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Does money make you happy?

A report into the nation’s wellbeing finds seniors are happier than younger people. Wealth has a lot to do with it.

  • Finance
  • Read Time: 5 mins

Super 'fuels inflation'

A record payout in superannuation benefits to members is driving consumption among older Australians and fuelling inflation, a study suggests.

The UBS study shows that superannuation benefits boomed to a near-record high of $29 billion in September and $145 billion over the year, equal to 10% of income.

The growth of benefits paid is 17% year-on-year – double the historical average since 2007.

It’s claimed that retirees spending big on cars, investment properties, and world cruises is not only supporting economic growth but fuelling inflation – which is being paid for by younger families pulling back on necessities to pay their mortgages.

UBS economist George Tharenou said this is boosting the income available to older households at the very time the Reserve Bank of Australia (RBA) is trying to take heat out of the economy.

In turn, this was “making the economy more resilient to RBA rate hikes versus what historical models would normally suggest”.

Mr Tharenou said there was likely to be a “spillover” to other households via the “bank of mum and dad”, either to support large costs such as school fees, or make mortgage payments for those facing financial squeeze, helping to keep mortgage arrears very low.

“This is a factor keeping inflation relatively sticky – a growing portion of households who are (much) less sensitive to RBA rate hikes which would normally crimp consumer demand enough to see downward pressure on prices,” he said.

A report into wellbeing and happiness in Australia has uncovered a generational divide: those aged under 50 are less happy than those over 50.

Economic conditions including personal income, shape how people measure their happiness or wellbeing. Self-reported wellbeing was notably lower for people in households with gross incomes of $100,000 or less, compared to those earning more.

Satisfaction with the economic situation has dropped to the lowest level in the 22-year history of the Australian Unity and Deakin University Wellbeing Index report – even below the 2008 global financial crisis.

Reasons for this include cost-of-living pressures and housing affordability as revealed by this survey of 2,000 Australians.*

The study determines personal wellbeing by asking people to rate their standard of living, personal relationships, and how they are achieving in life.

Australian Unity’s wealth and capital markets chief executive Esther Kerr told the Australian Financial Review the findings reflected the “pressure cooker” effect caused by the rising cost of living, higher interest rates, stubborn inflation, and global economic uncertainty.

“This appears to be affecting the financial wellbeing of people who were previously able to cope or had a savings buffer to carry them through tough times,” she said.

Ms Kerr said the report should be a “call to action” for governments and businesses to implement a suite of policies to bridge the divide.

“This is the canary in the coal mine,” she said.

More expensive

Previous reports had found the increase in wellbeing to be only incrementally bigger for higher income earners and tended to level off around $150,000 annual household income.

However, this latest report, which covered the duration of the pandemic, shows a big increase in wellbeing in households with incomes between $150,000 and $250,000.

Money is becoming more important as things become more expensive.

This observation prompted lead researcher Kate Lycett from the Deakin University school of psychology to conclude there is a “clear division” between different generations’ sense of wellbeing.

Differences by age

Those aged 76 and older reported the highest average wellbeing (78.7 out of 100), and those aged 18-25 the lowest – though not by much, with their score (72.5) being just below those aged 46-55 years (73.2).

The average wellbeing score for 18- to 25-year-olds was the lowest in 21 years. It probably reflects higher feelings of anxiety, stress, depression, and climate worry (also measured in the survey) among this age group.

*The survey was conducted in 2022 but the report was released in November 2023.

Related reading: Australian Unity, AFR 

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