Intergenerational Equity – Intergenerational Report 2015

The real purpose of the Intergenerational Report 2015 was to try to justify the 2014 Budget cuts to pensions, education and health. The report made numerous misleading claims to try to convince us that we could not afford our present levels of commitment to older and younger people.

The first misleading claim is that labour force participation is going to fall and reduce per capita economic growth. The second misleading claim is that the costs of providing for an older population will increase significantly as a percentage of GDP over the next forty years. The third misleading claim is that in order to deal with these costs Australia must maintain high immigration, on the grounds that migrants tend to be younger than the average resident. The Intergenerational Report assumes Australia's population will rise from 23.8 as of mid-2015 to 40 million in 2055, a massive two-thirds increase in just 40 years. The Report is completely inadequate in dealing with the numerous economic, social, and environmental consequences of such an increase.

In fact an analysis of the Report by Bob Birrell and Katherine Betts shows there is NO net change in per capita economic growth over the next 40 years. There is a slight fall in real per capita economic growth from declining labour force participation of 0.1 percentage points a year. But this is totally offset by an increase of 0.1 percentage points a year because the proportion of the population who are children will fall relative to those aged 15 plus. Any decline in labour force participation of those aged 15 plus is offset by the rising share of the population in this broad age group. ("The 2015 intergenerational Report: Misleading findings and hidden agendas", Bob Birrell and Katherine Betts, The Australian Population Research Institute, Research Report, July 2015). It is regularly the case that the people who want to use a scare campaign about population and workforce ageing to attack social security "accidentally" forget to take into account the ways in which population ageing makes life easier for governments and communities.

The Report is also misleading about rising medical and hospital costs. It is true that health expenditure is rising and will continue to do so. But the vast majority of this extra cost is due to the higher costs of providing health care for everyone, including the implementation of new technology. While Commonwealth spending per person is projected to increase by $3700 by 2054-55, $3100, or 84 per cent of this, can be ascribed to non-demographic causes. Ageing is only a minor factor. (Ibid). I don't accept that our spending on health, welfare and pensions is unsustainable. We spend a lower proportion of GDP on government funded age pensions than most OECD countries.

And what of the third claim that we need high migration to slow down population ageing? Bob Birrell and Katherine Betts have calculated from the data in the report that every extra 70,000 migrants up to the year 2055 only increases economic growth by a mere 0.06 per cent. And yet an extra 70,000 net overseas migration adds over four million people, and the Report says nothing about the extra costs on the community that this imposes. Indeed the Report works on the basis of population growth between 2015 and 2055 of nearly 16 million!

The infrastructure costs of such an increase are glossed over with the claim, which Bob Birrell and Katherine Betts describe as bizarre, that infrastructure costs "are not linked explicitly to demographic factors".

The Report also is misleading about the issue of productivity. It says high levels of migration MIGHT increase productivity because migrants may, on average, be better educated than the average Australian. No evidence is advanced to support this optimism, and given the extent of the rorting of migrant worker and overseas student programs it seems to me to be doubtful. In any event Ross Gittins has reached the opposite conclusion - that high migration lowers national productivity. Rapid population growth, through its effects on congestion and land and housing prices, acts as a drag on productivity.

The Report also papers over the impacts of rapid population growth on the environment, saying the 'level of government spending on the environment is not directly linked with demographic factors". This is amateur hour. Population growth is a direct and indirect cause of environmental damage and should not be glossed over in this way. The fact that State and local governments have to do much of the heavy lifting in terms of maintaining water quality, and environmental repair, does not make these costs any less real.

The IGR finds that per capita income will be higher in real terms than it is today. Its modelling shows an increase, in constant dollars, from $64,400 to $117,300 by 2054-55. Bob Birrell and Katharine Betts say our descendants should he selves be able to comfortably deal with any extra costs that arise from providing for a larger cohort of older persons (Ibid, p.6). They say the IGR's own data show that the supposed ill-effects of ageing are trivial, and should be easily managed by future generations themselves. The IGR's lukewarm endorsement of massive immigration-driven population growth just about completely overlooks and fails to take into account the massive costs of such growth. (Ibid, p.v).

The problems which the Intergenerational Report 2015 says are looming are looming due to the policy failure of neo-classical economics, which has dominated economic policy-making since the 1970s. Its signature policies of economic growth, rapid population growth, globalisation, free trade, privatisation, and deregulation have progressively generated deficit and debt, de-industrialisation and unemployment, and a declining capacity to care for older Australians, younger Australians, and the environment.

After the war the Marshall Plan of 1947 paved the way for the re-industrialisation of Europe and a long period of economic prosperity. Lessons learned from the 1929 financial crash and the Great Depression saw an essentially tripartite political setting, with business, labour and government roughly in balance.

The free trade theory of comparative advantage espoused by David Ricardo in the 19th Century and the Washington Consensus in the 20th was not actually applied in western countries. Countries which actually applied the theory, for example Somalia with its comparative advantage in agriculture, continued to specialise in agriculture and remained poor. By contrast, Korea, through very heavy- handed industry policy, broke away from its comparative advantage in agriculture, and it's GDP per capita skyrocketed, whereas Somalia's remained static.

Other Asian nations which industrialised were also successful. As Eric Reinert says a nation with an inefficient manufacturing sector is much better off than a nation without any manufacturing sector at all.

