Well-off baby boomers should pay more for their aged care

The report of the aged care taskforce, released on Tuesday, makes eminently sensible proposals for changes to cover the ever-growing cost of aged care. But since its solution is to require the well-off elderly to bear more of the cost, I doubt if Aged Care Minister Anika Wells will be able to implement the changes without much pushback from those well-off elderly – otherwise known as the “wealthy Boomers”.

The cost of aged care – both residential care and, increasingly, at-home care – is expected to grow hugely in the coming decade for three reasons. First, because federal governments have been underspending on care, as repeated Four Corners exposes have kept reminding us.

There’s been a lot of catch-up spending since the shocking report of the Royal Commission into Aged Care Quality and Safety in 2021, but there’s more catching up to do.

Second, there’s the continuing retirement of the Baby Boomer bulge, plus the increased care that later, longer-living generations will require.

Third, as living standards rise, so do the expectations of the aged for something a lot better than their parents settled for.

The federal government’s spending on aged care last financial year totalled $27 billion. It’s expected to have reached $42 billion by 2026-27. And there’s a lot more to go after that.

The royal commission suggested that the increased spending could be covered by a Medicare-like levy of 1 per cent of everyone’s taxable income. But the taskforce rightly rejected that idea as too unfair to younger taxpayers.

Don’t forget that few of the elderly pay much income tax, even those earning so much that, were they younger, they’d be paying a lot.

So the taskforce has come up with a solution that previous governments have, for decades, not been game to propose: ask the well-off elderly to pay a higher proportion of the daily living expenses – meals, laundry and cleaning – and accommodation costs.

At present, those in residential care who can afford it are required to pay a “refundable accommodation deposit” of many thousands, which is refunded when they leave or die. Effectively, it’s an interest-free loan to the provider of the residential care facility. On the strength of this, those who provide a deposit aren’t asked to pay much of their accommodation costs.

It’s never been a popular arrangement, so the taskforce proposes to phase it out between 2030 and 2035. Those on the old arrangement would be “grandfathered” – allowed to stay on the old deal.

But newcomers would go onto the new, rental-only scheme and be asked to pay a lot more for the accommodation cost than people of lower means.

Unlike me, many Baby Boomers vociferously object to being held responsible for the unfair way the younger generations are treated by the tax system, the superannuation system, the university fees system and the gig-economy system.

But though it’s wrong for youngsters to assume all Baby Boomers are rolling in it – some are still renting and others are locked in long-term unemployment – the truth is that, as a generation, most Baby Boomers have had a rails-run.

Those who went to university got scholarships rather than debt. Most males had little trouble finding a good, permanent, full-time job. They were able to buy a first home without much trouble, have stayed in the property market and today own a house worth an unbelievable sum – through no great effort of their own.

Baby Boomers are the first generation to gain much from the introduction of compulsory superannuation in 1992. These days, almost everyone retires with some significant superannuation sum, and those of us who’ve taken advantage of the various concessions have reached retirement age with super sums in the millions.

The super system is wildly biased in favour of the well-off. And the people who try to tell you that having super and other savings sufficient to eliminate (or even just reduce) their eligibility for the age pension makes them a “self-funded retiree” are deluded.

They have no idea what a high proportion of their payout has come from accumulated tax concessions rather than contributions.

So how would the well-off elderly afford to pay for a much greater share of their aged care costs? By dipping into their super.

The justification for superannuation and all the money it costs the taxpayer is to allow the retired to live comfortably in their final years when they’re too old to work. So the notion of many that they must live only on the annual earnings and never dip in to the principal is wrong-headed.

No, you were granted such generous tax breaks only to support you in retirement. For the well-off elderly to want to pass what’s left of their super on to their offspring is to make the world even more unfair than it already is.

Let’s hope Minister Wells and her boss have the conviction to stick to their guns when the Boomers start crying poor in defence of their privileged existence.

