Why do some believe the younger generation in Australia are worse off than baby boomers.
Young Australians today face many challenges that make them worse off compared to the Baby Boomer generation. Let’s explore some key issues including housing affordability, wage growth, job security, student debt, living costs, taxation policy and environmental concerns.
Housing Affordability
One of the biggest problems for young people today is buying a home. In the 1980s, the average house cost about 3.3 times the annual income. Now, it’s around 10 times the annual income. This means that houses are much more expensive compared to what people earn.
Back in 1984, people borrowed about 2.2 times their annual income to buy a house. Today, they need to borrow about 6.4 times their income. Even though interest rates were higher in the 1980s (over 15%), the lower house prices made it easier to manage mortgage repayments. For example, the average monthly mortgage repayment in 1984 was about $418. Now, even with lower interest rates around 6%, the average monthly repayment is $2,286. This makes it much harder for young people to afford a home (CoreLogic, Reserve Bank of Australia).
Wage Stagnation and Job Challenges
Since 2008, wage growth has slowed, limiting the earning potential of younger Australians. According to the Reserve Bank of Australia, real wage growth has been near zero or below inflation, weakening purchasing power. Young people also face higher levels of part-time or casual work, with about 24% working part-time today, compared to only 10% among baby boomers at the same age (Australian Bureau of Statistics). Youth unemployment remains high at 13.9% for people aged 15-24.
Education Costs and Student Debt
University education was free or low-cost until the late 1980s, with baby boomers benefiting from minimal tuition fees. After the Higher Education Contribution Scheme (HECS) started in 1989 so graduates in the 1970’s and 1980’s there was very little to no tuition fees. In the 1990’s students began accumulating debt. Debt levels increased from around AUD 5,000-10,000 in the 1990s to AUD 15,000-20,000 in the 2000s, and today’s graduates owe an average of AUD 23,000-30,000 (Grattan Institute). Slow wage growth and higher costs make it harder for graduates to repay loans compared to previous generations and this growing debt makes it harder for young people to save money, buy a home, or start a family.
Living Costs and Retirement Savings
Essentials like rent, healthcare, and childcare are more expensive than in previous decades. Rents have risen by 20-30% over the last decade, according to ABS, consuming a larger portion of young Australians’ income. Childcare costs in Australia are also high, with families spending around 27% of household income, more than twice the OECD average of 12%.
Younger generations rely more on superannuation (retirement savings) introduced in 1992. But the average balance for workers under 30 is only around AUD 25,000, compared to over AUD 300,000 for those nearing retirement age (Association of Superannuation Funds of Australia).
Wealth Inequality
Wealth inequality has also grown. The wealth of households headed by someone under 35 has barely changed since 2004, while older Australians have seen their wealth increase significantly. This is partly because older generations have had more time to accumulate assets like property and superannuation.
Australians over 55 holds about 57% of the nation’s wealth, compared to just 17% for those under 35 (ABS). Many young Australians rely on future inheritances to help fund home purchases, highlighting the difficulty of wealth-building through traditional methods like homeownership and stable jobs, which were accessible to previous generations.
Policy and Taxation
Tax policies have often favoured older Australians. For example, tax-free superannuation income in retirement and refundable franking credits mean older households pay much less tax than younger households on the same income. This increases the financial burden on the younger generation.
The Impact of COVID-19
The COVID-19 pandemic disproportionately affected young Australians, especially in industries like retail, hospitality, and tourism. ABS data shows nearly 60% of early pandemic job losses hit workers under 35. A survey by the Australian National University found that 40% of young Australians reported worse mental health and financial stress due to job instability and income loss.
Climate Change and Environmental Concerns
Younger Australians are also more affected by climate change and environmental issues. The past seven years have been the hottest in recorded history, and Australia has experienced more frequent and severe bushfires. These environmental challenges add to the economic pressures faced by the younger generation.
Conclusion
Young Australians today face many challenges that make them worse off than Baby Boomers. From housing affordability and wage stagnation to job insecurity and student debt, these issues are compounded by policy decisions and environmental concerns. Addressing these challenges requires comprehensive policy reforms to ensure a fairer and more sustainable future for all Australians. Experts suggest policies for affordable housing, fair wages, and education reform to address these generational disparities.
“It’s hardest it’s ever been for a 30-year-old in Australia in Australia’s history. It is true 30-year-olds are going to be less well off than their parents are that is fact. It’s true that a baby boomer paid half the tax that a 30-year-old pays now when they were 30 years of age, so the reality is it is extremely difficult to be a 30-year-old in Australia” Russel Howcroft, Gruen.
References:
- CoreLogic, 2021 Australian Housing Market Report.
- Reserve Bank of Australia, Historical Interest Rate Data.
- Australian Bureau of Statistics, Household Income and Wealth Data.
- Grattan Institute, Education Cost and Student Debt Reports.
- Association of Superannuation Funds of Australia, Retirement Savings Data.
- Australian National University, COVID-19 Financial and Mental Health Impact Survey.