Elayne Grace

The equity gap between Australia’s generations closed slightly after ‘a year like no other: 2020’. The authors of the Australian Actuaries Intergenerational Equity Index (AAIEI) believe gains for young people will be temporary, quickly reversing as government support is withdrawn.

The first update to the AAIE Index was released today. The Index, commissioned by the Actuaries Institute and launched in 2020, takes a broad view of 24 indicators across six domains to track how wealth and wellbeing for different generations change over time. Those domains are economic, housing, social, health and disability, education, and the environment.

The first Index showed the relative wealth and wellbeing of those aged 25-34 was lower than at any other time in the past two decades. The update shows a drop in the values for those aged 65 to 74 years of age and an increase for those aged 45 to 54, and 25 to 34. This reversal breaks a 7-year streak of growing inequity, between the youngest and oldest cohorts, said actuary Hugh Miller, who compiled the Index, along with actuaries Ramona Meyricke and Laura Dixie.

“2020 was a year like no other for everyone,” Dr Miller said. “The Index shows, perhaps surprisingly, younger people doing slightly better than they have previously, closing what had been a record gap between generations. But the change is likely to be temporary. It reflects, among other things, government support directed towards young people through Jobkeeper and Jobseeker payments, which ended in March this year.”

The Index tracks equity over two decades. From 2012 it shows a marked widening of the gap between the generations. The latest iteration shows the gap still close to record levels, with six years – from 2015 to 2020 – showing a gap of more than 40 points. Some of the latest narrowing reflects worsening outcomes for the oldest age cohort, including rising rates of homelessness for older Australians.

The Index is the most detailed produced in Australia and is designed to help inform public debate and help policymakers consider an array of factors that may affect the development and delivery of good policy across generations.

“Actuaries are well placed to bring together the data and model evidence-based outcomes across a very wide range of domains,” said Actuaries Institute President Jefferson Gibbs. “We want what is fairest for all Australians.”

Actuaries Institute Chief Executive Elayne Grace said an ability to assess the impact of the COVID-19 lockdown on Australians, across so many facets of life, would help those making key decisions drive towards better outcomes. She said quick decisions made during the early stages of lockdown, including increased bail rates for offenders, and housing for people who were living on the streets, could serve as evidence for future policy.

“These temporary measures could help direct policy in the future,” Ms Grace said. “There may be an increased appetite for experimenting with different types of support given the demonstrated ability to adapt so quickly through 2020.”

Commenting on the 2021-22 Budget, delivered May 11, Dr Miller said that many of the new spending measures will potentially improve wealth and wellbeing across areas such as employment (extensions of funding for wage subsidies and training) and health (new money for suicide prevention programs).

“Some parts of the budget will continue the trend towards a widening gap between the older and younger age bands. The growing net debt position will reduce future fiscal flexibility. The significant increase ($18 billion over 5 years) in aged care spending is welcome but will continue the trend of a greater share of government spending being allocated to older Australians,” he said.

“Other measures should improve the absolute index for younger bands. Continued spending on skills training and wage subsidies target long-term youth unemployment, a key concern following any recession. The significant sums directed towards suicide prevention, if effective, will likely see a greater impact for younger and middle-aged people amongst whom suicide is the leading cause of death. And increased childcare subsidies for those with multiple children will potentially boost participation and incomes for younger Australians,” Dr Miller said.

Within the Index results, the economic domain showed the pandemic disproportionately affected employment for young people, but temporary government support helped offset loss of income as businesses shut and jobs were lost. Poverty rates actually fell, with the larger decreases for the youngest cohort. Overall, the number of people expected to be in poverty was estimated to have dropped 13% during the pandemic, compared to an increase of 90% had the government failed to provide additional support. Poverty rates remain high for single, aged pensioners who do not own their own home.

In the housing domain, continuing record low interest rates turned predictions of a house price crash into a surge. “There is evidence that many first homebuyers entered the market, pausing the longterm trend of falling rates of homeownership for young people,” Dr Miller said.

Rising rates of homelessness among the young continued, but the largest growth in those presenting for homelessness support came from older Australians, who have also seen a significant increase in poverty rates since 2016. “Higher homelessness rates for older Australians are a growing concern, which has lowered the Index score for older people,” Dr Miller said. While financial distress remains a key driver of homelessness, more people sought support because they were also experiencing domestic violence or mental health problems.

Health and disability indicators include life expectancy, disability, obesity, and suicide rates. The Index found that while there was great concern about levels of anxiety caused by the pandemic, suicide rates remained stable or even decreased slightly. This is a good outcome compared to early predictions, but ongoing vigilance is needed.