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What a future: impossible climate, a life of renting and a crappy job

The older I get, the more I worry about the nightmare we oldies are leaving for our children and grandchildren. The obvious, in-your-face problem is climate change, but other difficulties are everywhere you look.

Now the northern hemisphere has been introduced to the joys of bushfires and heatwaves with, I imagine, a cleanser of flooding to come, global warming has become global boiling. Climate change is now — and will get a lot worse even before we oldies have popped off.

We wasted decades worrying about the economic cost of doing something about climate change, now we’re facing the daunting economic costs of not having done anything about climate change.

We’ve exchanged a government of closet climate-change deniers for a government that knows what it should do, but is dragging its feet under the influence of two powerful unions representing the interests of a relative handful of mine workers who don’t want to look for jobs elsewhere.

Then there’s the way the older generation of home owners has allowed the lure of ever-rising house prices to permit successive governments to turn housing into an inheritance lottery.

Australia is dividing into two distant tribes: the owners and the renters. If you have the good fortune to be born to home-owning parents (perhaps with an investment property or two on the side), the Bank of Mum and Dad will ensure you too eventually become a home owner, able to pass your good fortune on to your own kids.

But pick renters as your parents — or have too many siblings — and you, like them, will be a life-long renter. As will your kids.

And, naturally, governments couldn’t possibly oblige landlords to give their tenants more security and better maintenance without the landlords giving up and leaving thousands homeless on the streets. (Yeah, sure.)

HECS HELP debt is adding to the difficulty of making it onto the home ownership merry-go-round. The scheme was designed to have people who benefit from a university education contribute towards its cost without discouraging kids from poor families from seeking to better themselves.

But incessant tinkering by successive governments has turned HECS into a millstone.

And all that’s before you get to the gig economy, better thought of as the rise of insecure employment. The security of having a full-time, permanent job is something the older generation has been able to take for granted. Not so the youngsters.

In the latest surge of inflation, businesses haven’t hesitated to pass on to customers the higher cost of imported inputs, often seeming to add a bit extra for luck.

But in the decade or two before then, price rises were modest, sometimes even falling below 2 per cent a year, despite healthy growth in profits.

One way that businesses kept prices low was to find new ways of holding down labour costs. With the gig economy, people seeking to earn a living from digital sites are treated as contractors rather than employees.

They thus get no guaranteed work, no paid sick or holiday leave, no workers’ compensation cover and no employer contributions to their superannuation. Their work is precarious.

But that’s just the bit that gets the publicity. Less talked about are the various devices businesses have used to minimise labour costs, shift risks onto workers, and weaken the legal link with their workers by using labour-hire companies, setting up franchise arrangements and disposable subsidiaries.

Above all, workers have been hired as casuals. Casual employment is meant for cases where work is intermittent, short-term or unpredictable. But these days many casuals work full-time, most work the same hours from week to week, more than half can’t choose the days on which they work, and most have been with their employer for more than a year.

Casual workers get no sick or holiday pay, meaning if they’re too sick to work they earn no income. If they take a break, they have to live on their savings.

In principle, they get a 25 per cent loading instead. But get this: as best we can tell from official statistics, less than half actually receive it.

And because they’re casuals, they get no job security. Permanent employees can’t be sacked without due cause. If they’re laid off, they get redundancy money. Casuals don’t have to be sacked and don’t get redundancy. They just don’t get rostered on.

Some companies avoid union wage rates and conditions by using workers actually employed by labour-hire companies.

Last week, workplace relations minister Tony Burke announced further details of the government’s plan to make it easier for casual workers to apply to become permanent. Earlier he’d announced plans to require labour-hire workers to be paid the same as the regular employees doing the same work beside them.

Naturally, the employer groups cried that this would “increase business costs and risks” – which I take as a tacit admission that causal workers have been underpaid.

It’s not much, but it’s a step towards giving the younger generation a better future.

