Intergenerational Report 2015: More sobering then shocking

THE key fact of this milestone report is the ageing of the population and the growing gap between what we spend and what we make.

FOR something that Joe Hockey said would “shock our socks off” the Intergenerational Report is a sobering rather than shocking document which is designed to “start a conversation” rather offer any immediate solutions.

As was the case with all the previous IGRs the central “shocking” fact is the ageing of the population and the growing gap between what we spend and what we make, individually and as a nation. Added to the previous challenges of the ageing population and rising health costs is the massive, and so far unfunded, National Disability Insurance Scheme.

For the individual Australian the future is that we will be living longer, working longer and paying more tax. The brighter side is that income will continue to rise.

For the national Government the future is one of rising debt, rising costs, particularly for older Australians and the need for unpopular reforms for modest returns. There isn’t a bright side for Government.

As a springboard for the Budget only two months away the IGR provides little short-term comfort with the Government’s positive projections about effects on debt and deficit reduction still dependent in the short and long term upon the passage of legislation opposed in the Senate or the winding back of education commitments already made.

It is clear the projections of improvement based on what has been passed since the 2014 Budget and what the Government hopes to pass are either incremental or have little chance of success.

The two keys to the optimistic outcome – to avoid a decade of deficit and a grinding national debt – are bracket creep on the revenue side and flatlining of education spending over the next two decades after initial cuts in expenditure.

Only able to talk about addressing bracket creep in five or so years if everything goes well the Treasurer can’t offer any tax relief to individuals and to reflect the demographic shift requiring a parallel shift in expenditure from the younger to the older Hockey has to make long-term cuts to education.

The Gillard Government’s Gonski funding for the outyears is going to have to be wound back and the higher education reforms to reduce higher education costs will have to be implemented.

To sell these unpalatable ideas Hockey is going to have to do more than he did for the Budget in 2014 and take the people with him on a political and Budgetary incremental journey of change.