The principle that those who are best off should be paying more tax as a proportion than those of more modest income is a fundamental one. That includes baby boomers.
The 2026 federal budget will be dedicated in part to the idea of generational equity, the idea that older Australians own too much at the expense of younger Australians, and that something ought to be done about it. This may be an urgent task. Particularly if Pauline Hanson gets her way and we cut immigration, even of white people. Under her policies our population will have declined by about 20 per cent by 2055.
I belong to that wicked generation of baby boomers, now becoming the most senior generation, said to have been the greediest generation of all – the ones who have virtually guaranteed that succeeding generations, alive or not yet born, will, on average, be poorer than we have been. Added to our general wickedness is also the charge that we were a generation that never faced general war or general depression and prospered from the thrift and sacrifice of our parents’ generation, which had suffered considerably from both.
I must bear my share of the general condemnation with all the fortitude I can muster, though I do not think it all deserved, or at least deserved by all of us. The boomer generation is largely the Whitlam generation, who came to benefit from massive increases in funds devoted to public education, and, for a time, free or much cheaper university fees which saw boomer Australians (and their descendants) transition into the middle classes. In our time, Australians got access to free, or much cheaper, health care. Somewhat under-remarked are the efforts of the 1960s and 1970s to electrify, sewer and water cities and towns and to connect them with bitumen. This had a massive, if probably undercounted, effect on the standard of living. Boomers were among those who soon took these initiatives for granted. So do the generations after us.
The social security system was considerably improved to provide public access to welfare benefits, single mothers benefits, childcare, aged care and community care. There was, for the first time, a major public investment in improving the lives of Indigenous Australians. It was during the period that the boomer generation was coming into its own that Australia opened itself to the world and to world markets and achieved most of the productivity growth in the period since the end of the Second World War. Much to Pauline Hanson’s regret, Australia ceased to be a monoculture of complaining and under-educated people eating a diet of chops, three veg and greasy fish and chips, and became a vibrant multicultural community with richer culture, diet and more interesting jobs.
We rode an international wave of social change towards greater tolerance, more outward-looking and more liberal thinking that sought to improve the common wealth of Australians and of our neighbours in the Pacific, Asia and Africa. That very improvement in the standard of living prompted political calls for using increasing public wealth to help some of those who had been left out. After the Colombo Plan, a Menzies Government innovation that has never been equalled (and which educated much of the next ruling class of Asia) came generous aid and development schemes, a role in the decolonisation of the neighbourhood and practical efforts to be a good citizen of the world.
To the consternation of figures from the previous generation, such as John Howard, Australia became a fierce opponent of apartheid, a force in world public health and a peacemaker and friend in countries, such as Cambodia, Australia had helped to ravage.
Willy nilly we also benefitted from some critical decisions made by governments, though it is stretching the truth, I think, to say that they were created directly to benefit boomers at the expense of future generations. Paul Keating involved himself with efforts to improve the retirement savings of Australians with universal superannuation, but the beneficiaries in his mind’s eye, I suspect, were more his parents’ generation then moving into retirement.
Likewise, a high proportion of boomers got into the housing market when the price of a house in real terms, or as a proportion of average annual earnings, was a fraction of what it is today. The fact – and fact it is – that many in later generations were frozen out of home-ownership by high house prices was and is more a function of reduced public investment in providing land for housing, much reduced public housing stock and tax policies, including superannuation and ageing policies that favoured those already with houses, ahead of those wanting to join their number. Some of the extra costs did also come from expensive changes in public taste or consumption. Between my coming of age and my becoming a grandfather, for example, the average house built in Australia increased in size from about 12 squares to 22 squares (say 112 to 204 square metres.), often on a block of about half the old average size.
Having sampled public largesse of this type, the baby boomers sailed by as public policies changed for the next generations. Government focused on major cuts on public spending, or at least public spending of the type regarded as non-productive such as health, education, welfare and community service spending, rather than solid and productive things such as subsidising the hydrocarbon industry, diesel rebates for farmers and miners, and propping up a domestic car industry.
Contrary to some modern impressions this was not usually the boomer generation pulling up the drawbridge behind them once they had had their fill but was the result of the arrival of neo-liberalism and economic rationalist ideas in the minds of the then governing generation.
Such governments responded to demands for lower taxes (sometimes running to about 70 per cent of OECD averages, and rarely very progressive), particularly for the better off, supposedly crippled by excessive taxation that reduced the incentive to work. At least while there was no pressure from the lobbies of Treasury for reduced subsidies for inefficient industries, the only way to respond to calls for lower taxes was to reduce the cost of services going to the poorer half of the community. To ease the immediate political pain, many public utilities, publicly owned operations such as Telstra, Qantas, government offices and energy companies were sold off to cronies of government at prices most taxpayers thought too cheap. Privatisation, and contracting in and out, National Party rorts and some of the outrageous business handouts of the COVID era were never popular, either at the time of sale or after. Most of the transfer of public goods into private hands was organised by earlier generations, or, initially, benefited boomers only about as much as any other cohort.