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It's no wonder the young hate Boomers like me

As I get older, more parts of my body are giving me gyp and I spend more of my life seeing doctors, but the people I don’t envy are the young. They may be fit and keen, but everywhere they look they see problems.

The big advantage of capitalism is supposed to be that it makes each generation better off than the last. But that’s breaking down before our eyes. The really harmful problem we’re leaving them is climate change, of course, but there’s much more than that.

They’re better educated than ever but, for many, it doesn’t seem to get them a secure, decently paid job. Even so, they leave education owing big debts to the government.

But, coming well behind climate change, the biggest disservice the older generation has done to them is to let the price of a home keep reaching for the sky.

We’re now at the point where each successive age group contains an ever-lower proportion of people who’ve managed to buy the home they live in.

In contrast, the aged have never had it better. The only thing they have to fear – and the young have to look forward to – is still needing to rent privately in retirement.

We’ve turned housing into Lotto. If you manage to win, they shower you in wealth. If you don’t win, you get screwed. Renters have few rights because, as we all know, it’s just a temporary state for the young.

And then the Baby Boomers (like me) wonder why the young seem to hate them. It’s not true that all Baby Boomers are rolling in it. Some of them don’t even own their own home. But most of them (like me) were able to buy early in their lives, when first homes were affordable. Since then, they’ve just sat back in delighted amazement as their wealth has multiplied.

Of course, if there’s anything wrong with the way the world’s run, it wasn’t anything I did, it was those terrible pollies. Yeah, nah.

Since older home owners have always far out-numbered the young would-be home owners, the politicians have always run the housing game to favour those who love seeing property prices rise – and, now you mention it, wouldn’t mind buying another house as an investment.

At present, it’s easy to conclude the big problem with housing affordability is rising interest rates and so blame it all on the Reserve Bank boss Dr Philip Lowe. But, as I’ve written elsewhere, although it’s reasonable to ask whether putting interest rates up and down is a sensible and fair way to manage the economy, that’s a separate issue.

Home loans take two to tango: how much you have to borrow and the interest rate on the loan. The interest rate cycles up and down around a relatively stable average, whereas the amount you need to borrow has gone up and up, decade after decade.

True, house prices are falling at present, but this is just returning them to where they were before they took off during the pandemic. It’s a safe bet that, once they’ve finished falling, they’ll resume their upward climb.

This is why oldies are wrong to scoff at young people complaining about mortgage interest rates of 5 per cent. “In my day, I had to pay 17 per cent!” Yes, you did – for a year or so in the early 1990s, when the amount you had to borrow was much less.

What’s true is that, right now, it’s mainly younger people who borrowed huge sums in the past few years who’re really feeling the pain.

But the real question is why house prices have risen so far for so long. They’ve risen much faster than incomes. The Grattan Institute calculates that whereas typical house prices used to be about four times incomes, now they’re more than eight times – and even more in Melbourne and Sydney.

But why? Not because of anything the Reserve Bank has done. Nor so much because we’ve failed to build enough additional houses and units to accommodate the growth in the population.

More because our tax and social security rules have made home ownership a highly attractive, government-favoured form of investment, not just a place you can call your own and not be chucked out of as long you keep up the payments. People who buy investment properties out-compete would-be first home owners, bidding up the price.

But also because there’s more competition to buy homes in particularly desirable areas. Spots near the beach or the river, for instance, but also places near where the jobs are.

People have been crowding into the big cities, trying to get close to the CBD with all its well-paid office jobs, but the older home owners fight hard to discourage governments from making room for younger newcomers. “It’s so ugly.”

And the bank of mum and dad (yes, I’ve done it) is helping prices stay high, while widening the divide between those young people with well-placed parents and those without.

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Generational conflict comes to a polling place near you

The most memorable news photo I’ve seen in ages is one from the first School Strike 4 Climate late last year. It shows a young woman holding a sign: MESS WITH OUR CLIMATE & WE’LL MESS WITH YOUR PENSION.

