I was privy recently to a conversation between two recently retired women (mid to late 50s).
They were complimenting each other on their hairdos. Before long each had admitted she no longer used fancy shampoos and conditioners, but just soap.
The conversation then went to clothes, household gadgets and all the paraphernalia of the modern consumer world. It seemed they were impervious to the babbling of advertsing. Since then, I have noticed that retired, partially retired and portfolio workers in general consume much less though they are capable of treating themselves to something special every now and then.
The portfolio workers are those who no longer work in a full-time job but have several part-time jobs or consultancies and have to wonder where the next dollar is coming from.
It is difficult to get detailed spending habits according to age and employment status, but the anecdotal evidence suggests the obvious.
What this means for government worth looking at especially in this week of Budgets (Federal, ACT and Victorian).
Treasurer Peter Costello has already rung the alarm bells about the ageing population. He thinks it will require greater health and welfare spending. His solution is to keep people in the workforce longer, even if part-time. That might help income-tax revenue a tad, but income tax is only part of the revenue story.
This ageing population is getting more frugal. It is less beguiled by consumerism. It is spending less of its money on goods and services that attract the GST and more of its money on things that do not attract the GST. It spends more on health – which is GST exempt. It cooks mostly GST exempt at home while the paid workforce eats out and pays the GST and buys GST-attracting consumer items for their demanding children. They buy more second-hand (GST-free) because they have the time to search it out through classifieds, the net, op shops and fetes.
They try to buy quality once and keep items for longer. You would think younger people would buy things to last, but they seem to accept stuff will break and have to be replaced. The ageing population not in the full-time workforce might buy a new car “to see us out” – which could mean 20 years and only one GST payment. They buy clothes to wear till they wear out; not until fashion demands a change.
The GST has been called the growth tax. And since 2000 it has been. Maybe that will change with spending habits and governments will have to look elsewhere to fund health, education and welfare.
It may also require a rethink about what governments do and why they do it. Most recent Treasurers, particularly Costello and Paul Keating have worked on the groundrule that we must have continued economic growth, or more precisely a continually growing GDP. Without that you cannot have a better, more prosperous society, the theory goes.
But there are numerous examples of events that increase GDP but reduce human happiness or reduce GDP and increase human happiness. I smash my car and increase GDP when it is fixed. I cleverly redesign my house, moving windows north and consuming less electricity and gas heating. GDP falls, my well-being increases in the sunny house.
It is truer of the information age. I copy a CD (leave aside the illegality in this economic argument) rather than buying it. GDP goes up only 80c for the blank CD, rather than $30 for the original, but human happiness is the same.
I recycle building material rather than buy new material. GDP is lower; happiness is equal. Simiarly if I invent a cheaper more environmentally friendly material and end production of an expensive environmentally destructive material. I eat lots of takeaway food increasing the GDP but get ill increasing GDP further through dental and medical bills, but I am worse off.
So will it matter if GDP falls? Will it matter if we have the occasional two quarters of “negative economic growth” and a “recession” if the fall is only attributable to the sort of falls caused by things that increase human happiness, like fewer car crashes.
The week the ACT Treasurer announced that the ACT would move to “triple bottom line accounting”. This accounts for social and environmental costs and benefits as well as purely economic ones.
Measures of Australia’s Progress (MAP) provides a digestible selection of statistical evidence that will allow Australians to make their own assessment of whether life in Australia is getting better