But from the mid 1970s neo-liberal economic policies started de-industrialising countries both in the developed world and in the developing one. Free trade has undermined the manufacturing base of many western countries, including Australia. Neo-classical economics has failed to distinguish between the financial sector and real wealth creation. Where Roosevelt's New Deal reigned in the financial sector to become the servant rather than the master of capitalist development. Countries which did better during this period, such as Brazil, India, and China, did not embrace or implement neo-classical economics.

We need to return to the middle ground represented by initiatives such as the New Deal. Otherwise we will continue to de-industrialise, with the financial sector destroying value in the real economy, and business, labour and governments out of balance. Our debt and deficit will continue to grow, and we will be unable to meet the needs of older Australians and younger Australians, and we will continue to trash the environment in a futile quest for economic growth in the mistaken belief that this will solve our problems.

Intergenerational Equity - Change in the Eighties

John Edwards (Australian Financial Review March 2015) said "Elected on a platform of opposition to the Campbell recommendations and of budget expansionism, the Hawke Government abruptly moved in the reverse direction".

And there is no shortage of people working for big corporations or their political or media cheer squads who are happy to regard the 1980s and 1990s as a halcyon era of political and economic reform which served Australia well. The argument goes that floating the dollar, pulling down tariff barriers, deregulating the financial markets, and implementing National Competition Policy, laid the foundation for economic growth and rising living standards in the years that followed. It is said that Australia's income per head rose during this period as a result of these changes.

But less simplistic and more detailed analysis suggests that the deregulation and destruction of industry support, and the ripping up of the Australian Settlement which occurred in these years and subsequently, has not been the claimed road to paradise. Much of Australia's increased income has been a consequence of exports to China. China's increased prosperity has led to demand for Australian commodities, particularly minerals. The mining boom could not go on forever, and it has not. It has come at the cost of narrowing our economy, when we need a broader, more resilient, one.

Secondly Bob Birrell and Ernest Healy have pointed out that the achievements of the 1990s were not just attributable to the protection offered by the low Australian dollar and therefore vulnerable to the currency rise that came with the mining boom, much of the elaborately transformed manufacture (ETM) exports of the 1990s can be attributed to foundations which had been established during the protectionist period, which the market liberal policies of the 1980s and 1990s dismantled.

Peter Sheehan and colleagues showed that ETM exports from the mid-1980s to the early 1990s were predominantly those which had benefited from "industry specific policies directed at increased outward orientation and export levels". (P. J. Sheehan, Nick Pappas and Enjiang Cheng, 1994, The Rebirth of Australian Industry, Centre for Strategic Economic Studies, Victoria University, p. 30). The industries included telecommunication equipment, cars, computers and pharmaceuticals.

Motor vehicles were a standout, with an average annual rate of export growth of 16 per cent over the decade to 2000-01. Pharmaceutical exports grew by 21.4 per cent per annum during the same period, to $2.4 billion. (Jonathon Coppel and Ben McLean, 2002, 'Trends in Australia's  Exports, Reserve Bank of Australia Bulletin, April 2002, p.3).

New enterprises were not significant contributors. Bob Birrell and Ernest Healy present the heretical hypothesis that the tariff protection and industry policy support of the pre-reform era laid the foundation for Australia's ETM export successes in the 1990s, and that once this support was removed in the 1990s and 2000s that the success was short-lived.

Dennis Glover, Lecturer Graduate School of Humanities and Social Sciences at the University of Melbourne, draws a parallel between what happened to English workers in the first three decades of the 1800s and what happened in Australia from the Mid-eighties and the 2015. ("The unmaking of the Australian working class - and their right to resist", The Conversation, 3 August 2015).

Dr. Glover says that at the end of the eighteenth century the English working class of hand loom weavers, agricultural labourers, iron workers, miners and so on lived a largely rural existence, employed at home or in small workshops, with strong connections to village or parish life. But by the 1830s many had been agglomerated into large factories. Towns like Manchester, Liverpool and Leeds had been transformed into the "dark satanic mills" of Blake's poem. Crammed into dangerous slums, many died young and poor. The old world had been physically transformed: bricked over, blackened, cheapened, uglified.

Dr. Glover says something just as dramatic happened in Australia during the past three decades. He says the transformation from the industrial to the post-industrial era has been so total as to constitute the sociological equivalent of an extinction event. (Ibid). "The queues of workers' cars lining up each morning to get through the factory gate - gone. The publicly owned banks and utilities - gone, or about to go...... Secure, full-time employment, with its guarantee of holidays, sick pay and promotion - in many industries long gone. The working class dream of home ownership and upward mobility via cheap land, equal educational opportunities and cheap land - all are on the way out"(Ibid).

Dennis Glover describes this as the un-making of the Australian working class. "Just as 18th century England's green and pleasant fields were paved over with brick, its vocations replaced by the steam-powered machine, its pastoral life rent asunder by the regimentation of the Industrial Age, in just 30 years the world of the Australian working class, with its factories and unions and quality public services and the communities they supported, has been made all but extinct, wiped out, like the dinosaurs, by the fiery asteroid of creative destruction". (Ibid).

