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* Australia faces division along income, opportunity inequality
* Govt kickstarts unofficial election campaign with May 8 budget
* Govt to raise spending on health, education in budget
* Opposition Labor pledges to abolish tax perks for wealthy
* Australia's generational split: tmsnrt.rs/2ImjDjY
By Swati Pandey and Colin Packham
SYDNEY/HYAMS BEACH, Australia, May 4 (Reuters) - Robyn and John Marlow own two properties in Australia - one in Sydney’s affluent northern beaches, which earns them a steady rental income, and a multi-million dollar, three-bedroom house where they live about 200 km (125 miles) south.
The retired couple, whose rustic home borders a national park and is only steps away from Hyams Beach - reputedly the whitest sand beach on earth - are worried by calls from the opposition Labor Party to remove tax perks for wealthy retirees.
Just 30 kms (18 miles) inland from the Marlows, 22-year-old Luke Sultana works as a part-time receptionist in the regional service town of Nowra. Three pawn shops along the town’s main parade offer a glimpse of the economic hardship it is facing.
Sultana says he has hardly any savings and job opportunities in the town are scant, leaving little prospect of getting on the property ladder that has been the source of much of the wealth for many Australian baby boomers.
“The local shopping centre is probably the best chance of a job in Nowra. It is either that or you have to leave,” said Sultana, adding he will vote for Labor at next election because of their support for young and low-income workers.
Australia has enjoyed an extraordinary 26 years of growth without a recession but is now facing a populist wave that has hit the United States and Britain as income and wealth inequality widen.
The growing divide between wealthy baby boomers and struggling younger voters poses a big problem for Prime Minister Malcolm Turnbull who must win marginal seats like Gilmore - which includes Hyams Beach and Nowra - at the 2019 election if he is to retain control in Canberra.
Turnbull’s Liberal-National coalition government, which has been trailing in polls for more than two years, is targeting next week’s federal budget to seize back the policy initiative.
In recent days, it has committed to expensive education and health programmes, usually a domain of state governments and Labor.
Treasurer Scott Morrison defended the government’s populist approach, saying a commitment to return to a budget surplus by 2020 is intact and better-than-expected revenues have allowed higher spending on key projects.
At the same time, Labor has promised to make Australia’s wealth and income inequality a centrepiece of its election campaign as it targets younger voters.
Australia’s A$1.8 trillion ($1.4 trillion) economy survived the end of a once-in-a-century mining boom thanks partly to the influx of Chinese visitors who bolstered tourism and education sectors.
A surge in house prices that rekindled housing construction and boosted the net worth of home owners and property investors also played a key role.
Over the past 12 years, middle and high-wealth households enjoyed a real increase in average net worth of 31-58 percent, government data shows. But low-wealth households saw no real rise in that period.
As an illustration of higher income inequality, Australia’s Gini Coefficient has been rising and at 0.3, is greater than Canada and most European countries, according to OECD data.
What’s more, the Gini coefficient of Australia’s household net worth is double that, at 0.6, underscoring the big wealth disparity in a country that has prided itself on a “fair go” for all mentality.
Median home values are now at A$875,816 in Sydney - almost eight times average gross income - making owning a house an elusive dream for many young workers.
Their problems are exacerbated by stagnant wage growth of 2 percent compared with 4 percent or higher during the hay days of the mining boom.
Worryingly, the rate of underemployment - those wanting to work more hours - for those aged 15-24 has stayed near historic highs of 17-19 percent in recent years, compared with 10-12 percent before the 2008 global financial crisis.
A study based on government data by research firm McCrindle shows the top 20 percent households in Australia own 62 percent of private wealth. That amounts to a whopping 80 times the average of those in the bottom 20 percent.
Kasy Chambers, Executive Director of community service organisation Anglicare Australia, blames the tax system.
“We have become a country that cuts from the poorest to give to the richest,” Chambers said.
A report commissioned by Anglicare showed tax benefits for pension savings, known locally as superannuation, plus capital gains to the richest 20 percent cost taxpayers more than A$60 billion year. The bottom 20 percent of Australians by wealth receive only about A$5 billion in such benefits.
Labor has pledged to cut capital gains tax discounts and scrap a favourable tax scheme for multiple property owners called negative gearing.
Both have been blamed for adding to frothiness in the property market, but are popular with wealthy voters the government wants to keep on side.
“Abolishing negative gearing, which has been part of our housing markets for a century, and increasing capital gains tax, would clearly have a more substantial and dislocating impact, placing more than just our credit rating at risk,” Morrison told reporters last week.
While house prices are one sore point for young voters, the lack of job opportunities is another.
Youth unemployment in Nowra at 30 percent is almost six times the national average, according to research by advocacy group Brotherhood of St Laurence.
Political analysts say Turnbull risks losing Gilmore, a seat that helped him win the last election by the slimmest of margins, if he does not deliver on his party’s mantra of “jobs and growth for Australians”.
Offering Turnbull a route to re-election, however, is the large percentage of retirees that call Gilmore home.
Lured by beachside living, 34 percent of voters are over 60 years old - many like the Marlows who are rattled by Labor’s plans.
“We can’t vote for Labor when they want to lower our superannuation,” said Robyn Marlow.
($1 = 1.3300 Australian dollars)
Reporting by Colin Packham in Jervis Bay and Swati Pandey in SYDNEY; Editing by Lincoln Feast.