Election The First Skirmish Of A Long Generational War
It would seem that the upcoming election is to be fought along generational lines. This is the first skirmish in what is likely to be a series of pitched battles that will be fought throughout the 2020s.
The losers will be the baby boomers; the winners will be their children’s generation (the millennials). Whether the upcoming election delivers a decisive victory to the millennials over the boomers remains to be seen. But even if they are not successful this time, there will be ample opportunity for the millennials down the track to finish off the straggling, retreating, retiring baby boomer army.
And here is why this generational war will not cease until the baby boomer life form has finally ceased to exist. It is because the Australian people cannot afford to fund baby boomers in retirement in the manner to which they have become accustomed. They are too big of a group to start with; and they simply will not die off in sufficient numbers before they consume vast resources in the form of pensions and healthcare support. That is the blunt truth.
The solution from a baby boomer point of view is to be self-supporting; to make sacrifices during your working life so as to be fully independent of government support.
The problem is that any pile of savings, no matter how legitimately accumulated by the rules of the day in one decade can be reinterpreted as illegitimate (even greedy) through a different lens in a subsequent decade. There is no defence because the objective is to clip pools of savings from people unlikely or unable to defend that pool.
What the next generation of taxpayers needs right now is a narrative that attaches fault — such as “they’re greedy” or “they had it easy” — to the baby boomers so as to rationalise the redirection of resources to other parts of the economy.
But is this a smart approach at this election?
Did you know that by the time of the upcoming election there will be 7.3 million millennials aged 18-37 and who are naturally enough quite concerned about their ability to access to the housing market in their preferred location?
So surely this is a young people versus an old-people battle?
Baby boomers, on the other hand, now aged 58-77, comprise just 4.8 million Australians. It is true that there’s another 1.3 million pre-boomers aged 78 and older, but I doubt that they’re as incensed, or as motivated, as are active retiree baby boomers.
The boomers believe they have a window within which to enjoy the retirement that they have worked for, planned for, made sacrifices for, and which extends from the early 60s to the late 70s. This is the active retirement stage of the life cycle that requires some level of funding for cruises, for golf clubs, for gardening makeovers, and for the wicked and wanton indulgence of their grandchildren.
New policies reducing retirement incomes of active retirees would reshape retirement dreams. Boomers fear that much of what they thought they could enjoy in their retirement years will be swept away by a change of rules, by what the economists call a manifestation of sovereign risk. Boomers feel that they’ve been dudded on the social contract that has underpinned their retirement planning.
But here’s the thing. Boomers can feel duped, dudded, done over, betrayed all they like, and it won’t change the long-term outcome because the narrative says that they built their retirement dreams on a false logic that is only now being corrected. Whether this is true, or even fair, is not the point. The point is, will this narrative work at the next election?
Because I think it will work.
Oh, and do not think, my baby boomer friends, that acquiescing on this issue at this election will cause demands for intergenerational wealth transfers to cease and desist in the future. If the proponents of these generationally targeted policies are rewarded in May, you can be assured that political strategists at the state level, and at every future federal election, will come knocking on retirees’ doors demanding more.
The development of a rationalising narrative is simple: you lot had it easy when you were our age … we’re doing it tough. I’m surprised there’s no #boomerprivilege hashtag trending as yet.
And here is why this battle will continue during the 2020s. It’s the irresistible weight of numbers: the voting potency of boomers will weaken as they approach the great abyss. When politicians understand that there is no significant voter backlash in taking funds from one group and delivering to another, they’ll be pursuing the concept of intergenerational fairness at every future election.
Welcome to retirement, boomers.
There’s a couple of defences that could be deployed by the boomer forces.
The property industry could be harnessed to predict a disastrous effect on property values. The problem is that the millennials will say, “you beauty, we can now afford an apartment in Sydney’s Surry Hills as opposed to Homebush”.
What if boomers got their millennial kids to support the status quo? I’m not sure that boomers would ask this of their children and, besides, the millennials might say “sure thing Mum and Dad”, and then vote for the changes anyway.
The millennials might be persuaded to the view that retirees have a right to enjoy savings legitimately accumulated under rules that prevailed in the past and that should not be changed, because that would limit their ability to fund luxuries and cruises in retirement. You can try this logic, but I do not think it’s gonna fly.
This is a demographic issue. A big concentrated chunk of young Australians (aged 18-37) galvanised over a single issue such as housing affordability, is more politically potent than a smaller group strung out over a broader slice of the life cycle, where only one in four (or five) has a sufficient savings pool to be at risk from the changes.
Here is a case of a majority leveraging power over a minority in order to achieve an income redistribution.
The narrative is important because without a credible rationale this looks like bullying.
The problem for the proponents of rule changes affecting retirement incomes (for example, franking credits, negative gearing, capital gains) is that galvanised young people cluster in inner-city electorates — no doubt yearning for a piece of inner-city real estate — and so this policy may only enhance existing margins.
The demographic strength that incensed, self-funded, one-in-four (or five) active-retiree baby boomers have is that they are scattered across middle and outer suburbia, including in swing seats like those on the edges of Brisbane, Melbourne, Perth and Sydney.
The proponents of intergenerational fairness need to connect with these swing seat baby boomers on other issues such as health (includes cancer) and infrastructure, while defenders of the status quo must whip up a perfect storm of outer suburban indignation at this egregious betrayal of hardworking older Australians.
You get the picture.
The battle lines are drawn.
We’ll get a result of this first real intergenerational skirmish on Saturday, May 18, at around eight o’clock in the evening.
The battle will play out in the swinging outer suburbs of our biggest cities.