Can Parents Still Deliver On The Promise Of Higher Living Standards For Their Children?
My mum always told me when I was growing up that all she wants is for my brother and I to have it better than they did. Unfortunately, that may not be as easy as it sounds for Australia’s current young generation.
"The generational bargain, under which each generation of working Australians supports retirees while still improving its own standard of living, is at risk," John Daley, Grattan Institute CEO, shared.
This promise is at risk Down Under, with various factors like ballooning spending on older people funded by deficit budgets causing the concern, as well as the housing boom and an increase of government payments to pensions as well as services for older generations. The Wealth of Generations, a new report from Grattan Institute, credits the elder population with capturing a growing share of the nation’s wealth. Meanwhile, younger Australians’ wealth growth has stagnated, leading to the idea that this generation will have a lower standard of living than that of their parents.
Daley credits this downward trend to deficit spending.
"For every year that we run a $40 billion deficit, which is roughly where we've been for the last few years, that imposes an extra $10,000 of tax liability on a younger household over their lifetime," said Daley.
Daley is calling for the government to address the structural deficit within the budget, but we won’t know until the next budget is revealed if the deficit will be a concern or focus of Abbott. To once again get to a budget balance, Daley believes that governments should change the eligibility for age pension, change tax concessions for superannuation—mainly, reduce them—and increase taxes on assets. Although the opposition to this idea shares that the current generation of young people might benefit from their parents’ fortune through inheritance, inheritances are often given later in life and tend to go to people who are already financial stable and considered better or well off compared to a majority of the population.
Information sourced from Sunday Morning Herald.