He describes this as the revolution the little people lost, and makes the astute observation that the little people, the losers, refuse to go away. They vote against more "economic reform" - they won't support a higher GST and they won't support more privatisations. One might add that they voted out the party of Workchoices and they don't support deregulated university fees or Medicare co-payments either.

Dr Glover asks why they don't thank Paul Keating for liberating them from their dull, monotonous, supposedly unskilled and unimportant jobs making cars? He answers by saying that Australia's working class won't easily give up without a fight, won't voluntarily accept poverty, and won't surrender its culture and traditions without a struggle. "Australia's wilful working class deserves to be rescued from the condescension of the economic reformers. Just like the members of the English working class who went through the Industrial Revolution, the people who have experienced the destruction of their industries and communities in places like Dandenong and Doveton in Melbourne's South-East, Norlane in Geelong, Broadmeadows in Melbourne's north, and Elizabeth outside Adelaide, where the car factories and canneries are still being closed and unemployment is still well above 20per cent after 25 years of economic growth, have something important to say to us" (Ibid).

He concludes with the observation that we should try to make economic change work for everyone.

Right wing commentators and economists regularly say the world is changing, and changing rapidly, and nations must change in order to survive. This is a classic case of seeking to profit from their own wrongdoing. Much of the change that is happening is being driven by policies advocated and implemented by right wing commentators. Much of the change is not inevitable. The fact that it is making it tougher to survive should be cause to question our policy directions, not head even faster towards the cliff.

One of the defining features of modern political life is a pervasive loss of faith in government's ability to solve problems, or indeed do anything much at all. Sally Young, Associate Professor of Political Science at the University of Melbourne, says we are living through a lost era of policy making. She says that politicians of today are suffering a crisis of confidence about whether their policy making can make a big difference. (The Age, 1 April 2015, p.20 ).

She notes that the Prime Ministers of the seventies built things. Gough Whitlam left behind Medibank, women's health centres, the Family Court, single-parent pensions, public transport projects, sewerage systems, the Arts Council, the National Gallery, Triple J and Legal Aid. He gave us free tertiary education, the Trade Practices Act, no fault divorce, needs based schools funding, the abolition of conscription, the Heritage Commission, aboriginal land rights, voting at age 18 and fair electoral boundaries.

But the situation since the 1970s has deteriorated dramatically. Erik S. Reinert from The Other Canon Foundation set this deterioration out in detail in 2012 in his paper "Neo-classical economics: A trail of economic destruction since the 1970s". He says that three decades of applying neoclassical economics and neo-liberal policies have destroyed, rather than created, real wages and wealth.

Reinert starts by observing that after the Second World War Two institutions were established which provided the conditions for an unprecedented increase in human welfare. The 1947 Marshall Plan paved the way for the re industrialisation of Europe and other nations all the way to Japan. The 1948 Havana Charter established rules of international trade that made this industrialisation possible. It allowed for "infant industry protection" where unemployment was present in a country. There was a tripartite political setting, with a balance of power between business, labor and government.

Countries with a diversified economy prospered. For example South Korea diversified away from agriculture and raw materials and into manufacturing industry. It did not continue to rely on its 'comparative advantage' in agriculture, instead using heavy-handed industry policy to break into manufacturing. On the other hand Somalia was richer than Korea until the mid 60s, but in Reinert's words "continued to specialise according to its comparative advantage in being poor".

Reinert says that the theory of "comparative advantage" advanced through David Ricardo's free trade theories was in practice only applied in the colonies. He says that the US Washington Consensus free trade theories were for a long time mainly intended for export, not for use at home. He says that "Unfortunately, in the end the West also started believing in the propaganda version of its own economic theory".

The world development record, expressed as a growth rate of GDP per capita, is described by Reinert as excellent from 1950 to 1973 but dismal from 1973 to 2001. He says that during this period Latin America experienced a string of 'lost decades'. Real wages in Peru were more than halved when the free trade shock and subsequent deindustrialisation hit Peru starting in the mid-1970s. Africa's beginning industrialisation was reversed, and the communist economies became poorer than they had been under a notoriously inefficient communist planned economy. Reinert concludes from this period that a nation with an inefficient manufacturing sector is much better off than a nation without any manufacturing sector at all.

Reinert says that even the United States finds that too much free trade has undermined its manufacturing base. The West has embarked on an attack on wage levels and purchasing power in the name of austerity. The results are likely to be just as harmful to real wages and purchasing power as they have been wherever they have been applied. A wave of neo-classical wealth destruction hit Latin America in the mid-seventies. It also hit the little industry Africa had managed to build. Another wave of destruction hit the centrally planned economies after the fall of the Berlin Wall. The fall of the Wall heralded a period of Western triumphalism, an in particular a failure of mainstream economics to distinguish between the financial sector and real wealth creation. This has now caught up with country after country in Europe and beyond.

Three economies which have done well during these lost decades have been Brazil, India and China. Reinert notes that they escaped the free market fundamentalism and free trade shock that accompanied the fall of the Berlin Wall. In these countries neoliberalism was met with resistance from a critical mass of economists.

