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Baby boomers prosper ‘at expense of the young’

Baby boomers are taking a greater share of national wealth at the expense of the young, a report has found.

Older age groups are richer now than they were a decade ago, but 25- to 34-year-olds are worse off, according to the new research.

For the first time, younger Australians could have a poorer standard of living than their parents, in part because they are subsidising older age groups, said independent think-tank Grattan Institute.

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The Institute’s report, entitled The Wealth of Generations, found that the average 65- to 74-year-old household was $215,000 richer in real terms in 2011-12 than was a household of that age in 2003-04. An average 55- to 64-year-old household was $173,000 better off over the same period.

In contrast, the average 35- to 44-year-old household was only $80,000 richer. Worst affected were 25 to 34 year olds who had less wealth than people of the same age eight years before – even though they saved more than did people of that age in the past.

Grattan Institute CEO John Daley told The New Daily that older Australians “are definitely getting wealthy at the expense of the young”.

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Housing is one of the big difference between older and younger Australians. Photo: Shutterstock

About the house

A contributing factor was the property market boom that made older home owners richer, but forced the young to rent or take out crippling mortgages, he said.

“Baby boomers are entitled to sell their homes for whatever the market will bear, so I don’t think we can blame them,” Mr Daly said.

But very rapid rises in house prices have been a “windfall” for baby boomers that “younger generations are ultimately paying for”, he said.

Other factors were superannuation tax concessions, taken up mostly by older age groups, and increasingly expensive aged care and retiree pensions funded by tax revenue and national debt. The burden of payment fell heaviest on high-income 45 to 65 year olds, but Gen Y also contributed, he said.

The government increased the amount it spent on older households over the past decade, from $20,000 per household aged over 65 to approximately $30,000, he said.

“All of those things are not helping the situation we’re seeing in terms of younger households really struggling to build their wealth,” Mr Daly said.

Think of the young

The Foundation for Young Australians (FYA) chief executive Jan Owen described the report as “a wake-up call”, and said Australia must include both young and old in the national economic debate.

“All of the policy discussions for the last 20 years have been about the ageing population, and we believe we need to re–task those discussions to be about an investment in our young people,” Ms Owen said.

Younger Australians will be worse off than their parents in the areas of debt, housing and unemployment, a recent FYA report predicted.

“There is a real genuine concern about what the future looks like for young people in this country,” Ms Owen said.

No simple answers

COTA Australia, the peak body representing older Australians, agreed that inequality is a problem, but said it should not be characterised as “a simple one-generation-versus-another issue”.

COTA chief executive Ian Yates told The New Daily that older Australians cannot be solely blamed for the rise in national debt, are not the only generation requiring costlier health care, and that many in this generation are house rich but income poor.

“Portraying it as just intergenerational inequality is a bit simplistic,” Mr Yates said.

“Why is it that older people are the cause of the debt when there are hundreds of millions of dollars in tax concessions out there which are not targeted particularly at older people — family trusts, negative gearing, all those areas?” he asked.

But tax concessions on superannuation are “inequitable”, Mr Yates acknowledged.

“We have indicated quite clearly to the public and to government that we need to look at retirement incomes as a whole, including looking at costs of and distribution of tax concessions on superannuation,” he said.

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