Hey Joe Hockey, don’t eat up all our bikkies

“DADDY give me a bikkie?” asks my toddler, Louie. “No. Not until you have eaten all your vegies,” I say firmly, staring him down with my best Julie Bishop face.

06/02/2009 BUSINESS: Scott Pape. The Barefoot Investor. HWT staff.

“DADDY give me a bikkie?” asks my toddler, Louie.

“No. Not until you have eaten all your vegies,” I say firmly, staring him down with my best Julie Bishop face.

“But I want a bikkie!” he wails.

There’s a standoff at the high chair.

Louie studies my face intently — looking for the slightest bit of leeway.

I give him nothing, so he proceeds to chuck a tanty, throwing his corncob on the floor and crying like Bob Hawke. Thirty seconds later he’s giggling and eating his carrots again.

As a young first-time parent I freely admit I pretty much make things up as I go along — but the one thing I have learned is the need for consistency. If you constantly change the rules, there are no rules. Kids sniff that stuff out, and once they know you’re an easy touch, they’ll run all over you.

This week we learned that we have an easy-touch Treasurer.

Joe Hockey has had a thought bubble that you’ve probably heard about: that we should be able to use our superannuation as a “shock absorber” and dip into it throughout our lives — using it to help buy our first home, pay for education and training, even tide us over between jobs.

Hang on, let’s back it up a bit: superannuation was designed in the government’s best interest. It’s a way of handballing the responsibility of retirement back to us, so eventually they’ll be able to limit the ballooning aged pension entitlements as we grow older and greyer. It’s sensible stuff.

As a policy though, it’s the financial equivalent of making voters eat their brussel sprouts — for their entire working life — so they can enjoy biting down on a bikkie with their falsies, not worrying about what the sugar hit will do to their blood pressure. It’s a hard sell. Deep down we’re all capable of being terrible tots when it comes to wanting things “now!”.

And that’s why the nation needs a strong Treasurer. You can’t waver. You can’t have thought bubbles. You can’t be crazy Uncle Clive with hair-brained schemes. The Treasurer has the most sensible and boring job in the country: to ensure that at least someone in Canberra is keeping an eye on the nation’s finances and planning for the long-term.

That explains why there is a grudging respect for both Paul Keating and Peter Costello. They were determined. They were sure about their position. And like a good strong parent, they set boundaries. In contrast, what Joe Hockey did this week was the equivalent of waving a bikkie under Louie’s nose, and then eating it in front of him.

THE BRAIN SNAP

HOCKEY says that he’s “starting a conversation about the changing role of superannuation”. Yet so far it’s been fairly one-sided, with people lining up from both sides of politics to tell him how stupid his idea is.

The guts of their argument is the same: if you increase the demand for housing by allowing people to access their super for a deposit, without also increasing the supply of housing, all you get is higher prices. That’s economics 101.

It’s investment 101 that you shouldn’t have all your eggs in the one investment basket. Especially if that basket consists of some of the most unaffordable real estate in the world, which even conservative economists calculate as being around 30 per cent overvalued at current levels.

And, as I discussed last week, the reality is that all these first-home buyer incentives do is create an illusion of affordability, that encourages young people to borrow more money and chase higher prices — at a time when interest rates are half their long-term average. And having advised thousands of young people throughout my career, that’s the real danger.

Anyone who lived through the days of 20 per cent interest rates of the late ’80s will tell you that debt is something to be feared. It’s sometimes useful, but it always adds more risk. It’s why famous frugalists such as Warren Buffett have described debt as like driving with a dagger taped to your steering wheel: ‘Sooner or later, you’ll hit a bump’. Yet unlike the government, we can’t just blow out our budget deficits and blame it on our other half. We have to live within our means. Eventually, we have to pay it back — or go without.

LEVEL THE PLAYING FIELD, JOE

HOCKEY says he’s “concerned about rising house prices and the accessibility to homes and home ownership for younger Australians”. And as the Treasurer, he is in the unique position to actually do something bold and gutsy about it — without having to trash our superannuation system.

First, he could bribe the states with funding to release more land, build more infrastructure and cut down on the red tape that inflates the price of a new home by as much as 40 per cent.

Second, and most importantly, he could level the playing field. Right now young families cannot compete against property investors.

The investors can afford to pay more for the same property because they can write off their rental losses against their personal income.

It’s not insignificant: the latest ATO figures show that 1.9 million property investors claimed a massive $6.8 billion in rental losses in 2011-12.

Yet don’t hold your breath for any of these changes. Joe has shown that he doesn’t have the political ticker for real economic reform.

And besides, approximately 66 per cent of the voting public are homeowners with a vested interest in seeing property prices staying high, so it’s easier for him to swim in the shallow end of the policy pool and bubble away at ideas that violate both economic and financial common sense.

And that’s the one thing I’ve learned this week: we should keep Joe away from the bikkies.

Tread Your Own Path!

Originally published as Hey Joe Hockey, don’t eat up all our bikkies