One minute we oldies are berating the younger generation for their seeming lack of interest in politics (although, having arrived on the scene at a time when our politicians are behaving so badly, who could blame them?), the next we’re criticising them for missing a day of school.

When you remember how many days of uni the baby boomers missed with all their marches against the Vietnam war, the odd day off school hardly signifies. (Not that I’d want to discourage the ageing climate-change deniers from criticising the school-dodgers. When you’re growing up, defying adult authority is a big part of the motivation.)

Whenever I get the chance, I have a simple message for youngsters: you’d better start taking an interest in politics because it’s the people who aren’t watching that the pollies end up screwing.

The truth is our young people are interested in political issues, but that interest is unfashionably idealistic. They really care about fairness to the LGBTI community, climate change and the environment more broadly.

They’re not yet sufficiently old and cynical to have realised that politics has devolved into a self-centred free-for-all, where you jump into the ring to advance and protect your own interests at the expense of those with less muscle.

When last my colleague Jessica Irvine expressed support for Labor’s plan to end the refunding of unused dividend imputation credits to all except those receiving an age pension or part-pension, an angry reader accused her of “continuing to fuel the fire of inter-generational envy”.

Sorry, that argument doesn’t wash. It’s one the well-off and their champions have used for ages. What it’s really saying is, “it’s a sin for you to envy the fruits of my greed”.

When people accuse others of “the politics of envy” or inciting “class warfare”, their true message is: I’m winning, you’re losing, so why won’t you just accept it? Just be nice and stop trying to make things fairer.

(Speaking of sin, when last I supported the reform of imputation credits, a reader accused me of “preaching”. Sorry, when your father spent his life preaching two sermons a Sunday, it’s only to be expected. And I’m old enough to regard being likened to my father as a compliment, not an insult.)

Stripping away the religious overtones, there is, always has been and probably always will be plenty of scope for conflict between the generations. The solution is for the generation presently in power
to put its children’s interests ahead of its own (see climate change above).

Almost all of us do this in our private lives (it’s clear a lot of the well-off retired fighting to retain imputation credits are motivated by maximising their kids’ inheritance, and we’re happy for the bank of mum and dad to help our children into home-ownership), but when it comes to public policy we’re easily seduced by politicians seeking our votes with promises of short-term gain for long-term pain.

Not enough people realise that our system of taxes and benefits is explicitly designed to move money between the generations.

People – mainly younger people - with jobs and no kids pay a lot more in taxes (all taxes) than they get back in benefits (whether in cash or kind, such as education and healthcare), whereas families with kids get back a lot more than they pay. Couples whose kids have grown up but who are still working pay more than they get back, and then the retired get back a lot more than they pay.

Since almost all of us will progress through each of these stages, this money-shifting should pretty much even out over our lives. So, until relatively recently, it’s been seen as fair. It’s the basis for the oldies’ eternal sense of entitlement: “I’ve paid taxes all my life . . .”

But this has changed. As our leading independent think tank, the Grattan Institute, has demonstrated, tax changes over the past two decades have been “hugely generous” to older Australians.

“Older households pay $7500 [a year] less in income tax in real terms today than older households 20 years ago, despite high increases in average incomes,” it found. “Taxes on working-age households have risen over the same period.”

Most of this is explained by changes made by John Howard to benefit the alleged “self-funded retirees” (including making unused imputation credits refundable) and similar changes to superannuation tax breaks made by Peter Costello.

Add in Howard’s more favourable tax treatment of negatively geared property investments, and the young are dead right to believe the tax system has been biased against them and in favour of the better-off old (including me).

They’d also be right to see the looming federal election campaign as a battle between one side seeking to reduce the system’s bias against the young and the other fighting to protect the recently conferred perks of the well-off aged.

But a note to outraged Millennials: Howard is no baby boomer and the intended beneficiaries of his munificence were his own and earlier generations. Only some of the world’s evils were installed by my privileged generation.

