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Joe Hockey turns intergenerational report into a propaganda weapon

The five-yearly intergenerational report ought to be highly informative, leading to serious debate about the economic choices we face. In the hands of Joe Hockey, however, it has become little more than a crude propaganda exercise.

As such it will be quickly cast aside, like last year's report of the Commission of Audit. Within a few days all that will remain is the taxpayer-funded advertising campaign. It, too, will be more about spin than brain-food.

Gittins: Intergenerational Report is highly political

Ross Gittins exposes the flawed assumptions behind the Intergenerational Report and applies some common sense.

Hockey has shifted the report's focus from the next 40 years to the government's present struggles with the budget. The message he wants us to take away is that it's all Labor fault, but the government has worked hard to greatly reduce the problem. And were not for those crazies in the Senate - who seem to think our spending cuts were unfair - last year's budget would have set us up for budget surpluses right through to 2055.

The message we should take away from it, as with its three predecessors, is one no politician on either side is prepared to admit: as our demands on the government for more and better services continue to grow, we will have pay for them with higher taxes. Since our real incomes are projected to rise by almost 80 per cent, this won't be so terrible.

Treasurer plays blame game with our future: Joe Hockey.
Treasurer plays blame game with our future: Joe Hockey. Photo: Andrew Meares

Instead, the message from all these reports is that there is no alternative to sweeping cuts in government spending, unfair or not.

They come to this conclusion by quietly assuming that before long we will return to annual tax cuts, even as the budget deficit and debt get bigger every year. Sure.

If you wonder how anyone could have any idea of how things will play out over the next 40 years, you are right. No one can. The one thing we can be sure of is that, whatever the budget and the economy end up looking like in 2055, it won't be what this report says they will.

The mechanical projections in this report are based on a host of assumptions about an unknowable future. Some of those assumptions are spelt out in the fine print, some aren't. Some are honest guesses, some have been chosen to lead us to the conclusions the government wants us to reach.

Chart of net debt from the Intergenerational report espousing the virtues of Government reforms.
Chart of net debt from the Intergenerational report espousing the virtues of Government reforms. 

One demonstration that projecting what will happen over the next 40 years is unavoidably dodgy is that the four successive reports have each come up with widely differing figures for where the budget will end up.

One demonstration of the report's lack of genuine concern about our future is its dismissive treatment of climate change. The biggest risk we face in 40 years' time is the budget deficit?

One demonstration of the report's inadequacy is its failure to take account of what may be happening to the state governments' budgets. This allows it to claim last year's budget measures would have restored the feds to eternal surplus, while ignore the consequences of Hockey's proposal for ever-growing cuts in grants to the states for hospitals and schools. Really?

To be fair, before Hockey got into the act Treasury would use the intergenerational report for its own propaganda. Its message was aimed at its political masters: the budget may look OK now, but there is a lot extra spending coming in a few years' time, so keep running a tight ship.

It was spectacularly unsuccessful. The Howard government went mad with tax cuts and middle-class welfare and Rudd and Gillard were a fraction worse with their unfunded schemes to help disadvantaged school kids and the disabled.

And these guys think it's all our fault?