We have arrested the development of our young

I hope you’re not among those silly people who concluded last week’s economic reform roundtable was just a talkfest that will lead to nothing concrete. Breaking news: we have to get together and talk about things before we agree on what our biggest problems are and what we will do about them.

Lots of bits and pieces came out of the roundtable, but by far the most important thing was universal agreement that something had to be done about “intergenerational inequity” – an economist’s way of saying that our young people have been getting a raw deal.

This came after Danielle Wood, the boss of the Productivity Commission, drew on its research to warn we were in danger of breaking Australia’s generational bargain – that our children will live better lives than their parents, as their parents did of their own parents.

Economists, naturally, see this largely in terms of reforming our system of taxes and benefits. The independent economist Saul Eslake summarises this by saying that our tax system “imposes a disproportionately high burden on younger working Australians, and a correspondingly lower burden on older, asset-rich Australians”.

Much of this disproportionate burden is accounted for by a problem we all know about – young people’s inability to afford a home of their own unless they have considerable help from their parents.

But a report to be released on Wednesday by Deloitte Access Economics reveals there’s much more to it than that. (The report has been prepared by Deloitte’s own young people.)

It says there has been an unprecedented shift in how young people under 35 work, vote and live. They’re navigating a version of adulthood that feels less like a rite of passage and more like a locked door.

The Hungarian sociologist Karl Mannheim argued that the economic and social conditions of our youth leave a lasting imprint on collective values, expectations and behaviour.

“Through this lens,” the report says, “Millennials and Gen Z are not merely younger versions of ourselves. They are products of their own formative experiences. The greatest mistake is to assume today’s young people are simply behind because they are young – and that, with time, they will catch up.”

Today’s young Australians are more educated than any generation before them, the report says, yet they face more insecure work and delayed financial independence. They are the first generation to live entirely online, and yet they report rising loneliness.

“They show up for issues and are determined to find balance, but remain locked out of the systems their parents helped to build.

“When the rules were written before they arrived, and the road ahead offers little promise of change, it is no wonder young people feel sidelined. In fact, 42 per cent of young Australians (18 to 24) feel they are missing out on their youth, and 41 per cent worry they won’t be able to live a happy and healthy life as they grow older,” we’re told.

Deloitte has used the census results for 1991 and 2021 to see how people aged 25 to 39 have changed between the Baby Boomers and the Millennials.

For a start, Millennials are better educated. The proportion of young people with post-school qualifications has gone from just under half to almost 80 per cent. The proportion of women with bachelor degrees has gone from one in eight to one in two.

Next, today’s young people are less likely to be married. The proportion which has not yet married has doubled from 26 per cent to 53 per cent. The median age at which the young marry has risen from 27 to 34. And whereas the proportion of 25- to 39-year-olds living as a couple used to be just over half – now it’s one-fifth.

Thanks to better economic management, the rate of unemployment among older young people has more than halved, falling from 8.4 per cent to 3.5 per cent.

The proportion of people with bachelor degrees whose earnings are in the top 15 per cent has risen from 38 per cent to 65 per cent. This may be because more of the female graduates have jobs and are working full-time. We know that the rate of participation in the labour market for all women has gone from almost two-thirds to more than three-quarters.

Now we get to home ownership. We know Millennials are likely to be better educated, more likely to be working and more likely to be in well-paid jobs but, even so, are less likely to be home owners. Whereas 66 per cent of Boomers aged 25 to 39 were home owners, for Millennials, it’s down to 55 per cent.

And whereas by that age, 19 per cent of Boomers owned their home outright, it had fallen to just 6 per cent for Millennials.

Elsewhere, we’re told that the younger generations are having children later, and more than half say they’re unlikely to have children.

The report argues that today’s young Australians are fundamentally different from previous generations, noting that they’ve grown up amid intensifying globalisation, a climate emergency, the rise of social media and now generative AI. Those young enough to have been at school during the COVID lockdowns had their educations significantly disrupted.

The report tells us how much a rapidly evolving labour market and financial instability are narrowing young people’s opportunities for economic prosperity. The way they see it is that the system has persistently moved the goalposts: you stay longer in education, you take longer to earn good money and longer to afford to buy a home. You marry later and have kids later (and maybe don’t have time to have as many as you’d have liked).

Little wonder the report tells us young Australians feel sidelined and unheard by political decision-makers, with only one in three trusting the federal government to do the right thing.

The way I’d put it is that, by our neglect, we’ve allowed our young people to suffer a bad case of arrested development. But thanks to the roundtable, I think we may be ready to do something to give the young a fairer deal.

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We need to unclog the pipes of the capitalist machine

Of the many worthwhile economic reforms put on Treasurer Jim Chalmers’ to-do list after last week’s roundtable, I suspect the one that could – repeat could – produce the most lasting boost to our productivity is the one that didn’t sound like much: reform of the way we regulate the economy. Abolish more nuisance tariffs, anyone?

Economists are obsessed by taxes. So too are business people. So it wasn’t hard for those sitting round the oval table to convince themselves that reforming our system of taxes was the key to improving our “productivity” – the efficiency with which our capitalist economic machine converts inputs of resources into outputs of myriad goods and services.

But I doubt it. Our tax system does need major reform, but that’s much more about reducing its generational unfairness than increasing economic efficiency. Economists see taxes as just another price, and the “neoclassical” model of the economy they carry in their heads tells them prices are the key to understanding everything. That’s why they believe such absurd propositions as that every worker on the top tax rate – including all the worthies at the roundtable – is only doing it for the money, and is unmotivated by, for instance, the desire for power and status.

No, a more productive way to think of it is that, though many, many aspects of our lives need to be regulated – from outlawing theft and murder, to what and where we’re allowed to build things – there’s a real risk that the politicians and regulators will overdo it.

That, with the best of intentions, they’ll end up misusing their power. That they’ll make their regulation of the particular bit of our activity they’re responsible for too prescriptive, that they’ll try to perfect outcomes in their bit at the expense of all the other bits. That their demands will overlap with, or even contradict, the demands of other regulators.

This risk is greatly multiplied by our federal system of government, with at least two levels of government having the power to regulate most of the aspects of our activity.

As the Productivity Commission has confirmed, our businesses face a thicket of regulations. That thicket grows with each year of governments governing.

And then there’s the risk that multiple regulators will yield to the temptation to do their job in a way that makes things easier or cheaper for them, at the expense of those they’re regulating. Requiring too much form-filling, for instance.

Worse, regulators who take far too long to approve or deny applications to start a new business or build something. The delay probably saves them the cost of having to hire a few extra workers, but the cost to the rest of us, I now realise, is huge.

If ever there was a “negative externality”, as economists call it, this is it. The cost of regulatory delay has two aspects. It greatly reduces the productivity of the construction industry, affecting both housing, and commercial and infrastructure construction.

If ever there was a multifaceted problem it’s housing affordability; problems on both the demand and supply sides. But we’re indebted to Treasury for pointing out just how much of the problem is explained by the growing inefficiency of our home building industry.

It’s a cottage industry that’s done too little to seek economies of scale. But the average time it takes to produce a new home has worsened greatly in recent decades. This must surely be explained mainly by the growing time it takes for building permits to be issued.

So, if we were to greatly reduce the average approval time – which shouldn’t be too hard – we could expect this to significantly increase the number of homes the industry could produce each year, without any increase in its size. Productivity improvement doesn’t come more clearly than this. And this relatively easy policy measure could also put a decent dent in our home affordability problem.

The other respect in which delays in approvals are costly comes from what economists call “the time value of money,” and normal people call interest rates. Construction companies have capital – borrowed or from shareholders – tied up and waiting for the off from approval bodies. So for every day that capital lies idle, the business has funding costs that aren’t matched by income-earning work.

One of the most useful things about the roundtable is the way it has produced evidence of the extent of something we rarely notice: overlapping and conflicting regulations, the surprising number of approvals businesses must get and the growing delays in getting them, as well as all the forms that regulators demand be filled, repeating known information.

They want economic growth and rising living standards, but they also want to transition to renewable energy, protect the natural environment, keep people safe at work, ensure diversity in the workforce, and various other completely legitimate concerns.

Trouble is, we’ve got all these outfits busily regulating this bit and that bit, without any outfit sitting over the top, regulating the regulators. Making sure the various bits fit together without overlap and contradictions, finding the best trade-off between the conflicting objectives, and forcing all the regulators to rationalise their form-filling, using uniform definitions and common databases.

That would be hard enough at the federal level, but it has to be achieved by agreement between the feds and the states, with the states getting their local government into line.

When you think it through, it’s not hard to see how excessive, unco-ordinated and conflicting regulation of businesses, with all its approval processes and form-filling, is clogging up the capitalist machine. Unclog the pipes and the machine would produce more each year without any extra inputs.

But regulatory reform has been tried before and achieved little before being slipped quietly into the too-hard basket. And even if the roundtable decisions were to lead to an almighty clean-out of the Aegean stable and a one-off lift in the level of productivity, the capitalist pipes would start clogging up again as governments continued to govern and regulation expanded.

So what we need is another permanent government agency, whose only job is to regulate the nation’s regulators in the interests of the regulated and the continued success of the capitalist machine.

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Candles don't quite cut it in a powerless share house

By MILLIE MUROI, Economics Writer

The good thing about century-old share houses is that they tend to be (relatively) affordable to rent. The bad thing about them? At any given time, they’re probably falling apart in one way or another – which, I’ve come to realise, is probably why their owners choose not to live in them.

Why live in these shacks yourself when you can sit on them as an investment – and extract income from the tenants for effectively house-sitting for you?