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Home affordability problem caused by generational conflict

You know the remarkably high price of homes is now a top issue for our politicians, state and federal. But you may need reminding that house prices are an intergenerational issue.

As a general rule, the younger generation buys its homes from an older generation, which means rising house prices constitute a transfer of wealth from younger to older generations.

Unfortunately, this conflict of interests between the generations makes it unlikely the measures in the "housing affordability packages" the pollies say they're working on will do much to limit the rise in prices.

Our problem in Australia isn't so much fake news as fake government – governments that, lacking the courage to implement controversial solutions to problems, just create the pretence of solving them.

Since the media usually fall for the trick – the recent excitement over Snowy 2.0 being a case in point – the pollies' preference for appearances over reality has worked well for years, although the drift of voters away from the mainstream parties is a warning the illusion is wearing thin.

As a general rule, older generations don't have much sympathy for younger generations – which is the pollies' dilemma.

We make an exception, of course, for our own kids. This is why parents who've benefited from the rise in house prices over the decades increasingly find it necessary to help their offspring make it onto the home-ownership merry-go-round.

I've done it myself. But get this: what we regard as an act of parental generosity, is actually an act of generational self-interest.

Huh? Everything parents do to help their kids afford seemingly unaffordable house prices helps keep those prices high.

Were parents to decline to help their kids, prices would have to come down until they could be afforded – which would be contrary to the interests of older sellers, such as parents.

Prices rise when demand for the item is growing faster than supply. One reason could be because the population has been growing faster than the number of dwellings has, but this seems less likely to be a big part of the story now we've had a surge in home building and face an excess of units in some state capitals.

It suits politicians to say the solution to affordability is to add to the supply of homes. Federal pollies say it because supply is essentially a state responsibility.

State pollies say it because allowing more homes to be built on the fringes of the city pleases developers without annoying many people.

Trouble is, this does little to increase the supply of homes where people want them to be: closer in – where the jobs and entertainment venues tend to be, and where road congestion and commute times aren't as bad.

State politicians are a lot less enthusiastic about increasing supply in middle-ring suburbs by changing planning rules to allow higher density development. The locals hate the idea.

Next the pollies pretend to help by giving special breaks to first home buyers, such as cuts in stamp duty on home purchases.

But as with help from the Bank of Mum and Dad, all this does is help young people meet and increase the higher prices. The benefit ends up with those older home-owners selling their homes to newbies.

What politicians rarely propose is measures to reduce the upward pressure on prices by reducing the demand for homes.

How? By distinguishing between the two main motives for wanting to own a home: the desire for secure tenure, to modify it as you see fit and minimise housing costs in retirement, as against the desire to own a rapidly appreciating, tax-preferred investment.

Many of the tax advantages politicians have loaded onto home ownership, in the name of encouraging it, have made home ownership more desirable to have but, by increasing the demand for homes, made it that much harder for would-be home owners to attain.

Exempting the family home from capital gains tax, for instance, encourages people to "invest" in improving their home rather than buying shares or securities.

Largely ignoring the value of the family home when assessing people's eligibility for the age pension under the assets test adds to the attraction of homes as an investment.

Then there's Australia's unusual tolerance of negative gearing, combined with the 50 per cent discount on the taxation of capital gains, which adds greatly to the demand for homes as an investment, while adding little to the supply of homes.

Even without all those tax advantages, homes would still be a good lifetime investment – though not as good.

The Great Australian Dream of owning your own home has always been about personal security and autonomy.

The attraction of home owning as an investment option has become a big issue only since the introduction of capital gains tax in 1985 and, more particularly, its modification in 1999.

See the scope for conflict between the two motives for wanting to be a home owner? Making housing less attractive as an investment would reduce the demand for it and so make it easier for first home buyers to get on board.

What makes the pollies reluctant to act is their knowledge that existing home owners – whose votes greatly outnumber first home buyers' – have come to value their home's (or homes') attractions as an investment.

It comes down to a conflict between the generations.

