Young people are getting smashed—and not in the fun way
Australia’s run-for-the-rich economy is hammering young people.
Living standards for those aged 15 to 34 went backwards between 2004 and 2022, according to a new analysis of Bureau of Statistics figures by economist Tarric Brooker. That’s despite national wealth per person increasing nearly threefold in the same period.
As if that weren’t shocking enough, the situation has dramatically worsened in the last two years, real consumption spending collapsing by nearly 13 percent among 25 to 29-year-olds.
“Given the size of the decline, it’s entirely possible that this is the largest sustained drop in real consumer spending for this vital demographic since the Great Depression”, Brooker noted last month.
Consumption is also down by more than 7 percent among 30 to 34-year-olds, 6 percent among 35 to 39-year-olds, and 2.7 percent among 18 to 24-year-olds.
According to the Commonwealth Bank, spending on essentials such as groceries and utilities has fallen significantly in real terms.
For several years, there have been warnings that, for the first time in living memory, a new generation could end up financially worse off than their parents. That prediction has now come to fruition.
Real wages are down around 7 percent in four years. The federal Treasury says they won’t fully recover until sometime in the 2030s—and that’s certainly not guaranteed. While that affects all workers, renters—who are disproportionately young people—have been hardest hit because landlords have jacked up rents far faster than the rate of inflation.
Capital city asking rents for units have climbed by around 50 percent, and asking rents for houses have jumped even more.
Also, if they can afford a house in the first place, younger people are more likely to have larger mortgages because they have spent less time paying off their debts and have had to buy at the latest stratospheric prices. The increases in interest rates mean that they are also disproportionately hit in the current economy.
Indeed, the Bureau of Statistics’ selected living costs indexes—which, unlike the regular inflation measure, show the effects of rising interest rates—show that the cost of living has been much higher for working-class households than reported in the press over the last two years.
We are seeing a significant transfer of wealth from renters to landlords and from mortgaged homeowners to banks.
As an example, the Commonwealth Bank last week reported another $10 billion yearly profit. It’s doing so well that Mathew Hodge of investment adviser Morningstar said that the bank’s “excess capital” (its reserve of money) is growing so fast that it now “faces the high-quality problem of what to do with it”.
You read that right—analysts say the bank has more money than it knows what to do with.
Other asset holders are also riding a wave of prosperity. In fact, they are being treated to, in the words of the Financial Review’s Chanticleer column, “a deluge of dividends”—“the capital returns incentivised by Australia’s tax” system.
A bank with too much money. An investor class drowning in dividends. And young people enduring a Depression era-like collapse in living standards.
Welcome to the Australian economy in 2024.