These were the thoughts I fell asleep to this week as the power to our Canberra share house was switched off on a freezing Monday evening after what was supposed to be a look into why our hot water supply had dwindled to zero.

This same week, Treasurer Jim Chalmers herded about 40 experts and leaders – including from business, unions and the public service – into the cosy cabinet room at Parliament House to talk about economic reform.

But as Sally McManus, secretary of the Australian Council of Trade Unions, noted on the final day of the roundtable, many people who are facing the brunt of the housing crisis weren’t actually in the room.

“We wouldn’t want to be in a situation where we ask people [in the room] to declare how many investment properties they might have,” she said. “[But] I think people have to check all of that at the door, and they’ve got to think, what’s the most important thing?”

Some – including McManus, Australian Council of Social Service chief executive Cassandra Goldie, and former treasury secretary Ken Henry – have been outspoken about intergenerational fairness and the need for urgent action on housing.

But it’s difficult to trust that the interests of renters and aspiring first home buyers – who make up more than one-third of the population – would have been adequately represented at the closed-door meeting where most were on six or seven salary figures and probably own their own home, if not also one or more investment properties.

As I arrived home on Monday, the electrician (our third in two weeks) was leaving. “Hi. How are you going?” I asked. “Better than you will be!” he exclaimed, explaining it would be negligent for him to turn our power back on given our wiring was effectively fried: “I’m surprised you guys haven’t been electrocuted through your water.”

As the temperature crept towards freezing, my housemates and I lit some candles, laughed at the absurdity of our predicament while nibbling cold food in the dark and dialled our landlord with dwindling phone battery. “You’ve got to laugh, or you’ll cry, hey,” he offered. Helpful.

It was a return to the Victorian era for us, huddled up in our ancient abode. “It’s how the house was built to be lived in,” one of my housemates joked.

There are about 11 million dwellings in Australia. At any given time, some are under renovation, some are changing hands, and others are left uninhabited for most of the year as holiday homes.

I’m convinced a large additional chunk also fail to meet minimum standards, but are rented by pensioners, low-income families and younger Australians squeezed by cost pressures and left with little choice but to accept the cards they have been dealt.

There are minimum standards for rental properties, but renters have very little power to push landlords to meet them. Why? Because renters lack bargaining power. Push too hard over cold showers, flooding drains or a broken back door, and you’ll often be met with an unfortunate rent hike at the end of your (usually 12-month) contract.

In a housing market with greater supply, landlords would have to comply to avoid their tenants walking out – or worse, being reported by those tenants.

But with the vacancy rate – the share of empty rental properties – falling to 1.2 per cent in July (lower than the same time last year), renters have very little wriggle room when it comes to finding a better home or negotiating their rent. Rental markets with a vacancy rate of 1 per cent are considered “extremely tight”.

Longer-term contracts between renters and landlords (say, for three or more years) would help. Not only would they reduce the constant anxiety of rent rises and being evicted at the end of a one-year contract, but they would also make it easier for renters to raise issues without fearing an imminent jump in their rent.

We also need to boost supply and wind back the unnecessary rewards we’re giving to landlords investing in existing property.

Investing in homes that have already been built is an extremely unproductive use of money because it doesn’t contribute to our economic growth.

Since 1993 when our Canberra share house sold for $268,000, its estimated value has soared to nearly $1.7 million. And for most – if not all – of that time, our landlord has also been raking in hundreds of dollars in rent a week.

That he has spent very little on maintenance or improvements is clear from the growing cracks in the wall, lack of heating and dangerous electrical wiring. Getting our hot water fixed took the admirable persistence of one of my housemates who insisted to our landlord that he pay for an electrician who wasn’t just a mate down the road.

Investing in homes that have already been built is an extremely unproductive use of money because it doesn’t contribute to our economic growth. Buying your own home is, of course, sensible. But if you have some money left over to invest, that money should be funnelled into business, upskilling, or even new housing, which help generate growth and make us better at what we do.

Of course, there is justification for incentives that apply only to new housing because that adds to supply, helping to dampen house price and rent growth.

But by providing a far-too-generous capital gains tax discount (a 50 per cent reduction in the tax on any profit pocketed from selling an asset, such as property, after 12 months) for existing homes, we’re doing at least three rather silly things.

First, we’re encouraging more investment into something we don’t need (buying up existing properties as an investment) at the expense of things we do need, such as investment into businesses and spending on new housing.

Second, we’re making it harder for people to buy their first home because they have to compete with investors who might otherwise have decided housing wasn’t as attractive a place to park their money.

Third, we’re missing out on tax money from people who have, for the most part, simply been lucky and will still – even if the capital gains tax discount is reduced – pocket big profits.

We should also go a step further. The family home – or primary place of residence – is currently spared from capital gains tax. That is, people can buy multimillion-dollar homes and sell them for a huge (untaxed) profit.

That’s about $50 billion of revenue every year that the government misses out on according to Treasury. If we scrapped the capital gains tax discount on all property, that would amount to a further $19 billion.

That tax revenue could dramatically expand the government’s $10 billion Housing Australia Future Fund, but it could also simply reduce the tax burden on disproportionately younger and less wealthy workers.

Not only would this reduce inequality and give everyone a fairer go, but it would encourage more work and business investment, helping to kickstart our stagnant productivity.

While the lights were back on in our old house on Tuesday evening, my housemates were too scared to ask for a rent discount this week. Better to let this one through to the keeper, they said, in the hope we are spared a rent hike in a few months’ time.

The people hardest hit by the housing crisis are generally those without the power to speak up – either in the rooms of Parliament House or in the cold rooms of their share house – but we shouldn’t leave them in the dark.

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I've changed my mind about red tape: it's well worth cutting

This is the week to understand something most people don’t: businesses don’t do productivity. Although the nation’s productivity happens – or doesn’t happen – mainly on the floors of the millions of Australia’s businesses, their dominant goal is to achieve higher profits.

So most of the “reforms” the business lobby groups are calling for in the name of improving productivity are really intended to help them increase profit.

There’s actually no reason businesspeople would want to spend any of their time contributing to the political debate other than to win favours from the politicians that make it easier for them to increase their profits.

Productivity and profit are related, but not the same. Productivity is a measure of the efficiency with which businesses (and other organisations) take raw materials, capital equipment and human labour and turn them into the myriad goods and services they produce to meet our needs.

So wouldn’t making a business more efficient in doing what it does also make it more profitable? It could – although economists are hoping the strength of competition in their industry will end up obliging businesses to pass on the benefit of their greater efficiency to their customers in the form of lower prices. But even if a weakening in competitive pressure – which seems to have occurred in recent years – could allow businesses to retain the benefit of any improvement in their efficiency, it’s still just one way to increase profit.

Business will always be seeking the easiest way to do it, and achieving greater efficiency – improved productivity – isn’t easy. It’s easier for big businesses to reduce competition by buying out their smaller competitors, thus making it easier for the remaining big boys to put up their prices.

And this is just what research by Treasury and the Reserve Bank says has been happening over the past decade or so.

Of course, the easiest way to increase after-tax profits would be to persuade the government to cut the rate of company tax. And – purely by chance, you understand – this is the top proposal to increase productivity that the business side is taking to this week’s economic reform roundtable.

Another favourite supposed productivity booster would be for the Albanese government to reverse the industrial relations changes it made in its first term, which were intended to shift the balance of bargaining power away from employers and towards employees.

Business’s third idea is for governments to cut back all the “red tape” that has tied business up in knots and to improve planning and the approval of major projects. It’s not hard to see how this would make businesspeople’s lives a lot easier and add a bit to their profits.

But here’s the thing: it’s equally easy to see that reducing excessive regulation and speeding up the approval of major investment projects and even ordinary homes could indeed make a probably small but worthwhile improvement to the economy’s productivity.

Certainly, those hard-nosed folk at the Productivity Commission are convinced. In her speech on Monday, the commission’s boss, Danielle Wood, gave some hair-raising examples of excessive regulatory requirements.

One provider told the commission it is required to complete 15 separate accreditation processes across the health and social care services. Another said it is accountable to 350 pieces of legislation and regulations, and has a minimum of 16 program audits every three years – many of which require them to provide the same information over and over.

Yet another service provider said the cost of repetitive audits and accreditation processes runs into the hundreds of thousands of dollars each year.

Elsewhere, businesses complain of delays extending to years for the approval or rejection of major construction projects, and many months for ordinary homes.

Now, I used to be sceptical of demands to get rid of red tape, fearing they were disguised demands by business fat cats to be able to damage the natural environment wherever they saw fit and build housing anywhere and everywhere. But the greater specificity of the latest proposals has convinced me there’s a real problem that is indeed wasting a lot of the private sector’s time and money.

Part of the problem is government agencies responsible for protecting the environment, or occupational health and safety, or public safety who, in their zeal, set the highest standards without regard for all the other things we need to protect – including our standard of living.

They’re like the French teacher who wants their students to spend all their time preparing for their French test, at the expense of all the other subjects they’re being tested on.

But a further complication is overlap between our three levels of government. If businesses in particular fields are being regulated by federal and state and local government, with overlapping and conflicting regulations and separate forms to fill in, this is confusing as well as wasteful.

And then you’ve got the sad truth that government departments and agencies are constantly temped to abuse their power over the rest of us, and often do. We know how private monopolies commonly overcharge and give their customers poor service. They do this for no other reason than that they can.

But the government is also a monopoly, and its departments and agencies are just as commonly able to abuse their power over us. They are the law, we can’t take our business elsewhere, and if it suits them to make us wait many months for their approval to build something, that’s your problem, not theirs. They save a little by employing too few workers to keep the approval process to time, and you bear the cost of the delay.