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There are few "taxed-nots" apart from the elderly

It's a sad day when economic commentators like me have to spend so much time explaining what's wrong or misleading about the things the federal Treasurer says, rather than backing up his efforts to educate the public on economic realities and helping him fight for sensible though unpopular policies.

To be fair, Scott Morrison did have useful points to make in his big speech last week, his first major contribution since the election.

But then he veered off onto reinforcing the mythology of the greedy well-off, who resent being taxed to help those less fortunate than themselves.

He announced there was a new divide in the community – "the taxed and the taxed-nots".

"A generation has grown up in an environment where receiving payments from the government is not seen as the reserve of those who unfortunately will be forever dependent on support or in need of a hand up, but a common and expected component of their income over their entire life cycle," he said.

"On current settings, more Australians today are likely to go through their entire lives without ever paying tax, than for generations.

"More Australians are also likely today to be net beneficiaries of the government than contributors – never paying more tax than they receive in government payments."

Get it? Here are you and I, working hard all our lives, having far too much of that income taken off us in tax. Yet out there somewhere, living in suburbs we rarely visit, is a growing army of bludgers who don't bother working, but find some way of conning the government into paying their way.

Now, apparently, a lot more of them will go their entire lives without paying more in tax than they get back in benefits.

This is self-pitying fantasy. It's not the disadvantaged we should feel sorry for, it's you, slaving away in Mosman or Brighton.

It's an imaginary picture of the world. It's the conspiracy theory you'd expect from One Nation, not the federal Treasurer.

It's built on a few simple tricks. It hopes you won't remember that Australia's social security system is the most tightly means tested among the developed countries, paying flat amounts that aren't at all generous – which is the main reason we pay less tax than most.

And it hopes you won't remember that we pay many more taxes than income tax. Personal income tax accounts for only a little over half the federal taxes we pay. Add in state and local taxes, and income tax accounts for 40 per cent of all taxes.

So the notion that people who don't work don't pay tax is silly. Even taking account of benefits received, next to no one goes through their life being "taxed-not".

It's true we spend almost $160 billion a year on social security – most of it going on pensions and benefits – which accounts for more than a third of all federal spending.

Official figures show there are about 5.2 million recipients of federal "income support". So who are these bludgers? People on the dole? They account for just 13 per cent.

Sole parents? They're 5 per cent. People at home being "carers"? Just 4 per cent.

I know, all those people faking bad backs on the disability support pension. Sorry, that's only 16 per cent.

So where are the rest of the people not pulling their weight and expecting us to support them? Well, half the people on income support are people on age or service pensions.

Oh. You mean the people who keep saying they're entitled to the pension because they "paid taxes all their lives". The people whose investment advisers helped them have lots of other income, but still get the pension.

And that doesn't count all the retired people paying no income tax on their income from superannuation, at present no matter how huge.

Nor does it count all those bludging parents getting the family tax benefit or those bludging mothers expecting us to help with the cost of childcare so they can go to work.

Family benefits and childcare subsidies account for more than a quarter of federal spending on pensions and benefits.

What, not quite so many lazy loafers as you expected?

The Australian Bureau of Statistics conducts a study where it attempts to allocate as many taxes as possible from all levels of government to each of Australia's 8 million-plus households, while also allocating as many cash and in-kind benefits as possible from all governments.

Morrison ought to look at the most recent study, for 2009-10, particularly page 41. It shows that whether we pay more to the government than we get back in benefits changes as we move through the life cycle.

It shows that, on average, single people of working age pay a lot more than they get back, as do couples without dependent kids.

Couples with a few kids pretty much break even or get back a bit more than they pay, but the people who really clean up are the retired.

Elderly couples are ahead to the tune of about $690 a week, on average, with elderly singles getting $475 a week, mainly because they pay little income tax but get huge health benefits along with the pension.

ScoMo isn't smart enough to know it, but in disparaging the "taxed-nots" he's really attacking the old.

