OLDER Australians are becoming more financially comfortable while younger generations stagnate, and proposed changes to superannuation rules are unlikely to close the widening generation gap.
New research from ME has found that the financial comfort levels of Baby Boomers and retirees has been rising for the past four years, largely thanks to growing house prices and superannuation balances.
However, Generation X and Y households have remained relatively static, says MEs Household Financial Comfort Report, released today.
Housing affordability issues are shutting the door on property ownership for many young Australians, and while superannuation rule changes are likely to be announced soon, many of the proposals being floated will hit younger savers rather than retirees.
The gap in financial comfort between older and younger Australians is widening the younger generations are going sideways while the older generations are seeing it improve, ME consulting economist Jeff Oughton said.
Superannuation ideas that dominated media attention last week included scrapping planned rises to compulsory super, and reducing some tax breaks that would affect millions of middle-income earners as well as wealthier workers.
Mr Oughton said richer Australians should be better able to manage any wind-bank of super tax breaks.
Industry Super Australia director of policy Zak May said the rising financial comfort of older Australians showed that superannuation was working, but there was broad recognition that current rules were poorly targeted, benefiting high-income people the most.
However, recent rule changes such as abolishing the low income super contribution from 2017, tightening age pension means testing and delaying the rise in compulsory super payments were hitting low and middle income earners, he said.
These policies all have winners and losers, and most of the losers are on lower to middle incomes and that tends to be women as well, Mr May said.
The changes and ideas coming from government raise concerns about the commitment to the superannuation system, and helping everyone have a decent retirement.
The ME report says households still rely largely on employer contributions to super and less than 20 per cent tip in extra money. It says retirees have average net wealth of $577,000 while couples with young children have $366,000.
Renters have low levels of financial comfort, reflecting difficulties buying a house. Both house prices and rents are growing faster than incomes, particularly in some of the major capital cities, it says.
Mr Oughton said intergenerational transfers through wills and estates would share the wealth of older Australians but they are very slow events, although a growing number of parents and grandparents were helping out financially earlier than before.
Some older people shake the younger peoples hands with a warm hand today rather than a cold hand later, he said.