The more you think about it, however, the more you realise that streamlining regulation, so that a better trade-off between the many conflicting objectives of government is achieved, and the many cases of overlap between the three levels of government, won’t be easily or quickly done.

Maybe it would take a royal commission, with a continuing monitoring authority, rather than a three-day roundtable.

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Want better productivity? Keep wages growing strongly

Our economy has become unbalanced and is in danger of slowing to a halt. But not to worry. The Reserve Bank is determined to ensure that, should we sink under the sea, we won’t have had an inflation problem to worry about.

This is the week we fix our productivity problem, but how far we get remains to be seen. The problem is that, while improving the efficiency with which the economic machine converts inputs of raw materials, capital equipment and human labour into outputs of goods and services has been the way we’ve raised our material standard of living over the past two centuries, there’s been no improvement in this productivity for a decade.

But if that’s the problem, we still have a problem: no one wants to accept responsibility for fixing the problem. That’s for the government to do. Even the Reserve Bank wants to pass the parcel to the government.

Last week, while finally cutting the official interest rate by a click, the Reserve lamented the need to lower its assumed annual rate of improvement in productivity from 1 per cent to 0.7 per cent, with governor Michele Bullock noting there was nothing the Reserve could do about productivity.

The weirdest thing about this episode is the way the business lobbies have got away with portraying the lack of productivity improvement as having been caused by the government. It’s as though productivity is something created on the Cabinet room table, the product of good – or not-so-good – policy decisions.

You’d never know that the figure for national productivity improvement is largely the summation of what’s happening in all our farms, mines, factories and offices. By how much have each of them become more efficient at doing what they do.

But no one ever bothers to ask the bosses – or even their Canberra lobbyists – why they’ve stopped getting better at what they do. If they did, they’d be told it was all the government’s fault. Too much regulation and red tape, too high taxes and too little freedom to change their employment arrangements.

Yeah, sure. You get closer to the truth when you remember Sims’ Law. Rod Sims, the former competition watchdog, never tired of explaining that improving their productivity was just one of the ways businesses could increase their profits.

So, why has productivity improvement stalled? Because businesses have found other, easier ways to increase their profits.

To be fair, there are other, more technical reasons that help explain the lack of productivity improvement. One is our continuing shift from capital-intensive goods to labour-intensive services: it’s easier to use better machines to achieve more output per hour than it is to speed up humans.

Another reason is our recent growth in employment in the “non-market sector”, particularly aged care. When the taxpayers are covering much of the cost, it’s hard to measure productivity. And when the care objective is as much about quality as quantity, it’s hard to replace a motherly nurse with a robot.

But the debate in the lead-up to tomorrow’s economic reform roundtable has done much to clarify the chief cause of the productivity pause. The main way we’ve made workers more productive is by giving them more and better machines to work with. Labour-saving technology keeps advancing.

However, Treasury tells us that, as a share of gross domestic product, business investment in equipment and structures is lower than it was in the early 2000s.

So, why have businesses slackened in their efforts to make their workers more productive? Most likely reason: because the increased “concentration” of many industries – more of the market served by fewer big firms – has reduced competitive pressure and given those big businesses greater freedom to keep their prices high.

This brings us back to the Reserve Bank. Last week it was at pains to point out that its reduction in the assumed annual rate of productivity improvement from 1 per cent to 0.7 per cent meant that average annual earnings can’t grow by more than 3.2 per cent – down from the previously assumed 3.5 per cent – without stoking inflation.

What? Sorry, this is the risk-averse, conventional thinking of a bookkeeper, that puts avoiding inflation ahead of getting productivity improving and the economy, growing. It’s saying I’m responsible for inflation; productivity is someone else’s worry.

It’s also thinking that’s biased in favour of business, at the expense of households – the people whose interests businesses are supposed to serve. It’s saying that businesses must be free to make profits any legal way they see fit: if this is bad for their employees and the households they come from, tough.

The pro-business bias comes from the neoclassical model of the economy every economist carries in their head, which assumes that businesses respond rationally to the incentives they face. No, they don’t. They’re just as susceptible to fads and fashions as the rest of us – fashions reinforced by the sharemarket and its analysts. “Everyone’s doing X, why aren’t you? What’s wrong with you?”

In the Reserve’s case, the pro-business bias coming from the model is reinforced by it having a board stacked with businesspeople but, at best, only one person coming from the employees’ perspective. As well, the Reserve consults extensively with businesses, while not bothering to talk to the union side. (Little wonder their forecasts for wage growth are so consistently wrong.)

So profits growth is unconstrained, while big pay rises are a terrible worry because they could add to inflation. Trouble is, the economy is circular: when business fattens its profits at the expense of its workers, those workers turn into households that don’t have as much to spend on the things businesses are selling.

When you tolerate businesses fattening their profits by finding ways to keep their wage bill down, you’re helping them cut their own throats. But no one will be able to accuse you of letting inflation get away.

Back on productivity. One big reason businesses haven’t been investing much in the labour-saving technology that increases their productivity is that they’re not paying a lot for their labour. Use generous pay rises to raise the cost of labour relative to capital, then watch our productivity improve, retrospectively justifying the generous pay rises.

The Reserve needs to switch to a “growth mindset”.

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For some, reaching old age marks a historic first

By MILLIE MUROI, Economics Writer

As much as it is a privilege, caring for our parents and grandparents – the people we have relied on – can be confronting. We see their vulnerability, their pain, and we have to step up in ways we’re often unprepared for.

But ageing is a process most of us are at least somewhat familiar with, especially as life expectancy in Australia has eclipsed 81 years for men and 85 for women. For some communities, though, the experience of aged care is a historic first.

Speaking at the Independent Health and Aged Care Pricing Authority’s conference in Adelaide last week, Stan Grant – distinguished professor at Charles Sturt University, and a Wiradjuri, Kamilaroi and Dharrawal man renowned for his journalism – pointed this out.

“I stand here today older than both of my grandfathers were when they died,” Grant, 61, said. “It’s an incredibly sobering thought that as First Nations people, we are experiencing the first generation of ageing.”

Grant’s father, who is 85, has lived well beyond the 71-year life expectancy for First Nations men. But if not for some key factors, Grant reckons he would probably have died earlier.

“My parents have had to bury nieces, nephews and grandchildren,” he said. “Just a week ago, we had to bury a nephew of mine who was just 40 years old.”

One of the most important factors behind his parents outliving the national average is tied to a challenge facing the entire nation – but especially First Nations Australians – according to Grant: housing security.

“Every Aboriginal person like me who has closed the gap, every single one, has two things in their life: home ownership and an education,” Grant said.

Owning a home to live in, and to be cared for in, has been crucial – not only for his parents’ ability to live at home in their old age and be around family and their community, but also to Grant’s own personal success.

“I could go to sleep at night [as a kid] and know I wasn’t going to be woken at midnight to pack up and move somewhere,” he said.

After he moved school 14 times before even entering high school, Grant said his parents getting their own home meant he finally got to play in the same football team, get a tutor and have friends for more than six months.

The home ownership rate among First Nations Australians was 42 per cent in 2021 compared with 67 per cent in the broader Australian population.

Research last year found that among the broader population, older Australians who rent their homes tend to live shorter lives and have fewer years of good health compared with home owners – even after accounting for factors such as income and education.

University of Wollongong lecturer in statistics and data science Dr Kim Kiely said the research highlighted the need for more policies aimed at making housing secure and affordable, allowing people to stay connected to their community as they age.

Home or community-based care is especially important for many First Nations people, said Andrea Kelly, the interim First Nations aged care commissioner.

“Aboriginal and Torres Strait Islander people are often disconnected from country as they age,” she said, preventing elders from passing down knowledge, providing leadership and care, and safeguarding family, community and intergenerational wellbeing.

Kelly also said many stolen-generations survivors avoided mainstream services, because of a shortfall in trauma-aware care and because these environments could often resemble institutions these people were placed in as children.

“The lack of cultural safety is the primary deterrent for older Aboriginal and Torres Strait Islander people not accessing aged care,” she said, also noting the interpersonal and structural racism reported by First Nations people when accessing standard aged care.

While many Australians take for granted a level of familiarity, ease and comfort with aged care systems, Grant pointed out these were often not aligned with how First Nations families and communities are structured.

“The government very generously provides an allowance for the primary carer,” he said. “But we don’t have a singular primary carer. We have primary carers.”

Grant said it was invaluable for his parents to have the choice of medical services that didn’t require linguistic or cultural translation.

“My parents were within an hour’s drive of an Aboriginal medical centre where they felt comfortable, respected, and cared for,” he said. When they could no longer drive, the nurses came out to visit them.

These Aboriginal Community Controlled Health Organisations – known as ACCHOs – are run by Aboriginal and Torres Strait Islander communities and show an “incredible amount of innovation and entrepreneurship” distinguished professor and health economist Jane Hall said.

Kelly said the government should support and encourage more partnerships between these organisations and mainstream service providers until they could be better funded.

The Productivity Commission, in its final report before the productivity roundtable next week, also backed this suggestion and said these organisations needed to be sufficiently resourced.

While data is important for measuring outcomes and progress, Grant also spoke about the need to look beyond overall statistics which could mask inequalities among First Nations people, and flagged the need for policies to account for differing circumstances.

“The first or second generation Aboriginal middle class, who may be more literate, have greater access and live in more affluent areas, enjoy very different lives from communities including such as the one I’m from,” he said, with some people requiring more support than others, but those with access to resources tending to be better placed to receive that support.

Grant also stressed the importance of leaning into the expertise and strengths of First Nations people in improving the aged care system.

“We need Aboriginal people who have experience, who can bring that nuance and knowledge, understanding and cultural knowledge to bring better outcomes,” he said.

