The fall-out from the 2016 Household, Income and Labour Dynamics in Australia (HILDA) survey continues, following the disturbing revelation that the inter-generational wealth gulf has widened, with the older generations’ wealth expanding rapidly between 2002 and 2014, while the younger generations’ wealth has stagnated (see below table).
When quizzed on the reasons for the growing wealth disparity, the report’s author Roger Wilkins noted the following:
Professor Wilkins said there was no reason the wealth of older households should grow faster than younger households.
“You expect them to be richer, but there’s no structural reason why they should be experiencing greater wealth growth than the other age groups.”
Increasing inequality between generations was due instead to conscious policy changes, such as the decision to halve the tax on capital gains and super tax changes, which disproportionately benefited older Australians, and baby boomers in particular.
“I guess the baby boomers really piled into the investment housing market subsequent to that,” Professor Wilkins said. “They tend to have paid off their homes, so the house price growth helps them a lot more.”
“The 2006 super changes that [Treasurer Peter] Costello introduced gave them a big free kick in terms of tax exempting a lot of their assets. There has been a big shift of assets into super, which is basically a legal tax shelter.”
In other words, you can pin most of the blame for the growing wealth divide on the 50% capital gains tax discount, implemented in 1999, as well as Peter Costello’s raft of superannuation giveaways.
In stands to reason, then, that one of the solutions to bridging the wealth divide is to unwind these tax shelters.
