Here’s something you may have guessed already: barring drastic policy overhauls, young Aussies will face a lower quality of life than earlier generations for the first time in decades, and it’s “not a problem caused by avocado brunches or too many lattes.”
That’s according to the Grattan Institute‘s fresh Generation Gap report, released yesterday, which presents a pretty gloomy assessment of the years to come.
While older Australian are by and large better off than previous generations were at the same age, the same is not true for Millennials and Gen Z Aussies, whose net worth has dipped overall in comparison to their forbears. The generational wealth gap is only getting bigger, folks.
“All but the richest households headed by someone younger than 35 have lower real net wealth in 2016 than similar households in 2004,” the think tank states.
In short, the report states older Australians have inherited a financial system geared in their favour at the detriment of younger folks.
“Working-age Australians are underwriting the living standards of older Australians to a much greater extent than the Baby Boomers did for their forebears, straining the ‘generational bargain’ to breaking point,” the report states.
The exact causes of that strain are as numerous as they are depressing.
There’s the housing market, which has provided bulk capital gains to older homeowners while squeezing out younger buyers. There are the tax concessions heaped on folks who can afford to build a property portfolio. Then there’s the fact that buyers entering the market in 2019 are simply accruing more debt than their forebears did, despite lower interest rates.
There’s the fact we have an ageing population, ergo, a growing number of people eligible for the aged pension and public health expenses associated with ageing, coupled with low (or non-existent) wage growth among working Millennials and Gen-Z folks – let alone the worrying figures of young Australian workers already experiencing unemployment.
There’s the problem of inheritances, a cornerstone element of intergenerational wealth transfer, which the report claims overwhelmingly helps those who are already financially secure.
There’s also a token acknowledgement of the climate crisis, which will impact Australia’s economy in ways we can’t even bear to predict.
At least there’s this morsel of vindication, aimed at the ‘avocado toast’ set:
Younger households are also saving more. They have made sacrifices to do this. Spending on non-essentials such as alcohol, clothing, personal care, and household services and furniture is lower for younger Australians today than three decades ago.
“In the absence of enduring economic good fortune and historically abnormal spending restraint, Australia will be left with growing structural budget deficits over the next decade,” the report states.
“The intergenerational pressures built into the budget are coming home to roost.”
The proposed solutions including slashing tax concessions which overwhelmingly benefit older Australians with established wealth, bumping up housing stock and density to lower prices, and even levying a fee on inheritances. Given our nation’s entrenched position on shifting support to younger Aussies, don’t expect any of those changes to arrive before it’s already too late.
Read the full report here.
Nearmy / Image: Tracey Nearmy / Getty Images