Modern Australian
Men's Weekly

.

For the first time in centuries, we're setting up a generation to be worse off than the one before it

  • Written by Kate Griffiths, Senior Associate, Grattan Institute

Each new generation of Australians since Federation has enjoyed a better standard of living than the one that came before it. Until now. Today’s young Australians are in danger of falling behind.

A new Grattan Institute report, Generation gap: ensuring a fair go for younger Australians, reveals that younger generations are not making the same economic gains as their predecessors.

Economic growth has been slow for a decade, Australia’s population is ageing, and climate change looms. The burden of these changes mainly falls on the young. The pressures have emerged partly because of economic and demographic changes, but also because of the policy choices we’ve made as a nation.

Older generations are richer than before, younger ones are not

For much of the past century, strong economic growth has produced growing wealth and incomes. Older Australians today have substantially greater wealth, income and expenditure compared with Australians of the same age decades earlier.

But, as can be seen from the yellow lines on this graph, younger Australians have not made the same progress.

For the first time in centuries, we're setting up a generation to be worse off than the one before it The graph shows that the wealth of households headed by someone under 35 has barely moved since 2004. It’s not young people’s spending habits that are the problem – this is not a story of too many avocado lattes (and yes, they are a thing). In fact, as the graph below shows, while every age group is spending more on essentials such as housing, young people are cutting back on non-essentials: among them alcohol, clothing, furnishings and recreation. For the first time in centuries, we're setting up a generation to be worse off than the one before it Wage stagnation since the global financial crisis and climbing underemployment have hit young people particularly hard. Older people tend to be better cushioned because they have already established their careers and are more likely to have other sources of income. If low wage growth and fewer working hours becomes the “new normal”, we are likely to see a generation emerge into adulthood with lower incomes than the one before it. It has already happened in the United States and United Kingdom. Our generational bargain is at breaking point Budget pressures will exacerbate these challenges. Australia’s tax and welfare system supports an implicit generational bargain. Working-age Australians, as a group, are net contributors to the budget, helping to support older generations in their retirement. They’ve come to expect that future generations in turn will support them. But Australia’s population is ageing – which increases the need for government spending on health, aged care and pensions at the same time as there are relatively fewer working age people to pay for it. Demographic bad luck is one thing (some generations will always be larger than others) but policy changes are making the burden worse. Read more: Expect a budget that breaks the intergenerational bargain, like the one before it, and before that A series of tax policy decisions over the past three decades – in particular, tax-free superannuation income in retirement, refundable franking credits, and special tax offsets for seniors – mean we now ask older Australians to pay a lot less income tax than we once did. Disturbingly, these and other changes mean older households now pay much less tax than younger households on the same income. For the first time in centuries, we're setting up a generation to be worse off than the one before it Added to this have been substantial increases in average pension and health payments for households over 65. It has meant that net transfers – government benefits minus taxes – have dramatically increased for older households but not for younger ones. The overall effect has been to make current working Australians increasingly underwrite the living standards of retirees. For the first time in centuries, we're setting up a generation to be worse off than the one before it A typical 40-year-old today contributes much more towards the retirement of others through taxes than did his or her baby boomer predecessors. As it happens, it is also more than the typical 40-year-old is contributing to his or her own retirement through compulsory super. For the first time in centuries, we're setting up a generation to be worse off than the one before it This can’t be what Australians want Most Australians want to leave the world a better place for those that come after them. It’s time to make sure we do it. Lots of older Australians are doing their best, individually, supporting their children via the “Bank of Mum and Dad”, caring for grandchildren, and scrimping through retirement to leave their kids a good inheritance. These private transfers help a lucky few, but they don’t solve the broader problem. In fact, inheritances exacerbate inequality because they largely go to the already wealthy. We need policy changes. Reducing or eliminating tax breaks for “comfortably off” older Australians would be a start. Read more: Migration helps balance our ageing population – we don't need a moratorium Boosting economic growth and improving the structural budget position would help all Australians, especially younger Australians. It would also put Australia in a better position to tackle other challenges that are top of mind for young people, such as climate change. Changes to planning rules to encourage higher-density living in established city suburbs would help by making housing more affordable. Just as a series of government decisions have contributed to the challenges facing young people today, a series of government decisions will be needed to help redress them. Every generation faces its own unique challenges, but letting this generation fall behind the others is surely a legacy none of us would be proud of. It’s time to share the burden, and perhaps an avocado latte while we’re at it.

