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The Actuaries Institute has backed the Government's Intergenerational Report, saying it strengthens the case for continued policy reform.
The institute linked the report's findings to its own work on wealth, housing, tax, climate, artificial intelligence and retirement incomes, arguing that pressures on younger Australians are building across several parts of the economy at once.
Elayne Grace, Chief Executive Officer of the Actuaries Institute, said the report sets out the scale of the challenge over coming decades.
"The Intergenerational Report highlights the scale of growing pressures on intergenerational equity over coming decades. It makes clear that improved living standards from one generation to the next depend on governments committing to ongoing reform," Grace said.
She said the issues identified in the report should not be treated in isolation.
"Housing, tax, climate, energy transition and AI, all spotlighted in the Intergenerational Report, are not separate conversations. They compound each other across generations. A young Australian locked out of home ownership faces a tax system tilted towards existing assets, rising climate costs and a labour market being reshaped by AI. The institute has examined each of these pressures and will keep building the evidence base so they can be tackled together," Grace said.
Wealth gap
The institute said its Australian Actuaries Intergenerational Equity Index complements the Government's long-range report. The index tracks 25 indicators across six areas, including housing, health, the economy and the environment, and compares outcomes across three age groups since 2000.
According to the institute, the index shows that over the past two years Australians aged 65 to 74 gained an average of $375,000 in household wealth, compared with $98,000 for those aged 25 to 34. It warned the overall gap could return to record levels within a few years.
"The intergenerational reports are important because they provide an opportunity to think through the long-term consequences of our current policy settings. We welcome the report's deeper discussion of issues such as climate and housing because they are critical to wealth and wellbeing, as reflected in our index," said Dr Hugh Miller, Member of the Actuaries Institute.
"Improving the long-term wealth and wellbeing of Australians means thinking through the needs of each generation. The data clearly show real household wealth has grown unevenly, and the cost of net government debt to future generations needs careful consideration. Mental health, housing, climate and the environment all remain areas requiring attention," Miller said.
Tax and housing
The institute also used the report to highlight findings from its analysis of Australia's tax and transfer system. That work found government spending follows a U-shaped pattern by age, while taxation peaks for working-age Australians.
It said two people each earning $100,000 in gross income can end up with net incomes that differ by more than $42,000 depending on age, after taxes, transfers and government spending are taken into account. According to the institute, some of that reflects higher healthcare spending for older Australians, but it also reflects differences in benefit eligibility and tax settings.
"Our work shows there have been limited real income gains for younger people over a decade, and on a per capita basis tax and transfer settings are geared towards supporting older Australians. As the IGR shows, wealth accumulation has been strong for people with existing assets and more older people are working longer. Continuing to evolve our tax and transfer system is important, particularly through a long-term lens," Miller said.
Housing featured strongly in the institute's response, with lower ownership rates among people aged 25 to 44 identified as a source of weaker wealth accumulation and broader equity concerns.
"The institute's intergenerational work shows we still have some factors in our favour. Our population is still relatively young, we have a targeted welfare system and a world-class superannuation system. All of these mean our fiscal future is better than many other advanced economies. These advantages are not accidental, but continued policy work will be needed over the coming decade.
"Housing remains a key community concern, with clear intergenerational implications. Lower ownership rates for people aged 25 to 44 have implications for equity and wealth. There are also opportunities to better support renters through improved government policy design, given how expensive the market is," Miller said.
Climate and AI
On climate, the institute said the report recognises that physical damage, transition risks and rising disaster costs will place greater strain on public finances and households. It also noted Treasury's modelling covered only four physical damage channels and did not provide a full assessment of the risks identified in the National Climate Risk Assessment.
"The Intergenerational Report recognises that climate impacts will impose increasing fiscal, economic and social costs over coming decades, and that a disorderly global transition would increase economic costs for Australia. Treasury also notes that its modelling is based on only four physical damage channels selected on the basis of available data and analytical methods, and is not a comprehensive assessment of the climate risks identified in the National Climate Risk Assessment.
"It further notes that more comprehensive global assessments have found significantly larger economic impacts from climate change. The report also recognises that rising disaster costs will place increasing pressure on public finances, including through disaster recovery expenditure and impacts on insurance affordability. Investment in disaster risk reduction, resilience and adaptation will therefore play an increasingly important role in reducing future losses," said Dr Ramona Meyricke, Chair of the Actuaries Institute's Climate and Sustainability Practise Committee.
She added: "The institute's Mobilising Investment for Climate Adaptation report highlights that managing these long-term climate risks will require a step change in adaptation investment, supported by better investment frameworks, stronger public-private collaboration and a clearer national strategy for resilience," Meyricke said.
On artificial intelligence, the institute said the report reflects both the economic opportunity and the policy risks linked to wider adoption.
"The Intergenerational Report acknowledges AI can create new risks and amplify existing ones," said Victor Bajanov, Member of the Actuaries Institute.
"Managing the risks of AI adoption robustly means going back to first principles. Some risks are easy for an individual organisation to manage once identified, while others need to be handled at a system level by government and industry bodies working together," Bajanov said.
Retirement system
The institute also pointed to the report's findings on demographic change and retirement incomes. It noted the report projects lower fertility and longer life expectancy over the next 40 years, leaving a smaller working-age population supporting more retirees, while the total cost of the retirement income system rises from 4.0% to 4.5% of GDP.
"With the IGR finding that the median super balance in the year before death was $76,000 and a quarter of balances exceeded $250,000, we can expect a continued focus on supporting Australians to confidently draw down their super in retirement as our retirement income system matures," said Tim Jenkins, Chair of the Actuaries Institute's Superannuation and Investments Committee.