The release of ME’s Household Financial Comfort Report shows older Australians are more financially comfortable, whilst younger Aussies are struggling.
The report has found that the financial comfort levels of baby boomers and retirees has been on the rise for the past four years, due to steadily improving property prices and increasing superannuation balances.
However, these same property price rises mean that many young Australian families are facing housing affordability issues.
“The gap in financial comfort between older and younger Australians is widening – the younger generations are going sideways while the older generations are seeing it improve,” said consulting economist for ME and co-author of the report Jeff Oughton.
The rising financial comfort of older Australians is a good indicator that the superannuation system is working. However, there is still a general feeling that current rules mostly benefit high-income earners. Recent rule changes, which include the impending abolition of low-income super contributions in 2017, the tightening of Age Pension means testing, and deferring the rise in compulsory super payments, will hit low- to middle-income earners hardest.
“These policies all have winners and losers, and most of the losers are on lower to middle incomes and that tends to be women as well,” said Industry Super Australia director of policy Zak May. “The changes and ideas coming from government raise concerns about the commitment to the superannuation system, and helping everyone have a decent retirement.”
According to the report, retirees have an average net wealth of $577,000, while young families have around $366,000.
Young families are having difficulty breaking into the first home buyers’ market and, as a result, are more likely to rent. “The lower comfort among renters may be a reflection of the difficulty first home buyers are experiencing getting into the residential property market. Both house prices and rents are growing faster than incomes,” the report states.
Mr Oughton said that although the wealth of older Australians will eventually be shared through wills and estates, “they are very slow events”. However, it seems there is a growing number of parents and grandparents financially helping the following generations prior to intergenerational transfers.
“Some older people shake the younger peoples’ hands with a warm hand today rather than a cold hand later,” said Mr Oughton.
Are you financially comfortable? Is your current financial situation reflected in this report? Do you worry about your family’s financial future? Have you lent, or would you lend, your children money?