Young voters, stop picking your own pockets

It’s the great heist of our times. At this federal election, “the youth” will seize the initiative from the old folks and vote on the issues which matter to them. What they want, according to experts, is for “government” money to be pumped into housing, more renewable energy, free stuff – such as TAFE and discounted higher education (HECS) loans for university tuition, and more government programs to stop them feeling bad about themselves (mental health) and others (discrimination).

Anthony Albanese takes a selfie with Queensland University students and staff. Credit: Alex Ellinghausen

The narrative has taken hold among voters under 40 that this money is somehow going to set things to rights for young people facing declining living standards. Well, the joke’s on them: the money they’re awarding themselves doesn’t appear from thin air or get creamed from “the rich”. It’s money they’re borrowing from their future selves and their prospective wealth.

The wrong-headed story is the reason midlife Millennials are struggling to get ahead, though most haven’t yet reached the stage of insight into how it happened. But as this cohort hits midlife, it’s becoming clear that the standard of living their parents enjoyed is simply not going to be available to them. Their rent is going up, eroding their ability to save. They’re despairing of ever being able to afford to buy a house anywhere near where they work, let alone in the pleasant environs in which they grew up. If they have dared to have children, they’re starting to worry about the quality of education they will be able to provide for them.

That’s because they are today $25,000 a year, per person, worse off than they should be. As Productivity Commissioner Danielle Wood explained in a recent speech, “had we been able to maintain productivity growth from 1995 to 2023 at the 2.2 per cent average of the 1990s, real annual average incomes for most workers today would be $25,000 higher”.

Productivity is underpinned, among other things, by education quality, which has slipped in Australia. It also requires an appropriate allocation of human capital – for instance, we shouldn’t be wasting young lives by doing university degrees for jobs which are better learnt on the tools. And people with good business ideas have to be able to get on with realising them without excessive regulation. In failing or skewing incentives in these areas, government policy has robbed young people of hundreds of thousands of dollars over the course of their working lives.

The situation is getting worse. As Wood illustrated with a devastating graph, Australians born in the 1990s – that’s the later part of the Millennial cohort, which is defined as 1981-1996, and first of the Gen Zs born after 1997 – are earning no more than those born in the 1980s. To put that into context, every birth cohort before the 1990s earned more than the cohort born in the previous decade at the same age.

While they are earning no more, they are paying more taxes to fund government programs. As a result, in Wood’s words, “average real disposable incomes for young people went backwards in the decade before COVID”.

If only someone had warned us that this might happen. If only someone had told young people when they were starting to vote in 2002 that the government spending and policy choices they voted for could materially affect their future lives. Perhaps someone would have said, in a time when “Australia’s social welfare payments [were] well targeted and government debt [was] low”, that “if policies are not adjusted, the current generation of taxpayers [mainly the Baby Boomers] is likely to impose a higher tax burden on the next generation”.

Of course, the someone who did do all that, in 2002, was then-treasurer Peter Costello. The quotes are from a tradition he established of reporting on how today’s government financial decisions would affect the voters of the future. He called it the Intergenerational Report, and treasury still produces them every five years, though they’ve become a bit of a farce, as dire warnings are meaningless when no-one is inclined to change their behaviour.

And we really, really aren’t so inclined. Instead of adjusting policies to not impose a higher tax burden on the next generation, you could say that we’ve selected policies that explicitly will. Governments no longer collect tax just to pay for things which can’t be run at a community scale, such as national defence, or which are part of applying laws equally to every individual, such as the justice system. They have expanded well beyond big infrastructure projects which lay the foundations for the future prosperity of the nation to ever-expanding services they don’t have a plan to pay for.

The first Intergenerational Report was about putting a framework in place to ensure we could pay for important social programs without impoverishing our
children and grandchildren. It anticipated that healthcare technology would become more sophisticated and that community expectations that Medicare would make them affordable would increase demand on taxpayer funds. The report advised that we’d need more taxpayers to keep up the payments, as well as a sharp eye on program expansion.

But since 2002, governments have given up thinking about how to pay, while dreaming up new ways to spend money and win the votes of people who like the idea that they’re getting something free. And voters have rewarded them for avoiding the hard questions. As a result, political parties have shifted from spruiking a “well targeted” social safety net to regular hand-outs such as energy rebates and tax excises, which aren’t even means-tested.

That’s an increasing amount of taxpayer money laid out for things which don’t raise productivity – the amount Millennials and Gen Z will be able to earn – even a bit. But it’s those generations who will pick up the tab through higher taxes on whatever living they can still manage to eke out.

The great irony is that the more of this sort of stuff a political party or candidate offers, the more younger voters seem keen to give them their vote. They’re picking their own pockets. And that wicked heist on themselves is the real story of this “youthquake” election.

Parnell Palme McGuinness is managing director at campaigns firm Agenda C. She has done work for the Liberal Party and the German Greens.

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