Proof old people screw the rest of us
Poorer young Australians have way less wealth than their predecessors three decades ago and are far less likely to own a home, according to a report out today.
The Grattan Institute's study Generation Gap: Ensuring a fair go for younger Australians reveals while younger Aussies struggle to stay afloat, wealth for the older generation has grown by more than a staggering 50 per cent.
And it's not because Millennials are splashing their cash on expensive breakfasts.
"This is not a problem caused by avocado brunches or too many lattes," the report's lead author Danielle Wood said.
The report actually found younger people were spending less on non-essential items such as alcohol, clothing and personal care, and more on necessities such as housing, compared with three decades ago.
In fact, the research discovered today's young Australians are in danger of being the first generation in memory to have lower living standards than their parents' generation.
The wealth of households headed by someone under 35 has barely moved since 2004.
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The report fond economic pressures on the young had been exacerbated by recent wage stagnation and rising underemployment.
Older households are better cushioned from low wage growth because they are more likely to have other sources of income.
"If low wage growth and fewer working hours is the new normal in Australia, then we could have a generation emerge from young adulthood with lower incomes than the one before it at the same age," Ms Wood said.
"This has already happened in the US and the UK."
Ms Wood said young Australians would also bear the brunt of growing pressures on government budgets.
"Because the population is ageing, governments will have to spend more on health, aged care and pensions," she said.
"But there will be fewer working-age people for every retired person to pay for it."
The number of 15-64 year-old Australians for every person aged 65 or older fell from 7.4 in the mid-1970s to 4.4 in 2014-15 and is projected to fall further to 3.2 in 2054-55.
Ms Wood said governments had "supercharged" these demographic pressures by introducing generous tax concessions for older people.
The report revealed the share of households over 65 paying tax had halved over the past two decades, with older households paying substantially less tax on the same income as younger households.
"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," Ms Wood said.
"Inheritances are not a magic bullet for young people - they tend to come later in life and are much more likely to go to people who are already wealthy."
Ms Wood said policy changes were required.
"Policies to boost economic growth - such as tax reform, better education and smarter infrastructure spending - are wins for all but especially for the young," she said.
"Changes to planning rules to encourage higher-density living in established city suburbs would make housing more affordable.
"And a fair go for younger people means winding back age-based tax breaks for 'comfortably off' older Australians.
"Just as policy changes have contributed to pressures on young people, they can help redress them. The time for action is now - none of us wants the legacy of a generation left behind."
The report comes after another by the Australian Housing and Urban Research Institute found the number of emerging young adults living with parents increased from 58 per cent to 66 per cent between 2003-04 and 2015-16.
For early adults the figure jumped from 14 per cent to 20 per cent, and the number living in share houses rose from 11 per cent to 13 per cent.
The report, Young Australians and the housing aspirations gap, released on Thursday revealed only 17 per cent of Australians aged 18-24 lived independently in 2015-16, with about two-thirds living with parents.
Meanwhile, about a third of Aussies aged 25-34 remained living with or moved back in with their parents or lived in shared housing.
But the researchers from Swinburne and Curtin universities found despite house prices and rents rising ahead of incomes, 18-24 year olds still held a "blind optimism" for home ownership.