Wealth gap widens across generations
OLDER generations are grabbing a growing slice of the nation’s record wealth as their children and grandchildren slip further behind.
An analysis of Australian Bureau of Statistics data stretching back more than 15 years shows that the average net worth of people nearing retirement has grown by seven times as much as 25 to 34- yearolds.
Today’s 55 to 64- year- olds are worth an average $ 1.24 million – an $ 844,000 increase since 2000, while those in their late 20s and early 30s have average net worth of $ 269,000, up $ 120,000 in the same period.
Economists and social researchers say the wealth gap will widen as rising property prices and superannuation balances lock out the youngest workers from building big money quickly.
ABS data shows Australians overall are enjoying record wealth, including more than $ 1 trillion in cash deposits and $ 836 billion in shares. It also shows that super fund balances have surged for older workers but have stagnated for under- 25s.
Economics & Beyond chief economist Jeff Oughton said higher wages of older Australians increased their wealth faster as at least 9.5 per cent of their income was added to their super each year.
“It’s not just rising asset values, it’s the compulsory superannuation system. More is getting saved each week and they are getting wealthier,” he said.
“Average Australians still only retire with $ 150,000 in super but the young Australian just starting work has zero.”
Older people used existing assets such as property and shares as leverage to buy more assets, Mr Oughton said. “All these things support a widening in wealth disparity across generations.”
Social researcher Mark McCrindle said the traditional road to wealth had been through owning a home, “but we have changed the rules of that and younger people aren’t getting that foothold”. “The younger generation have lost out on growth because they don’t own property,” he said.
The factors that created the wealth gap were now locked in, Mr McCrindle said.
“The property owners are the Baby Boomers and older Generation Xers, while the generation locked out of the property market in capital cities are the Generation Ys.”
CommSec senior economist Savanth Sebastian said a transition of wealth was coming in the next couple of decades that would see older generations pass down wealth – mainly to their Baby Boomer and Generation X children.