In the education domain, the index tracked higher across all age bands as education attainment has steadily grown. However, the pandemic raised questions around the quality of education in 2020; research on children in Years 3 and 4 found students from poorer backgrounds fell two months behind previous cohorts, as schools closed, and learning from home commenced due to COVID-19.

Environmental indicators continued to contribute heavily toward the worsening gap between younger and older age bands in the Index. These measures continued to worsen in 2020. Through late 2019 and early 2020, bushfires burnt 10 million hectares of land, killing an estimated 3 billion vertebrates. Thirty-four news species made the list of those that are extinct, threatened or endangered. The year 2020 was another hot one, with relatively low rainfall. However, there were also signs of progress. Greenhouse gas emissions fell across the world, largely because people stayed home. And during the year, leaders of some of the biggest economies committed to lowering emissions.

“The Index shows that 2020 is an interesting mix of temporary spikes, continuation of long-term trends, and opportunities to innovate in the policy space. Intergenerational issues will continue to have prominence in public debate,” Dr Miller said.

Dr Miller has a PhD in statistics, and he sits on the Actuaries Institute’s Public Policy Council Committee. Dr Meyricke has a PhD in financial economics and has produced papers for the Actuaries Institute including on the impact of climate change on mortality and retirement incomes. Dr Dixie has a PhD in physics and has been a consultant to the Government in the social services sector.

Read the 2021 AAIEI update.

Read the original AAIEI Green paper.

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Elayne Grace

Falling rates of home ownership, government spending that skews to older Australians and deteriorating environmental factors are some of the factors that have driven a wider gap in equity between Australia’s young and old.

The Actuaries Institute’s latest Green Paper, Mind the Gap – The Australian Actuaries Intergenerational Equity Index (AAIEI), launched yesterday, takes a broad view across six domains to track how wealth and wellbeing for different generations have been changing over time.

The Index was commissioned by the Actuaries Institute and compiled by actuaries Hugh Miller, Ramona Meyricke and Laura Dixie. Dr Miller has a PhD in statistics, and he sits on the Actuaries Institute’s Public Policy Council Committee. Dr Meyricke has a PhD in financial economics and has produced papers for the Actuaries Institute including on the impact of climate change on mortality and retirement incomes. Dr Dixie has a PhD in physics and has been a consultant to the Government in the social services sector.

“The Australian Actuaries Intergenerational Equity Index indicates that the relative wealth and wellbeing of those aged 25-34 sits lower than at any other time in the past two decades,” the Green Paper states.

“The wealth effects of the housing boom, plus rapid increases in government payments on pensions and services for older people are key reasons that young Australians today have relatively lower wealth and wellbeing index scores than that of their parents at a similar age.” Deteriorating environmental conditions have also had a significant negative impact on intergenerational equity.

The AAIEI tracks 24 indicators across six domains that relate to wealth and wellbeing, over nearly two decades from 2000-2018. The Index shows that since 2012, there has been a marked widening of generation gaps.

The report states: “The results are striking; from 2012 onwards, there was a marked increase in the Index for the 65-74 age band, while over the same period, there was a pronounced drop in the index for the 25-34 age band. This period coincides with the Baby Boomers entering the 65-74 bracket and Millennials entering the 25-34 bracket, so suggests a wider gap between these generations than has been present for previous cohorts.” A similar gap exists between those aged 45-54 and those aged 65-74. Those in the older cohort are pulling away from both younger groups.

The domains measured, and relative weightings, are economic and fiscal (30%), housing (10%), health and disability (20%), social (15%), education (10%) and environment (15%). The work includes reviewing indicators as diverse as poverty, average wages, teen pregnancy rates, changes in average rainfall and temperature, under-employment, home ownership, and the proportion of Australians completing a bachelor’s degree. Each indicator provides nuance to measure impacts on the lives of three distinct age groups: those 25-34, 45-54, and 65-74. The impacts of the COVID-19 pandemic, while not yet visible in the data underlying the AAIEI, are also discussed; in many ways the pandemic has accentuated intergenerational issues.

“We are all very used to the idea our children will live better lives than we do,” Dr Miller said. “We expect continuous improvements in government services, better products, higher incomes, and improved health. But an increasing majority of parents fear that as today’s children grow up, they will be worse off financially than their parents. There are a broad range of economic, housing and environmental issues that appear to be worsening.”

“It is very important to understand how equity is changing between generations over time,” said Elayne Grace, Chief Executive of the Actuaries Institute. “It helps inform public debate, and government policy, to deliver the best and fairest outcomes for all Australians. We need policy and outcomes that are sustainable.”

Ms Grace said the Index, designed by the Actuaries, is the most detailed of its kind in Australia and is intended to provide an objective foundation for important public policy discussions. In their report, the authors outline a number of policy options to address inequity issues including reviewing the rate of unemployment benefits, tightening superannuation tax concessions and greater action to mitigate climate change.