Authors: Kate Griffiths, Senior Associate, Grattan Institute

Read more http://theconversation.com/for-the-first-time-in-centuries-were-setting-up-a-generation-to-be-worse-off-than-the-one-before-it-121983

Powering Shepparton’s Businesses: Expert Commercial Electrical Services You Can Count On

When it comes to running a successful business, having reliable, compliant, and efficient electrical systems is non-negotiable. From small retail ou...

Maximise Efficiency: Cleaner Solar Panels for Optimal Performance

Solar panels are a smart investment in energy efficiency, sustainability, and long-term savings—especially here in Cairns, where the tropical sun ...

7 Common Air Conditioner Issues in Melbourne – And How to Fix Them

Image by freepik Living in Melbourne, we all know how unpredictable the weather can be. One moment it’s cold and windy, the next it’s a scorchin...

Powering Palm QLD with Reliable Electrical Solutions

Image by pvproductions on Freepik When it comes to finding a trustworthy electrician Palm QLD locals can count on, the team at East Coast Sparkies s...

The Smart Way to Grow Online: SEO Management Sydney Businesses Can Rely On

If you’re a Sydney-based business owner, you already know the digital space is crowded. But with the right strategy, you don’t need to shout the...

What Your Car Says About You: The Personality Behind the Vehicle

You can tell a lot about someone by the car they drive—or at least, that’s what people think. True Blue Mobile Mechanics reckon the car says a l...

The Confidence Curve: Why Boudoir Photography Is the Empowerment Trend You Didn’t Know You Needed

Boudoir photography has been quietly taking over social feeds, Pinterest boards, and personal milestones—and for good reason. It’s not just abou...

Understanding Level 2 Electricians: Why Sydney Residents Need Licenced Experts for Complex Electrical Work

When it comes to electrical work around the home or business, not all electricians are created equal. In Sydney, particularly when you're dealing wi...

Retirement Anchored in Model Boat Building for Waterford’s Doug Unsold

WATERFORD — When Doug Unsold sees his ship come in, it’s usually one he’s crafted with his own hands. The 67-year-old retiree from Waterford ...

The Science Behind Alarm Clocks and Your Circadian Rhythm

Waking up on time isn’t just about setting an alarm—it’s about working with your body, not against it. At the heart of every restful night and...

How to Use Plants to Create a Calming Atmosphere in Your Home

In today’s fast-paced world, cultivating a calm, soothing environment at home has never been more important. Whether you live in a busy urban apar...

How Maths Tutoring Can Help Students Master Maths

Mathematics can be a daunting subject for many students, often causing stress and frustration. However, maths tutoring has proven to be an effective...

Refurbished iPads Are Better Than New Ones (Here's Why)

Image by rawpixel.com on Freepik Apple's refurbished iPad program has quietly become one of the best deals in tech. While everyone obsesses over the ...

Your Guide to Finding the Right GP: What Perth City Doctors Offer Today

Choosing a General Practitioner (GP) is one of the most important health decisions you’ll make. Luckily, Perth’s vibrant CBD now hosts a new ge...

Why Every Mining Operation Needs a Robust Safety Management System

Mining is one of the backbones of the Australian economy, particularly in Western Australia. Back in 2019-20, mining contributed 10.4% of Australia...

Australian Classic Literature Enjoys Resurgence

Welcome back to the good old days of storytelling! As the modern world becomes increasingly more demanding, returning to childhood favourites offers...

How to Choose the Right Lawyers in Sydney for Your Situation

When faced with a legal issue, selecting the right legal representation can make all the difference. Whether you're dealing with a personal injury, ...

Building a Governance Model for Headless Content Management at Scale

Image by pch.vector on Freepik There's never been a better time to implement a headless content management system (CMS) to gain the flexibility and ...