“It’s such a shame that during the Voice referendum we never got to talk about love and care, about health and ageing. We frittered away so many opportunities talking about petty politics and culture wars. Imagine having an entity with Aboriginal input that understands the intricacy and changing needs of our community.”

There is also a strong sense of community, family and responsibility towards elders embedded in many First Nations cultures which may be difficult to quantify but is crucial to our understanding and development of aged care.

“There is no way my parents would have been able to stay in their own home, as hard as that has been, if it wasn’t for the love, resilience and strength of their community,” Grant said. “You go to an Aboriginal person’s home, you’ll never be turned away. There’s always somewhere to sleep, there’s always another seat at the table, there’s always going to be enough food.”

While there is plenty left to do to improve the aged care system – especially for First Nations people – Grant’s father, the oldest man in his family’s history, is a picture of hope.

Grant’s experience is also a reminder that we are – in many ways – all in this together, with an important opportunity to connect, empathise and learn from one another.

“After my dad had had his first brain surgery, I had to help my father to the bathroom, and I’d never held that level of vulnerability before,” Grant said. “My dad, who was always an incredibly strong, powerful, muscled man … I felt how his arms were soft, how his legs shook uncontrollably. This is what people are experiencing right across Australia: the intimacy of care that none of us are really prepared for.”

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Albanese is crying poor, but we're losing billions from untaxed gas

 It’s likely much will be said, but little done, at next week’s economic roundtable. With the budget expected to be in continuing deficit, Anthony Albanese won’t be able to splash out. But much could be done to spread the costs of government more fairly.

While young people are being charged an astonishing $50,000 for an arts degree, it’s a little-noticed fact that the government is providing much of our natural gas to multinational companies free of charge.

Australia has become one of the world’s biggest exporters of gas in recent decades, up there with the United States and Qatar. The world price of gas jumped in February 2022 after Russia’s invasion of Ukraine.

The sad story of our misadventures in ensuring the nation benefits from the export of its gas is told in a report by the Australia Institute. To be exported, natural gas has to be liquified. We’ve built 10 liquefaction plants, five in Western Australia, three in Queensland and two in the Northern Territory.

Like all natural resources in the ground, gas is owned by the government. Businesses that wish to extract it have to buy it by paying a “royalty” to the government. Royalty for gas from onshore fields is paid to the state government, as in Queensland.

But gas from offshore fields in Commonwealth waters is the responsibility of the federal government. So the WA and NT plants should buy their gas from the Commonwealth. With one exception, however, the feds don’t levy royalty. Rather, they impose a “petroleum resource rent tax” on the exporters’ profits in lieu of royalty.

Trouble is, the poor design of the resource rent tax has meant little or no money has been collected. According to Treasury, “to date not a single LNG plant has paid any petroleum resource rent tax and many are not expected to pay any significant amounts until the 2030s”.

Nor do the big multinational exporters of gas – including Exxon, Shell and Chevron – seem to pay much company tax. The Australian Taxation Office has labelled the oil and gas industry “systematic non-payers” of tax.

The Australia Institute report finds that the total value of our natural gas exports over the four years to June 2024 was $265 billion. It estimates that 56 per cent of this resulted in no royalties, state or federal.

“This means that more than half the gas exported from Australia is given for free to the companies exporting it,” it says.

The royalties that were paid over the past four years represented less than 4 per cent of the total value of the gas exported. It should have been nearer 9 per cent, yielding an extra $13 billion.

We’re always being told how important mining and gas are to the economy. But how, exactly? It’s not our job to help big foreign companies make big profits. Mining and gas are capital-intensive industries, meaning they don’t employ many people. And most of the capital equipment they use would be imported.

So it’s vitally important that the businesses – even when they’re locally owned – pay a fair price for the natural resources we allow them to extract and take away. The energy and minerals are, after all, non-renewable.

And it’s equally important that the mineral and gas companies pay a fair bit of tax on their hefty profits. We’ve had far too much, for instance, of the increasingly foreign-owned BHP telling us it’s the Big Australian, while telling the taxman it’s the Big Singaporean.

Which brings us back to next week’s roundtable. The radical change in the way companies are taxed, proposed by the Productivity Commission as a way of improving our productivity, has been opposed by 24 business lobby groups, and isn’t likely to fly.

But it was intended to reduce the company tax paid by most of our companies, while covering the government’s loss of revenue by increasing the tax on our 500 biggest companies, many of them the local subsidiaries of foreign multinationals.

The change would have made it harder for them to fiddle their taxes. And they would have included our big foreign-owned gas companies.

The Productivity Commission’s modelling in preparation for the roundtable includes an assessment of each of our taxes: how much they damage the economy by discouraging people from working, saving and investing.

I have doubts about these exercises, but the commission’s assessment gave the worst rating to the state governments’ stamp duties, the rate of company tax, and the top rate of personal income tax. (I’ve been on that top rate for almost all my career, and it’s done nothing to dampen my enthusiasm for bashing out another pontification about economics.)

But here’s the point: it gave the petroleum resource rent tax a small positive rating. In other words, it said that, if the rate of this tax were increased, it would do more to encourage working, saving and investing. That’s an indication of the price we’re paying by allowing the accidental free ride we’re giving the gas exporters to roll on.

Earlier this year, the boss of the Australia Institute, Dr Richard Denniss, caused a stir by claiming that the government takes more money from uni students through HECS than it collects from the petroleum resource rent tax. It was such a strange assertion the ABC set its fact-checkers on him. They had to admit his numbers were right.

And though it may seem an odd comparison, it’s a valid one. The government makes graduates contribute to the cost of their education because it doesn’t have enough money to do everything it would like to. In which case, why is it giving our gas away to big companies?

Denniss reminds us that, in Norway, they do it the other way around: tax their oil and gas industry heavily and give their kids free higher education.

Maybe if we impose a tax on gas exports, we could afford to halve the cost of a BA.

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Official modelling shows little benefit from a cut in company tax

Be sure your dodgy modelling will find you out. I’m starting to think economists have become so used to pretending to know more about the economy than they really do that they don’t notice the way they mislead the rest of us.

The Productivity Commission has proposed a radical change in the way companies are taxed which, it tells us, would improve the economy’s productivity and leave us better off. It has commissioned modelling that, it implies, supports its case for change.

But when you read its report – and add some knowledge of how “computable general equilibrium” models of the economy work – you’re left with nothing but doubts.

The proposal involves cutting the present 30 or 25 per cent rate of tax on company profits to 20 per cent for all companies except the 500 or so with annual turnover (total sales) of more than $1 billion.

But it also involves introducing a 5 per cent tax on the annual net cash flow of all companies. This new tax would include an allowance for the cost of companies’ equity capital, and an immediate write-off of the cost of newly purchased assets, but no allowance for interest paid on the companies’ borrowing.

The commission paid for two sets of modelling of the proposed changes, one from Chris Murphy, Australia’s leading commercial modeller, and the other from the leading academic modelling outfit, the Centre of Policy Studies (CoPS) at Victoria University.

The commission’s report compares the results of the two modelling exercises for just the first proposed change, cutting the rate of company tax to 20 per cent for all but the top 500 companies.

According to the Murphy model, this would cause companies to increase their investment in new equipment by 1.4 per cent, improve “productivity” by 0.4 per cent, increase real gross domestic product by 0.4 per cent and increase real before-tax wages by 0.6 per cent.

The CoPS modelling results are similar in some respects. It expects a smaller increase in business investment of 0.6 per cent, but improved productivity of almost as much, and the same increase in before-tax wages, even though GDP increases by only 0.2 per cent.

Does the modelling provide reasonably strong support for cutting company tax to make the economy bigger and better? Well, no, not really. Those results are shockingly small.

Economists have gone for years making their modelling results seem grander than they are by, in this instance, letting the rest of us conclude that the estimated increases of 1.4 per cent, 0.4 per cent and 0.6 per cent represent annual increases in the rate of growth in business investment, productivity, GDP and before-tax wages.

Wrong. What the people waving modelling results around rarely bother to make sure the punters understand is that these are once-only increases in the levels of investment, productivity, GDP and before-tax wages. What’s more, they’ll come about only “over the long run”.

And how long is the long run? They rarely bother to tell us – especially as it can vary with the modeller. But if you dig deep you can find out. CoPS sets it at five years, I’m told, but it’s more usually thought of as about 10 years. And the commission’s report seems to be saying that its comparison of the two modelling exercises is what they estimate will be the story in 2050.

Get it? We’re considering a hugely expensive cut in the rate of company tax in the belief that this will cause real GDP to be between 0.2 and 0.4 per cent greater in five to 25 years’ time.

Really? Its modelling shows the benefit from cutting the rate of company tax would take years to materialise, and still be trivial, but the commission thinks we should do it anyway.

See what this is saying? Even the economists who commissioned this modelling don’t take its results seriously. Why not? Well, for a start, they know how primitive and grossly oversimplified these modelling exercises are. It’s as though the economy they’ve been able to model is one inhabited by stick figures, not humans.

As modelling is such a dodgy exercise, economists know they don’t have to believe any results they don’t fancy – because, in truth, economics is based more on religious belief than scientific inquiry. What figures largest in the thinking of economists is the model of the economy they’ve been carrying around in their heads since about second year uni.

The model in their head tells them taxes discourage and distort economy activity, meaning lower taxes are always better. So if econometric modelling tells them a rate cut would make little difference, they’re undeterred.

Speaking of taxes, one reason the effects of a cut in company tax are so modest is the standard assumption that the lost government revenue has to be covered by tax increases somewhere else. The modellers here have assumed it’s covered by a “non-distorting lump-sum tax” (which doesn’t exist in the real world) or by bracket creep (a hidden, lasting increase in personal income tax).