But as the boomer generation has become the senior generation and in retirement (which I marked by becoming a great grandfather, something few generations after me will achieve alive), they have profited unduly. They have benefited from the tax-free status of the family home, from very favourable capital gains tax regimes, generous tax treatment of superannuation and a host of schemes preferencing investment income ahead of earned income. This budget, it is said, will address some of the inequitable ways by which the poor have subsidised investment housing by the richer, but, fearing a reaction (which will certainly come from the elderly, which is to say, boomers) most of the rorts will be ‘grandfathered’ – those already benefiting will be allowed to continue doing so.
But there will be, it seems, clear limits to government intentions to make life easier for younger generations. There will be nothing new in the way of wealth taxes, even though Australia’s wealth is unduly concentrated in the hands of older Australians. It will be passed on by inheritance only when they die – on average about 10 to 15 years from now – and those who will most benefit, their children, will themselves be close to senior status at the time they do so. Perhaps half of all Australians will eventually inherit their parents’ house, or the equivalent, but the pity of it is that they will inherit it not at the time of really needing the money (say at 35 when starting a family and wanting to buy a home) but 30 or more years later when the home mortgage has been paid off and the children have left home.
In a fairer system, homes as well as second and third investment and holiday houses would be subject to land taxes, and exemption of the family home in assets and similar tests would cease. Taxes of this sort are common in the United States and most of the OECD countries.
Perhaps a nervous Treasurer would want to lighten the blow for working-class Australians, making the first $500,000 of value exempt from tax, and allowing elderly taxpayers the option, as with their rates, of having the land tax debt registered against the estate, to be collected, with interest, once the property passes to another. A side benefit, of course, is that it would encourage owners of large houses with few residents incentives to downsize. A high proportion of Australian houses have two or more vacant bedrooms.
From a time when the first baby boomer was born in Australia has developed a new but strange presumption, that most of the family wealth will be passed on to the next generation. This was not true 80 years ago, when only about 15 per cent of Australians left anything of substance to their children. The family house might be inherited, but even that would often be sold so that its value could be divided among a family on average bigger than the average family these days. It was one way that the national housing stock was regularly increased.
These days, a sizable number of Australians will retire with substantial superannuation, often more than $1 million. Strictly this is supposed to be a sinking fund from which a superannuant, or superannuant couple, could draw a reasonable income, the amount in the fund declining as the person got older. These days many can so manage their affairs that the sum does not decrease in value and can be passed on in full (or more) to the next generation. Worse, it seems, many of the children expect that this is what their prudent, cautious and modestly living ancestors will or should do: the money being rightfully theirs at the end. It is one thing for property and income to pass to a spouse, but money transferring down a generation or two would, in many jurisdictions of the world, attract death duties, or inheritance or estate taxes, with the higher rates being 40 per cent (US and Britain) and up to 60 per cent (in Japan.) It does not prevent intergenerational transfer after death, but it happens only at a substantial discount.
I am by no means the only person of the boomer generation who has always believed that most of my generation contribute too little towards the upkeep of society by way of our taxes. I accept the argument that it might be better to improve the mixture of taxes (between income, consumption and wealth) but I would not alter the balances so that a person on median taxes was paying any less. By international standards Australians are lightly taxed, whether at high incomes or low. It is commonplace for some newspaper economic columnists, particularly in Murdoch papers and the financial press, to claim that tax rates are extortionate, but that is largely propaganda and nonsense. Statistics simply do not bear this out, whether it is rates which are being compared, or the services rendered by different governments, for example with national health care, costs of tertiary education and so on.
Australia has also gone far too far in trying to flatten the tax scales, so that high income earners are paying at rates not much different from low-income Australians. It is quite possible that rates can be so high that they are a positive disincentive to work. But the principle that those who are best off should be paying more tax as a proportion than those of more modest income is, I think, a fundamental one. Successive treasurers, and prime ministers – even, sadly, Labor ones – seem to think they will build up treasure in heaven by making it easier for the well off. As anyone from Treasury won’t tell you, the actual quote, from Mathew is: “Again I tell you, it is easier for a camel to go through the eye of a needle than for someone who is rich to enter the kingdom of God.”
John Waterford AM, better known as Jack Waterford, is an Australian journalist and commentator.