“Actuaries are well placed to unpack the underlying domains and indicators that drive the numbers,” said Actuaries Institute President Hoa Bui. “Our skill set allows us to examine large data sets, weigh risks and outcomes and deliver evidence-based reports,” Ms Bui said, launching the Index.

The Index shows today’s young people have significantly better health, education and social outcomes than older cohorts. “But we can see large deficits for economic, housing and the environmental domains,” Dr Miller said. “When focusing on change, particularly over the past five years, it is the movement of economic, housing and environment components that causes the slide in relative score.”

He said the findings gel with modern concerns prominent for young people. “Wage growth has been weak, often negative in real terms recently, and low unemployment (prior to the pandemic) masked under-utilisation that was particularly prominent for younger workers.”

The AAIEI’s absolute values show the gap between the 25-34 year olds and 65-74 year olds has increased from -10 around 2006, to -46 in 2018. “This suggests that younger people have been relatively disadvantaged across a range of measures,” the Green Paper states.

The gap between those aged 25-34 and those who are 45-54 has remained relatively steady. But the absolute index for the 65-74 year old age band has pulled away. “We regard this as a material and adverse shift for younger and middle-aged Australians and an indication of worsening intergenerational equity.”

The Green Paper states one relative driver of better outcomes for older Australians is a rise in government spending from 3.7% of GDP to 4.5% on those aged 65-74. This compares to a flat share over time for those aged 25-34 or 45-54.

Not all indicators point to worse outcomes for Australia’s young. “Poverty rates are high for certain groups, with single pensioners who rent a major issue,” the Green Paper states. “Obesity rates are growing, with higher rates in older Australians.”

Older people may be more vulnerable to the health implications of COVID-19, but the economic impacts of the pandemic have bought many intergenerational issues into even sharper relief, the paper states.

“Young workers have been more likely to lose income and less likely to qualify for government payments such as JobKeeper. Significant increases in government debt will take decades of fiscal restraint to reduce as a fraction of gross domestic product (GDP),” the Green Paper states.

The report adds that for decades to come, today’s government spending will be a claim on the future earnings of the younger generation.

The implications of growing inequity are widespread and are felt across all communities. The Green Paper doesn’t make detailed policy recommendations, but states: “While the current global focus is on COVID-19, climate change and the environment remain urgent and important areas requiring policy attention.

“A key question around all of this is how much of the recent change will persist in the ‘new normal’, and how much will prove a temporary change to Australian society. Any crisis also represents an opportunity to make policy reforms that will provide lasting benefits.

“Put simply, policies that advance the needs of older Australians while those of working age go backwards are not sustainable. “We need not live in a country where most people believe their children will be worse off; such a system is not sustainable.”

A copy of the Green Paper: Mind the Gap – The Australian Actuaries Intergenerational Equity Index is available here.

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Hugh Miller

Moderate changes to Australia’s social support programs could deliver better outcomes for those receiving assistance and result in billions of dollars in budget savings, according to a paper published by actuary Hugh Miller.

For each vulnerable individual, social service spending across welfare, housing, health care, justice and child protection can easily amount to $500,000 to $1 million over a lifetime, Dr Miller said in his Dialogue Paper* People, Projections and Payments: A Look at Modern Government Service Delivery which has been published by the Actuaries Institute.

Australia’s local, state and federal governments have clear opportunities to speed up improvements, he said.

“Moderate gains that lead to improved pathways for people would result in annual savings to government budgets that would be measured in the billions,” Dr Miller said.

“Most importantly, a large portion of the savings comes from better outcomes for individuals who might move into active employment, sustain their housing situation, or reduce their criminal offending. This means they have better options for a fulfilled life.”

Dr Miller argues that while there is much good work already going on, in many ways “governments can do better”.

“The large amount of money being spent, plus the significant potential impact on people’s lives means that even incremental improvements in government services will yield substantial benefits over time,” the paper states.

Dr Miller said Australian governments will face growing budget pressures, including the demands made by an ageing population.

Other pressure points include rapid growth of disability pension payments, increases in public housing (in NSW in 1960 only 15% of public housing tenants were on government benefits compared with 94% today), rising health care costs and a continuing increase in prison populations despite falling crime rates.

“Governments can improve their ability to target recipients, intervene earlier and use innovative funding mechanisms to support ongoing programs,” he said.

“These goals will only be met with stronger and better links between data sets already collected by State, Territory and Commonwealth authorities, attention on collecting data on people’s broader outcomes, and transparency when it comes to evaluating programs.”

New Zealand, starting earlier than Australia, has made significant advancements when it comes to the efficacy of social welfare programs. The New Zealand government collects and links key datasets while maintaining strong privacy protections. New Zealand’s long-term view of its future

welfare spending, and early and better intervention, has led to a 14% reduction in future benefit costs over six years, which means fewer people on income support and shorter durations for those that are.

