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Treasury boss cautions against old vs young wealth debate

Mike Taylor4 June 2024
Baby boomers vs millennials

The secretary of the Treasury, Dr Steven Kennedy has cautioned politicians against seeking to pit younger Australians against older Australians.

Answering questions during Senate Estimates about the level of spending attributable to older Australians and its impact on inflation, Kennedy said he did not believe such discussion was helpful.

Kennedy told Tasmanian Greens Senator Nick McKim said that while he often shared the Senator’s concern about the way different markets are working, “I would just caution (about) this younger person, older person dynamic”.

“I don’t think it’s helpful for the policy discussion,” he said. “There is nothing particularly unusual about the way macro-economic policy is working at the moment. The best thing we can do for young people is give them jobs and ensure the economy is growing strongly”

McKim had asked Kennedy what he had to say about the proposition that inflation was being driven by spending by mostly older people “who have got savings in the bank because younger people are actually decreasing their spending because they simply can’t afford to spend”.

Referring to the recent uptick in inflation, Kennedy said Treasury expects the decline in inflation to be “bumpy”.

“We’ve seen inflation in other countries decline then go back up again but it has then declined and then continued to decline and that is what I expect to happen in Australia,” he said.

“It rose [in Australia] from 3.4% to 3.6% and is still outside of the band but still represents substantial progress from the above 7% some time ago which was a shock to the many Australians.”

“My own view is that inflation is headed in the right direction, the balance of policy is working towards it, I’m confident of that outcome and I have not been particularly concerned about changes in monthly statistics,” Kennedy said.

Mike Taylor

Mike Taylor

Managing Editor/Publisher, Financial Newswire

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Oldies Should Pay Own Advice
1 month ago

How about mass cross subsidisation of Industry Super Funds charging all members Hidden Commissions for Sales Advice.
Guaranteed the younger members don’t get any Sales Advice and are thus paying for the oldies to get Retirement Sales Advice.
How is that fair to younger members ?
Boomers get another win

one foot out the doora
1 month ago

“My own view is that inflation is headed in the right direction, 

Well currently that’s up!!

Anon
1 month ago

Not helpful for the policy discussion ?!?

Property incentives and concessions from both sides of politics over many years have contributed greatly to the housing crisis and wealth inequality. It is a longstanding problem, that is getting exponentially worse. The young are disproportionately impacted. And the head of Treasury doesn’t even want the problem discussed, let alone fixed. Perhaps because he, and his political masters, bear a large element of responsibility for it.

The issue should not only be discussed in Senate Estimates, it should be shouted from the rooftops, and taken to the next election as a policy platform by the Greens. The Greens will get a massive swing in their favour from young people who are hurting, and from oldies like me who are outraged at the major parties’ continued unwillingness to fix a broken and inequitable system.

Wildcat
1 month ago
Reply to  Anon

It’s a very intractable problem. The Greens however are not the answer in my view. Very few, if any, of their policy positions on almost any matter are cogent, take in all the facts and are a prudent position for the benefit of the country as whole. They are more knee jerk and divisive most of the time which is not good for the country which is why I will never vote Green. Both majors suck on housing too BTW so I’m not defending them. The Greens target landlords for example, if they all leave the market due to repressive policies (like Victoria) what will happen to rents over the long term for those that need it? They claim it’s a win for buyers but it’s not, rental properties on average have a higher occupancy ratio than owner occupied hence more have a place to live. Some percentage of the population will always need to rent and they need to be supported.

The liberals idea that super money can be accessed is beyond stupid. This will further hurt young ppl by damaging their retirement and increasing the supply of capital which will push prices up not down. Labor has offered nothing of value which is not unusual.

The best things to do in my humble opinion are:

TAX

  1. Quarantine losses to the property (like a company or a trust)
  2. Retain CGT discount (we used to have indexed cost base which was more complex but fairer – this was simplified to the 50% – you should NOT be paying tax on inflation)

STRUCTURAL REFORM

1. Remove the power of councils development restrictions, have a state wide body to promote fast approvals but not allow unfettered development
2. Remove the power of the NIMBY brigade
3. Reduce government imposed costs on construction – all the “certificates” that are required these days is ridiculous, costly and takes too much time.
4. Continue investment in public transport to create mega hubs. The current Metro in Sydney should be a game changer and massively change the ability of some suburbs to support much greater density without clogging up the roads

But the BIGGEST issue of all is the governments (of all persuasions) has spent the last 40 years getting out of public housing. Now they want to punish the remaining private landlords for the state of the rental market when the governments caused the majority of the problems in the first place. Typical bureaucratic idiocy and hypocrisy.

Either legislation and subsidies to support build to rent, or fund private operators to run public housing is the answer. Governments have shown that they can’t run a chook raffle in a hen house with any degree of cost effectiveness. Therefore if they fund public housing but contract it out and then provide inspections to ensure tenants are fairly treated this will go a long way to easing the current problems.

Of course all this requires a greater than the next election timeframe view of the world. Most of our politicians don’t even understand this, let alone do anything about it.

Anon
1 month ago
Reply to  Wildcat

A complete landlord exodus will never happen. If a change in rules made residential properties less attractive, prices will go down allowing more potential owner occupiers to buy, reducing the demand for rental properties, and reducing the need for as many landlords. But as prices decline there will come a point when new property investors can make decent returns even under tougher rules. We might even get back to the days of >5% rental yields which are the norm in most countries, and used to be in Australia. Yield focused landlords will replace the current crop of growth focused landlords whose gains have been driven by bad tax policy.