Significantly, this would be why, under Murphy, the real wage increase of 0.6 per cent before tax, turns into an after-tax increase of zero. Really? We want to improve productivity to raise our material standard of living, but real after-tax wages would be unchanged under Murphy – or, under CoPS, would actually fall by 0.5 per cent. Great idea, eh?

Finally, economists at the Australia Institute reveal that what the commission chooses to call “productivity” is actually “output per worker”, which ain’t quite the same thing.

It turns out that, according to the modelling, national output per worker increases not because any worker becomes more productive, but because the company tax cut’s reduction in the after-tax cost of capital causes our capital-intensive mining industry (which thereby has higher output per worker) to expand at the expense of the labour-intensive health and education sectors.

And this would be progress, would it? The sad truth is that modelling is used to help sell policy changes someone thinks we should make, not to improve our understanding of what works and what doesn’t.

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PC wants our big mining companies to pay more 'rent'

If you get the feeling that the profits some big businesses make are far more than they deserve – exorbitant, in fact – you’re not wrong. “Super profits” are something economists are well aware of, though they rarely say much about. And they prefer to call it “economic rent”.

Economic rent has nothing to do with what you pay to live in someone else’s house. And it’s money you receive, not money you pay. Why economists call it “rent” is lost in the mists of the history of economic thought. Maybe they just like using jargon other people don’t understand.

But in one of the reports the Productivity Commission has produced for the economic roundtable, it wants to make sure we all understand economic rent. Why? Because it wants to partially replace the present company tax with a tax on companies’ “net cash flow”. And the great advantage of this new tax, we’re told, is that it taxes companies’ economic rents, not their ordinary profits.

When a company considers setting up a business, it needs to earn a certain rate of return – that is, an after-tax profit after allowing for all its direct costs. The after-tax return is the company’s shareholders’ reward for investing their savings in the business rather than, say, lending it to someone.

And for the company to stay in the business, the rate of return it receives needs to be at least as great as what it could earn by moving to some other industry. Economists call this its “opportunity cost”.

But here’s the point: if the company’s after-tax return exceeds its opportunity cost, the extra bit is its economic rent. This rent is a sign the company’s profits are bigger than they need to be.

Sometimes these extra profits are temporary. Other businesses see how much moolah is being made, enter the market and, in the process of getting their share, bid down prices and profits. So, competition has removed the economic rent.

Often, however, the economic rent is lasting. This can be because the existing business has a special advantage other firms can’t share or copy. They’ve got the best location or have cornered the market in some other way. (Or, of course, they may have persuaded the government to grant them some special advantage other firms or industries don’t get. This, by the way, is why economists call businesses that ask for government favours “rent-seekers”.)

For Australians, note that economic rent is common in mining. Some minerals are in high demand, but limited global supply. Some mines are better located, or have deposits that are higher quality or nearer the surface.

Note, too, that pop stars and film stars also receive economic rent. Some of them earn far more than others because they have more charisma or a bigger following. (Please don’t tell my boss, but even I make a bit of rent. I’d do this job for a lot less than I’m paid. And nor could I make as much in some other occupation. So why doesn’t the boss pay me less? I guess because he’s worried some rival editor might offer me more.)

In other words, there are many companies and individuals earning economic rent that we can’t do much about. The commission sees this as a problem because the ability of some businesses to charge higher prices than necessary reduces the economy’s efficiency and causes living standards to be lower.

Which brings us to company tax and taxes generally. Economists worry that imposing taxes on certain activities distorts people’s behaviour. Taxing companies’ profits, for instance, may discourage them from expanding – or setting up in the first place.

So how widespread is economic rent? The commission says that modelling undertaken for its inquiry estimates that 54 per cent of the company income tax base takes the form of economic rent. This is up from an estimate of 41 per cent in 2018.

Taxing individuals’ incomes may (repeat, may) discourage them from working as hard. And taxing the purchase of some goods and services but not others may encourage people to buy stuff that’s not what they would prefer.

See where this is leading? We often need higher taxes to cover increased government spending and stop the government’s debt getting too big. However, economists worry that higher taxes will discourage people from working and investing, as well as distorting their purchases.

But if economic rent is bad for the economy – if it reduces efficiency and holds back living standards – doesn’t that mean taxing it, even taxing it quite heavily, can help reduce the budget deficit without harming the economy?

This is why the commission wants us to cut back ordinary company tax and start moving to a new 5 per cent tax on companies’ net cashflow. On one hand, ordinary company tax discourages investment even in companies that aren’t earning economic rent because it reduces their after-tax rate of return.

On the other, the commission argues, a cashflow tax would not distort decisions to invest via companies because it’s designed to tax only their earnings above their required rate of return. That is, it’s designed to tax only the companies’ economic rent – if any.

Remember, we’re supposed to be finding ways to improve our productivity. The commission notes that one of the main ways businesses have increased the productivity of their labour over the years has been to give their workers more and better machines to work with. Lately, however, firms’ spending on plant and equipment has grown only slowly.

That would be another benefit of transitioning from ordinary company tax to a cashflow tax. Under the old way, spending on new equipment reduces taxable income only over a number of years via annual depreciation.

Under the cashflow tax, they would get a full deduction for such spending in the year it was made – which should encourage companies to spend a lot more on productivity-enhancing equipment.

Now, tax economists have long been huge supporters of a cashflow tax. But no country has been game to try it yet, and I doubt if Anthony Albanese is the guy who would like to go first.

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Roundtable will fix nothing unless we can all park our self-interest

I’m not sure if it’s happening by accident or design, but we may be about to convince ourselves that, though our democracy isn’t nearly as stuffed up as America’s, we’re fast making ourselves ungovernable, unable to agree on how to fix our problems.

I fear that Treasurer Jim Chalmers’ economic roundtable in a fortnight’s time won’t reach agreement on any measures of substance. The players – business on one side, the unions on the other, plus assorted experts – confidently assume that the Albanese government will use this indecision to come up with its own set of solutions.

But what if it doesn’t? Everyone complains that this government’s too timid, unwilling to risk losing votes by making the controversial changes we need. Surely, it could use the roundtable’s failure to agree on anything as its justification for doing nothing. “When you guys can agree on what we should do, we’ll do it.”

Initially, the roundtable was to discuss the great worry of our times – productivity. Almost every year since forever, our economic production machine has got a fraction more efficient at turning economic resources into goods and services, thus raising our material standard of living. But for the past decade or so, it seems to have stalled. Why? And what can we do to get it going again?

But Treasury would have been quick to remind Chalmers that the budget is expected to be in deficit for as far as the eye can see. Something needs to be done about this, and the government is certainly in no position to try to fix productivity by cutting taxes.

And, led by former Treasury secretary Dr Ken Henry, the nation’s economists will tell you our biggest economic problem is that our tax system, which is little changed since the introduction of the goods and services tax 25 years ago, is no longer working properly. It needs a major overhaul.

In economics, you can’t get away from tax. Our productivity is determined largely by what happens inside the nation’s factories, mines and offices. Ask any economist what can be done to make our businesses more productive, and they’ll want to do it by changing the “incentives” businesses face. Translation: pull some kind of tax lever.

So it’s no surprise that, when the Productivity Commission was asked to offer some suggestions, its first was to rejig company tax in a way that encouraged greater business spending on more and better machines for the workers.

Almost all our companies would pay less tax, but this loss to government revenue would be covered by making the big tax-dodging foreign multinationals pay more.

Trouble is, when you boil it down, the (big) Business Council of Australia exists to protect the interests of big foreign businesses, which want to make profits in Oz but pay negligible tax. Amazingly, the Business Council has persuaded Canberra’s 23 other business lobby groups to join it in rejecting the company tax changes.

Now the ACTU has proposed curbs on negative gearing, the capital gains discount and the use of family trusts – all of which allow the well-off to minimise the income tax they pay.

The financial press seems to think this means the Labor government will rush off to do the unions’ bidding, even though Albanese has explicitly rejected these reforms, and the well-off would fight them tooth and nail.

Somehow, I doubt it. I think it will confirm Albo in his resolve to do very little.

What depresses me is realising the way our democracy has devolved into a self-interested fist-fight. Every interest group goes all out to extract as many benefits as possible while paying as little tax as possible – and may the deepest pockets win. Which they often do, by way of bribes to the political parties. This triumph of self-interest over co-operation is promoted by a small army of lobbyists and an increasingly partisan media.

The politicians themselves have fostered this notion that we should vote for the party that’s offering us the best deal. “Vote in the national interest? Vote for the party that would try to be fair to everyone and protect the poor? What kind of sucker do you take me for?”

It hasn’t got them far, but for years the Liberals have promoted themselves as the party of lower tax. What’s more, they can do it without any reduction of “essential services”. This has always been no more than wishful thinking – and Labor’s not much better.

The result is people convincing themselves that taxation is the great evil, that asking me to pay more tax is outrageous, and expecting tax cuts at every election is no more than my due.

In truth, what we’re saying is “I want to pay less, so find someone else to pay more”. Those who fondly imagine government spending involves huge waste and could easily be slashed with no harm to anyone are deluded. And they never come up with specifics on what spending could be cut.

When businesses demand lower company tax, they’re arguing that consumers should pay more GST. When well-off individuals (like me) demand lower taxes, what they’re really saying is: “Please stop asking me to subsidise people less fortunate than me. I don’t care how hard they’re doing it.”

And now, would you believe, we have Professor Ross Garnaut popping up last week to warn that Australia’s transition from fossil fuels to renewable energy is happening too slowly, so we’re not on course to get our emissions down to net zero by 2050.