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We shouldn't feel bad about leaving public debt to our kids

There are a lot of nice people in the world, people who worry about all the debt we're leaving to our kids and grandkids. I know this from the letters I get from people.

I got an email from a retired couple who said they'd be happy to pay more – a 15 per cent goods and services tax, medical co-payments or even a 10 per cent increase in income tax – if only it was guaranteed that the money was spent "to pay down debt, not rack up more with populist promises".

Unfortunately, there are no nice people in politics. Or, if a few start out that way, they soon get it beaten out of them.

Last week, in his first big speech since he was re-elected – the one so rudely interrupted by some woman who thought the mistreatment of asylum seekers on remote islands was something worth drawing to our attention – Malcolm Turnbull decided to tug on the heartstrings of nice people everywhere.

"We sing Advance Australia Fair," he said, "but there's nothing more unfair than saddling our children and our grandchildren with mountains of debt that we have created because our generation could not live within its means.

"If we aren't prepared to make the tough choices today – younger Australians, future generations, will be forced to pay back the debt through a combination of higher taxes and a lower quantity or diminished quality of government services. In short, through lower living standards than they would otherwise have enjoyed."

Sorry, but that's not true. It's roughly the opposite of the truth. And I don't believe someone as smart as Turnbull actually believes it.

But before we go on, how's this for one of the "tough choices" about fairness Turnbull wants our elected representatives to agree to in this year's budget: cutting the dole – which is a princely $38 a day – and other welfare payments by $4.40 a week, while agreeing to tax cuts of $6 a week for people earning more than $87,000 a year.

The justification for the cut in benefits is that it represents the belated removal of the "energy allowance" originally paid in compensation for the carbon tax. Since Tony Abbott abolished that tax, the allowance is no longer needed.

Now that is a tough choice. Is it fair to cut the benefits of low income-earners because we're "living beyond our means" while we cut the taxes of high income-earners?

But are we living beyond our means? What does that phrase mean, anyway?

Is any person or government that's borrowing money living beyond their means? That's what the politicians who keep repeating that line hope we'll assume.

A moment's reflection reveals its weakness. Say your offspring borrow a frighteningly large amount so they can live in a home of their own. Does that mean they're living beyond their means?

No, of course not. Not if they can afford the repayments. And not when you remember that the house they've bought will deliver them a flow of services for as long as they own it.

What service? It's providing them with somewhere to live – and thus relieving them of the expense of renting.

If I told you of a couple with a debt of $600,000, would you automatically assume they had nothing to show for that debt? No, you'd assume they must have bought a house and may well have made a sound investment.

But when politicians tell us the government owes many billions of dollars, many of us assume there's nothing to show for all that spending and borrowing. Which is just what game-playing politicians hope we'll assume.

But it's usually not true. What do governments have to show for all their borrowing? Public infrastructure – roads and motorways, bridges, railways and bus fleets, hospitals and schools, prisons and police stations and all manner of other facilities.

All those things contribute to our standard of living and to the efficiency of our economy. Do you think we'd be better off had the money not been borrowed and those things not been built?

Since we worry about our children and grandchildren, what kind of physical Australia do we want them to inherit? One with rundown and inadequate public facilities – one where it's really hard to get around, where roads and trains and hospitals and schools are grossly overcrowded?

If we continue letting our politicians demonise public debt, that's the world we'll be leaving for our descendants.

It's true we'll be leaving debt to our children. But we'll also be leaving them a better equipped, better educated and healthier Australia. Does this add up to something to worry about or feel guilty over?

According to the federal budget papers, almost all of the expected underlying cash deficit of $37 billion this financial year will be spent on infrastructure.

Most infrastructure spending is done by the state governments. Much of what they spend each year building facilities that will serve the community for 30 or 40 years or more is covered by that year's tax revenue (including federal grants), the rest is borrowed – to be serviced and repaid by the people who'll still be using those facilities.