Reinert says that what is needed is to recapture the middle ground. He supports the principles of the Havana Charter, unanimously approved by the members of the United Nations in 1948, as a blueprint for a world economic order that creates, rather than destroys, mass welfare. He says that of the three political systems which brought financial capital under control during the 1930s, - communism, fascism, and the New Deal - there is little doubt what most people today would choose. But that needs to be kept as a live option, and neoclassical economics is failing to do this. It fails to distinguish between the real economy and the financial sector, with the risk that financial sector stops adding value to the real economy, but starts to parasitically destroy value. (This paper is online at http://mpra.ub.uni-muenchen.de/47910/).

Intergenerational Equity – The Australian Settlement

The argument over protection versus free trade has been around for well over a hundred years. Indeed it was the dominant political debate at the time Australia was becoming a nation. And many of the arguments of the time sound familiar to our ears and ring true today. Bob Birrell writes in his book "A Nation of Our Own" that free trade was seen as the policy of the pastoralists (p.169). That is still true. It is the agribusinesses that push hardest, by a mile, in favour of the free trade agreements that Australia has entered into in recent years.

And back then, as now, the protectionists were people who wanted to promote a diverse industrial base. Protection was also seen as crucial to the well-being of the working class. The great Liberal Alfred Deakin declared in 1901 that "if federal protection increases the manufacturers' profits, state laws must provide that the employee shall secure his share, perhaps by means of special boards for wages and hours, according to the plan partly adopted by Victoria". (Robert Birrell, "A Nation of Our Own", p. 170.)

A similar insight into why the protectionists did not support free trade comes from the Bulletin's leader writer, James Edmond, in his 1900 tract "A Policy for the Commonwealth". He says "No country ever became a great industrial state under free trade unless it had cheaper labour than its neighbours, and cheap labour means degradation and slavery... Nor can any nation, in these days of cheap freights, remain a great industrial state under free trade unless it pays as low wages as the cheapest of its rivals, or unless its workers can hold their own by exceptional skill". (Ibid). Observers watching the way in which nowadays the rich get richer while low paid workers are becalmed or going backwards might think Mr. Edmond just as relevant today.

The view of many protectionists and particularly the social democrats among them was that Australia should learn from the mistakes of the 'old world' and become a 'new world’, free of both the social divisions and strong class boundaries of the United Kingdom, and the slavery which had blighted the United States.  We were to do our own dirty work rather than expect someone else to do it. Australia was not to be like America, where competition reigned supreme at the expense of workers' long-term will-being. This outlook was egalitarian, and helped give the Australia of the Federation era a democratic culture – that Jack is as good as his master, and down with "tall poppies", or at least those who give themselves airs. (Ibid, p. 281).

Bob Birrell concludes that the Federation era and the 'Australian Settlement' offers ideals directly relevant to our present dilemmas, and that it is a shame that it has been disparaged by Australia's cultural gatekeepers. (Ibid, p. 283).

It has been fashionable for years to deride the Australian economic, political institutions and culture of the Federation era, often referred to as the Australian Settlement. And the Settlement itself was effectively torn up several decades ago.

But I believe many of the things done at that time served Australia well and indeed are key reasons why we developed a more egalitarian, more prosperous, fairer society than many other countries were able to accomplish. Darin Acemoglu and James Robinson have written a book about why some nations have succeeded in generating sustained economic growth through industrialisation and others have not, titled "Why Nations Fail" (Crown Business, New York, 2012). They regard Australia as a success story.

They focus on the role of what they describe as "inclusive institutions", which include democratic accountability and the rule of law. Once they are established, these institutions create circumstances where the government is accountable and responsive to citizens, and where the great mass of people can take advantage of economic opportunities. Acemoglu and Robinson say that these institutions tend not to emerge in "extractive economies", where the economy is based on natural resources, and their exploitation is dominated by a narrow elite. Too often the elite uses its political power to prevent the development of inclusive institutions which could provide a pathway to industrialisation. (Ibid).

Argentina is a classic example. It is a country rich in natural resources, and at the turn of the twentieth century it was prospering; it was as wealthy at the time as Australia. But its large landholding elite conceded little to either urban or rural work forces. It did not industrialise, and remained an extractive economy and society. It was therefore highly exposed to commodity downturn in the 1930s and it did not handle the Depression and its aftermath well. Political turmoil led to military coups in 1943 and again in 1976. From being one of the world's most affluent nations at the start of the twentieth century, it finished the century a long way down the chart. In 2001 it defaulted on its debts.

Australia could have had a similar experience, but we did not. New South Wales was indeed an ideal location for an extensive pastoral industry based on cheap convict labour. In the early nineteenth century its political leaders wanted to turn New South Wales into an extractive economy free of inclusive institutions. Their first problem was the British Government, which was persuaded to lay the foundation for a working democracy in the colony of New South Wales.

Their second problem was Victoria. The Victorian gold rushes of the 1850s led to direct conflict between the gold diggers and the pastoral landholding class. Victoria got limited parliamentary democracy, and then small farmers. The Victorian Government also took up the cause of protection to provide additional employment opportunities and in order to create a more self-reliant society. Protection was strongly, but unsuccessfully, opposed by the pastoral elite and their merchant supporters, and by the end of the nineteenth century, in Victoria, although not in New South Wales, most leading politicians were committed protectionists.

The Victorian Alfred Deakin was both a protectionist and a radical social democrat. His parliamentary group wanted to create an Australia free of the old world class and caste differences. Deakin was able to implement much of the protectionist agenda, including its social democrat dimension, between 1905 and 1909 when he was Prime Minister of a government which ruled with the support of the Labor Party.

