Alternative facts
the intergenerational report comes with a confidence detached from reality. by david hughes.
First published in the MRC’s Watercooler newsletter. Sign up to our mailing list to receive Watercooler directly in your inbox.
Sometimes the best way for a government to earn the trust of the public is to give them the bad news. In fact, the great leaders of the last century had this in common. Churchill, Roosevelt and Menzies presided over wars and economic depressions. Churchill entrenched the trust of the British Empire by delivering the darkest of messages. These great leaders did not sit back and let events define them. They defined events on their own terms, and in doing so charted a new course.
I spent the best part of a decade working for three Prime Ministers, and I became good at finding something positive to say about whatever bad news arrived on any given morning. It is a useful skill, up to a point. Past that point it becomes an all consuming strategy.
It has now become the operating principle of the Federal Government. Our economy is stuffed, families are going backwards and global tension is at a 50-year high. We don't want or need good news devised from clever spin. We want the cold hard facts and a plan of action.
This week provided an example. On Monday the Treasurer released the Intergenerational Report with a confidence detached from reality: “Our advantages as Australians are substantial. The report confirms Australia is better placed and better prepared to deal with rapid change than most countries.”
Blatant falsehoods
The Treasurer made other bold claims which are better characterised as lies than creative spin. He even suggested the report endorsed the need for Labor’s tax-and-spend agenda.
He made the outlandish claim that “the Australian economy has outperformed other advanced economies in recent years.” That’s simply not true. Australia has had one of the largest declines in living standards, one of the highest rates of inflation and some of the slowest productivity growth in the developed world.
Compare this confected spin with the approach taken by the man who created the Intergenerational Report. Launching the second report in 2007, Peter Costello explained what it was for:
“It is to report honestly and openly on the effect this generation will have for the one that follows. It would be unfair if today we spent on ourselves and sent the bill to tomorrow's generation ... That is why we report intergenerationally: to make sure that we account, and are held to be accountable, for fairness as between the generations.”
In the same speech he added a warning that reads today like a description of the current Government’s method:“A lot of the greatest threats come not from things that are unpopular, but things that are popular."
There is bad news in this latest report, and by Costello's standard it should have been front and centre on Monday, but it wasn't. The Treasurer mentioned it in passing and spent the rest of his time telling us how well placed we are. The bad news is that Australians are having fewer children than ever before.
Treasury's assumption about how many children Australian women will have has changed in every report, and lately in only one direction. The first report in 2002 assumed Australian women would have 1.6 children on average. The 2010 and 2015 reports lifted that to 1.9. The 2021 and 2023 reports cut it to 1.62. This week's report assumes 1.34. Last year the actual figure was 1.48.
This means that on a fateful day in early 2060, deaths will overtake births. And for the first time in our nation's history, we will start to see a natural decline in our population. In 2065–66 the report projects 334,000 births and 348,000 deaths. Only migration, assumed at 235,000 a year, keeps the population growing at all.
The convenient explanation is that young Australians simply don't want as many children as their parents did. It is convenient because, if it is true, there is nothing for the Government to do. I don't share this theory.
The HILDA survey has asked Australians the same question since 2005: how many children would you like? The answer is consistently around two. Nearly half of women and men under 45 want two children, one in five wants three, and only one in seven wants none. The average has slipped a little over 20 years, from 2.35 to 2.09 for women, but it has not collapsed. What has collapsed is the number actually being born. Australians say they want two children and are having 1.48. On our calculation, closing that gap would mean about 100,000 more babies a year.
Declining birthrate not an intractable problem
A gap between what people want and what they can achieve is the kind of problem governments exist to solve. Howard and Costello understood that. In 2004 Peter Costello urged Australians to have "one for mum, one for dad and one for the country", backed in with a $3,000 maternity payment, and the birth rate climbed from 1.74 in 2001 to 2.02 in 2008. Economists still argue over how much of that was the baby bonus and how much was postponed births finally arriving. Either way, nobody in that government assumed the birth rate was beyond the reach of policy.
Treasury's own explanation supports this. Nearly half of the projected decline comes from fewer families having a third child, not from more Australians choosing to have none. The share of women who become mothers has barely changed. Families are starting later and stopping earlier. Families simply cannot afford a second or third child anymore.
The desire to raise a family hasn't been lost. Seventy-one per cent of Australians in their early 20s say they hope to have children. Part of the problem is that home ownership among 25 to 34 year olds has fallen 17 percentage points since 1981. The median home now costs eight times average full-time earnings, up from four times in 1999–2000. Talk to any couple in their 30s and you will find that none of this is a mystery. It is housing and the cost of living, and each one of them is within the reach of the Government.
The Intergenerational Report treats the birth rate as an assumption to be revised down every three years — a social challenge outside of their control. Family size is now dictated by how many children a family can afford rather than how many children they actually want. It is difficult to think of a greater intergenerational injustice than this.
The point of the Intergenerational Report was never to make us feel good about the future. It was to give us the bad news early enough to do something about it. Small, sensible changes now cost far less than the drastic ones a government will be forced into once the problem is locked in. That was Costello's whole argument in 2002, and it is truer today than it was then.
The one thing our economy needs most is more children: a new generation of workers and taxpayers to support an ageing population. The Menzies Research Centre will be setting out how we get there, on housing, family support, the cost of living and tax, over the coming months.
