Authors: Peter Varela, Robert Breunig and Matthew Smith
This paper estimates the extent to which the Australian tax and transfer system redistributes income between Australians of different ages and how this has changed in the past three decades. These estimates combine individual level survey data such as the Household Income and Labour Dynamics in Australia survey (HILDA) and the Survey of Income and Housing (SIH) with aggregate values from the Australian National Accounts. This paper shows that Government expenditure targeting older Australians has increased significantly in real, per-person terms in recent decades. At the same time, older Australians have also earned significantly more private income, primarily as a result of higher capital income from real estate and superannuation. The combination of these two trends has significantly changed the nature of the Australian tax and transfer system and the age profile of the final (after taxes and transfers) income distribution. We discuss the implications of these trends for intergenerational equity, tax policy, housing policy and budget sustainability.
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