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10 March 2015

Abbott, Hockey, Procrustes and 21st Century Australia!

Procrustes was a host who adjusted his guests to their bed. Procrustes, whose name means “he who stretches”, was arguably the most interesting of Theseus’s challenges on the way to becoming a hero. He kept a house by the side of the road where he offered hospitality to passing strangers, who were invited in for a pleasant meal and a night’s rest in his very special bed. Procrustes described it as having the unique property that its length exactly matched whomsoever lay down upon it. What Procrustes didn’t volunteer was the method by which this “one-size-fits-all” was achieved, namely as soon as the guest lay down Procrustes went to work upon him, stretching him on the rack if he was too short for the bed and chopping off his legs if he was too long. Theseus turned the tables on Procrustes, fatally adjusting him to fit his own bed: Mythweb

An interesting thing to contemplate is the fact that someone turning thirty after June 30th this year will have spent more of their life in the twenty-first century than the twentieth. I only mention this because I’m sure that many of the reports quoting the year 2030 or the year 2050 seem a long way off, but we’ll be there before we know it. Just like those memes on Facebook telling you – in many cases, incorrectly – that it’s the day that Marty McFly goes to in “Back to The Future”.

Joe Hockey’s right about one thing. We do need to start planning for the future. After that, he begins to sound more and more like Procustes. In order to adapt to the future, he seems to be arguing we need to lop off the odd limb. And, of course, I’m sure we need to stretch many things to make our bed fit. However, it seems to me that the main thing that Abbott and Hockey seem to stretch is the truth.

Now some of you will have noticed Mr Hockey’s suggestion that people should be allowed access to their superannuation for such things as buying a house and job training. On the face of it, the idea has a certain appeal, but before I point out the basic flaws in the concept, I’d like to spend a few moments questioning whether we should doubt the intelligence or the motives of the Treasurer. Being generous, I prefer to question his ability to see a relationship between cause and effect, and his time in politics has led to his decision-making only taking into account how something sounds when making the statement; the result of actually doing what he proposes is of no consequence. And anyway, it was Labor’s fault!

My basic problem with any actions the Liberals have taken on superannuation over the past twenty years is that it fails to line up with any of their rhetoric about what they expect from the future. While telling us that the government won’t be able to fund generous age pensions, it cuts back any increases to the super guarantee. First Howard passed legislation to stop the increases that were part of Keating’s plan; recently we had the Abbott government freeze the proposed increases at 9.5%. And now to cap it all off, we have a Treasurer who seems to be saying, you don’t need to fund your retirement because we don’t intend to let you have one. As the Sydney Morning Herald put it:

“Mr Hockey said on Saturday that Australians ought to start thinking seriously about the way in which their super savings can be used in the future, because we are all going to be living for longer and therefore working for longer.”

So, we’ll give you access to help you buy a home. And this has gained widespread support… Well, the Real Estate Industry liked it, claiming that it would make housing “more affordable”. It was only people like the superannuation industry, unions, Labor, economists and Saul Eslake that thought the idea dafter than Mr Hockey’s claim that the GST and company tax would probably be gone in forty years. (He didn’t seem to suggest anything to replace them but maybe we could have a tax on voting. Well, he does seem to like attacks on voters!)

Ok, what’s so bad about it?

Well, the first point is that first home buyers who are struggling to raise the deposit to buy a house in most cases won’t have spent that long in the workforce, so they won’t have that much in super, so it’ll be of limited value to those on a low income. Higher income earners would be able access their super, then salary sacrifice their salary back into their super accounts at a later date, taking advantage of their higher income to minimise their tax Which raises the question, would people be taxed for accessing their super early? If not, it would make this much more attractive to someone on the higher marginal tax rates than low income earners.

The second point is that once you give a large number of people access to extra funds to buy a house, something very interesting happens in a free market. As more funds become available then it increases demand. The extra demand created is likely to drive the price of houses up, potentially leaving the poor first home buyers no better off.

As far as the job training goes, one has to wonder whether it would actually lead to someone gaining a qualification where they earn a higher income, as opposed to paying dodgy operators for training that led nowhere. Think what happened with many of the private operators who filled to void left by TAFE closures. And one has to ask how many times would a person be able to access their super to ‘retrain”? As often as one wanted until there was none left?

And, of course, once the restrictions on accessing super before retirement age are loosened, then they can be loosened for all sorts of things. Say, unexpected medical expenses, so there’s really no need for a universal health scheme.

But the whole rationale of the current government for what we need to do seems absurd as soon as one starts to pick it apart. In order to maintain our standard of living, we need to remove the things that make up part of that standard of living – like Medicare. And we need to live within our means so the Government can’t afford certain things, but no we can’t put up any taxes because you can’t afford that, it’s better that we cut the service and/or let you pay for it yourselves which you clearly can afford because well, it was just absurd that when Joe Hockey’s son broke his foot, Mr Hockey was only $40 out of pocket because he could afford to pay more. (I notice that he didn’t suggest how much more!) Of course, when Labor tried to means test anything, didn’t they realise that people on $150,000 are struggling? And anyway, making people on higher incomes pay more is just “the politics of envy” and “class warfare”. Then, because our Budget isn’t balancing we need to get rid of the Mining Tax because it wasn’t raising a lot of money, while simultaneously sending Mining Companies overseas because it was costing them too much. The carbon tax was an enormous drag on the economy and since its abolition, unemployment has hit figures not seen since Peter Costello was Treasurer in the early part of this century.

Yep, there’s not a lot of consistency in the current government’s rationale for what they do. Then again, perhaps they think that logic, consistency and rational thinking are vastly overrated.