Kim Day has received news that her mother-in-law is dying. This scenario, reminiscent of the beloved noughties comedy series Kath and Kim, once provided a satirical lens on the aspirations of middle Australia. In the series, Kim, played by Gina Riley, is depicted as eagerly awaiting an inheritance from her wealthy mother-in-law, a plotline that now mirrors a stark reality for many Australians.
Two decades later, the issue of inheritance has transcended comedy, becoming a crucial factor in the economic futures of younger Australians. With house prices soaring since the show’s “Sitting on a Pile” episode aired in 2004, inheritances have turned into a vital lifeline for many hoping to secure home ownership or financial stability. In the coming 20 years, an estimated $5.4 trillion will be transferred from the baby boomer generation to their beneficiaries, raising significant concerns about social mobility and economic equality.
The Unequal Distribution of Wealth
Guy Debelle, a former deputy governor of the Reserve Bank of Australia, highlights the impending intergenerational wealth transfer as a major challenge. Australia boasts the second-highest median wealth globally, with property accounting for over half of personal wealth. Debelle warns,
“It matters whether you have a parent with an expensive house or not.”
While many Australians will receive inheritances, a growing number are benefiting from “inter vivo gifts” or the informal “bank of mum and dad”. University of Melbourne economist Dr. Melek Cigdem-Bayram notes that the percentage of Australians receiving such gifts increased from 5% in 2002 to 7% in 2022, with the average gift value rising significantly. However, these gifts are unevenly distributed, with the top quarter receiving amounts that can significantly alter financial trajectories.
The Impact on Social Mobility
As baby boomers age, the real shift in wealth distribution will occur through inheritances. Cigdem-Bayram explains that inheritances often enable home ownership, even though they typically arrive when recipients are in their 50s or 60s. This trend raises fears of exacerbating future inequalities, as wealth is increasingly concentrated among those with affluent parents.
Dr. Ken Henry, former head of the federal Treasury, observes that wealth concentration has intensified over the 21st century, with the top wealth bracket accumulating most national wealth increases. A 2024 study by the University of New South Wales and the Australian Council of Social Service found that the top 10% of under-35 households hold nearly half of their age cohort’s wealth, highlighting a growing disparity within younger generations.
Historical Context and Future Implications
Historically, Australia has prided itself on social mobility, a belief that hard work could lead to a prosperous life. However, as Cigdem-Bayram points out,
“This dream that all you needed was to work hard is not the case anymore.”
The middle class, traditionally a pillar of productivity and home ownership, is increasingly reliant on parental support for financial stability.
Professor Peter Siminski of the University of Technology Sydney warns that growing inequality could undermine social cohesion and trust. He stresses,
“The larger inheritances are, the more compromised equality of opportunity becomes.”
Ken Henry echoes these concerns, suggesting that declining social mobility could erode confidence in democratic institutions.
Conclusion: A Call to Action
The impending wealth transfer poses a significant test to Australia’s social fabric. As Ken Henry emphasizes, it is crucial to focus on ensuring a fair go for all Australians. The challenge lies in addressing these inequalities to prevent disaffection with democratic systems and ensure that everyone has the opportunity to access a life they value.
As the nation navigates this complex economic landscape, the lessons from Kath and Kim serve as a reminder of the importance of addressing wealth inequality to maintain social cohesion and trust in the Australian dream.
