Politics The economy is set up to screw young people

[Johnny Bananas]

Tax systems in pretty much every country favour investment income and capital gains over earned income. And who owns the assets producing that investment income? People with inherited wealth, and people who have been working long enough to purchase assets themselves. Young people working for a living have to pay an outsized proportion of tax to subsidise wealthy investors, unless they have very rich parents who assist them to buy assets.

The treating of housing as an investment first rather than a place to live has also screwed over young people, who make up the majority of renters. The economy is set up to keep house prices high, by keeping demand high through incentives for landlords like negative gearing and the capital gains tax discount, as well as high immigration. Successive governments simply don't care about housing affordability, as evidenced by a recent Q&A episode where politicians from both major parties didn't agree that reducing house prices was an aim of theirs.

Is it any wonder we get spending patterns like the below?

 

[Ohitsthatguy]

And no government has the guts to push back because of the 2019 election

We get what we deserve

 

[peetoo]

Tax systems in pretty much every country favour investment income and capital gains over earned income. And who owns the assets producing that investment income? People with inherited wealth, and people who have been working long enough to purchase assets themselves. Young people working for a living have to pay an outsized proportion of tax to subsidise wealthy investors, unless they have very rich parents who assist them to buy assets.

The treating of housing as an investment first rather than a place to live has also screwed over young people, who make up the majority of renters. The economy is set up to keep house prices high, by keeping demand high through incentives for landlords like negative gearing and the capital gains tax discount, as well as high immigration. Successive governments simply don't care about housing affordability, as evidenced by a recent Q&A episode where politicians from both major parties didn't agree that reducing house prices was an aim of theirs.

Is it any wonder we get spending patterns like the below?

View attachment 1997928

Is this anything new? Seems to track my life

I was 25 in 1984

 

[peetoo]

If it's a full on housing discussion. There's a lot of talk about governments failing

For whatever reason the development sector is failing badly. There's sites marked for development in desirable locations sitting there untouched for years if not decades

 

[paulige]

Too many are too quick to pull the ladder up behind them.

 

[evolved2]

I somewhat agree. If you're on minimum wage and living in a capital city, you're basically screwed. There are also a lot of whingers who don't have that excuse.

For the middle class, there's a clue in there as to how to get out - don't spend all your money on depreciating assets. Spend some of it on appreciating and income producing assets like investment properties and shares.

If you can afford overseas holidays, 80 inch televisions, eating out regularly, European vehicles, updating your phone and iPad every second year, and other luxuries, you can afford to buy some shares.

Too many people are financially illiterate and incapable of living within their means.

 

[evolved2]

And no government has the guts to push back because of the 2019 election

We get what we deserve

That's democracy in action. The people spoke and government listened.

I see no problem with that.

 

[Nuggs Bunny]

I somewhat agree. If you're on minimum wage and living in a capital city, you're basically screwed. There are also a lot of whingers who don't have that excuse.

For the middle class, there's a clue in there as to how to get out - don't spend all your money on depreciating assets. Spend some of it on appreciating and income producing assets like investment properties and shares.

If you can afford overseas holidays, 80 inch televisions, eating out regularly, European vehicles, updating your phone and iPad every second year, and other luxuries, you can afford to buy some shares.

Too many people are financially illiterate and incapable of living within their means.

How many people, though?

OP makes a good point - the tax system is set up to favour those with assets rather than income. When we debate things like tax reform i.e. the Stage 3 tax cuts, the group who gets painted as "the rich" are those with a high income, not those with substantial wealth. Curious where your "too many people are financially illiterate and incapable of living within their means" fits into this.

 

[Captivating]

So the people who didn't take gap years and didn't eat out so they could insta their meals are now spending more in retirement?

 

[evolved2]

How many people, though?

OP makes a good point - the tax system is set up to favour those with assets rather than income. When we debate things like tax reform i.e. the Stage 3 tax cuts, the group who gets painted as "the rich" are those with a high income, not those with substantial wealth. Curious where your "too many people are financially illiterate and incapable of living within their means" fits into this.

