How pandemic temporarily reduced Australia's wealth gap

Baby boomers may have lost some of their edge in the Australian wealth stakes, according to the latest Australian Actuaries Intergenerational Equity Index, which shows younger Australians closing the gap due to the disruption caused by the COVID-19 pandemic.

Up until last year a record gap existed between baby boomers and younger generations, but while it still exists it no longer as significant.

“2020 was a year like no other for everyone,” according to one of the authors of the Index report, Dr Hugh Miller.

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“The Index shows, perhaps surprisingly, younger people doing slightly better than they have previously, closing what had been a record gap between generations,” he said.

However, Miller said the change was likely to be temporary.

“It reflects, among other things, government support directed towards young people through JobKeeper and JobSeeker payments, which ended in March this year.”

The Index tracks equity over two decades and from 2012 it shows a marked widening of the gap between the generations. The latest iteration shows the gap still close to record levels, with six years - from 2015 to 2020 - showing a gap of more than 40 points. Some of the latest narrowing reflects worsening outcomes for the oldest age cohort, including rising rates of homelessness for older Australians.

Within the Index results, the economic domain showed the pandemic disproportionately affected employment for young people, but temporary government support helped offset loss of income as businesses shut and jobs were lost.

It showed that poverty rates actually fell, with the larger decreases for the youngest cohort. Overall, the number of people expected to be in poverty was estimated to have dropped 13% during the pandemic, compared to an increase of 90% had the government failed to provide additional support. Poverty rates remain high for single, aged pensioners who do not own their own home.

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