For some time now MB has tracked the war on youth that has engulfed Australian public policy. The war is as wide as it is clandestine.

At the macro level it works in an economic model that consumes future standards of living growth in support of current over-inflated standards. This is the current account deficit model of growth that must expand either public or private debt loads forever if it is to grow.

This model, in turn, is driven by a social contract with the baby-boomer demographic bubble that has been promised ever rising house prices as the road to wealth and prosperous retirement. The political economy manifestation of which I call the politico-housing complex.

This plays out in a number of micro-economic policies: untouchable support for a highly distorting taxation regime that mis-allocates national savings into mortgages; superannuation concessions that favour property and business sectors such as finance and mining. Even as the national Budget seeks to wind back many middle class entitlements, the tax concessions that drive the economic model – which represent 8% of GDP, the highest of their kind in the OECD – remain off limits for reform.

There are also the public guarantees for the nation’s banks that have prevented markets from-restoring balance to the system; the local level restrictions on housing supply; the record high immigration levels and un-policed foreign buying activity of existing real estate. These policies explicitly degrade our national political economy and future standards of living in the name of boosting baby-boomer dominated property-owner wealth.

The war on youth is wider still in climate change policy. On that front the previous government was better but the Abbott Government and its mining-oriented support in the senate has set about dismantling Australia’s contribution to the global effort by scrapping the carbon price, appointing cronies to the renewal energy target review, and proposing alternative policies that are less efficient as well as far more expensive if ever funded properly, which it has declared won’t happen.

But the bill for neglecting the future is starting to come due. Our levels of household debt are extreme in any reasonable international comparison. In economic terms, the major casualty of the distorted economic model is competitiveness. Over time it has inflated business input costs so extraordinarily that Australia can no longer compete in anything value-added and, increasingly, not even in commodities. Miners of high-carbon raw materials are facing a growing movement aimed at stranding their existing assets. Rating agencies insist that both private and public debt be contained. Our currency has lost its power to restore competitiveness by falling as the high interest rate structure that the current account deficit model demands keeps sucking in capital. And nothing can change quickly for the better because the political economy is paralysed by the vested interest of the old system.

And so we move into this year’s Budget. MB supports the push by the Government to roll back the entitlement mentality that has become part and parcel of our tiring economic model. Especially encouraging are the moves to reform pensions and share some burden with the wealthy (even if ham-fisted). What MB does not support is the radical social re-engineering program underway that unfairly targets youth to carry the burden of adjustment ahead of all other groups.

In the Budget we had no attempt to address the failings of the economic model for young Australians but we did see draconian cuts to unemployment benefits and a radical overhaul of education funding that is bound to dramatically increase the cost of higher education (see Ross Gittins excellent weekend article) for future students. There were cuts to training programs across the board and an accompanying new subsidy for the employment of older Australians. The Government’s 457 visa program is being ramped-up and is most concentrated in the kind of entry-level positions that use to be the first rung on the employment ladder for young Australians.

Finally, over the weekend we got this from The Australian:

THE Abbott government is considering drug testing for the unemployed as part of a major overhaul of welfare. The suspension of payments to people with outstanding arrest warrants is another option being debated, News Corp Australia newspapers report. The Coalition says it is looking closely at New Zealand’s welfare system, which includes a tough approach to drug use. The New Zealand model strips welfare recipients of half their payments if they fail a job-required drug test or refuse to submit to one. They are then given 30 days to get clean. Those still using drugs or refusing to take a job that requires testing are required to pay back their welfare payments.

I’m not going to comment on the social appropriateness or not of this measure. What I ask you to do is view it in the broader context of an inter-generational war in which Australian children are being fattened up for slaughter by the failing economic model of their parents. That’s the framework in which reform is failing and the youth are being blamed for it. This is not liberalism in any true sense of the word. It is some weird amalgam of support for capital, baby boomer interests, political opportunism and Catholic values. What social offender is next in line?

I have a simple model of contemporary politics. Parties gain power by occupying the ideological centre and highlighting Opposition policies that sit outside the accepted centrist boundaries of policy-making. This policy “band” gets shifted around a little over time but only by inches. The Budget has smashed Government polls because its solution to national problems falls outside of this band, largely around questions of equity. Policy that pushes the Tony Abbott further outside the band will result in a one-term government.