This paper estimates the extent to which the Australian tax and transfer system redistributes income between Australians of different ages, and how these transfers have changed in recent decades. This calculation maps estimates from microdata to aggregate values from the Australia national accounts to produce a consistent set of estimates. This calculation shows that the tax and transfer system used to reduce income inequality across age groups, largely by transferring resources from the working age to those that are retired. However, due to higher capital incomes amongst retired Australians and a growth in the generosity of the Age Pension, this is no longer the case. By some measures, the tax and transfer system now increases age-based inequality.

Peter Varela is a research fellow at the Tax and Transfer Policy Institute at the Australian National University. His research focuses on the Australian migration program and intergenerational equity. Peter has previously held various positions focused on applied economic policy, including at the Australian Treasury, the Centre for International Economics and the Australian Productivity Commission.