The private sector isn’t building many new solar and wind farms because there isn’t enough money in it, and the solution is to bring back the carbon tax abolished by that man of great foresight Tony Abbott.

Really, another tax? I don’t see Albanese doing that, either. And the notion that governments should have the courage to force on us things most of us oppose is another idea from Fantasyland.

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Big business quick to veto productivity tax reform

Well, you can forget about Treasurer Jim Chalmers’ three-day roundtable discussions leading to any improvement in the economy’s productivity and growth, let alone getting the budget back under control.

Late last week, the Business Council of Australia persuaded all of Canberra’s many other business lobby groups to join it in rejecting out of hand the Productivity Commission’s proposal for reform of the company tax system which, the commission argued, would increase businesses’ incentive to invest more in productivity-enhancing plant and equipment, without any net reduction in company tax collections.

The proposal is for the rate of company tax to be cut for all but our biggest 500 companies, while introducing a 5 per cent tax on the net cash flow of all companies.

The join statement by 24 business lobby groups says that “while some businesses may benefit under the proposal, it risks all Australian consumers and businesses paying more for the things they buy every day – groceries, fuel and other daily essentials”.

Get it? This is the lobbyists’ oldest trick: “We’re not concerned about what the tax change would do to our profits, dear reader, we’re just worried about what it would do you and your pocket. It’s not us we worry about, it’s our customers.”

Suddenly, their professed concern about the lack of productivity improvement and slow growth is out the window, and now it’s the cost of living they’re deeply worried about. They’ve been urging governments to increase the GST for years, but now they don’t want higher prices. Yeah, sure.

Bet you didn’t know there are as many as 24 different business lobby groups in the capital. Their role is to advance the narrowly defined interests of their paying clients back in the rest of Oz by means fair or foul. They’re not paid to help the government reach a deal we can all live with, nor to suggest that their clients worry about anything other than their own immediate interests.

Canberra calls this lobbying. Economists call it rent-seeking. You press the government for special deals at the expense of someone else, while ensuring you contribute as little as possible. This, apparently, is the way democracy is meant to work.

And if the lobbyists can play this game, why can’t the business press join in? As its blatantly partisan commentary makes clear, big business’ only interest in attending the government’s roundtable was to come away with some new concession, ideally a cut in company tax.

At the summit after Labor was elected in 2022, business came away with nothing, we’re told, while the unions got all they wanted. Well, not gonna play along with that again.

It’s no surprise the Business Council is so opposed to the Productivity Commission’s proposal, which would reduce the tax paid by all companies bar the top 500. They’d get no cut in conventional company tax, but would pay the new 5 per cent cash flow tax.

Which lobby group roots for our biggest companies? The Business Council. What is surprising is the ease with which it was able to persuade all the other business lobbies to join it in helping protect the Big 500, even though most of their own members should have benefited from the deal.

Huh? I think the explanation is in the first sentence of the joint statement: the “proposal to tax business cash flow is an experimental change that hasn’t been tried anywhere else in the world”.

True. So, a simple case of resistance to radical change. And who could blame them? Economists – and the Productivity Commission itself – don’t have a good record in promoting radical changes that look good on paper and also work in practice. Think: the whole neoliberal project and, especially, the notion that creating from nowhere a market for the supply of disability services would be easy and efficient. It’s wasted billions.

When we wonder why productivity has stopped improving, the obvious suspect is the huge decline in the growth of business investment in new plant and equipment. Giving workers more and better machines to work with is the main way we’ve increased their ability to produce more per hour.

On paper, the commission’s partial switch from conventional company tax to a tax on companies’ net cash flow – which allows them to write off the full cost of new assets immediately – ought to improve productivity.

But the budget’s projected decade of deficits prohibits the Albanese government from giving tax cuts to companies or anyone else. So, while the commission’s plan would cut the tax paid by almost all companies, this cost to government revenue would be recouped by the extra tax paid by the Big 500.

Guess what? Many if not most of those companies pay far less tax than you’d expect. In particular, many of them are the subsidiaries of foreign multinationals using profit-shifting to pay laughably small amounts of tax in Australia.

The commission readily explains that the tax saving to most companies would be covered by tax-dodging foreign companies. Australia’s rare system of dividend imputation (“franking credits”) means that the Australian shareholders of Australian companies get their share of company tax refunded.

Only the foreign shareholders of Australian companies bear the cost of company tax. So why does the Business Council bang on unceasingly about the need to cut the rate of company tax? Because, when it gets down to cases, the Business Council represents the interests of foreign multinationals operating in Australia. That’s its guilty secret.

Footnote. When I wrote last week about the way “modelling” is used to make estimates of the favourable effects of a proposal sound more scientific and reliable than they are, I didn’t know the first offender would be the Productivity Commission, quoting results produced by Australia’s leading commercial modeller, Chris Murphy.

It says modelling suggests its proposal could increase investment by $7.4 billion, Gross Domestic Product by $14.6 billion and labour productivity by 0.4 per cent.

Sorry, no “computable general equilibrium” model can tell you the likely effect of some policy change on productivity. Someone has to insert their best guess at the effect on productivity, and all the model does is calculate what, given a host of other assumptions, such an improvement would mean for GDP.

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It's hard not to hate investors when the property game is so unfair

BY MILLIE MUROI, Economics Writer

The thing about moving up the food chain from renter to home buyer is that it comes with a monumental mindset shift.

After years of renting, hearing the words “high rent” makes me freeze and sends shivers of dread down my spine. Yet, there I was at an inspection last weekend, listening to a real estate agent happily declaring how high the average rent in the area was.

It took me a moment to recalibrate my alarmed expression, trying to blend in with the investors nodding along in satisfaction. There’s also a certain air of indifference radiating from buyers who aren’t desperately looking for an escape from the rental rat race – which I failed (quite miserably) to imitate.

Don’t get me wrong. Investors can play a positive role in our housing crisis. But only when the rules of the real estate game are set correctly.

Right now, there are plenty of ladders for investors and home owners, and no shortage of snakes setting renters and first-home-buying hopefuls back.

The more inspections I attend, though, the more I understand how we got where we are – and how we’ve ended up so stuck.

When we stand to gain from the rules and outcomes of a system, it becomes easier to play down the problems. That’s because humans hate the discomfort (known as “cognitive dissonance”) of holding conflicting beliefs or acting in a way that clashes with their beliefs.

While I’ve met and heard from generous landlords who could – but choose not to – charge the maximum rent, they’re an exceedingly rare species. It’s much easier for most of us to justify an unfair system we benefit from, than to give up our personal gain or live in a constant state of contradiction.

It’s also easier to think things are totally fine when the people we’re surrounded by aren’t outraged by it. The more time I spend at inspections, the more desensitised I’ve become to the way we see housing: as a wealth-building machine.

Low home ownership is not always a bad thing. But it’s terrible when the only other option – renting – leaves many in financial stress and struggling to save for a deposit: the very thing they need to buy their way out.

In Australia, about one-third of the population rents and one in three of these renters are spending more than 30 per cent of their income on housing, meaning they are considered to be in financial stress.

The problem with keeping people renting for life by necessity is that it keeps many of them trapped in a tough position for the rest of their lives.

Retirees who rent in the private market are much more likely to live in poverty than retirees who own their own house. Two-thirds of retired renters live in poverty, compared with one-quarter of those with a mortgage and one in 10 who own their home outright.

And the rate of home ownership has continued to drop over the decades. More than half of Australians born between 1947 and 1951 owned a home between the ages of 25 and 29, compared with one in three people born between 1992 and 1996.

The big focus on lifting our supply of houses is fantastic: both the government’s ambition to build 1.2 million new homes by the end of the decade and the push to reduce the red tape – from zoning laws to slow approvals processes – standing in the way of private businesses and developers.

But as ANZ chief economist Richard Yetsenga points out, the evidence suggests changing things on the supply side alone won’t be enough.

As of March this year, the government had completed only about 350 homes through its $10 billion Housing Australia Future Fund, with 5465 under construction. Building houses has never been something we can do overnight. But the process has become slower over time.

Yetsenga also points out Australia has 11 million dwellings and a population of 26 million. With these numbers, there should be far fewer people facing homelessness or being priced out of the property market.

“The challenge seems to be more about misallocation than a genuine shortage,” he says. “Some choices, while individually reasonable, might be turning housing into a luxury for others.”

One thing we need to examine is the capital gains tax discount, which halves the rate at which investors are taxed when they sell a property and make a profit as long as they have held the property for at least 12 months.

That’s a generous discount that gives investors more reason to snap up properties. That’s not necessarily a bad thing, except when considering the fact investors are often competing against first home buyers, and we’re facing a supply shortage.

We may not need to abolish the tax discount completely. In fact, it’s probably a good idea to keep it for investors who are building new homes rather than buying up existing ones. And the additional discount for people using their investment properties to provide affordable housing is a good thing.

But reducing the capital gains tax discount for existing properties being rented out at standard (and often seemingly excessive) rates might give first home buyers a better chance at getting their feet in the market.

Because here’s the thing: as long as most of the population are home owners, and the majority of their wealth is tied up in the value of their house, the overwhelming interest will always be to see property prices continue to rise, even if incomes fail to keep up.

In the 1990s, the average home in Australia was worth about 9.5 times the average household income per person. By 2023, they were fetching 16.4 times the average household income per person.

With supply only softly creeping up, it’s simply unrealistic to assume house price growth will slow significantly.

I’ve been fortunate to have lived rent-free, until the age of 21, and to have received a little bit of help from my grandparents to boost my deposit.

But it shouldn’t take luck – having the right parents (and grandparents) – to buy a house.

If we’re going to treat homes as investments, it needs to be just as possible for a kid growing up in a broken household with no family help to escape the rental market and start building their wealth as it is for anyone else.

