Inequality between generations – our children deserve a chance

According the lastest Chifley Research, Australia is now above the international average on inequality.


We are less equal than countries like Canada and Germany – and it’s getting worse. 

We used to be one of the most egalitarian countries in the world. In fact, we prided ourselves on it. But this has changed quickly and dramatically. In the past 30 years low-income workers’ wages have gone up 15 per cent while their bosses’ income has gone up almost 60 per cent. The divide between rich and poor is getting obscene.

In NSW this inequality is exacerbated by our housing market. Housing is an essential sector of every economy and in NSW, since the mid 1970’s, the value of the family house has risen by far more than the earnings of the family who live in it. In fact, house value has increased by around 30 per cent, far outstripping the wage rise. The International Monetary Fund (IMF) finds Australia now has the third highest house price-to-income ratio in the world.  

Many families are spending over half their income on mortgage repayments, essentially living in poverty to buy their house.

The high cost of housing is also driving a new form of inequality – between the insiders who have already got into the property market and the outsiders for whom barriers to entry are just too great, particularly when coupled with a HECS debt. Without wealthy parents to help with a deposit, home ownership is increasingly out of the reach of so many young Australians.

And it’s no coincidence. The rise in house prices is a straightforward failure to match supply to demand, coupled with inequitable tax and public policy, and a planning system that makes it hard to build a new house. These are deliberate political decisions which have been shaped by the interests of the incumbent generation.

This inequality between the generations extends into superannuation – the other major form of personal wealth ownership in NSW. Certain super schemes, set up to pay significant pensions to (mostly) baby boomers are no longer available to young employees to join, but these pensions would run out of funds unless the current younger generation contribute to them. The young workers are essentially paying towards gold-plated schemes that they themselves will never benefit from. In fact, with insecure contract work increasingly becoming the norm, younger Australians will never see the true benefits of decent superannuation unless we make changes now.

We see a generation failing to recognise the claims of future generations and instead it harnesses all the powers of modern government to protect its own narrow interest.

It is the baby boomers, born between 1945 and 1965, who have ended up with the valuable houses and the gold-plated pensions. This inequality offends our sense of fairness but it also offends the hope at the heart of the modern Australian social contract that each generation will be better off than the one which went before. This inequality in the ownership of wealth between the generations is now a deep problem in the structure of our society in NSW.

We see a generation failing to recognise the claims of future generations and instead it harnesses all the powers of modern government to protect its own narrow interest. This is the key driver of a new and pernicious inequality.

We must all recognise that inequality matters. Where you are relative to others in our society affects your status, your ability to control your own life, your health and your destiny.

We must consider the effects on family structure of these policies. The family is one of the most effective mechanisms we have for redistributing from rich to poor and across generations.

This is tantamount to arguing that the rich are rich because they are better than the rest of us. What rubbish.

A renewed focus on inequality challenges both political parties. But as the gap in income and wealth widens, the Baird Government appears not to care about it. I have heard members of the government benches argue that wealth is simply a reward for exceptional talent and risk taking. This is tantamount to arguing that the rich are rich because they are better than the rest of us. What rubbish.

There are a series of accidents and chance events which put some people on the path to riches and others on a path that means no matter how hard they work, they will always struggle. The distribution of these rewards is not shaped by some moral principle and we should not defend it by claiming it is.

A pop star or a stockbroking wiz-kid may earn far more than a nurse, a police officer, a labourer or a scientist but the market does not distribute its gains according to some set of moral judgements on relative worth.

Demonising the rich is an understandable but unworkable way out of this problem. But equally, we should not pull our punches to recognise the advantages they enjoy and the policy settings that allow them to rapidly consolidate and extend those advantages.

There are real things to be done, actions to take and policy to implement that will reduce inequality in NSW. These include current Labor policies such as reducing negative gearing in the future, and bringing other polices to the table for discussion, such as looking at increasing stamp duty on investment properties, reintroducing generous first home buys schemes and allowing home loan deposit savings accounts to offset tax. 

Above all, our children must have the chance to participate in our “property-owning democracy” too.

Dr Hugh McDermott MP is the Labor Member for Prospect. He holds a PhD in Law from King’s College London.

Back to Top