The fake intergenerational war

Everything is the fault of older Australians. They are greedy, rich and ruining life for millennials. Yep, here we go again.

It seems somewhat ironic that in the week that a joint Fairfax-ABC report on retirement villages revealed systematic financial and institutional abuse of older Australians, that another commentator finds it necessary to stoke a fake intergenerational war based on misinformation.

So what’s this all about?

On Monday, The Guardian published an article by John Daley and Danielle Wood from the Grattan Institute.  Titled Malcom Turnbull be warned the young are coming, the article predicts an Australian political youthquake following the high turnout by younger people who voted Labour in the June 2017 British election. Such a turnout, we are told, is because UK millennials are faring so poorly on many economic indicators, including housing (un)affordability, university debts and lower incomes. Additionally, it stated that ‘young people will inherit sizable government debts and a pension and social care system many regard as unstainable (sic) given the ageing population’.

The article goes on to quote from the Grattan Institute’s own 2014 report, The Wealth of Generations, stating that, over the past decade ‘older households captured most of the growth in Australia’s wealth’. Later that day, when interviewed by host Patricia Karvelas on Radio National’s drive program, Mr Daley said that older households paid less income tax and that the Age Pension has ‘gone up significantly faster than wages’.

Enough! Stop! We really do need to challenge these misleading statements before they add further fuel to a fake intergenerational war.

And, more importantly, separate the issues over which individuals do exercise a degree of control, from those political changes that the current government refuses to make.

Let’s start with the Age Pension. As noted, Mr. Daley did not define the period during which he believes that the Age Pension has risen significantly faster than wages. YourLifeChoices has been covering all aspects of retirement income for 18 years, and we are not aware of this happening.

The last major boost to Age Pensions was in 2008 just after the Rudd Government came to power. More recently, the indexation of Age Pensions on 20 March 2017, saw the single Age Pension increased to $808.30 – a total of $13.50 extra per fortnight, from the 20 March 2016 indexed rate. This rise equates to 1.7 per cent, a considerable amount lower than the 3.3 per cent rise received by those on the minimum wage. Indeed, if an increase of 3.3 per cent had been awarded to those on the Age Pension over the past 12 months, the payment would be $821 per fortnight.

Also, the Age Pension (after CPI is applied) is benchmarked to the MTAWE, so how is it possible to have increased more than wages? The single rate of pension equals 27.7 per cent of the MTAWE and the couple combined rate is equal to 41.76 per cent. 

As calculated by Matt Grudnoff, Senior Economist at The Australia Institute (TAI), if this is tracked as a comparison from when the clean energy supplement was introduced, there is negligible difference in increase between the Age Pension and the Wage Price Index (WPI):


Another measure of the relatively low wealth held by the majority of older households is the amount of superannuation at retirement age. The median superannuation savings for workers approaching retirement in 2014 was less than $100,000. (ISA) So if household wealth for older Australians is ballooning, this is probably tied, for most, to their one major asset – the family home. Its value is calculated at today’s inflated house prices, and could just as easily come crashing down tomorrow.

Lastly, we know from the YourLifeChoices Retirement Affordability Index research that those on an Age Pension who are renters (at least 15 per cent of retirees) are doing it tough. They are spending about a third of their income on rising rental costs and cutting back on health services and social activities to live within their limited means. Those on a pension living in their own homes are barely covering costs, but are able to afford the occasional meal out. Put simply, retirees on a full or part Age Pension in Australia are hardly living the life of Reilly.

But let’s not rely on YourLifeChoices research alone. A new study by researchers at the University of Birmingham tells us that fears of ‘intergenerational tension between young and old are unfounded’ and that ‘baby boomers vs young generation’ is NOT the problem with financial inequity. Key findings in the study note that:

  • families are determined to support their own members financially
  • some families are much better placed than others to provide help – reinforcing the gap between rich and poor

It also found that an alternative means of reducing financial inequality over the longer term could be to reform wealth taxation.

It’s clearly time to introduce some facts into the discussion about wealth, opportunity and who is suffering. There is no intergenerational divide, as Mr Daley claims, but a very real divide – some might say a chasm – along the lines of haves and have nots, of life course advantage and disadvantage. We know that the rate of home ownership for younger Australians is decreasing.

But it’s also worth remembering that our Age Pension is the third meanest out of the 34 OECD nations with the proportion of GDP spent on the pension in 2014-15 at 2.9 per cent. It is only projected to rise to 3.6 per cent by 2055, according to the most recent Intergenerational Report (IGR 2015). This makes us the third meanest nation in the world, sitting behind Korea and Mexico.

Let’s be very clear that our older citizens are not a burden on our economy. And younger generations are not being sent broke by money spent on the Age Pension. In fact, many older Australians have compromised their own retirements by transferring money and assets to younger family members, to help them get a better start. This includes cash, house deposits and assistance with university debts, not to mention the untold hours of free grandparent supplied babysitting. Whilst older Australian may have enjoyed free university education, many are now paying fees on behalf of their children.

So let’s not take up the cudgels in this fake intergenerational war incited by economists in search of a headline. Let’s acknowledge that legislation which favours those who are better off – negative gearing, capital gains tax reductions, overly generous superannuation concessions – is simply unfair. And that it is up to our government to have the political will to fix this, and fix it sooner rather than later. Beating up pensioners is not going to help younger Australians any time soon.

Related articles:
Super-dooper spin
Smashed avo fightback
Missing the point on super

Written by Kaye Fallick


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