ROSS GITTINS. We have a bad case of misdirected compassion

Why do so many of us – and the media, which so often merely reflect back the opinions of their audience – feel sorrier for those who profess to be poor than for those who really are?

Last week, on the day after the single dole was increased by 50¢ to a luxurious $273 a week ($14,190 a year), Malcolm Turnbull’s henchmen succeeded in persuading Pauline Hanson’s One Nation to let him give the down-and-out part of our one nation another kicking. (Sorry, my Salvo upbringing is showing again.)

You’ve heard the news that homelessness is much more prevalent than we thought. According to the Australian Council of Social Service, the Senate’s passing of the Orwellian Welfare “Reform” Bill will, in its first year, add to homelessness by cutting off payments to more than 80,000 people.

The bill contains 17 measures that will adversely affect the lives of thousands of the unemployed, single parents and women and children escaping violence.

You’ve never seen such a list of pettifogging nastiness, yielding tiny savings to the budget.

The unemployed will no longer be back-paid to the day they lodged their claim, meaning the longer Centrelink takes to process that claim, the longer the jobless go without (or have to go cap-in-hand to outfits like the Salvos) and the more pennies the government saves.

Let’s hope it doesn’t make lengthening processing times a KPI.

Until now, the legislation has protected people who can’t complete and lodge their claim because they’re in hospital, are homeless, are escaping domestic violence, or are victims of natural disaster or fire. Sorry, such pathetic excuses will no longer be accepted.

Fortunately, Hanson was shamed into reneging on a commitment to remove a small, one-off “bereavement allowance”.

So, were the media up in arms over this gratuitous attack on people who are already below the poverty line – this “cash grab”?

No, they hardly seemed to notice. Perhaps they were distracted by the bitter tears they were shedding over the plight of all those poor self-funded retirees whose unused dividend imputation refunds the evil Labor Party is threatening to steal.

I’m sure there must be a few retireds with genuine cause for complaint, but I didn’t see any among those whose cries of pain were taken up by a righteously outraged media.

Perhaps the problem is that most political reporters are too young to know how retirement income works. Let’s look at Australia’s most self-pitying and grasping group, the self-proclaimed “self-funded retirees”.

What they mean by this term is that they don’t get the age pension. What they fail to mention to naive reporters is that they don’t get it because they’re too well-off to meet the means test – notwithstanding the best efforts of their investment advisers to rearrange their affairs so they do.

What’s the main reason they’re too well-off to get the age pension? Too much superannuation savings. That’s why I see red every time I hear them claiming to be “self-funded”.

They’ve convinced themselves they’re fiscal heroes who are saving the government a fortune by not getting the pension. Rather, they’ve scrimped and sacrificed for decades to amass the super savings they have.

But they’re deluding themselves on both counts. They conveniently forget that their contributions to super were taxed at 15 per cent rather than their much higher marginal tax rate, as were the annual earnings on those tax-concession-enhanced contributions.

And, since 2007, thanks to Peter Costello (who spent his time as treasurer planting time-bombs in the budget), they’ve paid no tax on their super withdrawals.

As a result, a proportion of their super balance is attributable not to their frugality, but to decades of annual tax concessions, plus compound interest on those concessions.

The higher the payout, the higher the proportion of it attributable to tax breaks rather than actual saving. For most of those with super balances high enough to exclude them from the pension, those accumulated tax breaks would greatly exceed the budgetary cost of that pension, sometimes several times over (as in my case).

That’s being “self-funded”?

Another thing the media’s bleeding hearts (middle-class division) don’t know is that since withdrawals from super are tax-exempt, the money that allegedly self-funded retirees have to live on far exceeds the modest “taxable income” they tell you about.

When they cry poor, these comfortably-off people with their hand out don’t tell you their goal is to get sufficient assistance from the taxpayer to allow them to avoid dipping into the capital value of the shares and property they want to hand on intact to their offspring – who are, no doubt, just as deserving as they are.

Ross Gittins is the Herald’s economics editor.

This article first appeared in Fairfax publications on March 26 2018

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4 Responses to ROSS GITTINS. We have a bad case of misdirected compassion

  1. Kathy Heyne says:

    And let’s not mention that the tax concessions cost the rest of us more than paying these self-funded heroes a full aged pension would. In fact, if memory seves me correctly, the tax concessions cost us more than the aged pension does.

  2. Rob Stewart says:

    Totally agree with everything Ross. Just a comment on the budget “time bombs” planted by Costello.

    I was working in the APS during the “river of gold” surplus years of the Howard / Costello regime. I learnt an important lesson then: governments say they hate deficits, but what they really, really hate is surpluses.

    With debt and deficit disasters as far as the eye can see the vicious, mean, class based attack on spending programs outlined in your article can be implemented under the pretence of fiscal rectitude, austerity, or even what some have called in countries such as Greece – contractionary fiscal expansion! It would be laughable if it didn’t destroy so many lives. It’s politically harder to keep dishing out tough love when there’s money everywhere (surpluses).

    Costello was rather stupid but perhaps he knew his largesse to the better off and retirees wouldn’t only lock in a demographic block of pro conservative voters, it would also help lock in structural rigidities fuelling deficit tendencies. Just like right now with the Government deliberately attempting to undermine the company tax revenue base by a total of $65 billion (around half already passed) , while we are actually in significant fiscal deficit with growing debt.

    Turnbull, Morrison and Cormann crow on about the deficit and debt and living beyond our means when justifying kicking the poor and cutting spending programs. They don’t seem to think that’s a problem with the tax cuts though. It’s not because they believe in supply side rubbish. I am convinced that, deep down, they actually don’t care if the deficit blows out further if it’s done by handing more back to wealthy retirees and the top end of town – because the fiscal gap that opens up makes it even easier to kick the guts out of the homeless, the helpless and the hopeless, while dressing it up as “necessary fiscal reform”. So it’s a win-win for the conservative agenda.

    Such cuts also provide a golden opportunity to give a patronising moral lesson, to the displaced, vulnerable and dispossessed, on character, toughening up and not relying on government handouts.

  3. paul frijters says:

    yes, our treatment of those at the bottom reveals the most about who we are.

  4. Toss gascoigne says:

    Good stuff, Mr Gittins, even though I’m a beneficiary of the largesse dispensed by Howard and Costello.

    We seem to be moving further and further from the egalitarian society Australia prided itself on, with policy framed to create a permanent underclass

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