings. If these funds were invested in new industries and infrastructure, Australia could generate meaningful businesses and jobs, and once again foster family life.
For this to happen, though, governments will first have to adopt industry policies and establish a development bank to channel super savings into meaningful investment.
Such is the parlous lack of political leadership in Australia that neither of these issues is on the policy agenda.