In Australia, data collection is more piecemeal and there are significant barriers to linking together important information across health, housing, education and disability support. The State and Commonwealth divide can also hinder good analysis.

“We could use data to see long-term patterns of service use, including people who require extended support over long periods of time,” Dr Miller said, citing early intervention and better targeting of services. This provides significant impetus to focus on prevention to improve people’s subsequent pathways.

“Not every policy experiment will be successful,” Dr Miller said “which means that publishing an evaluation can open policymakers up to criticism and potentially reduce the likelihood of trying new things. Political risk aversion is natural but means that good analysis is often not published. We should not be afraid of the truth.” Dr Miller cites the increasing use of social impact investments as a good way of building the evidence base of what works.

Dr Miller argues that some areas of government already are using data to triage people according to need. He said we can predict which job seekers are likely to secure work or who will end up homeless. “This means we can anticipate outcomes good or bad.”

While using predictions to offer different support to people raises important ethical issues, many people are comfortable with the notion of providing higher levels of support to those at greatest risk of poor outcomes. He adds that equality of provision of services does not guarantee good outcomes for all.

“Children from low socio-economic backgrounds require significantly more support to achieve comparable educational outcomes to children from wealthy backgrounds,” Dr Miller cites as an example.

With improved data linkage, better outcomes data collection, tackling of fragmented services and further improving transparency when programs are evaluated – all in a way that respects people’s privacy and builds trust with the community – government service delivery can be significantly improved.

* The Dialogue is a series of thought-leadership papers, written by actuaries, which aim to stimulate discussion on important issues. Opinions expressed are those of the authors and not necessarily those of their employers or the Actuaries Institute.

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Now in their fourteenth year, the Awards recognise excellence and achievement by the top performing individuals and businesses in the industry.

The Australian Insurance Industry Awards provide us the opportunity to celebrate our industry achievements, sense of community and commitment to excellence. With 106 submissions received this year, these awards recognise the outstanding performers and high achievers in the industry and the positive impact our industry has on the community,’ says Prue Willsford, CEO, ANZIIF

‘With many entries showing a high level of excellence, originality and passion in what they do, these Awards continue to highlight how far ahead of the curve the Australian insurance industry is globally. The Awards, in continuing to recognise the contribution of insurance to the community, indeed has an overall positive impact,’ says Sivam Subramaniam. Editor-in-Chief, Asia Insurance Review.

The finalists for each category are:

Small broking company of the year

• Austbrokers Coast to Coast
• Remingtons Insurance Brokers
• Simplex Insurance Solutions

Medium broking company of the year

• Adroit Insurance Group
• GSA Insurance Brokers

Large broking company of the year

• Aon
• Insurance Advisernet
• Marsh

Underwriting agency of the year

• CHU Underwriting Agencies Pty Ltd
• NTI
• PetSure (Australia) Pty Ltd
• Primacy

Small- medium general insurance company of the year

• RAA Insurance
• RACT Insurance

Large general insurance company of the year

• Allianz Australia Limited
• CGU Insurance
• QBE Australia
• Suncorp

Life insurance company of the year

• AIA Australia
• BT Financial Group
• MetLife
• TAL

 Innovation of the year

• ANZ Wealth(Grow for Advice)
• CelsiusPro (Wet Harvest Weather Certificate)
• CHU Underwriting Agencies Pty Ltd (CHUiSAVER)
• PetSure (Australia) Pty Ltd (VetHub)
• Suncorp (Cyclone Resilience Benefit)
• Suncorp (Trōv Protection)

Professional services firm of the year

• Barry.Nilsson.
• Finity
• MinterEllison
• TurksLegal
• Wotton+Kearney

Service provider to the insurance industry of the year

• Gallagher Bassett
• Gratex International
• IPAR Rehabilitation
• JB Hi-Fi
• Phenix Jewellery Pty Ltd
• recoveriescorp

Women’s employer of the year

• AIA Australia
• iag
• TAL
• The Hollard Insurance Company Pty Ltd

Insurance learning program of the year 

• Allianz Australia Limited (Career Pathways)
• Allianz Australia Limited (One Service)
• Elders Insurance
• QBE Australia

Young insurance professional of the year

• Gemma Gould (MGA Insurance Brokers Pty Ltd)
• Hugh Miller (Taylor Fry)
• Jennifer Jackson (CommInsure)
• Kimberley Jonsson (CHU Underwriting Agencies Pty Ltd)
• Melody Caffin (Raytheon Air Pty Ltd)
• Sheree Siow (AIA Australia)

The Awards will be held at The Star Event Centre in Sydney on Thursday 31 August 2017.

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