Tension between the generations is not new. The young over throw the ideas of their elders and recast them as their own. But intergenerational tension, based on inequities and access to economic opportunities, is an entirely different and far more serious matter.
We need to start an intergenerational war chest for future generations to fund infrastructure and human capital projects of their choosing.
There are about 5.8 mature age people aged 55 and over in the population. Around 2 million of them are working fulltime (1.3 million) and part time (700,000). Of the 3.8 million not in the labour force, 2.2 million currently access the aged pension. We can expect another one million boomers to draw on the age or disability pension over the next 20 years.
The so called 'generation Y' and those born after them, will be taxed to build infrastructure projects and support the ageing boomers while saving for a home and paying off HECS debt. Where's the fairness in that?
Last year the Australian Parliament voted against establishing a national intergenerational future fund while South Australia and Western Australia took steps to establish their own future funds.
The Barnett Government will build a $4.7 billion nest egg by 2032 to be spent on roads, ports and medical research to spread the benefits of the mining boom to the next generation.
One would have thought that by looking at Europe and its sovereign debt issue that an intergenerational future fund (or sovereign wealth fund) would be a 'no brainer'.
Look at Norway. The Norwegian Sovereign Wealth Fund which was started in 1990 is now worth $US600 billion. Its income comes from taxes on oil companies, exploration licence fees and dividends from the state-owned Statoil. Norway is thinking of future generations.
Even though older workers are working longer, the fiscal gap between government revenue and outlays to fund health and pensions will still be in the order of 2-3 percent of GDP.
According to the 2010 Intergenerational report, 'Australia to 2050, future challenges', the proportion of working age people is projected to fall, with only 2.7 people of working age to support each Australian aged 65 years and over by 2050. In 1970 it was 7.5 people.
There has been little discussion of demographic workplace contraction, so I have listed three issues, which will hit business practice over the next 30 years.
For the last 20 years, Australia has been very successful in keeping wages from breaking out. Yet this time around it will be employers not workers behind the push to increase salaries to hunt for talent. Wage inflation by sector will rise and it will push up the CPI. How much? We don't know but an increase of two percentage points would not be far off. Inflation is a cancer that kills savings and value.
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