Deakin expressly set out to make Australia a more diverse and self-reliant industrialised economy. He and his supporters were worried that Australia could become, in his words of 1905, an economy of "hewers of wood, drawers of water, shearers of wool, and growers of wheat". (Bob Birrell, "Federation, the Secret Story", Duffy and Snellgrove, Sydney 2001, p. 203). Furthermore the Deakin Government linked receipt of tariff protection to the payment of 'fair wages', establishing the Commonwealth Arbitration Court, which incorporated the principle of a living wage into its determination of industrial awards. Australia developed a reputation as a 'working man's paradise'.

Australia was hit hard by the Depression, but the Australian Settlement and the Federation-era institutions survived the test. There was little social unrest, and after the Second World War Australia's manufacturing exports expanded and we enjoyed a golden age of prosperity.

Between 1946 and 1974 real per capita GDP increased at an average annual rate of 2.2 percent. From 1974 to 1991 it slipped to 1.5 percent, and between 1991 and 2010 it was still lower than in the post war years, at 2 percent. (Ian McLean, "Why Australia Prospered", Princeton University Press, 2013, p. 16).

Of course during these later years the Australian Settlement has been abandoned. Industrialised countries benefit from the productivity gains that flow from adopting the latest technology in manufacturing. On the other hand, economies based on natural resources face diminishing returns. Miners have to dig deeper or exploit ore bodies with lower mineral content. Farmers have to farm less productive land, or add more fertiliser or water to their crop. This leads to lower returns on capital and labour.

But before the Australian Settlement was abandoned, Australia had a vibrant manufacturing industry, thriving in such diverse areas as pharmaceuticals, chemicals, automotive, iron and steel, and telecommunications.

Our pharmaceutical industry had prospered due to the Labor Government's Factor F scheme. This piece of industry policy paid drug companies who increased their research and development, production and exports from Australia. It was successful in increasing exports of pharmaceuticals from $321 million in 1990-91 to $894 million in 1995-96 and $2.3 billion by 2001-2, jumping by a factor of seven in just over a decade. Later on the program was cut and in the decade after 2001-2 we built up a trade deficit in drugs of $6.9 billion. Pharmaceutical company executives contrast the present situation with the Factor F era. According to the head of AstraZeneca it manufactures in Australia because the Labor Government "incentivised pharmaceutical companies to invest in sophisticated manufacturing facilities in the 1980s". ("Pharmas need to more drugs", Nigel Bowen, The Age, 19 May 2014).

 

Professionals Australia and Contracting Out

This week I was visited by a member of Professionals Australia who expressed great concern at the loss of science and engineering skill sets to the Australian Public Sector, and particularly the Department of Defence.

He described to me an epidemic of contracting out, involving a push to have as much work as possible done by private industry, and as little as possible done by the Defence Science and Technology Group within the Department of Defence, and the removal of staff with decades of high-level experience.

I share the concern of Professionals Australia about this modern fad. I think it is important that the Australian Public Sector builds up and retains genuine expertise. Without it the chances of delivering infrastructure projects on time and on budget diminish. It is a false economy to contract out all the project delivery functions – we need people who know what they're talking about inside the tent, as well as outside it.

The contracting out obsession also has a real cost in terms of education and training. For many years large public sector agencies like Defence have been prepared to invest in education and training their staff, to the benefit of the nation. Private sector companies don't have the same enthusiasm – they want someone else to do the training. The risk is that no-one does it, and Australia becomes a less clever country than we need to be.

Intergenerational Equity – How We Are Failing Future Generations

In 2015 the Federal Government released another Intergenerational Report. It was easy to dismiss it as a political stunt. After all the well-known scientist they got to spruik it, Dr Karl Krusenicki, did just that, correctly lambasting it for its failure to talk about climate change. Any discussion about the future which leaves out climate change is farcical.

And these Reports, first commissioned by Peter Costello, are absolutely a Trojan Horse for the right wing agenda of winding back the social contract, dismantling the benefits achieved in Australia with a lot of blood, sweat and tears over many years, in health, education, and retirement incomes, which make Australia one of the best countries in the world to live in. They run a scare campaign about population ageing designed to convince us that our health, education and retirement incomes systems are not sustainable.

This is just not right. Population ageing is not a bad thing at all. Countries with older populations are uniformly healthier, wealthier, have longer life expectancy and fewer problems than countries with younger populations. The group Sustainable Population Australia has produced some great work from the academics Katherine Betts and Jane O'Sullivan about this and I recommend it to anyone with an interest in this issue.  My take home message about population ageing is "Don't worry, be happy!"

But is the issue of Intergenerational Equity important? Bloody oath it is. Do we want to be remembered as a generation that wrecked the planet and passed on an inheritance and legacy of unemployment, mental health problems, drugs, conflict and terrorism to the next generation? Surely we have an obligation to pass on to our children and grandchildren a world in as good a condition as the one our parents and grandparents gave to us. We do not have a right to trash the joint.

So how are we going so far? Well let's look at deficit and debt, the two Ds, a bit like Daz and Dee from The Block. It is true that we need to balance the books. It is true that leaving behind deficit and debt is unfair to future generations, who have to pick up the interest bill.

