House poor, super rich: The one area young Australians are winning

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Make no mistake, when it comes to how younger generations compare financially with older Australians, there are plenty of reasons to take issue and feel as though decades of government policies have left us behind. From record high housing prices and higher education debt to stagnant wage growth that’s failed to keep up with the cost of living and the soaring price of trying to raise a family, these complaints are well documented and valid.

But if the federal government’s most recent projection of how younger Australians will fare in the future is anything to go by, there is one area in which these generations are now thriving by comparison with today’s retirees, and they are on track to massively outperform their elders. The area? Superannuation.

The median super balance for Australians aged between 65 and 69 in 2024 was $204,000; for those in the same age bracket in 2066 – which will be anyone born in 1999 or before – that figure will be $450,000.Getty ImagesAccording to the 2026 Intergenerational Report, which was published last week and offers projections about what life might look like 40 years from now, the number of Australians aged 67 or over (the current age of retirement) will have risen from 4.7 million in 2024 to 9 million in 2066. Yet despite the number of retirees effectively doubling, the report predicts that the number of people accessing the federal age pension is set to fall from 66 per cent today to 52 per cent.

The reason for that fall is, as you may have guessed, our superannuation scheme. The latest Intergenerational Report estimates that where the median super balance for Australians aged between 65 and 69 in 2024 was $204,000, for those in the same age bracket in 2066 – which will be anyone born in 1999 or before – that figure will be $450,000.

While a higher balance is great for retirees on an individual level, the median balance being more than double what it is today is also excellent news for the Australian economy. It’s estimated that due to higher super we will see less reliance on the federal pension to the point where budget spending is expected to fall from 2.3 per cent of GDP to a predicted 1.8 per cent.

Compare that with countries who don’t have as robust retirement schemes in place, such as Britain, where age pension spending is on track to account for 10 per cent of GDP spending in 2060. In Canada, the predicted figure is 8 per cent, and in New Zealand it’s 7 per cent. According to Treasurer Jim Chalmers, thanks to decades of compulsory superannuation, Australia’s spending on pensions as a share of the economy will be the lowest among all OECD nations, freeing up the economy to invest elsewhere.

Of course, an awful lot can change between now and four decades’ hence, and none of the seven intergenerational reports that have been published since treasurer Peter Costello introduced them back in 2002 can be treated like a crystal ball.

The inaugural Intergenerational Report, for example, considered what life would be like in 2042, but failed to accommodate the deep and long-lasting economic impacts of the global financial crisis of 2007 to 2009. Nor did the 2015 edition of the report, which cast forward to 2055, foresee the COVID-19 pandemic that would hit five years later – or the profound economic impact that would have for Australians.

Just because something can’t predict the future down to a tee doesn’t mean it isn’t informative, though. On one hand, news that more people are on track to retire with superannuation balances double that of their grandparents is great news. But it’s also true that more people than ever are retiring with mortgages, that a large portion of the population is now unable to afford to own property, and that we’re living for longer. All of these things mean that the ways in which we’re using our retirement funds, and the amount of time that money will have to cover, is changing and will almost certainly change again by the 2060s.

However, to my mind that’s what makes the report’s predictions on superannuation so important for the time we’re in right now.

Earlier this month, One Nation proposed a scheme that would allow Australian workers to divert 3 per cent of their compulsory 12 per cent super contributions directly to their accounts today rather than putting it aside for their retirement for three years. For a full-time worker on an average wage, this would equate to about $44 a week or $2288 a year, and just under $7000 in three years.

The Super Members Council estimates that, under this scheme, people would have about $25,000 less in the average retirement fund by the time they were done working. That might not seem like much in the grand scheme of things, but when you spread the amount across the 9 million people who will be leaving the workforce come 2066, it suddenly adds up to $225 billion that the government needs to find so people aren’t worse off.

For its part, the Coalition has said it’s also open to changing how superannuation is accessed and used. At the last federal election, the Coalition proposed allowing first-home buyers to withdraw up to $50,000 of superannuation to use towards a house deposit, which economists universally panned.

Last week, opposition housing spokesperson Andrew Bragg (who previously promoted the early access scheme) floated a new proposal that would allow people to use their superannuation as collateral for a mortgage or to increase the size of their mortgage loan to an amount they may not otherwise be able to borrow.

While it’s true that getting into the housing market, and being able to have a mortgage paid off before retirement, is a fundamental pillar in ensuring people have a safe and comfortable retirement, what the Coalition and One Nation proposals seem to miss are two truisms that have been obvious from every Intergenerational Report to date.

The first is that a lot of things can change between now and when we stop working – and between now and the next 40 years, for that matter. The second is: should we be lucky enough to make it to retirement age, we’re going to need money in the bank that acts as an equivalent income when we get there.

To make that amount smaller, or to put it at risk in any way, isn’t solving a problem, it’s just kicking the can down the road and putting generations who are already behind in an even worse position at the end of their working lives.

Victoria Devine is an award-winning retired financial adviser, a bestselling author and host of Australia’s No.1 finance podcast, She’s on the Money. She is also founder and director of Zella Money.

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