Is there an accurate means of quantifying the number of people? I suppose you could get a rough idea looking at data on credit card interest and the fees paid on buy now pay later services like Afterpay.

It's difficult to become wealthy from income alone, even a good income. The easiest way to financial freedom is living within your means and setting aside part of your income to buy appreciating and income producing assets. That to me is the golden goose, and I'll vote against any political party that looks to attack it - obviously not a popular view on the SRP but one that resonates with enough swinging voters to make a difference.

I'm suggesting the average middle income earner should be capable of following the same simple plan. If not, it's highly likely they lack sensible management of their finances.

Things like inheritance tax and investor incentives are more important to me than income tax, and I say that as someone with an eye firmly on the future of my children who are getting close to being part of 'the real world' after being through the education system. Their future will be better and brighter because of what their parents and grandparents have accumulated for them. There would be a significant number of families in the same boat.

What does that mean for the poor? Currently they're shit out of luck, unfortunately. I'm sure there are ways and means to make things better for them that will be acceptable to the electorate.

 

[Gethelred]

Is there an accurate means of quantifying the number of people? I suppose you could get a rough idea looking at data on credit card interest and the fees paid on buy now pay later services like Afterpay.

It's difficult to become wealthy from income alone, even a good income. The easiest way to financial freedom is living within your means and setting aside part of your income to buy appreciating and income producing assets. That to me is the golden goose, and I'll vote against any political party that looks to attack it - obviously not a popular view on the SRP but one that resonates with enough swinging voters to make a difference.

I'm suggesting the average middle income earner should be capable of following the same simple plan. If not, it's highly likely they lack sensible management of their finances.

Things like inheritance tax and investor incentives are more important to me than income tax, and I say that as someone with an eye firmly on the future of my children who are getting close to being part of 'the real world' after being through the education system. Their future will be better and brighter because of what their parents and grandparents have accumulated for them. There would be a significant number of families in the same boat.

What does that mean for the poor? Currently they're shit out of luck, unfortunately. I'm sure there are ways and means to make things better for them that will be acceptable to the electorate.

I'd argue the problem here isn't that the poor cannot do what it takes to become rich - which is individuals making poor decisions/not financially sensible decisions - and a wider societal trend that means you need to start with a significant leg up or be very, very good/lucky with your investments.

Give this a read:

The Pitchforks Are Coming… For Us Plutocrats

A memo for my fellow filthy rich who live in our gated bubble worlds: Wake up, people. It won’t last.

www.politico.com

It's an oldie, but a goodie.

 

[Nuggs Bunny]

Is there an accurate means of quantifying the number of people? I suppose you could get a rough idea looking at data on credit card interest and the fees paid on buy now pay later services like Afterpay.

It's difficult to become wealthy from income alone, even a good income. The easiest way to financial freedom is living within your means and setting aside part of your income to buy appreciating and income producing assets. That to me is the golden goose, and I'll vote against any political party that looks to attack it - obviously not a popular view on the SRP but one that resonates with enough swinging voters to make a difference.

I'm suggesting the average middle income earner should be capable of following the same simple plan. If not, it's highly likely they lack sensible management of their finances.

Things like inheritance tax and investor incentives are more important to me than income tax, and I say that as someone with an eye firmly on the future of my children who are getting close to being part of 'the real world' after being through the education system. Their future will be better and brighter because of what their parents and grandparents have accumulated for them. There would be a significant number of families in the same boat.

What does that mean for the poor? Currently they're shit out of luck, unfortunately. I'm sure there are ways and means to make things better for them that will be acceptable to the electorate.

I feel this is sort of missing the point - just so I'm clear in what way do you somewhat agree with the OP?

Nobody is going to argue with you that investing and setting aside a portion of your income for growth is a good thing - everybody already does it anyway to the minimum extent via superannuation. But considering it takes 20 years at 10% growth per annum to turn $500 a week into a million bucks, it's not going to help young people in the period where they're making the biggest financial decisions of their lives - buying house #1 and having kids. Both of these things are trending towards happening later and we're now starting to see the demographic implications of that. Is that desirable? Most people would say no once they see the effects, probably a lot of swinging voters too.