It is worth noting that countries with large populations and rapid population growth tend to have greater problems of deficit and debt than smaller countries, or countries with stable populations. Rapid population growth leads to overcrowding and pressure on existing infrastructure. Residents and communities naturally object to this, so in order to head off public objection to rapid population growth governments have to build new infrastructure. This new infrastructure is very expensive, and leads to deficit and debt. The Queensland academic Jane O'Sullivan points out that maintaining infrastructure in a population growing at 2 per cent doubles, repeat doubles, the infrastructure cost for governments, who have only two percent extra taxpayers to pay for it.

We have seen a classic example of this in Melbourne, with the former State Government secretly locking Victorians into a contract to build a tunnel through Royal Park that would have cost $8 billion. Seriously $8 billion for a tunnel! I had Professional Engineers in my office giving this as an example of the way the public sector is being stooged by private consortiums. Victorian taxpayers dodged a massive financial bullet as a result of the Victorian Labor Government negotiating an end to this contract. It is remarkable that the Liberal Party and its media and corporate cheer squad had the temerity and audacity to criticise this. To lock Victorians into a multi-billion dollar contract with a secret side note days before an election was the height of contempt for the right of Victorians to democratically decide our future.

Let me return to the two Ds, deficit and debt. During the good times John Howard and Peter Costello introduced measures which damaged the revenue and pushed up deficit and debt. The fiscal time bombs they left behind for subsequent governments included abolishing tax on superannuation income, cutting capital gains tax in half, introducing the Baby Bonus – now thankfully gone – and ramping up Family Payments.

The Abbott Government went down the same path. It reinstated the Howard Governments fringe benefits tax arrangements for privately owned motor vehicles, which Labor had cancelled, at a cost of $500 million a year. It cancelled Labor's 15 per cent tax on superannuation income over $100,000. This reduced revenue by about $600 million a year. They abolished the carbon price, at a cost of $7.6 billion, and overturned the mining tax. One country which runs a whacking great surplus and has no debt is Norway, which years ago introduced a sovereign wealth fund. People say Norway is fortunate because it has lots of natural resources. And we don't?

The legacy of deficit and debt we are handing down to future generations is not unavoidable. For example we have allowed companies to avoid paying tax on their income. In one financial year just 10 companies channelled over $30 billion from Australia to Singapore and avoided paying tax in Australia. In that year, 2011-12, an estimated $60 billion in so-called "related party transactions" went from Australia to tax havens. Energy companies have established "marketing hubs" in Singapore, but their principal purpose appears to be as a destination to shift profits in order to pay less tax. A report by the Tax Justice Network estimated annual tax avoidance by the top 200 companies at over $8.4 billion.

And as for infrastructure spending, the property developers who are the beneficiaries of the increased land value that comes from population growth ought to be the ones to pay for the costs of this growth. I support the Labor Government capping Council rates. Pensioners shouldn't be the ones paying for population growth; the beneficiaries should be.

Let's now look beyond the two Ds. How are we really going? Is there really intergenerational equity?  The opportunities I and my generation had – free tertiary education, lots of job and career opportunities, affordable housing – seem a distant memory for way too many young people. They are now fitted up with an axis of financial evil – job insecurity, housing unaffordability, and student debt.

Job security has declined dramatically. Back in the 1980s well over half a million 15 to 19 year olds had a full time job. By January 2015 the figure was more like 150,000, an all-time low. There has been a dramatic switch from full-time to part-time employment. Back in 1980 just 20 per cent of workers aged between 15 and 19 were part-timers but the figure is now about 75 per cent.

Youth unemployment grew to its highest for 17 years. The number of long-term unemployed has risen dramatically in the last seven years, well over double what it was in 2008.

Well-qualified young workers are finding it difficult to break into high-skill jobs. Many young people have to continue their part-time university jobs after they finish their degree. And those who do have jobs have less secure jobs. In March 2015 the Saturday Age reported a worker who only knew if he had work when he received a text message just 15 minutes before his shift was due to start at a clothing warehouse. As a statement of the bleeding obvious, it is impossible to plan his day or his life around that kind of insecure work. It is a throwback to the work arrangements on the waterfront a hundred years ago, when Dock workers would stand in a line waiting to be picked out for a day's work.

The rise of casual, contract and labour hire jobs, with far fewer protections for workers, is a feature of the last 20 years. More than 2 million workers are now engaged as casuals and more than 1 million are contractors or in labour hire.

The personal and social consequences of unemployment and underemployment are negative and long-lasting. Experts say that young people lose their hope, their health deteriorates, they suffer from depression and anxiety, and they become vulnerable to drugs and crime. Being out of work for long periods can affect physical health, mental health, and future employability. The job market is now also tougher for postgraduates.

Young people are also getting the rough end of the pineapple in relation to housing. Whereas I and my generation had opportunities to buy and live in detached houses, high-rise apartment towers in Central Melbourne are now being built at four times the maximum densities allowed in such crowded cities as New York, Hong Kong and Tokyo. These hyper-dense skyscrapers are being built with little regard to the effect on the residents within, or their impact on the streets below, or on neighbouring properties.

