Australians aspire to leave the world a better place for future generations. And previous generations have largely succeeded in doing so. Australia’s population is healthier, wealthier and better housed than 100 or even 20 years ago. Generation-on-generation economic progress has been the norm for the past century.

But continuing progress is not guaranteed. Older Australians today have substantially greater wealth, income and expenditure than older Australians three decades ago, but living standards have improved far less for younger Australians.

The wealth of households under 35 has barely moved since 2004. Poorer young Australians have less wealth than their predecessors and are far less likely to own a home. In contrast, older households’ wealth has grown by more than 50 per cent over the same period because of the housing boom and growth in superannuation assets.

There is no evidence that young people’s spending habits are to blame for their stagnating wealth – this is not a problem caused by avocado brunches or too many lattes. In fact, younger people are spending less on non-essential items such as alcohol, clothing and personal care, and more on necessities such as housing, than three decades ago.

Economic pressures on the young have been exacerbated by recent wage stagnation and rising under-employment. Older households are better cushioned from low wage growth because they are more likely to have other sources of income. If low wage growth and fewer working hours is the ‘new normal’, then we could have a generation emerge from young adulthood with lower incomes than the one before it. This has already happened in the US and UK.

Young Australians will also bear the brunt of growing pressures on government budgets. The ageing of the population means higher government spending on health, aged care and pensions. But there will be fewer working-age people for every person over 65 to pay for it.

Governments have supercharged these demographic pressures by introducing generous tax concessions for older people. The share of households over 65 paying tax has halved over the past two decades. And average income tax paid has barely changed for people over 65 despite strong growth in their incomes and wealth. Working-age Australians are underwriting the living standards of older Australians to a much greater extent than the Baby Boomers did for their forebears, straining the ‘generational bargain’ to breaking point.

Inheritances will not fix the problem. Instead, they exacerbate inequality, because the biggest inheritances tend to go to people who are already wealthy.

Policy change is required. Boosting economic growth and improving the structural budget position are wins for all, but especially for the young. Changes to planning rules to encourage higher-density living in established city suburbs would make housing more affordable. And a fair go for younger people means reducing or eliminating age-based tax breaks that are pushing a growing tax burden on to working Australians.

This report examines the stalled progress and what governments can do to help. It reviews indicators of financial wellbeing – wealth, income, employment, expenditure, and government taxes and spending – for people of different ages and how they have changed over time.

The report identifies policy settings that have contributed to differences in outcomes across generations. And it looks ahead to what an ageing population might mean for the economic future of today’s young.