A lucky generation of Australians are set to amass a ton of wealth in the years to come, and it’s not just the super rich who will benefit.
The young Australian team is expected to generate a whopping $224 billion in wealth every year by 2050 as baby boomers invest in stocks as well as money earned from the skyrocketing property market.
A new report finds that Gen X and older Millennials can expect an eye-popping $3.5 trillion in the coming years and that cash won’t be limited to the super rich, even the poorest Australians People also expect unexpected gains.
In fact, inheritances and gifts are expected to amount to a massive $237 billion by 2050.
The Productivity Commission found that money transfers are getting even bigger, with more than $120 billion passed in 2018, more than doubling in 2002 and more than the federal government spent on health in that fiscal year.
In that 16-year period, the Australian team had inherited a total of $1.5 trillion since 2002.
In particular, inheritances, which account for about 90 per cent of all transfers, have steadily increased in line with the growing wealth of older Australians.
The average inheritance value was $125,000 in 2018-19, compared to $8000 for gifts.
But the Productivity Commission forecasts a fourfold increase in the value of an inheritance over the next 30 years, based on a booming housing market, smart investments, and fewer kids leaving money.
But surprisingly, Legacy is actually helping to reduce wealth inequality in Australia.
Productivity Commissioner Catherine de Fontaine said, “Wealthy people receive more inheritances and gifts on a dollar-for-dollar basis, but less as a percentage of their existing wealth.”
“When measured against the amount of wealth they already have, those with less wealth, on average, have a much greater boost from inheritance, which is about 50 times larger for the poorest 20 percent than for the richest 20 percent. Is.
“Wealth transfer therefore reduces the share of wealth held by the richest Australians and our projections suggest that this is likely to continue. This may come as a surprise to some, but it is found in every other country.” which has been studied.”
While the poorest Australians have an average net worth of only $7500, they receive about $30,000 from their parents, which is usually made up of retirement and a car or truck, the report found.
Each generation has been richer on average than the previous generation at the same age, although Baby Boomers have done particularly well.
Children enjoy the same relative wealth status as their parents, although inheritance is not the main driver.
“Inherited wealth is only a minor contributor to the persistence of inter-generational wealth. About a third of this observed persistence is attributable to inherited wealth. Everything else parents pass on to their children – education, networks , value and other opportunities,” said Productivity Commissioner Lisa Gropp.
“By the time people receive an inheritance, they are typically in middle age—about 50 years old on average. This limits the impact of inheritance on life-long choices and opening up career and family opportunities. Gifts, on the other hand, are very small and flow to young people just starting out in life.”
Wealthy parents may have invested more in their education by sending their children to a private school or a better public school,” the report said.
“They must have established their attitudes and values which promote wealth accumulation. And to the extent that there is a genetic tendency for wealth accumulation, their children may have inherited it,” it said.
Previous research found that the Baby Boomer generation has an estimated 7.5 million children and that if 70 percent of that wealth were transferred, the average Australian would have one. Massive $320,000 Passed Them.
Research has shown that nearly two in three Australians aged 60 and over plan to leave an inheritance to their children, with 57 percent wanting to leave everything to them.
Meanwhile, 19 per cent will only go to the family home and 13 per cent will pass on their savings to their children.
Wealth expert Vanessa Stoykov, who commissioned the research, said the data highlights how people are making a living now, but are relying on the money they inherit from their parents for a better future .