There’s also a strong case for abolishing stamp duty – a levy collected by state and territory governments on the purchase of homes – and moving to a land tax paid annually on the value of the land a property sits on. Why? Because stamp duty discourages people from moving, including empty-nesters who could downsize, to homes that better fit their needs.

While we should welcome investment into new homes, we don’t need to give more reason for investors (who are not providing affordable housing) to compete with first home buyers.

I’m still on the hunt for a home after one property I inspected with a price guide of $460,000 sold to an investor for $530,000.

I’m in a much better position than many, but it’s clear, as long as I’m competing with investors, to see how the cards remain stacked against first home buyers. Hating the player might not be very productive, but I certainly hate the game.

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What if people just want better jobs, not more stuff

Sorry, but the more the great and good bang on about the urgent need for more “productivity”, the more doubts I have. Have you noticed it’s always the businesspeople, economists and politicians who tell us what we need more of, never us telling them what we’d like?

How do we know whether what they say we need would be better for them but not better for us? Short answer: we don’t. We’re supposed to take their word for it.

The urgers rarely take the time to explain what this “productivity” is, let alone why we need much more of it. I’ve no doubt that, following the coming three-day economic roundtable, the Albanese government will make some changes to taxes and regulation that, it assures us, will increase this productivity thing, whatever it is.

We’ve seen such exercises many times before. “We’ll do this and it’ll all be much better.” Trouble is, they never come back to check whether it really is better – or who did better and who didn’t.

We were assured that cutting some rich people’s taxes would, say, create more jobs. The tax cuts go through, but we never hear any more about the jobs. Makes you wonder whether it was just a story we were told.

So, what’s the story with this fabulously desirable thing called productivity?

What we do in the economy is take a bunch of resources – labour, capital, equipment and raw materials – and transform them into a host of the goods and services we use to live our lives. When the output of goods and services grows faster than our input of resources grows – when our production processes become more efficient – economists say our “productivity” has improved.

Which means we’re better off. More prosperous. Believe it or not, our productivity has improved a bit almost every year since the Industrial Revolution. How? Mainly by us inventing better machines, finding better ways to do things and having a better-educated workforce.

It’s this huge improvement in our productiveness that’s given us a standard of living many times better than it was 200 years ago. Our homes, our health, our food, our entertainments and our possessions are far better than they were.

What’s worrying the great and the good is that this process of small annual improvement in our living standards seems to have stalled about a decade ago. They don’t actually know why it’s stalled, or whether the stoppage is temporary or permanent.

But the people at the top of our economy are worried by the thought that, unless we do something, our standard of living may never go any higher. This thought appals them, and they assume it appals us just as much. We’ve got used to ever-rising living standards, and for this to stop would be disastrous.

Well, maybe, maybe not. What no one seems to have observed is that this is a completely materialist view of how our lives could be better. Better goods, better services and a lot more of both.

My guess is that, for the managerial class, more money to buy bigger and better stuff is what they most want. But I’m not sure if that’s what the rest of us want – especially after we’d given some thought to the alternatives.

If an ever-higher material living standard came free of charge, of course we’d all want it. But if it came at a cost – as it’s likely to – we’d have to think harder about the price and what we’d have to give up to pay it.

When the big business lobby groups argue that our productivity has stopped improving because their taxes are too high and the Labor government has introduced too many regulations controlling how they pay and treat their workers, sometimes I think what they’re saying is: we could make you so much richer if only you’d let us make your working lives a misery.

In a recent article for Project Syndicate, Dani Rodrik, a Harvard economist, argues that most working people probably want a good job more than higher pay. “When people are asked about wellbeing and life satisfaction, the work they do ranks at the top, along with contributions to their community and family bonds,” he says.

This is something economists keep forgetting. In their simple theory, work is a pain. And the only reason you do it is to get money to buy the stuff you want. The bad bit is work; the good bit is consumption.

In truth, most of us get much of our identity, self-worth and satisfaction from our jobs. Some people hate their jobs, of course, but that’s the point: they would be a lot happier if they could find a job they enjoyed.

Rodrik adds that jobs can be a source of pride, dignity and social recognition. It’s clear that Australians hugely value having a secure job. One where they don’t have to worry about where their next meal’s coming from. Where they know they’ll be able to keep up their mortgage payments. Where their job classification is permanent, not temporary.

Good pay is nice, but work is about a lot more than pay. Psychologists tell us that job satisfaction is helped by having a degree of autonomy in the way you do your job. A more obvious need is a boss who treats you fairly and with respect. No one wants to work for an idiot who thinks they should treat ’em mean to keep ’em keen.

I have no doubt that all workers want the pleasure of being loyal to their boss and their company. But they have to be receiving loyalty to give it back.

So here’s my radical thought: what if, instead of pursuing an ever-higher material living standard, governments focused on improving Australian workers’ job satisfaction? Would that be better or worse? A good way to lose votes? I doubt it.

It could even be that a more satisfied workforce was more productive.

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Roundtable: When they say 'modelling' grab your bulldust detector

The warm-up for next month’s three-day economic roundtable has begun, and this week we’ll start hearing from worthies who know exactly what we should do to improve our productivity. What’s more, they have the modelling to prove it.

Did you see last week’s headline that “Productivity boost would make workers $14,000 richer”? It was attached to the news that this week Productivity Commission boss Danielle Wood will release a report recommending the government overhaul company tax, speed up planning approvals for infrastructure projects and embrace artificial intelligence.

And doing this would lead to Australia’s full-time workers being $14,000 a year better off within a decade, would it? Well, no. That’s not what she said. It was that if our productivity performance could return to its long-term average, then that would translate into every full-time worker being $14,000 a year better off by 2035.

So, there was no actual link between what she wanted us to do and this mere calculation of what a return to the higher rate of productivity improvement in our past would do to our pay cheques in the present.

But even this simple calculation assumes that, should a return to a higher annual rate of improvement in productivity come about, the workers would get their fair share of the proceeds.

My point is, we’re about to hear many worthies proposing we do more of this or more of that particular thing because it will improve the economy’s “productivity” – its ability to turn the same quantity of labour, capital equipment and raw materials into a greater quantity of goods and services than before.

Sometimes they’ll advocate change X because they genuinely believe it would make the rest of us better off, and sometimes it’s just themselves they’re hoping to benefit. But, either way, many of them will try to make their argument more persuasive by producing “modelling” showing how much better off we’d be.

Let me tell you something, the politicians, businesspeople and economists who wave it in our faces never bother to: modelling isn’t all it’s cracked up to be. It can’t tell you much you didn’t already know except the answer to very complicated sums.

It allows to you to say, “if I assume A, B, C ... and K, what would that do to the rate of economic growth, employment and incomes, given that the economy works the way economic theory says it does?”

There’s a class of modelling using “computable general equilibrium” (CGE) models that’s very popular in Australia, though less so overseas. These models are often used to measure the likely effects of a change in government policy or of a proposed major infrastructure project.

It’s a safe bet we’ll be told the results of a lot of such modelling exercises before, during and after the roundtable. Just remember that modelling is more about helping me sell my idea to you than about finding out whether my great idea would actually work and, if so, how well.

The problem with economists is that they’re much more about religious faith than scientific inquiry. Our economics profession’s leading sceptic is Dr Richard Denniss, director of the Australia Institute. Other economists know what he knows and share his reservations, but they keep it to themselves.

With Matt Saunders, Denniss has written a paper on the limits of CGE modelling, which would make enlightening reading for many. “General equilibrium” means the model is designed to take in the whole economy, not just one part of it.

“Part of the persuasive power of CGE models comes from the perception that they contain a large amount of objective mathematics and theory,” they say. But while these models “contain many equations, this is not the same thing as a large amount of objectivity.

“The modeller needs to make decisions about the values of thousands, potentially millions, of model variables. It is not the model that estimates the many inputs for which no good data is available, it is the modeller and the modeller’s client that makes such choices.”

One way of viewing the economy is to say that the growth in real gross domestic product is determined by “the three Ps”: population growth, the proportion of the population that participates in the labour force, and the rate of improvement in the productivity of labour.

With these models, all three of those Ps are “exogenous variables”. That is, the modeller makes their best guess on what will happen to population growth, the rate of participation and the rate improvement in labour productivity, then punches them into the model and turns the handle to see what it says will happen to economic growth, employment and all the rest.

This means modelling can tell us little about productivity. If you had a list of things you wanted to do because you thought they’d improve productivity, the model couldn’t tell you whether each of them really would improve productivity, nor by how much all of them would improve it.

So, for instance, modelling can’t tell us whether cutting the rate of company tax would do more for productivity than, say, doubling government support for research and development. When it comes to productivity, it’s always the modeller telling the model what to think, not the other way around.

The great contradiction of modelling is that, while you have to be really good at maths to run a model, let alone build one, and really good at economics to build one that makes sense, the economy you end up modelling is so grossly oversimplified it’s like a world inhabited by stick figures.

Unlike all the people happily quoting modelling results to us, Denniss and Saunders tell us that, although these models spit out many numbers with dollar signs in front of them, there is no actual money in the model, no interest rates, credit, loans or savings.

The models usually assume that inflation has no effect on the real economy, most assume that the profits in each industry are minimal because competition competes them down, and capital equipment can be repurposed at no cost.

It’s fortunate for economists that their profession has never worried too much about ethics.

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The ABS just had to bin some statistics. Here's what went wrong

By MILLIE MUROI, Economics Writer

Within the world of chaos and uncertainty that economists – and, in fact, many of us – constantly work, the Australian Bureau of Statistics is usually a comforting presence.

