Baby boomer cruises: a lifestyle too good to last

March 1, 2015
man on cruise ship

Baby boomers, is the party over? Will the Rhine river cruise be a thing of the past? Many people in their 60s have had it good. Australia’s book groups, knitting groups and film groups are emptied out each northern summer as the Rhine and Danube call.

But the critics are saying ‘turn the music off.’ They’re calling for curbs on government largesse for boomers – superannuation tax concessions, easy access to the Age Pension, and tax privileges around investment properties and owner-occupied housing – that have underpinned the cruisin’ lifestyle.

At a summit on older workers last week, the Rhine cruise emerged as symbolic of a generation’s ill-gotten prosperity. The summit was organised by the Australian Human Resources Institute. Guest speaker demographer Bernard Salt depicted the Rhine cruise as a rite of passage for boomers, the generation born between 1946 and 1964. They’ll happily draw down their superannuation to see Budapest in style.

“’I’ve worked hard since 22, had kids at 25; I’m owed this by society,’” he said, speaking of the baby boomers’ attitude. “And they’ll organise their assets to get a dollar of pension in order to get access to the Seniors Health Card…They’ll have 24 years in retirement and baby boomers won’t spend all that time minding grandchildren.”

If Salt’s sweeping generalisations are right, it’s clear any government will have a fight on its hands to make the retirement income system fairer. Baby boomers, Salt said, feel “entitled.”

As I’ve written before baby boomers are not all rich or white, and they’re not all on cruises. They include Aborigines unlikely to reach advanced old age and post-war migrants who got stuck in declining manufacturing industries. About 200,000 people in their 50s and 60s are on unemployment benefits, and thousands more are on the disability support pension. Baby boomers write to me of shocking age discrimination, and of precipitous falls from middle-class life into poverty due to later-life divorce, unemployment, illness and bad luck. Others are just getting by with nothing left over for cruising.

But according to another keynote speaker, John Daley, from think tank the Grattan Institute, about 20 per cent of people over 65 could be counted as disadvantaged. They’re surviving only on the full Age Pension, and possibly renting. Most people aged 60-plus are doing well, he told me. Older people have been the biggest beneficiaries of increased government payments, concessions, services and health spending over the past 11 years, and if they’ve got a competent financial adviser, they’re paying no tax, or much less than once was expected. “There appears to be a principal in our parliament house: do not under any circumstances touch baby boomers,” he said.

Middle-class welfare for people under 65 was mostly eliminated by the Rudd-Gillard government, “one of its unsung successes.” Not so for older people. “Our pension and superannuation tax systems are very skewed,” Daley said. “Some people can’t afford to pay. Those who can should.”

Just why our current system needs to change was rammed home by the confronting graphs Daley presented. They’re drawn from his three recent research reports on budget problems and intergenerational fairness. Start with the latest. They challenge any fair-minded person over 60 to re-consider.

Here’s his argument. After 8 years of budget deficits, there really is a problem, a budget hole of $43 billion. It’s nothing to do with the ageing of the population, or the GFC. It’s to do with decisions of the Howard and Rudd-Gillard governments to increase spending on health and  households without raising the revenue to cover it. “The budget is unsustainable,” Daley said. “And spending on older households is a substantial part of the problem.”

So why should older people be singled out to solve the budget problems? Because pensions and superannuation tax concessions (along with health) are so costly, it’s where major savings could be made; and because older households are significantly wealthier than a decade ago. Households aged between 65 and 74 are $200,000 wealthier than households of that age eight years ago. Meanwhile, the wealth of households aged 25 to 34 has gone backwards. The boom in housing prices explains this in part.

But incomes also grew fastest for older Australians thanks partly to government decisions to increase the Age Pension and broaden eligibility to include people on quite high incomes. In 2010, governments spent $9400 more per household over 65 than they did just six years before.

What the country needs is bipartisan support in Canberra to fix the unfairness in the retirement income system. Should we saddle youngsters with huge university debts and short-change public schools but allow couples with million dollar holiday homes, an income of $70,000 (untaxed if from super) as well as their own home to qualify for a part pension? Should we embrace “welfare reform” for people with disabilities and the unemployed, many of them in their 50s and 60s, but reject it for well-heeled older workers and retirees? Should people be able to access their (heavily taxpayer subsidised) super at 60, run it down in Budapest, by and large pay no tax on the super income, and later claim the Age Pension?

The cruises will continue for the wealthy elderly, whatever changes might eventuate. For others who lose out, a cruise down the Murrumbidgee may have to suffice. But will any politician have the gumption to turn off the music and tell affluent boomers the party’s over?

Would you rather raise the GST? An inheritance tax? Cut spending? Please leave a comment.

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