 

[james haish]

It's not going to get any better for them in the near future. But I also don't see them articulating any solutions other than half baked ideas. There's really something quite weak and pathetic about people under 40, boomers would have taken action if they were subjected to this.

The ‘extraordinary numbers’ signalling years of pain for renters

An expert analysis shows migration, low vacancy rates and soft investment will drive rental inflation beyond its current 15-year high.

www.theage.com.au

 

[Johnny Bananas]

I somewhat agree. If you're on minimum wage and living in a capital city, you're basically screwed. There are also a lot of whingers who don't have that excuse.

For the middle class, there's a clue in there as to how to get out - don't spend all your money on depreciating assets. Spend some of it on appreciating and income producing assets like investment properties and shares.

If you can afford overseas holidays, 80 inch televisions, eating out regularly, European vehicles, updating your phone and iPad every second year, and other luxuries, you can afford to buy some shares.

Too many people are financially illiterate and incapable of living within their means.

Sure, this is all sound advice. But consider that it's harder for young people to save enough to purchase properties now (for investment or to live in) due to the growth in house prices heavily outpacing the growth of income. Not only is it harder to put money aside because rent is much higher as a proportion of income than it used to be, the deposit that one has to save for to get the mortgage is also a much bigger proportion of income. The result is, young people have to save for much longer for a deposit.

Shares have a much lower barrier to begin investing, of course, but they're not risk free, and buying them in small chunks means a greater proportion of the money gets eaten away in brokerage fees. Also, I would imagine many people end up selling off their share portfolio in order to have the necessary deposit for a house. It's hard to have your cake and eat it too when you don't already own a lot of assets.

 

[evolved2]

I'd argue the problem here isn't that the poor cannot do what it takes to become rich - which is individuals making poor decisions/not financially sensible decisions - and a wider societal trend that means you need to start with a significant leg up or be very, very good/lucky with your investments.

Give this a read:

The Pitchforks Are Coming… For Us Plutocrats

A memo for my fellow filthy rich who live in our gated bubble worlds: Wake up, people. It won’t last.

www.politico.com

It's an oldie, but a goodie.

I don't disagree with anything in the article.

The thing I've perceived to exist even through the extremities of opinion that get posted on the SRP is that we all seem to want the same things - the poor looked after, young people helped, equality for First Nations people, healthcare for all, care for the environment, etc.

The main points of difference seem to be in what costs we'll accept both individually and globally, the sense of urgency with the issue, and how big the issue actually is.

At the end of the day, we're purely having a theoretical discussion here - whether the electorate favours OP's proposal or not and whether it can survive unscathed through a misinformation campaign are different matters entirely. That's what truly counts.

I won't pretend to have the same grasp on politics of you, Johnny Bananas and Nuggs Bunny - so I'll throw this question back to the three of you: do you think OP's proposal has a realistic chance of being accepted by one of the major political parties and adopted into our tax system?

 

[evolved2]

Sure, this is all sound advice. But consider that it's harder for young people to save enough to purchase properties now (for investment or to live in) due to the growth in house prices heavily outpacing the growth of income. Not only is it harder to put money aside because rent is much higher as a proportion of income than it used to be, the deposit that one has to save for to get the mortgage is also a much bigger proportion of income. The result is, young people have to save for much longer for a deposit.

Shares have a much lower barrier to begin investing, of course, but they're not risk free, and buying them in small chunks means a greater proportion of the money gets eaten away in brokerage fees. Also, I would imagine many people end up selling off their share portfolio in order to have the necessary deposit for a house. It's hard to have your cake and eat it too when you don't already own a lot of assets.

I don't find anything to disagree with there.

The barriers to gaining a foot in the property market are bigger than at any time I can recall. I guess where we differ is in what we want done to fix the issue.

 

[Gethelred]

I don't disagree with anything in the article.

The thing I've perceived to exist even through the extremities of opinion that get posted on the SRP is that we all seem to want the same things - the poor looked after, young people helped, equality for First Nations people, healthcare for all, care for the environment, etc.

The main points of difference seem to be in what costs we'll accept both individually and globally, the sense of urgency with the issue, and how big the issue actually is.

