they don't own their houses outright so the banks sell them off for whatever they can get to recoup their losses and the children get nothing. That's not actually how it works, Banks in Australia VERY VERY rarely foreclose on a loan, In this instance you would inherit the house with the mortgage attached. The Bank would absolutely pause the repayments on it (although the interest would increase) it would be up to you either keep paying the mortgage or sell the house, pay out the loan and take what's left. Given the rise in home value it only about 0.1% of home loans in Australia have negative equity (loan higher than the value of the house) so the chances you would get in trouble are very low

In reality most Australia die with higher wealth than they had a retirement age. Essentially people are in fact too conservative in retirement and keep too much money. Now of course that is an average and there will be some people who are struggling particularly in the current generation, particularly women and those who have had insecure employment but we do have one of the best Superannuation systems in the world. And it's worth remembering that the generation X (which you and I are) at the first generation who have had compulsory super their entire working careers, we will be far more comfortable than the current generation (although house ownership will be less)

And Finally when you look into generational wealth transfer it doesn't do much to even anything out, You have rich parents leave more money and they leave it to people who generally speaking are rich anyway. And the most common time to inherit money is between the age of 55-65.