And as if these issues aren't big enough, in April 2015 a prominent Britain-based international mental health commentator, delivering a public lecture for the Queensland Mental Health Commission, suggested the modern rat race could be making us unhinged! Gregor Henderson said that across the world levels of diagnosed depression and anxiety, and the prescribing of drugs to deal with those conditions, are rising alarmingly.  Mr Henderson said there may be a link between the way the modern world is structured and the elements of emotional and psychological distress we are seeing.

He said that if we keep putting such a high value on economic product, this leads to materialism, consumerism and individualism, which are mostly short-term benefits. Our modern style of living is out of synch with our mental and physical wiring.

I certainly think one of the contributors to increasing mental health issues is the loss of our connection with nature. Numerous studies have shown that public open space delivers tangible and important benefits for physical and mental health. Mathew White and colleagues at the University of Exeter Medical School found that people who live in urban areas with more green space tend to report greater wellbeing – less mental distress and higher life satisfaction – than city dwellers who don't have parks, gardens or other green space nearby.

A study from Norway says that health benefits from nature arise from nature's stress reducing effect. Stress, as is well known, contributes to cardiovascular diseases, anxiety disorders and depression. The American biologist E. O. Wilson says that because humans evolved in natural environments and have lived separate from nature only relatively recently in our evolutionary history, we have an innate need to affiliate with other living things.

People aren't just unhappy with their own lives. They're unhappy about the quality of their political leadership as well.

So if we are failing future generations, and I am convinced that we are, what can we do about it? I think employment is the key. We need to get fair dinkum about full employment. Now there are plenty of captains of industry and economists who immediately change the language and the objective of "full employment" to that of "creating jobs". But they are not the same thing at all, even though they may sound similar. The objective of "creating jobs" is used as cover for the desire to reduce workers pay, conditions and rights. It is claimed that reducing these things will increase labour market flexibility and thereby create jobs. It is also used as a battering ram against the environment, with the need to create jobs used to justify all manner of environmental atrocities. We should not agree to surrender pay and conditions or our beautiful and unspoiled environment. This would be the opposite of intergenerational  equity.

So how do we achieve full employment then, given its importance? I think five steps are crucial.

First, we should wind back our migrant worker programs, which have skyrocketed in the past decade. In a stable or slowly growing population, workforce ageing will help solve unemployment. As workers retire unemployed workers or young people entering the labour force get job opportunities. This is how things used to be. But when we are running massive permanent and temporary migrant worker programs, the unemployed and young people entering the market find themselves up against ferocious competition from new arrivals. The size of these programs puts us on a treadmill. No matter how fast we create jobs we still have unemployment above 6 per cent, a totally unacceptable figure, and a recipe for drugs, crime, mental health issues, even terrorism. As recently as 2000 the then Immigration Minister Phillip Ruddock said that net migration may average out at 80,000 per annum. A funny thing must have happened on the way to the Forum, because his government subsequently increased it to over 200,000 per annum, where it still sits.

Second we should focus on education, skills and training. What has happened to technical and further education is a scandal. Back in 2008 political parties promoted the deregulation of vocational education. 'Contestability', that is competition between the public TAFE Colleges and new private training colleges, became the name of the game. They competed for students and for government subsidies. The idea was that competition would lift standards and be good for students. The result has been the opposite.

Private training colleges have been quite unscrupulous. Their interest has not been in the students, it has been in making money. They get students in and churn them through. They have no interest in whether the students get the skills they need to find work afterwards. As long as the students, or taxpayers, pay them, they're alright jack.

Private colleges have cherry-picked the most lucrative courses, leaving TAFE to deliver the balance. The creation of a private market in education led to the appearance of education brokers, signing up people outside Centrelink offices with inducements like free laptops. Consumer protection has been inadequate.

And then there is the change to "competency-based" training. Whatever the virtue of the theory, in practice colleges have put students through courses in a matter of weeks. Quality assurance has been absent. Trainers sign students off as competent, but in practice they are woefully incompetent.

Then there are the universities. Labor Governments introduced student fees and uncapped student places. Now the Liberal Government wants to deregulate student fees. This would be a disaster. When I went to University there were no fees and places were allocated on the basis of academic merit. If fees are deregulated, the system will have been turned on its head. Academic merit and performance will count for nothing. Your capacity to pay large fees, or more commonly your parents capacity to do so, will count for everything. How are academic standards and quality expected to survive such an onslaught?

Education needs to return to being about academic achievement and quality, not making a profit.

Third we need to back science. The 2014-15 Budget cut a staggering $150 million from the science budget, including a $115 million cut to the CSIRO. The CSIRO says these funding cuts will cause the loss of nearly 1400 workers, over 20 per cent of its workforce, including 500 science and research staff. We can't compete with the rest of the world behaving in this short-sighted way. And we should rebuild engineering expertise in government, and insist that companies building infrastructure invest back into the engineering profession, for example through cadetship graduate programs.

Fourth we need to back manufacturing. During the mining boom we acted as if it didn't matter if all our manufacturing went offshore. But to have all our eggs in the mining and agriculture baskets is, once again, foolish and short-sighted. Recent developments around the iron ore price reinforce this. We need a diverse economy, and manufacturing provides good jobs in the middle of society – not rich but not poor. It brings with it research and engineering expertise; the kinds of things that distinguish successful nations from unsuccessful ones. We should be wary of entering into trade agreements that kill off manufacturing and render our economy narrow and vulnerable.