At the end of the day, we're purely having a theoretical discussion here - whether the electorate favours OP's proposal or not and whether it can survive unscathed through a misinformation campaign are different matters entirely. That's what truly counts.

I won't pretend to have the same grasp on politics of you, Johnny Bananas and Nuggs Bunny - so I'll throw this question back to the three of you: do you think OP's proposal has a realistic chance of being accepted by one of the major political parties and adopted into our tax system?

To change property settings to discourage investor class property ownership/purchase?

We ostensibly need the Boomers - the generation that holds the majority of assets here, and as awful as it sounds - to die off. Doing that will have multiple effects; it adds more houses to the market; it changes the demographics of home ownership; it removes their votes from elections.

If Labor were to run an election on reducing foreign ownership and immigration in a package with slowly decoupling the investor class from property - whether that's grandfathering in changes to franking credits or whatnot; I'm not an expert in this area - there'd be a lot of votes in doing it on two fronts; it'd allow them to dogwhistle to the racists in the same way the Coalition does, it keeps the unions onside, and it'd even up the property market to allow younger people to buy homes because the asset ceases to be a good investment and becomes what it is; necessary shelter.

Creating a RC into media ownership and instituting a fed ICAC would not go amiss either; one investigates if the media holds an unreasonable sway over elections by choosing which facts or interpretation of them to present, the other prevents lobbies from holding too much sway over the political process.

 

[evolved2]

To change property settings to discourage investor class property ownership/purchase?

We ostensibly need the Boomers - the generation that holds the majority of assets here, and as awful as it sounds - to die off. Doing that will have multiple effects; it adds more houses to the market; it changes the demographics of home ownership; it removes their votes from elections.

If Labor were to run an election on reducing foreign ownership and immigration in a package with slowly decoupling the investor class from property - whether that's grandfathering in changes to franking credits or whatnot; I'm not an expert in this area - there'd be a lot of votes in doing it on two fronts; it'd allow them to dogwhistle to the racists in the same way the Coalition does, it keeps the unions onside, and it'd even up the property market to allow younger people to buy homes because the asset ceases to be a good investment and becomes what it is; necessary shelter.

Creating a RC into media ownership and instituting a fed ICAC would not go amiss either; one investigates if the media holds an unreasonable sway over elections by choosing which facts or interpretation of them to present, the other prevents lobbies from holding too much sway over the political process.

Do you think it will be enough to wait out Boomers? The property market has been through a period of incredible growth throughout the past 30 years with barely a blip during the 2008 financial crisis and covid years - many who bought as recently as 5 years ago have significant paper wealth in property. That's without even considering property investors.

Property owners are accustomed to constant growth in their assets while the other side, renters and youth, are becoming increasing vocal in demanding action. I don't know if we're close to a tipping point, but it feels like it. I would have said the same in 2008 though, so what do I know!

Reducing foreign ownership and immigration could be very popular options, and that's where I feel we should start. You're not putting many voters offside by attacking runaway prices from that angle. As said earlier, I'm not in favor of reducing investment incentives and am cynical about changes being a slippery slope towards something more. Whether enough swinging voters think like me or not, I couldn't say. You'd imagine the ALP would be reluctant to take anything too extreme to an election and the LNP won't even consider an attack on investors.

I agree about media ownership.

 

[faible]

It's not going to get any better for them in the near future. But I also don't see them articulating any solutions other than half baked ideas. There's really something quite weak and pathetic about people under 40, boomers would have taken action if they were subjected to this.

The ‘extraordinary numbers’ signalling years of pain for renters

An expert analysis shows migration, low vacancy rates and soft investment will drive rental inflation beyond its current 15-year high.

www.theage.com.au

People not in power, not able to do anything to fix broken system. People in power, benefitting from broken system, unwilling to do anything to fix broken system.

UNDER 40S ARE WEAK AND PATHETIC.

 

[Gethelred]

Do you think it will be enough to wait out Boomers? The property market has been through a period of incredible growth throughout the past 30 years with barely a blip during the 2008 financial crisis and covid years - many who bought as recently as 5 years ago have significant paper wealth in property. That's without even considering property investors.

