Australian Actuaries Intergenerational Equity Index — Cracking the Unsolved Generational Equation

All Australians are better off than they were in 2000, but older Australians have seen bigger gains than younger generations, according to our latest Report led by actuaries Hugh Miller, Laura Dixie and Shams Mehry, analysing some of Australia's largest and most robust data sets spanning 25 years.

Australian Actuaries Intergenerational Equity Index: Cracking the Unsolved Generational Equation finds that the gap in wealth and wellbeing between older and younger generations narrowed during the COVID-19 pandemic but is widening again — and could reach record levels within years if current trends continue.

• The wealth gap is widening: Over the past two years, 65-74-year-olds gained an average of $375,000 in household wealth and 45-54-year-olds gained $336,000. Both groups gained more than three times the $98,000 gain made by 25–34-year-olds.
• Housing remains a generational divide: Lower pandemic-era interest rates and government interventions have helped, but the rental burden has increased across age groups and for buyers the ‘Bank of Mum and Dad’ worsens inequity.
• Policy inequity has increased: Government spending has shifted heavily toward older generations, driving the decline in intergenerational equity. At the same time, rising Government net debt means today’s 30-year-olds will bear higher tax burdens than previous generations. 
• Growing social pressures on younger Australians: A long-term trend of decreasing robbery victimisation has tended to most benefit younger people (who are more likely to be victims of crime), but this trend has reversed recently with theft rising to levels not seen for 20 years in some areas. Meanwhile, concerning trends in obesity and mental health are hitting young people hardest, with higher anxiety, lower life satisfaction and a sense that their futures are not within their control.
  

The Report also highlights a range of policy considerations that could help narrow the wealth and wellbeing gap. While there are nearly 30 policy topics touched on, the key themes by domain are:

• Economic and fiscal: Balancing tax and transfer policy across the age curve with reforms to increase taxes incident on older populations with the potential for that to fund reductions on working age people and/or additional government spending.
• Housing: Coordinated action on both the supply and demand side of the housing market to improve affordability alongside improved rights for renters.
• Health and disability: The use of alternative funding models to support value-based care coupled with investment in the mental health sector (both the workforce and expanded services).
• Social: Continued use of social investment principles for intervention programs, policies to address the growing population of prisoners on remand (unsentenced) and further investment in domestic and family violence services.
• Education: Concerted effort to increase school attendance rates, a focus on Science, Technology, Engineering and Mathematics pathways, addressing teacher workforce shortages and university funding and pricing.
• Environment: Ensuring policies are in place to meet the 2035 targets for CO2 emission reductions.

The Actuaries Institute will release two additional papers expanding on the insights from the AAIEI later in the year – an analysis of how support from the tax and transfer system by the different age groups has shifted over time and a deep dive on the housing market.