Like clockwork, at 11.30am most weekdays, the national bureau releases the latest wave of data: everything from what’s happening in our jobs market to how much prices have risen and how many houses are being built.

These are key numbers that the Reserve Bank uses to set interest rates, politicians use to inform policy, and that we use to hold the government to their word.

So when the bureau declared last week that it would not be releasing statistics from its latest survey of income and housing this year, it came as a bit of a shock … at least to the nerds (myself included) keeping a close eye on the bureau’s homepage.

And it’s actually bad news for everyone.

In a statement to the media, the bureau said this particular set of data – from a 2023-24 survey – failed to meet its high standards.

“While we were compiling the statistics … we found serious shortcomings in the questionnaire design and data collection processes that we could not overcome, despite our best efforts,” deputy Australian statistician Dr Phillip Gould revealed.

It might not seem like a big deal. But it means one of our best trackers of income, housing costs such as mortgages and rent, assets and liabilities such as property, motor vehicles, investments and credit cards – from 30,000 households across the country – has essentially been thrown out the window.

Wasted data is never good. And it’s especially painful during a housing affordability crisis when we need the information to formulate good policies.

And it’s especially a problem given we haven’t had an update to this particular set of statistics since 2019 because of disruptions during the pandemic – and won’t get an update until at least 2027 given the lag with which the results are released.

So, what exactly went wrong?

First, it’s worth noting that the bureau (also known as the ABS), is not alone in some of the hurdles it faces. National statistical organisations around the world are finding it increasingly difficult to collect information from households.

The UK’s statistics agency – the Office for National Statistics (abbreviated to the less, or perhaps more, fortunate ONS) – has had to start fixing some of its “virtually unusable” employment figures as well as some of its data on inflation and trade. Experts have warned these issues have left the UK’s central bank, the Bank of England, “flying blind”.

The problem with its employment data mostly came down to the response rate which plummeted to 17 per cent at its lowest point. Jonathan Portes, an economist at King’s College London, said UK households had become more reluctant to respond to surveys – an issue that worsened during the pandemic.

But he also flagged years of tight budgets and low pay for the office’s statisticians compared with private sector peers as further possible factors in the falling quality of the data.

Independent economist Nicki Hutley says the bureau – which in 2023-24 received about $417 million in government funding – is probably also not adequately funded.

“It would be great if we had a properly resourced bureau that could make sure that it was able to do things in ways that it was comfortable,” she says.

While a spokesperson for the bureau said the overall response rate for the survey of income and housing was “acceptable”, they said the mix of responses was not representative of the population.

There are a few reasons for that, including that people now prefer to interact with the government online, at a time that suits them, with some people being especially difficult to reach.

That’s driving up the cost of conducting these surveys because households are becoming less available and willing to engage, the spokesperson said: “[This] means field interviewers may need to make more frequent contact attempts, including in-person visits, to households.”

While the bureau says it generally receives excellent cooperation from households, it can legally direct people to provide information.

Besides being more annoying and knocking on more doors, the spokesperson said the bureau would make it easier for households to participate in surveys by improving the design of surveys and the ways in which they could offer help and receive feedback.

In December last year, the government committed $98 million over four years for the bureau to improve how it collects data and interacts with Australians, including improving the digital experience for key surveys.

But the bureau has also learned some lessons. It will, for example, monitor response rates more closely and frequently so that it can intervene earlier if the data isn’t looking up to scratch – and therefore avoid having to bin all the findings at the end.

It has also set clearer targets to allow for better tracking of the results as they come in.

While the bureau didn’t point to specific issues with the design of its 2023-24 survey, its spokesperson said some wording of questions had been changed from previous years.

When it came to changes to its 2025-26 survey of income and housing, the bureau undertook “extra user testing”, testing updates with the Australian public more vigorously before sending the survey out widely.

That testing was aimed at more carefully checking the public’s understanding of the questions to make sure it aligned with the things the bureau wanted to measure, and looking at how people worked their way through the survey forms to make sure they were easy to use but collected the necessary information.

While Hutley says the missing data is not catastrophic, she says it is pretty painful.

“A lot of people might think that this is not necessarily significant because there are other indicators that are available and some workarounds for some things, but there’s certainly things you can’t do, and this data gets used for an awful lot of research, especially around things like income inequality which is a growing issue in Australia” she says.

“Being told, ‘well, we’re not confident in the series’, is a little bit concerning.”

It’s also a problem given the data is meant to be an ongoing measure that allows changes and conditions to be tracked over time.

In a comment on LinkedIn, UNSW professor of housing research policy, Hal Pawson, said the missing data, which is supposed to be updated every two years, was a “shocking slip-up” by the bureau.

“This survey provides invaluable official data on rental affordability and housing under-utilisation, as well as on broader topics including the distribution of income and wealth,” Pawson said. “A data series that should be refreshed every two years will be badly damaged by a gap of at least five years [since the last release].”

Although this particular oversight may not be the end of the world, it will have consequences, and it’s an issue the bureau will be acutely aware of for some time.

As the census, the biggest survey of them all, enters the testing phase before its five-yearly distribution in 2026, the stakes will be even higher. That survey is one the bureau can’t afford to get wrong – or ghosted on.

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Cutting HECS debt is not the best way to help young Australians

It may seem an age since the federal election, but the new parliament has just convened for the first time. Anthony Albanese will be giving top priority to enacting his election commitments – “an honest politician? Really?” – and starting with his promise to cut uni graduates’ HECS debt by 20 per cent.

Unsurprisingly, the promise was popular, meaning the Coalition and the Greens won’t want to make themselves unpopular by blocking the cut in the Senate. In any case, the Greens’ policy is to abolish uni fees – a fairyland promise that’s easy to make when you know you’ll never have the numbers to keep it.

But just because a cut in graduates’ debt is popular doesn’t necessarily make it good policy. Is it? No and yes.

HECS – the higher education contribution scheme – now called HECS HELP because some imaginative smarty thought of adding the moniker “higher education loan program”, began life 36 years ago as an eminently fair and sensible way of helping the government afford to provide university education to a much higher proportion of our youth.

Over the years, however, successive governments have stuffed around with it, making it less generous and less sensible. So something needed to be done, but simply cutting the size of graduates’ debts doesn’t really fix the problem.

It’s clear that being provided with a uni education gives a young person a great private benefit: a lifetime of earning a wage usually much higher than most non-graduates earn. So it’s fairer to non-graduates to ask graduates to contribute towards the cost of their education.

It’s also true, however, that those taxpayers who don’t benefit from higher education still benefit from being able to work in an economy alongside more highly skilled workers. This “public benefit” justifies not requiring graduates to pay anything like the full cost of their education.

But the trouble with bringing back uni fees was the risk that it could deter bright kids from poor families from seeking to better themselves. This is where the designer of HECS, Bruce Chapman, an economics professor, came up with a brilliant Australian invention, the “income-contingent loan”, which should be up there with the Hills Hoist and the stump-jump plough.

You don’t pay the tuition fee upfront – the government pays the university on your behalf, and you repay the government. But, unlike any commercial loan you’ll ever get, when you to have start repaying, and the size of your repayment, depend on how much you’re earning. So, in principle, you should never be paying more than you can afford.

You don’t pay interest on the loan, but the outstanding balance is indexed to the rate of inflation – which, to an economist’s way of thinking, means you’re paying a “real” interest rate of zero.

If you never earn enough to be able to repay the loan – say because you become a monk – you never have to pay the loan back. That’s by design, not accident.

Trouble is, successive governments have not only made the scheme less generous, the post-COVID inflation surge has added greatly to people’s HECS debts. Debts have become so big they reduce the size of the home loans banks are willing to give graduates.

Worse, in the name of encouraging young people to take supposedly “job-ready” courses such as teaching, nursing and STEM (science, technology, engineering and maths), in 2021 the Morrison government reduced their annual tuition fees, whereas fees for courses such as business, law and the humanities were greatly increased.

Fortunately, this half-brained scheme did little to change students’ choices, but did mean abandoning the previous arrangement in which the fees for various courses were geared roughly to the size of the salaries those graduates were likely to earn.

The cost of an arts degree is now about $17,000 a year, or a massive $50,000 for the full three years. So it’s people who have studied the humanities who now have debts quite out of whack with their earning ability. Smart move, Scomo!

Albanese’s 20 per cent cut in debt levels will do little to fix this crazy misalignment of fees with future earning potential. The cut will have a cost to the budget of about a huge $16 billion in theory, but more like $11 billion when you allow for all the debts that were never going to be repaid anyway.

By making it a percentage cut rather than a flat dollar amount, too much of the benefit will go to highly paid doctors and lawyers. And, in any case, of all the young adults having trouble with the cost of living in recent years, those on graduate salaries are hardly the most deserving.

On the other hand, at a time when, justifiably, the young feel the system has been stacked against them, I can’t be too disapproving of Albo’s flashy measure to help keep the younger generation’s faith that, in the end, the democratic process will ensure most age groups get a reasonable shake.

The young are right to feel bitter about the way earlier generations have enjoyed the ever-rising value of their homes while allowing the cost of home ownership to become unreachable for an ever-growing proportion of our young. And that’s before you get to other features of our tax and benefits system that favour the old.

Thankfully, the government is making the rules for HECS repayments much less onerous, making them work the same way as the income tax scale. The minimum threshold for repayments will be raised from income of $56,000 a year to $67,000. Your income between $67,000 and $125,000 will require a repayment of 15 per cent, and 17 per cent on income above that.

This will yield significant savings to those with debts. But, of course, the lower your repayments, the longer it will take to clear your debt and the more your outstanding balance will be indexed for inflation.

The government’s changes offer justice of a kind, but the rough and ready kind.

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