Property owners are accustomed to constant growth in their assets while the other side, renters and youth, are becoming increasing vocal in demanding action. I don't know if we're close to a tipping point, but it feels like it. I would have said the same in 2008 though, so what do I know!

Reducing foreign ownership and immigration could be very popular options, and that's where I feel we should start. You're not putting many voters offside by attacking runaway prices from that angle. As said earlier, I'm not in favor of reducing investment incentives and am cynical about changes being a slippery slope towards something more. Whether enough swinging voters think like me or not, I couldn't say. You'd imagine the ALP would be reluctant to take anything too extreme to an election and the LNP won't even consider an attack on investors.

I agree about media ownership.

The problem you've got is you don't want to depress the market too much; if you do, you're absolutely ruining the people who've taken on immense loans for overpriced property and - let's face it - those will be the most vulnerable, both from a position of paying off their loans but also to the banks themselves. If bankrupcy becomes a better alternative than paying off your mortgage, banks will need to be bailed out to prevent them going under.

You need to do it just as slowly as it's worked up into this state. Slowly taper it back and pull house prices down; slowly build up renter's rights and enforce occupancy. Decrease foreign investment and speculation, change development goals and intent, change zoning laws to rezone areas as public housing.

Do it extremely carefully, to prevent a run on the banks and/or the speculator classes to deflate the housing market all at once. They aren't the ones who will be left without a chair when the music stops.

 

[peetoo]

Never fear you youngsters. The conservatives of the Anglo world have national service to help you along

 

[james haish]

People not in power, not able to do anything to fix broken system. People in power, benefitting from broken system, unwilling to do anything to fix broken system.

UNDER 40S ARE WEAK AND PATHETIC.

Boomers have had a firm grip on the culture and were a political force to be reckoned with since they were in their 20s. Millennials are hitting forty and still demanding they be “given” a turn. Why not just take it?

 

[barreness]

Boomers have had a firm grip on the culture and were a political force to be reckoned with since they were in their 20s. Millennials are hitting forty and still demanding they be “given” a turn. Why not just take it?

Demographics? life spans have lengthened and fertility rates have dropped ever since the boomer generation. Just take it? so suspend democracy and start a revolution, I mean could do I guess. Can't really talk about these things on bigfooty though comrade

 

[james haish]

Demographics? life spans have lengthened and fertility rates have dropped ever since the boomer generation. Just take it? so suspend democracy and start a revolution, I mean could do I guess. Can't really talk about these things on bigfooty though comrade

Protests in the late 60s and 70s were far more violent than the tepid pantomimes that pass for them now. Where is the millennial Weather Underground?

 

[evolved2]

The problem you've got is you don't want to depress the market too much; if you do, you're absolutely ruining the people who've taken on immense loans for overpriced property and - let's face it - those will be the most vulnerable, both from a position of paying off their loans but also to the banks themselves. If bankrupcy becomes a better alternative than paying off your mortgage, banks will need to be bailed out to prevent them going under.

You need to do it just as slowly as it's worked up into this state. Slowly taper it back and pull house prices down; slowly build up renter's rights and enforce occupancy. Decrease foreign investment and speculation, change development goals and intent, change zoning laws to rezone areas as public housing.

Do it extremely carefully, to prevent a run on the banks and/or the speculator classes to deflate the housing market all at once. They aren't the ones who will be left without a chair when the music stops.

I don't have a problem with most of that. Part of me wants to see the property market take a hard hit, but that's only because I have no mortgage or investment properties. The way of least pain is probably to have a static housing market for a significant period of time.

Deep government intervention is required if we want change. There doesn't seem to be much long term planning from the two main parties other than what will win the next election - it's become a battle between who can put the least number of voters offside. Even though I don't agree with either, I'd say the ALP targeting investment tax benefits and the LNP bringing in workchoices were brave politics. Where's the bravado gone of late?

Where do you think tenant rights are lacking? I have zero experience as a tenant so I haven't seen things from that perspective, and think the opposite is true - that tenants have too many rights.