Home ownership as a (crumbling) fourth pillar of social insurance in Australia

Abstract

Australia is seen as being at the forefront of shifts to an explicit asset-based policy in its approach to maintaining post-retirement living standards, having initiated a move away from an unfunded retirement income system to a universal, funded system in the early 1990s. This move supplemented a considerable implicit asset-based policy based on home ownership. This paper examines the potential that asset-based welfare has to protect households from poverty after retirement by focusing on the role of home ownership in preventing poverty among older Australians and on likely future trends in asset accumulation. It suggests that, although asset-based welfare has the potential to ease the fiscal constraints faced by the state, it may well lead to poorer social insurance outcomes for households with limited saving capacity over their lifetime. Older households who miss out on home ownership are shown to be multiply disadvantaged: they have lower non-housing wealth, lower disposable incomes and higher housing costs in retirement than homeowners and they have significantly higher after-housing poverty rates. Projections suggest that this group will grow in size in the coming decades. These outcomes suggest that Australia’s asset-based welfare system is crumbling.