Outside the supermarket last week, there was a man sitting with a sign asking for help to get accommodation for the night. His upturned hat contained some coins, so I decided to go and ask him if he could spare a few.
“What?” he said, betraying a distinct lack of manners, when everybody knows that “I beg your pardon,” is much politer.
“I have a mortgage,” I explained, “and you clearly aren’t in any debt whatsoever, so clearly your financial position is much sounder than mine. I just wondered, as you have a positive financial position, whether you’d like to help me out!”
Ok, ok, I didn’t really do that, but it did occur to me that he didn’t have a large mortgage and if I were a government and he were a taxpayer, then certain media outlets would be more concerned about my debt than his homelessness. Actually, when I think about there are dozens more stories about government debt than homelessness. Why is that?
Well, I suppose the obvious point is that government debt is everybody’s problem while homelessness is only a problem for that individual. Or that family. Or the person who owns the shop where he blocks the door by sleeping in front of it. Or the people who feel that he’s cluttering up the streets. Or the cost if he develops a problem that causes him to be hospitalised. Or…
Actually, it’s more than an individual problem when I think about it. Whatever, the main point remains: Being free of debt is not necessarily a great financial position to be in.
When the Victorian Government brought down its budget, there was a lot of talk about the “extravagant” big spend and – even though the amount being borrowed is considerably less than the Federal government – much concern about the level of debt being incurred.
Now let’s agree to look at this objectively and not through any tribal position. While too much debt is potentially bad, a lack of debt doesn’t necessarily mean you’re doing well. And in the case of governments, urgency in paying back the debt may simply be a desire to look good for no worthwhile reason. To illustrate this, I’m inviting you to the country where I’m government and you’re the taxpayer.
Governor Rossleigh has taken on a debt which works out to be equivalent of $50,000 per taxpayer. I could simply service in the interest and pay it off over fifty years which would mean that it was costing each taxpayer the interest plus one thousand a year. However, I’ve decided to pay it off quickly. I cut services, putting some of you out of work. I also raise taxes placing a great burden on the remaining taxpayers but, hey, that’s not my problem and isn’t it better that your government is free of debt so your grandchildren don’t have to pay off government debt..
And, if I raise taxes enough and stifle demand and kill off certain industries, your grandchildren may not even have to pay off your personal debt because – like the man outside the supermarket – you may not have a debt at all. Ok, you don’t have a home either, but Tim Wilson has the solution to that.
Timmy has this great idea that if we stop putting money into super we’ll all be able to own a house. Actually, I don’t know if that is his real belief, because I don’t know if he’s a liar or just stupid. Not that the two things are mutually exclusive. Whatever his actual belief, it’s what he suggests will happen if we don’t increase compulsory super from 9.5% to 12%. There’s just a couple of flaws in his argument. And, by a couple, I mean enough to bullet point them.
- There’s no certainty that if that extra money wasn’t mandated to go into superannuation it would find its way into workers’ pockets in the form of pay rises. It’s possible but just because employers can now theoretically afford it, doesn’t mean they’ll necessarily do it. After all, historically I can’t remember an occasion when an employer body argued that they’re doing so well that workers can have an increase.
- Even if the whole amount was turned into a pay rise, then after tax, someone on $100,000 a year would only get an increase of $1750 a year. While everything helps, it’s certainly not going make the difference between buying in the outer suburbs and the North Shore.
- Most people don’t earn $100,000 so they’re getting even less than the amount I just used in the above example.
- Of course, once everybody has the extra money from their super, then they’ll get a bigger deposit and they’ll be able to spend more and house prices will go up meaning that in no time at all people will need an even bigger deposit.
- And finally, not only will cutting the increase not help the homeless guy outside the supermarket, it won’t be much help to people whose income is too low to afford a house.
Yes, I’ve noticed over the years that the Liberals often have excellent solutions to problems that would be the perfect answer except for the fact that there’s no explanation about the steps to get to the actual solution. In much the same way that we were told that the answer to unemployment was to create jobs and growth, Joe Hockey told people that the way to buy a house was to get a better job, and that the best form of welfare was a job, we now have Timmy Wilson telling us that it’s better to buy a house than to increase your superannuation. Of course, how people on lower incomes manage to buy a house when they’re getting enough for an extra cup of coffee, well, that’s not really addressed.
I’ll concede that you’re almost certainly better off owning your home than renting once you hit retirement, but only if Mr Wilson will acknowledge that you’re also better off having a share portfolio, a million dollars worth of superannuation and a private jet. Answers to economic problems are always simple; the difficulty is how we actually create the circumstances where the answer is possible.
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