Last night’s federal budget included a fat gift to downsizing homeowners over 65 who can now put up to $300,000 from their house sale into superannuation, allowing many to keep their (part) pension and, most importantly, unlimited free healthcare.
This stunning generosity to the asset-rich is in striking contrast to the Turnbull government’s behavior toward young adults whose working lives have been fully mapped out for them, grinding down education debts after the first 9.5 per cent of wages goes to superannuation.
The older generations did not have these costs, which take the cream from the top of youngster earnings. Saving a home deposit from the remainder is a very big sacrifice. The jeers of those who bought in easier times are mistaken and patronising.
Grattan’s Coates & Daly put up a very thoughtful paper last week Why older Australians don’t downsize and the limits to what the government can do about it. They stick a knife in the empty idea downsizing incentives for seniors will change behavior and increase the supply of well-located family homes.
“Research shows most seniors are emotionally attached to their home and neighbourhood and don’t want to downsize.
“When people do downsize, financial incentives are generally not the big things on their minds. And so most of the budget’s financial incentives will go to those who were going to downsize anyway.
“When older Australians do downsize, their decision is dominated by non-financial considerations, such as a preference for a different style of house and living, a concern that it is getting too hard to maintain the house and garden, or the loss of a partner.
“These emotional factors typically dwarf financial considerations. According to surveys, no more than 15% of downsizers are motivated by financial gain. Stamp duty costs were a barrier for only about 5% of those thinking of downsizing. Only 1% of seniors listed the impact on their pension as their main reason for not downsizing.
The data shows the Turnbull government is throwing very large financial incentives at a group motivated by other matters whose behavior is unlikely to change. They are wasting taxpayers’ money.
The budget also introduces a scheme for first home buyers to save up to $30,000 toward a home deposit by making extra contributions to superannuation. According to the ABS, the mean dwelling price in Australia is $656,800. A deposit of $30,000 would barely cover the Stamp Duty.
Can anyone see the hypocrisy of the Turnbull government offering an advantaged group $300,000 and a disadvantaged group $30,000?
Reading the budget papers leaves the feeling Treasury was holding its nose at the political inclusions and the politicians were holding theirs over Treasury’s contribution. The headline projections of economic growth in GDP of 1.75 per cent this year, 2.75 per cent next year and 3.0 per cent in 2018-19 was probably the only matter they could easily agree on. This is likely to prove the most fanciful part of the entire budget.
The mining construction boom is over, housing construction is now in retreat and car manufacturing is ending. We will have to rely on Treasury’s comforting nostrum: ‘Something will turn up.’