It needs to be said that while the plight of retirees now is of grave importance, it matters less compared to the state of economy we’ll have 10 to 20 years from now. With the dwindling tax base the government insists the country should have, Australia’s future retirees have a scarier prospect than the current retirees.
Sure, having a lighter income tax puts Australia in a good light, worthy of a mention in OECD’s progressive high-income economies. It’s good news, overall. But with the new data from Australian Bureau of Statistics showing the rising inequality in Australia, it’s obvious lower tax only benefits higher-income groups.
It is problematic in itself, calling to mind the recent passing of tax package, particularly stage three. It suggests that when stage three comes, those earning over $120,000 will ensure the rising inequality will go up even more.
A closer look at the survey should also show that the primary wealth of Australians, which is home ownership, is dropping fast. According to the survey, more 55-64 years old Australians are still paying their mortgage in 2017-2018. So, from the perspective of those who will retire a decade or two from now, the future does not look good.
The rising percentage of Australians who still own mortgages at pre-retirement and retirement ages are represented below.
In 1994, 64% of Australians have paid off their mortgages by the time they reach their pre-retirement years. That figure dropped to only 37% today.
The percentage of people renting at ages 55-64 has also increased from 14.7% to 21%.
It’s worth noting that the budget expenses of the Association of Superannuation Funds of Australia (ASFA) as seen on the Retirement Standard for Retirees do not include rent or mortgage repayments.
The country’s retirement system follows a structure of 75% Australians owning a home. And judging from the historical downward slope of home ownership, it needs to work with only about a third of that in 20 years’ time. It appears that future retirees have bigger problems to face.
It does not help that tax base is narrowing instead of broadening. Cutting tax rates without widening the tax base puts risk on the budget’s bottom line. And a good distribution of budget relies heavily on healthy tax revenue collection.
So while the rest of the country is consumed with the issues retirees are facing today, it would be wise for the government to look at our decreasing tax base and home ownership statistics.
The combination does not bode well for the future.
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