Older people in Australia have much more wealth than the young and the gap is growing. Photo: Pexels.
Intergenerational inequality is once again being debated in Australia, a topic that always leads to the conclusion young people are ‘screwed’ by our tax and welfare system.
The finger of blame is often pointed towards Boomers in a country where the average retiree household has about three times the wealth of households of those aged between 25 and 40
But in a democracy, everyone can influence government. It’s a simple truth that one demographic is doing a much better job than another.
While it’s obvious that people who have had more years to earn and save will have more wealth, this gap is widening — thanks to policy settings that increasingly favour the old over the young.
For a start, we tax wage and salary earners at a much higher rate than we do those who make money out of assets. Personal income tax is the single greatest source of government revenue, while only a small fraction comes from superannuation funds and investment properties, which are laced with concessions and discounts.
This naturally advantages those older Australians, who are more likely to own property and stocks. It hurts younger people more likely to be renting and relying on their fixed salary job as their only source of income.
Former treasury secretary Ken Henry provided a blueprint to reform the tax transfer system 15 years ago, pushing for a system that eased the burden on wage earners and instead gained revenue by taxing land and natural resources.
More recently, Dr Henry has lamented the fact that more of his proposals were largely ignored, stating that the system is more unfair on young people now than it was in 2010.
Favourable tax treatment of investment is one factor that has caused the price of homes to skyrocket. In 1975, the average Canberra house cost $33,600, but it’s now well over a million dollars. This benefits older Australians who were able to buy homes when they were affordable, while locking many millennials and Gen Z out of the property market forever.
Our welfare system is also playing its part in this growing inequality. In the 1970s, the aged pension and the dole payment for job seekers were the same level. Since then, the aged pension has grown at a much faster rate and is around $280 more a fortnight than an unemployed person receives.
All of the above has led to the Australian economy being described as a ‘young people screwing machine’, with many commentators bemoaning the unfairness of it all.
But all it proves is that older people are better than the young at organising, getting involved in the political system and influencing policy outcomes.
Former Independent MP Tony Windsor once said the world is run by those who turn up. If you’re concerned about the world you live in, you need to get up and do something about it, he says.
Grey-haired Australians are the ones who are turning up in numbers. They’re the ones who hassle and ring up their local MP offices. They write submissions and attend parliamentary inquiries. They form groups, organise protests and pressure governments.
We always hear from lobby groups like the Retirement Living Council, the Association of Superannuation Funds of Australia, National Seniors Australia and Australian Independent Retirees when there’s a threat to the status quo. This pressure often sees politicians back down when contemplating meaningful reform.
Like it or not, that’s the way the system works in Australia. Policymakers pay attention to those who give them attention.
We don’t see young people marching in the streets because they can’t afford to buy a house or pay a higher rate of tax than millionaire property mogul retirees. Perhaps that’s what needs to happen before things start to change.