It's the self-same bargain that was made with our generation. Sounds a fair and sensible way to keep building a better future.

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Growing signs young won't do as well as their olds

Will today's young people end up better off than their parents? That used to be a stupid question. Of course they will. But these days, it's much less certain.

We've come to expect that each generation will be better off than its parents, with more income, better housing and better healthcare.

But many young adults have begun to doubt it. According to one opinion poll, only 22 per cent of respondents under 30 considered they would have a better life than their parents.

And now a report by the Grattan Institute think tank, The Wealth of Generations, has found evidence to support the fear that today's generation of young Australians may have lower standards of living than their parents at a similar age.

It's a question of what's likely to happen to their incomes and what's happening to their wealth.

Our wealth is our assets (property, superannuation and other financial investments, and money in the bank) less our liabilities (mainly debts).

Wealth is like congealed income. We can usually turn it back into money should we need to. Some of it produces income (rental properties, financial investments) and some reduces our need for income, such as when we live in our own homes rather than renting.

We add to our wealth when we save some of our annual income. Most of us save more than we think we do, by paying off a mortgage over 20 or 30 years, or by having our employer fulfil the government's requirement to put 9.5 per cent of our wage into super.

We also add to our wealth when the market value of the assets we own rises – "capital gain". And, of course, when we inherit the wealth of our relatives or receive a gift of money from them.

The wealth of Australian households has grown a lot over the years, even after allowing for inflation, as all the figures I'll quote do. But the report, by John Daley and Danielle Wood, finds that over the past decade, older households captured most of the growth in the nation's wealth.

Despite the global financial crisis, households aged between 65 and 74 in 2011-12 were, on average, $215,000 better off than households of that age range were eight years earlier. Those aged 55 to 64 were $173,000 richer, on average.

But the average household in the 35 to 44 age group was only $80,000 richer. And get this: those aged 25 to 34 actually had less wealth than people of the same age 8 years earlier.

Why? Various developments have conspired to bring this disparity about. Probably the biggest is what's happened to house prices and home ownership.

Rates of home ownership have fallen over the past two decades for all but the oldest households, the report finds. Going further back to 1981, more than 60 per cent of 25 to 34-year-olds were home owners. Thirty years later only 48 per cent of people in that age group were owners.

An increasing proportion of those born after 1970 will never get on the property ladder, according to the authors. If increasing education debts aren't already discouraging younger households from taking out mortgages, it sounds like it won't be long before they will be.

This means a higher proportion of the younger generation missed out on rising housing wealth as house prices boomed. Between 1995 and 2012, house prices increased by an average of 4.3 per cent a year faster than inflation. This was much faster than the rise in full-time wages.

The boom was caused by the greater availability of home loans, the return to low inflation in the mid-1990s and by our failure to build enough new dwellings to keep up with population growth.

The later you were to get in on it, the less the boom's capacity to increase your wealth, particularly because you had to borrow so much to join. But the worst of it for young people is that, though house prices are likely to stay high (making it hard to afford the entry fee), they can't possibly keep rising at the same rate (meaning the prize for getting in won't be as big as it used to be).

There's more to the problem than housing, however. Incomes also grew fastest for older people, allowing them to add more to their wealth through saving. In 2004, households aged 55 to 64 were net spenders; by 2010, with average annual incomes $4600 higher, their net annual saving was $2700.

Although households aged 25 to 34 kept their spending controlled, their average incomes increased by $3100 and their saving by $1500.

A big part of the reason for this is that, over the years, government spending and taxation policies have become more favourable to the elderly than they were. The age pension's been made more generous while income from super is now tax-free.

Who has gained most from the big budget deficits we've been running since 2009? The old. Who will eventually have to pick up most of the tab? The young.

All this wouldn't be such a worry if we could be confident that incomes will keep growing as strongly in the future as they have been for 70 years. They may.

But it isn't hard to think of reasons why they may not – including the thing none of us is allowed even to think about: climate change.

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