And we should back the home team – Australia. Our personal buying habits, our government buying habits, and our foreign takeover laws should support Australian jobs and Australian industry. It is remarkable that when the Victorian Labor government says it is going to use local steel that we have economic commentators saying you can't do that because it's a breach of our trade agreements! We should have food labelling laws that spell out what food is Australian and what is imported, so consumers can make an informed choice. We should not enter into Trade Agreements that contain Investor State Dispute Settlement clauses or other provisions which act as a barrier to governments carrying out the wishes of the electorate on matters like these.

There is much that we can do which will generate full employment, and it needn't involve trashing the environment. But if we don't do it, then future generations will be deprived of the opportunities that so many of us have had. And the big question for us now is, do we want to be remembered as visionary, intelligent, compassionate and generous, or remembered as greedy, selfish, ignorant and short-sighted?

Intergenerational Equity – A Day Representing the People of Wills

7.30 am. I visit a local railway station on the Upfield Line. The trains are chockablock. The Upfield Line is predicted to have 80 per cent more commuters in a decade. I try to explain to frustrated commuters that if we get a Federal Labor Government, or a Liberal Government stumps up the cash, we could build Melbourne Metro and put more services on these lines and improve things in a few years time.

9am. 61 year old engineer who has never been on the dole tells me he has only had work for three months in the last eighteen months, due to mining engineers bringing in '457' temporary workers on lower pay.

10am. Pascoe Vale residents come in to see me with concerns about the pending City to Tullamarine Freeway Widening project. While motorists understandably want it, in view of the freeway congestion, for these residents it just means more noise and fewer trees.

11am. Coburg residents come in with concerns about high rise buildings of up to 10 storeys being proposed on the doorstep of their single storey detached houses!

12.30. Lunch. I am buttonholed in the street by a man who is concerned about funding cuts planned for Fawkner Primary School. Later he sends me some paperwork showing English is neither the first or the second most common language spoken at home by the students, and that many students come to Fawkner Primary School not having been in Australia in their early education years.

Afternoon. No appointments. I work on follow up of my two forums – the Ice Epidemic and Unemployment. The Ice problem is very bad. Governments, police, and welfare agencies all have their hearts in the right place but are under resourced and overwhelmed by both the size of the problem and the number of other problems they have to tackle.

Unemployment in Wills is noticeably higher than for some years now. Long term unemployment and youth unemployment is breeding an underclass of disadvantage, people who are disengaged from community life.

5.45. Go home and watch the news on TV. If it’s not Joe Hockey telling us our best days are ahead of us, it's Malcolm Turnbull telling us how exciting the future is. Or I can hear from some economist, lobbyist or commentator saying Australia needs more population growth. What are these people smoking? Where do they live? It must be a long, long, way from here.

Intergenerational Equity – Introduction

President Obama said this about America, but it is just as valid for Australia and the other nations of the world as well: "Loving this country requires more than singing its praises or avoiding uncomfortable truths. It requires the occasional disruption, the willingness to speak out for what is right, to shake up the status quo".

There was a really interesting survey carried out in 2013 in the US, the UK, Canada and Australia. Over 500 people in each country – over 2000 in total – were asked a series of questions, which included two gems as follows -

"In your opinion, how likely is it that humans will be wiped out in the next hundred years?", "In your opinion, how likely is it that our existing way of life will end in the next hundred years?"

They are, of course, very different questions. It turns out that 24 per cent of us think that there is a fifty per cent or greater chance that humans will be wiped out in the next hundred years. Australia is right on the average, at 24 per cent, while Americans are the most apocalyptic, at 30 per cent, and Britons the most sanguine, at 19 per cent.

Even more troubling, over fifty per cent of us – 54 per cent – think our existing way of life will end in the next hundred years. Views about this are consistent from country to country - 53 per cent in Australia, 55 per cent in Canada, 51 per cent in the UK, and 57 per cent in the US, think our way of life is for the high jump. In each country less than fifty per cent thinks that our way of life will see out the century. (Melanie Randle and Richard Eckersley, "Public perceptions of future threats to humanity and different societal responses: A cross-national study", 2015).

Richard Eckersley and Melanie Randle see this pessimism as consistent with the results of a survey of 1000 Australians which asked which of two scenarios of the world in the 21st century more closely reflected their view -

"By continuing on its current path of economic and technological development, humanity will overcome the obstacles it faces and enter a new age of peace and prosperity", or

"More people, environmental destruction, new diseases and ethnic and regional conflicts mean the world is heading for a bad time of crisis and trouble".

Two thirds of Australians chose the pessimistic scenario, while less than a quarter (23 per cent) chose the optimistic one (Ibid).

Several questions arise. First, are the pessimists right? For reasons I will outline in the coming days, weeks and months, I think they are. Secondly, why do we continue on our current path given that a clear majority believes it is a path to catastrophe? Third, are there alternatives that might serve us better?

Intergenerational equity, or intergenerational fairness, means we have an obligation to pass on to our children and grandchildren a world in as good a condition as the one our parents and grandparents left us. I will set out where, how and why we are not faithfully discharging this obligation, and suggest how we could do better, giving both young people and older people a better deal than they are getting at present.